Cadence Design System stock has surged in this market rally with shares
roaring to new highs in may and never looking back the electronic design
software leader also is a member of IBD's Long-Term Leaders portfolio
that underscores the company's long track record of not just share price out
performance but fundamental strength over the long
term too and who better to provide insight into the company's success than
Cadence Design System CEO Lip-Bu Tan who joins me now
thanks for being here today Lip-Bu. Thank you Alissa thank you for inviting me
okay great now the company is very uniquely positioned to benefit from
long-term technological themes that are still in the early stages like 5G
self-driving cars and artificial intelligence just to name a few so talk
to us about how Cadence is helping enable these sorts of
innovations yeah and let me start with the overview
of the company Cadence Design is a kind of
computational software specialized in the electronic design
automation software so we provide the software tool, IP
and hardware verification and that is what we do
and then we have a strategy to move on to Intelligent System Design
and in the way we provide the design excellent that's EDA and IP that we have
currently and we move on to the next level next
layer is called Intel System Innovation
that is work on the system analysis and also the embedded software then the
next layer will be the pervasive intelligence that is AI
machine learning to the vertical market and
a little bit background the company is about
8,300 people and revenue is about 2.6 billion
and we grow about 11% a year this year and then the operating
margin at 33% market caps about 31 billion and
that's kind of our background of the information of the company
great and let's talk a little bit more about that growth that you mentioned
that the company is experiencing what areas of the
business do you expect to continue to drive that growth moving
forward over the next year yeah a couple of things like you
mentioned earlier the 5G you know the autonomous driving AI
machine learning deep learning and also the industrial
automations we call it the industry 4.0 and also the
whole hyperscale data center those are the
five generation of waves that happening
and then right at the foundation is that electronic design
and that's where we come in and so this is a very exciting time
and then the other part is basically that drive the growth
is that we we move into I call it the data centric
revolution it's all about data and so how do you
and not create that you know collect the data
you know by you know generating the data and then to
organize the data labeling the data to do the data analytics
and then how do you store and transmit the data
and that is really transforming all the vertical industry
and that is really exciting for us so I think we have a couple of things that
working for us one is a hyper skill data center they
are all quietly building their own silicon
to optimize their workload and that was really a nice growth for us
and then same thing with autonomous driving they have all the silicon the
sensor development is very exciting for us
and then the other big one is the industrial automation
they have all the data how do you use that data to drive
efficiency and productivity and that really drives some of this
I mentioned earlier intelligent system design
that we increase our time from 10 billion to 30 billion
so there's a huge opportunity to grow and that's what we're excited about
yeah it sounds like a huge total addressable market there
can you put this into action for us a little bit
give us an example of how you guys are really
leveraging data to come up with solutions
yeah so the design getting more and more complex
and so it really needs our Design Solution Software to really drive
the the improvement and then even we use
ourselves the AI machine learning to our own tool design
so that we use the parallelism we use the AI machine learning because we have
so much data how do we drive better solutions for our
customer at the end of the day is we really want
to delight the customer so that they can design all the cool
products that we you and I we can enjoy using and that's something that we
provide and then the innovation that you know
the tool improvement and so that they our customer not
just a semiconductor company also a lot of systems service providers
they can design their product and then really optimize their solution
to address the different workloads now when you're talking about a company
that has seen such a long successful track
record of growth as Cadence has innovation as you're mentioning is
very key to making that happen so how is Cadence is able to keep up with the
demand you know from your customers to be able to deliver those cutting edge
solutions when you have these new technological advancements
cropping up and and things are changing constantly it
seems yeah so couple of things you know I used
to be a basketball player you know I like to have a good team and
so I think the team culture is very important for us
and then the other part is you know constant adaptive
learning that I mentioned is important so that we keep learning
new things and also listen to the customer closely
so I spend a lot of time with customers so understanding what is their
challenges and how can we provide the solution
and then I have a culture that in 48 hours we get back to a customer
so we listen to them they tell us where we need to improve
and what are the challenges they need and then most of the customers trust
us as a trusted partner because we listen to them
we want to delight them we do all the innovations to help them
and through some acquisition to you know sometimes they even recommend which
company to acquire which product we need to have
so that we can serve them better so I think at the end of the day is basically
you know we have the best product to drive innovation to them
and one thing to highlight last three years we have more than 20
organically developed products to support the customer
and then thirdly we also use some of the acquisition
to help you know strengthen our products
and most important listen to the customer and be their trusted partner
yeah and 2020 has been a year that has thrown a lot of companies
curve balls so how have you been able to adapt this year and what
would you say is your biggest goal for the company in
the coming year and what are you going to do to work towards
that goal yeah it's a challenging year you know COVID19
pandemics but we basically you know tried most of the
employees about 90% of the employee working from home
so we try to make sure that they can be productive so we
communicate a lot with our employee our executive team
and then we also give them stipends to you know get all the right equipment
the comfortable chair then you know you know
high-speed connectivity so that they can be productive
and also we use all the different tools for them to collaborate closely
and also can communicate with customers engaging with customers
and so that's not we're not going to lose a beat on that
and then I think that's very important for us and then
able to continue to innovate I think that's very important
and then the other part is also we want to be another culture of
inclusive so that we include every different race and inter
diversity in terms of gentle and so that we can be worked together
collaboratively and over communicating and that's very
important and then also we want to take care of
the employee so we give them extra time and sometimes
they work so hard with the Zoom or Webex and then we basically give some
extra holidays for them so that they can really spend balance
with the family the children and then with work and so
that they can motivate it and enjoy what they're doing and that's very important
and so far have been working very well for us and then we're able to
reaffirming our 11% growth for the year and this is
very unusual and very challenging market that we can
able to do that and then one is the team working together
and then secondly because our resiliency of our business
and we our business is very predictable and also we are contract with our
customers two and a half years and then we kind of work with them in
the long term you know the trusted internship and then and also our
revenue model is a reticle model so that is very predictable you know
85- 90% of revenue is come from the backlogs and that is
very you know shareholders love it and that is very
predictable and then and then customers love it
so that we can work on more strategically
important to them and speaking of customers
who would you say are some of the key customers that you have
and what would you say is the biggest competitive advantage that Cadence has
in helping you win those customers and we have a very broad customer base
you know in the thousands and so
big and small and they're all important to me and
so it's ranging from you know the infrastructure
player automotive player in a mobile handset that you use and then
all the way to some of the industrial electronics
so almost anything that's electronic that depend on my
software tool and also IP for design and so that is a very broad and
we're happy to have all the customers that work closely with us
in terms of competitive advantage one I mentioned earlier we work as a team
and so every function we work well together as a team
and then secondly we delight the customer
we pay attention to customers listen to their pinpoint their challenges
we try to find solutions for them and then thirdly
continue the innovations and i always believe the best product win
and it's very important the customer would like to have the best product
so we always look out you know 5 years 10 years
for the customer need and then how do we build that
or through acquisition to get there so that we can delight the customer
Alright well on that note Lip-Bu we've got to leave it there but thank
you so much for your time today and for explaining the driving forces behind the
company's impressive growth thank you so much Alissa