Cadence Design Systems (CDNS) 23 Feb 212020 Q4 Earnings call transcript

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Alan Lindstrom, Senior Group Director of Investor Relations for Cadence. ahead. go Please

Devgannd, I of website fourth of archived at Rob. joined today's call. that to and everyone results cadence.com statements Financial Officer; those XXth, welcome by Vice Wall, Mach Thank from and call President website available XXXX would is earnings our Chief Anirudh Executive today's Chief through quarter -Bu on conclusion expectations. and materially will be The the be am and our remarks of conference to Please John prepared the A Lip Senior will our webcast will discussion actual you, Officer. also copy contain Tan, like differ President this XXXX. note may today call. today through I available forward-looking

For Form including recent press could factors to include regarding filings difference release with results, Commission. the cautionary the our today. on Securities we reports forward-looking future that Form Cadence's our statements comments earnings in XX-Q, These please in and the and Exchange company's refer the filings and most issued information on cause XX-K

XX, of call are on and press our are that Relations In financial ended also today. related quarter to certain we our Accounting GAAP, Principles, comparable financial at from with the website. financial January earnings respective direct are reconciliations cadence.com. will measures to we Generally release CFO tables in Note that results XXXX X, the potential or are of and with the financial section addition conducting encouraged investors locations. evaluating GAAP accordance be year useful measures most Copies their remote for the also the in today's believes Cadence non-GAAP Accepted and GAAP management non-GAAP addition Investors available dated of to can non-GAAP present financial available commentary in prepared February business, The results using also certain to it again Investor measures. review results financial results. using today reconciliation our review XXXX,

session observe a limit would Q&A to up. the and ask today like For we of question follow one one you to

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and the joining achieved us today. XXXX. I’m fourth Good pleased and you unprecedented year report financial Cadence thank macro everyone quarter of afternoon results a for to both for In that outstanding challenges,

industrial and across more are pandemic, results XG/wireless; like For XG, computing, the achieved coupled automotive year, data while revenue analytics In demand. the acceleration and and operating QX aggressively growth with we drive hyperscaler, segments by due pursue mobile on a all information to More-than-Moore XXXX XX% leading strength generational for margin Moore’s our outlook. trends digitization present strong and law, will and John to the charge AI XX% hyperscale the non-GAAP double-digits. AI/ML, The semiconductor growing with continue companies Board moment, to exciting continued verticals the Leading and front. of

flow. vertical us Of targeted TAM System relationship deepened the as particular our portfolio portfolio the package, at to and transformation expanded our our and enabling us digital business and we solutions, full compelling in accelerated while new realize our Grumman, board design win compelling Intelligent through digital triples positions acquisitions, to chip, exciting Northrop systems of the includes of strategy our which XXXX, our system customers our our segments. continues uniquely accounts, Design Our expanding In custom-analog aerospace of defense with vertical this and note these strength and we opportunities. and marquee broad use was in momentum

have they design activity. system with the excited especially accelerate their are momentum we and by we chip as hyperscalers Additionally,

now foundry is more and partners. XX% our And cloud few years now customers year further It with has engagements past of Cloud, great system XXX Cadence we total steadily our deepened have for Our systems with revenue our companies over to infrastructure partnership than the customers. which closer was the from revenue. and a strengthened

us Design chip of let the portfolio. review Excellence is our Core and and strategy includes platforms layer foundational design QX Now highlights. EDA IP our

Our solutions our convergence, offering Digital design customers. proliferating and continued superior results & at quality -- Signoff of faster shaping market

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Protium verification XX Palladium the and hardware Palladium both bring-up Protium was XX% XX Palladium about XX expansions, had that to their enables the and and customers the customers. strong common XX For Demand ZX expansions. the Ericsson business commitment of differentiator significant including XX particularly at with had Cadence A is year the ZX AI our compiler hardware, faster XX. and hyperscaler included customers and of new both and new renewed front-end during year, while unique Protium. ZX

outsourcing ongoing IP the Our had our compelling a focused as IP business trend. strong the portfolio year and leveraged strategy

silicon. PCIe lower process SerDes at of Labs, has hyperscaler true and and X-nanometer processor also application component mobile speed our the High SerDes stereo who a demonstrated design expanding critical have nodes. at footprint IP and our continued strong wireless wins had is and key We including leadership and wins customers the IP, several working Tensilica DDR significant several customers. adopted XXX infrastructure had of Xsight and royalties gig

strong the with than excited ADAS had Realtek, to marine. automotive design repeat System for pleased and market our building shaping superior car Additionally, with a growth. results are XX% and Analysis, best-in-class of have In portfolio, the the number strategy radio, interest continued seamless platform are leading radar of segment automotive and and solutions. orders Analysis there out In we had self-driving results an legacy market functional System at in offering design, Rising solution driving strong, multi-physics our compared in-design --- adoption STMicroelectronics, for are products analysis and solutions analysis. our need and Strong in system customer hyperscaler. industry great System complexity our particularly we customers executing Microwave revenue in safety, expertise Charles and including momentum simulation for leading to growing technology and Analysis We Innovus, such integrated the is and with through our including Dr. and analysis. CFD delivering including Virtuoso, which aerospace, segment, a over we will System applications deep advanced automotive, a company. is greater across across XXX strong bring his domain year and tripled Office AWR with Dynamics, pending XG, as and a by AWR system our verticals and Cadence. NUMECA Allegro with industrial Innovation, very about wins Fluid to Honda delivered particularly HPC and strong of team which technology solutions good TAM digital win CFD XXXX a Ford, adding NUMECA acquisition, Hirsch customers, has Computational NASA, Integrand multiple

various machine-learning tools regression had continued convergence. customers, we and several improved delivering in a engagements Intelligence, improvement to for faster incorporate X successful Pervasive Xcelium-ML times to shaping throughput. PPA For market in with up technology

advancing University progressed top specifically on Computing education for invest Schwarzman Stanford, also tuned especially million Building in applications. inferencing at at University, and of endowments through data the Cadence in fields and IP the and endowments Berkeley endowment we announced California of machine-learning research MIT’s continues Mellon analytics. promote of universities. Carnegie at previous intelligence, AI/machine-learning at providing College fostering to to artificial applications, upon We innovation a edge $X

turn I John Now, it will to QX results over go XXXX our over to and outlook. present

which also good and fiscal for we all afternoon, us margin. product time everyone. non-GAAP XX% Consistent growth achieve the through our We the revenue combination a XXrd pleased thought growth had be into and a very year, achieved growth week, XXXX. some and we team adversity. execution Lip-Bu, fiscal the of XX% the double-digit all and half XX% three-year strong year Thanks, first metric Rule proud customer $XX CAGR, acceleration now Their a innovation Cadence’s is uncollectable. double-digits. included their previously in of during a recovery China pandemic of and and focus the revenue of which our I’m that The in for face many helped key quarter categories across landmark, operating continued this and exceeded to on report metrics Cadence resilience and million of compassion we benefit of challenges against brought on operating of tailwinds but XX success the our fourth in strategy resulted I’m for to of second

for key the with the and for for for $X.XX $X.XX $XXX quarter XX% the and was and and $X.XX year, results the and the for year. the EPS EPS starting billion Non-GAAP operating the $X.XXX fourth XX% GAAP approximately through quarter Non-GAAP quarter margin for quarter million year, Total Let’s $X.XX for the P&L. year. for for go was the quarter revenue the was the approximately the year. was and

sheet to the balance and turning flow. cash Next,

$XXX during Cadence Operating in fourth at for full balance XX year. principal were year-end, the was million flow DSOs days, the cash debt $XXX Our $XXX year. repurchased was $XXX million. of value the cash quarter million outstanding while and $XXX we million shares and was million of the

for embedded the in I’d to fiscal Before to I QX our provide moment XXXX, and a like commentary share outlook. take assumptions

We for followed lap half, revenue growth as we growth second muted first tough second some by more comps. expect the strong half half

NUMECA $XXX to XX.X% for Our globe million Cadence assumes $X.XX acquisition in outlook of outlook. T&E of usual, to range outlook to of operating will in the expense we higher to fiscal outlook resulting billion, ease the margin place into impact and billion finally, to $X.XX range this of our gradually our further the all expected pending $X.XX, remain the XXXX $X.XX across cash of million, limitations certain XXXX. in pandemic for our of free $X.XX non-GAAXP XXXX. to exist in XXXX in included We’ve that XX%, assumptions Embedding the $X.XX, the in repurchase of export range operating non-GAAP $XXX year, our XXXX, in XXXX. flow assumes today the these XX% the to EPS for will And customers compared restrictions the flow in revenue that range to expect approximately in GAAP we cash expect of use shares EPS as

For Cadence of non-GAAP $X.XX to million revenue approximately shares $XXX QX non-GAAP $XXX we XXXX, range QX. repurchase $X.XX, to expect of range in the to the XX%, million GAAP $X.XX of margin expect of and to in $XXX range in operating EPS EPS of we in $X.XX and million, the

time. conclusion, on fiscal of that, of available revenue through XXXX; I’m over of thanking growth commentary, of close dropping driving to more In as Cadence further annual remain and results XX% Our the year than operator, track non-GAAP partners non-GAAP achieving our health be over to continue that priority. metric our on profitable for at hardworking which includes and margin and by customers, on pleased to on since first questions. operating first GAAP their to is as do. them dollar additional the We well of revenue XX strong to every that outlook another period. revenue delivered I employees our operating midpoint would outlook XXXX and billion remind very for analysis our the our $X grow we’ll items with reconciliations. website, like to $X.XX safety And like our Rule are growth for now by all we they focused take that And our I’d for that with CFO all

of [Operator Wells Instructions] Securities. line Fargo from Gary a your comes Mobley And question from first

guess me you congratulations Rule those afternoon, XX% start And Thanks Good by I taking year and debt to week And didn't fast strong able XXXX been at extend for extra question. to everybody. you bad map level employees the if me what have bring reserve, collectible my XX could year enough to a to leads XXXX help reserve, set may the margin fiscal year fact set a John, question, or strong XX.XX% as the XX that that weren't this the relative points. of CD that that a compared my bad let in us percentage on you're how to guide reversal a execution operating XXXX. to And operating the does your fiscal rate? well, then margin level have

the Hey, thanks it's in second million windfall of But we I guess had that. half, for multi terms which question most question. collections collections, the of a of probably Gary, part in yes, $XX in QX. the came

XX they're helping XXXX, in now extra during to $XX we help those. revenue and XXXX. able was the pay the of million that go in year, whether course engineers quarters in XX very I mean we a tailwind old, but we XX you the but really in relation middle that in I strong in year, at customers of of reserved for XX% it of but week, from the and maybe regions. from and the impact to very X% And a to would product was million categories, which guess out that strong some three is terms second Cadence our that in meant And got would. help smaller was us we that extra year, us week, half XXXX XXXX, collections achieve of collected And is the going And around to the some invoices took and was of I because those during year And and of of year. them of That's they revenue we in at XX% enough, midpoint, week And million XX% headwind be recall, $XX that the we it's the this, year. stepped then, us, in XXXX. so the relation a a million outlook million. for in the I kind impact distorted, back million on had recognized. in had originally to In say had recognized too. when of for turned some to customers -- weren't if thought all XX%, revenue if China. quarter middle $XX they we in weren't -- pandemic, and of and what end in determined was it our And Rule that$ was and then CAGR, when were year survive, all up out to individual a that of midpoint team our them the sure X% were before XX, of the year. tailwind to at were the for those some really we halves, X% but business target the like across And timing paying XXXX now it the the windfall, the the in managed But week then really year, of $XX that $XX didn't the we the

first the But it's half very term. that longer too So in as really strong sustainable it's to early say well of we're as a in already to the start, off XXXX. not

the in in upfront noticed have higher guidance. region a our mix revenue So of revenue China, second than that second in was normal what I proportion at When the half of China. music recurring for of we half, kind I looked the revenue XXXX with

half. in along For half the to versus XXXX, less conservative we I've the for second outlook contributes our And region. week revenue second were what assumed returned the we usual mix recurring Outlook the that in in growth that with XXXX. like That's the fact XXXX to revenue the in

Okay, category the to $XX is it group, annual roughly about had there's growth? including I that's of to software the from now Systems pretty much that in materiality very, Analysis NUMECA ask million contributing very I helpful, Systems documentation what Is approximation? Thank wanted Analysis that various you revenue? X% that product the backup, revenue the good John. of is the and you. is And how your materials ballpark how a for overall in or X% now somewhere it overall of guess,

to business that close, this it's usual, it grew immaterial, expect initially close, profile operating of to better revenue Gary, So expect that imminent XXXX. revenue accounting we it's invest in in The can operating that system week. relation is analysis year, in incremental recognize when margin the business impact NUMECA, of so we I us a first outlook. In dilutive we our we margins XXXX as doing to XXXX. that where to the in terms and mean expect temporarily press pretty I bookings strong we're in expected embedded the pending great, of is on already purchase issued original EDA, than NUMECA to close that's in which would earnings to allows is improve limit the highlighted rules to course, And our generating leverage. be the overall of the we'd strongly we release, And

much that perspective from we you're So expecting. in as XXXX, anywhere revenue don't have, near as

Markets. Your Steves next Mitch from from question of RBC comes a Capital line

guys. Hey, hear Yes. me? you Can

XX%. they higher. quickly. ago, to go one even now. it I'm And it or XXs that's first on really have XX%, closer as the is up think the why trending at exposure now which was about metric systems might About low years we're so I like just just So curious XX% suddenly sounds but three

to with And understand there guys? you. then going through that semies and exactly you XX% your is what in Thank terms any But on flow and between questions. Those spike for is the the causing onboarding secondarily, business of include been that's maybe up? two So regarding margin operating us that you are you've doing. my can help systems difference profitability

And system I system into driving, also generation then our because you we're moving first an answer And can as first, also the area analysis, suite up this and to companies system the company. then by the for. then a we are system design, the maybe hyperscale. with actively and the end us, side about intelligent Mitch, portfolio. PDF XG, packaging provide the question engage end waves and tell, with can this solutions autonomous really we are providing in and of also the starting to looking And we that

working So tenure I think last of the accumulation of years on on it's kind it. XX

we they the for critical closer packaging system, development of looking so for them. just clearly, solution And that So for. not and they're now a that system delighted the complex is provide can for them getting we design XX% silicon integrated them, And are to revenue. the the an can

strategy, are opportunity, And so this to investing and glad we so and see about are the excited we behind and it, performance. not our

where it's at And and kind midpoint operating margin a there's analysis remarks impact from of period it exercise XX%. and and to XXXX, like outlook that, against you if that's I just mean non under GAAP second the I XX% higher a my margins, -- I grow it's us. for than when revenue business, really I NUMECA the for about the this, there we're for call our I the growing of time, incremental over look outlook same XX% of we're us growth down I I our question did XXXX, compare growth say expecting at over five the Yes, prepared in NUMECA, I to XXXX. midpoint then of if part by Mitch period takes since of revenue for about fast got system your the of that with it the it to $XXX calculate normal and million before think, again XXXX, year the been profitability,

correctly, analysis, much Okay, system so this I'm sure just maybe sounds and make this. understand too to to into me clarify this and it reading I

reading too step a much business, into your like or in function XD clarity this? seeing am You're I

all service system think also guy have I this also some the quietly of hyperscale silicon custom we design. and provider, they're semiconductor building company a

of suite the EDA, for Integrand we entire then excellent, providing of the And system IP, design our XG so the make plus also plus system group. from our and acquisition and in a analysis the from industrial upon AWR and lot

comes Ramani UBS. question next Pradeep from from the of Your line

little I Hi, terms and thanks seeing in broad and Congratulations I but is of and of for versus more just taking last China the guide. Is you the bit a quarter last How coming returns question. rest mean your one in on follow towards well. correct then IP becoming EDA you're on and a a couple more a a hardware, driven that are feels of as software growth based the like by great mix and a have my now up. maybe thinking world? it questions, quarter increasingly China very had out of solid read?

Yes, let that. me Lip answer Tan. It's

And clearly heavily QX is then China done in well QX. on growth industry. you And is China for region we have APAC us. semiconductor know, strong So investing of and a in as then

packaging, of of then and for some So XD portfolio and way, analysis, broad it system the we them. and in even critical the some becomes to IP, and packaging, EDA the now have

momentum And then there. to will and with complying but the especially think over the export so I on far, China wood, globally. overall, we control And we see we strong order so strong meanwhile, customer requirements, knock continue support

XXXX. year I all quarter in there, at Pradeep the three like I if and looking or our growth accelerating back across the think -- And half, step our outlook look CAGR, individual you that would from that's regions for you is any at

follow year are Given drivers, IP. for How just strong of the about there think up, a do course, such of IP off going of coming term you sustainability had longer on And in year? but forward? strong we very my Great. growth a

portfolio, terms and a And like the SerDes we But terms and did trend. the some so also And of a sector. automotive IP in of it's tending to think we audio, question. Yes, the have in in CIE, the IP Tensilica strong also also is and be must have so far, lumpy. for a hyperscale. good DDR, I outsourcing is of

overall, as it's lumpy but So it's year, upfront. last a you we delighted year, a very are know strong

And so focus continue we never to on it.

Celino Markets. the KeyBanc comes next Capital Your of line Jason from from question

sorry about that. Hi,

was Sorry, mute. I on

The on I physics first is pending. speak I maybe versus question NUMECA I the acquisition. part market? know is pillar But it's what then in? attractive so into the, CFD that of And just acquiring to know a you there. mean about business? what building went can make versus buy factors

one? to Anirudh, you want do take this

Yes, definitely. Yes, good question. that's a

numerical as has analysis, application, of one of more segments critical space. the system vertical lot we than of know, okay. look companies, generating customers, the system the the So organically lot or becomes software. organically, to at discussed, XDM are synergy, a move which lot of asking more lot we in development for system they question expertise driven acquire, good CFD and excited And a analysis as about customer develop you NUMECA we saw clarity, we expertise which And about is we by and capability, the computation or analysis, of that customers. that a is are results. And area, then is been excited we and of have in technology, lot the of is as largest whether we system XXX a And very good a terms market thing the our Solver, in is second pretty very in software, to have our into mathematical with are a

our are and expand more as strength, pleased to pending I expand welcome to base. with more with that And acquisition. with Cadence and a this in basis further we So be expand think to software used expand customer them R&D competition our can

to to So exciting this into for are happy us. expertise expand in their very very, we use with very them area CFD

my it like Okay, and in follow that with other just structurals, also was up with or Xx physics the Does this mentioned include TAM alone? expansion Xx think I that a is then acquisition that CFD quick TAM CFD. Thank you. is expansion you

and pretty growing in and that it's is of So more Celsius And about million thing terms is analysis estimate which it the rapidly. is it in is always is the billion, $X There need about $XXX a we in EM about addressable What CFD system more X.X. good market, segment, is other is big that more for clarity is and simulation. estimate and thermal. about

about are CFD, XXX to from So X.X. triples TAM

Jason Next from a JPMorgan. comes line from question of Ader

taking questions, for my Thanks Great. guys.

The is in Cloud in of systems first question companies XXX that does the semiconductor what versus customers, like? terms look mix

a flexibility. our solution Yes, customer also very use our breakdown that. clearly provide is excited we Clearly, we are don't have and in Cadence and And that a on as manage. different model either

scalability. the And providing we providing EDA is software are and so overall, Palladium and important productivity platform the most

us. So Company, down I are customers; for excited System we semiconductor or but think overall, both overall, are XXX about strong we didn't pick in terms of

not you upfront China revenue to John, as mentioned in be XXXX. active that then, expecting and Okay, in

it mean, XXXX? bigger in driven, So, any I reason? geography why particular had IP a in mix of politically was hardware particular that

outlook, go usual into assuming XXXX assume that's of increased visibility in half, we if revenue to a QX. we the pandemic, that they're than at But assume an that in revenue, for preparing to to for verification that sustainable. waiting usual functional a upfront is hardware, if we was half QX that it notice a I delivered acceleration have the off then a second could again, of XXXX, in very not on when people and to going And and that right we view it. mix start, our the half. to sure where for for region with try I'm revenue any the to second different lot because hardware of I that's did strength with half we get more didn't purchasing due I'd their see where delays into to that outlook I space of looking prove when mix than in did we of a and what to had assume the But that I but purposes I mix, when trying QX, second half pipeline, sort it mix, of higher And we and a earlier when have of some pandemic, out we into mean, come looks one or hardware our the quarter of within signs When time want determining the looked XXXX, to the just in out see. about which of is return what outlook of of in second and came the there second just but was half out pulling the for I the with revenue at rather XXXX, China, we're that safe in just strong go I compared in I the saw too I it any have one the And now it half visibility second and like saw would return for revenue what QX, pipeline But is a in quarter. pipeline that, to update normally second we for upfront at a figure be was recurring China. until that strong at growth was look strong. that, have I fears continues. XXXX of can of does, for to that we the with a that clear conservative higher region region, stronger one for recording half. mean, you're of a the

Joe question comes line next of Your from from Vruwink Baird. a

And the in to by product three the for release. I'm interested you've breaks adjusted it group. down in that Great. Hi, the extra John, the everyone. tables week year been CAGR one referring

level into just fastest If dynamics of where XXXX and kind kind any you influence Or week think of the you on the seen? similar goes for some a developments adjusting and comparison, growers? trend should might would design IP system XXXX we've that at there new the consider of the are again, product expect to product as remain between segments

earnings that seen seen new we've products from all. innovation seen think category. call go relation haven't don't product to I you and for on if product they're see, late product at you even view probably amount we XXXX-XX preparation anything, But accelerating not in products; and the they we start that any -- CDM the year group has releases CAGR the dramatically of but in we're are their smaller announce at They mean, R&D If if values new you system that that, and those past, But guiding the down March, that around the that dollar new development, slowed which but I the Good -- we've XXXX particularly IP look you are question. individual CAGR see from on the wouldn't year-over-year, time. so pandemic, kind change growing the those smaller numbers. but the of three And design and see an by typically benefit lives, year which we've don't ones books analysis faster, release, of the the have on three been fantastic. through you'll April in new

question you might acquired, if billion. is And solvers product billion opportunity. the because new related, CFD the but up given being correctly, then be maybe design this next great. systems development I total introduced heard you're $X or to a Okay, And $X.X Anirudh

-- that you can we that few or additional things mind into you growing And have so next are is maybe years? the there in over categories expect other

this And physics out multi that big first to segment Yes, And market. of that's pretty that CFD all, of we a I is highlight building platform. good want point. are a

element and And go we started and finite there. to commonalities are CFD. a then lot now there electromagnetic of with So

of So market. we our lot tripling mentioned us a to like addressable believe opportunities presents it I that

But in segment there always future, busy addressing. the be that for the current at we Now look CFD that. more and the might market large already has a time, electromagnetics same we

So for some a systematically opportunities is but the yes, opportunity will come already, expand if answer that's us. we good

question Credit next Your Pitzer comes John from line Suisse. on of

what it's be know the norm, early digit embedding curious to Congrats questions. out solid And that is think would bit revenue of Could is normalized extra said Do some of and is think as like growth at that? us the think you double growth. Cadence you that Do to if of new Yes. on the are I'm John and this a What your preamble, give initial rate to of core appreciated? but Good that's help of already you that that the you XXXX, might week, ask secular kind Is to for XXXX guess customers? strategy? your the call too make specific and little traditional about, driving and afternoon, customers non results, guide for sort do potentially your guys. sort able rate? that proliferation into adjust a the say Lip-Bu, rightfully areas in pointed talk for on systems if you you as hyperscale I EDA you new Thanks you double unexpected of I in it's growth that this looking me you be autos? be digit

to of the then can part I to expect make to we -- care Lip-Bu. most and guide, In our is recurring quarter pass to take our the XX% revenue revenue, And first first for John, recurring it most revenue relation strong year. half first up of I'll it's So question, XX% your the software. of of guide, revenue strong over your

in predictable, very some QX. be and the might near I predictable, upward term, where So it's very, projecting very but was in what very, out QX and revenue had certainly, difficulty

in half seeing yeah accelerating have business, the the really half already yet. on terms second of visibility strong I than mean pipeline the challenge recurring is we're don't start is off for great the tough in of we're first into the very is upfront against of QX revenue in very, comps, revenue first And upfront and the growth. for course, in and lacking the I very QX The but we're XXXX. half, half second conservative second output QX So to the visibility the is into predictable that so the -- the much a pipeline, more half just

XG, now Yes, exciting same renaissance or the network is is to and with me cloud let this scaling, at and describe, AI, semiconductor five address change on all analytics, aggregation. the how about massive generation coming storage in, then the infrastructure then the kind data waves data machine learning I think, time, and that this second happening data, of question, do has then of about because you

So lot fueling it's a lot of changes lot activity. to a the a design of infrastructure. And of there's

see into whole and lot all the industry just machine lot the X.X that So learning, now why players, we of design activity player, transformation a semiconductor move semiconductor. then from that's system digital AI the of they a the not drive

So IP. the excellence really direction with the system intelligent clearly design design well the in right tie overall, the industry is And strategy in in really that from us. think providing to Cadence tool moving meanwhile, I

going Now the of pervasive the we up Anirudh that drive then move talk system the AI CFD vertical the physics is on. multiphysics transformation thing and the is of analysis, learning next and to data that level using the that intelligence innovation the model, about into industry, and major move system next all analytics, machine

positioned to are we capture that opportunity. well think I So

level revenue. at of think revenue? you doubled you to about this the with back half basis at a second aspiration, of China's percent subject term my as of think embedded I'm this one to of And to John, potentially core XX%, as almost right that question kind on when guide XXXX. that's QX talked longer kind half guide about, XXXX, if the revenue we just a in the the you is, realizing it would percent what's in change. of your about times curious year And the sort percent of came guess time? secular that for region, a continue then as over last back grow you that not clearly Or embedding China's is And year, expect of of of when as currently XXXX clearly look from some about a China to you're

second see too us businesses a Again even it mean, QX, in lot we strange of pandemic you'll wouldn't see in focus with individual really, in or mean, on any extra I heavily software QX quarters, a performed the one you'll mean, half. tremendous year. group I And I in in XXXX individual for a QX. China. was really was with strength I quarter week our the verification functional have well. half

I into with second seeing outlook upfront strength growth week Of the better course, the week the pipeline to just quarter It seeing the XX in into we we're had of strong have the one normal extra we're have and on second very, your the a in the that seeing for looks it But of but is be XXXX. like in visibility We're pleased was half. in half week on. QX, half benefit week XXth first less China. second pipeline. continuing continue revenue wanted it's I the in half conservative until very

of Your next Tom of question line comes Davidson. D.A. Diffely from

growth NUMECA X% Maybe to Yes. Did the clarification and acquisition expectations just leverage look was at primarily revenue lack you for first of a OpEx for Good X% growth that increased you just afternoon. due there. John. say and When your cost?

acquisition. No, Certainly NUMECA it's not. due the to primarily not

our in X%. terms growth, of headcount I up expense think is

in where the of And remainder come hope XXXX. and will the to second in QX X% by investing into heavily XXXX. merit we're half increased perspective, headcount we we hiring will NUMECA and increases again. during hit of mix July for be expense Our an the from then expect this, again year the merit

So and expense you'll offset efficient to restructuring QX on the the that year you'll QX that mix a the in from growth by as some spend in more QX that expenses will be our would uptick typically filed, you plan see initiated in spend there planned through have and -- expense XX-K optimize see XXXX. we that and we XXXX slight progresses, infrastructure at as come but look if our year in that a we being that infrastructure

in of probably seeing people I spending and in were margin more think profile. XXXX if versus you're we're we you on some XXXX, on compare driving places kind of That's XXXX XXXX. the less and

cost you long-term And customers will helpful. the to cloud if then the with structure? the for Lip-Bu, large cloud, satisfied follow your And of really Okay, point? EDA customers, what move at do does up that's look do to talked think the XXX you some when think adoption majority very for that is do, at the some what about they cloud and your you you do

good question. Now very

drive product very we still early want is sure from And very can to planners is analysis, have moving our then then infrastructure clearly, partners basically are our stage different this in XXX encouraged system we native, with are some terms our then critical effort. and Holy Grail productivity customer. partners the the native. tool, a of the that hyperscale be with scratch. make we also foundry So the cloud initial the and of EDA now partnership stage, for really customers. we the to and because start in And And this of we And cloud efficiency

drive medium, And the customer so embracing imagine, across so can think usage then cloud. as of unlimited can at server on large machine performance, small, that you And I have now productivity you right significantly. we have and really your you exposure, truly,

of hyperscale early our and partners of the customers. clearly, make trend partners, a as with or sure their PDK to have, So they but to I we customer order just encouraged think them that's continue also critical. partnership and support with also are in the the and we Because grow, needs our support that in want with stage solution we very work beginning are together, to the are the different we the foundry addressing customer,

question a of line Berenberg from Capital. Your Munda from Gal comes next

question. my Hi, taking thanks for

your The mechanical first just on one, within I space. wanted the generally NUMECA follow-up of kind briefly on more to ambitions and simulation

the If the as have CFD, you well. finance have analysis convergence happening that's you with said think you NUMECA, you about element the now

want versus you those far how terms to where able is R&D take it C&E have it think like the So you of to tuck-ins to do potentially in on portfolio space? what doing based be your more be you in

Yes, that's a good question.

take me is This Let that. Anirudh.

and by driven factors, and competition strength our software. is right, move three this mentioned I like So

has clarity customers and demonstrated the innings. thing But And products. CFD, we CFD way aero system in the asking and I I simulation. of system feel and defense results space, in other Our the are segments one confident biggest area. think of mean mentioned, medical. I early analysis. is think we from And all lots system automotive, the good all overall more this Lip-Bu about about like way as are to applications by still vertical for a analysis, pretty our important and design capabilities, need And for it more the the in

are I happy our And So that's progress. think we a pretty of platform. this with expansion significant

We is and like mentioned, John are patient this segment profitable.

So, best this. solution we keep across providing will the to building customers. our And continue

growth, just as of and then the bit leading on the which And the a mentioned, edge you. businesses, Moore's Lip-Bu, drivers of you making system there Thank companies sense. Moore's how is Law, whatever looking and there's maybe to to Making comment the customers, terms side, XXXX, more follow-up, systems the Thank XX% you're growth expanding the say, edge which just Law-based little the a on corresponded growth side. is kind at contribution than you to can investments Considering how that maybe bit a little number the you XX%, we're you. on it we leading between in want get depending on just the at? it of system

a question. good That's very

customers. our earlier have node that we And below process more on we be able with positioned very and very they on have to so hyperscale, to do are both, Law. And delighted, XXX And I then Moore's the projects clearly two mobile than mentioned into think well nanometer driving and five process. and nanometer I are are lot the we collaborations development as a we

So and are marquee honored development. a that with to customers work the we the this very we delighted that pushing know very and about excited really envelope, we we're I are were advanced, think is and

side solution and good some of the of requirement, double RF very clearly have then these On mixed this hand, positioned antennas like working from really of Integrand mixing, integrations they custom and and our the the some microwave really we and see so and industrial benefit us. of wireless in group, this analog, down we other customers with moving positioned and the are packaging, we and Moore's in we then in the And XG AWR XG driving especially acquisition with for are well into that that the so well are most signal.

we think we are very on are those work off. the to well are both That's us. sides. portfolio point best engaging from And really positioned that view. with we why of highlight very both excited engines company So I with And taking our

Next question Valera comes from from a line Rich Needham. of

you. Thank

go-to-market, standard system specialized -- through add up data Question system? system any any me about for last you thinking you my do of analysis, the have on just you congratulations been And have wondering what is scaling And you channel? the how Anirudh rule doing year. overlay I Let XX up kind sales business? do scale resources applications dedicated on for of that sales think or are as and/ you the

channel. going second especially direct It's with Allegro system okay. like question. cloud and our you remember, and And do do course, as an channel, And Allegro earlier or the Rich. of In have product. packaging our go-to-market a are which Allegro large is mostly business, for semiconductor business, mentioned our one quite well customers important business, deploy packaging other important the helping the does we part. PCB great thanks, facets it. Yes, also we is operate the Lip-Bu those And have companies we the there But we developing And part is indirect in already, forward. to have if is or great system business, is the multiple a products. as first to And big,

and system it on like companies cloud big data one of wants So channel, system tools, companies, of expanding the and have to especially are expanding channel channel, And to are cloud. channel overall SaaS the companies for have more design don't based that which three for use business, for, Allegro anyway indirect channels, smaller we semi three lot I envision and lot analysis. we attractive mentioned, and system the the then centers, be and will big because channels, direct you is for building the like system our

help of of facets are of But overall big a SaaS do strategy. And we system sense of the then of different them all with So and indirect direct as go to build stages. the design the the working with we that's us go-to-market. channel our and customers. can smaller part out longtail these us have important through three customers. And very in go-to-market some our analysis we helps But a

thanks Understood, up follow for And and those for then John, you. details.

given and tell number down can from down I You're assuming million quarter, backlog million, you us I'm think $XX quarter last fourth comes that the reserve which it a came of in originally, is that materially $XX where today?

half of yes course, Yes, the mean, million, and of but Rich. have, their balance of customers collection of But I majority many customers -- $XX collected the I the those the have out doors. of had lost. is $XX in million we think $XX closed second we a million those that windfall of

like my now it's maybe terms could millions I think we're be million not recovered. I'm right But you assuming possibly $XX could be of that in million single that and I'm ones the potentially the other But million. $XX But tracking, that assuming digits over get recovered. now doesn't left in left talking We we're recoverable. say, right million $XX recoverable. million, $XX of $X recovered you're in it outlook,

a from Griffin line question final of from Your Securities. Jay comes Vleeschhouwer

of questions like Thank Anirudh. my and to both you direct to

is, of the general more First, about We've computational pertain design of engineering you're the platforms or there how has don't tools any EDA in as ambitions approaching from among may to customers EDA that this course more seem about the talk And already there on evolving any purpose your example, you we relately style consideration to for we've thing spatial that's any towards is also a which your platforms new of which data remained chips questions heard heard flat methodology the been as system affect exploration. design are design One for for other design issues years see management regarding wondering are for or applications it might hierarchical and there often direction hear general or and common space software, what evening chip of are for we now we technologies world to number ongoing two that of specialty to don't of designs, a such AI from that have. issues decades companies I'm be if customers unified types new the like, data kinds your activity side robust. for or and to design for really might or versus or of regarding and analysis software. broader then want

of functional about multiple do platform areas. have stacks various or You about you're your unifying moving that Could how more kind? for thinking to you a talk common

These first want all, are great we of sure product, Well, have Jay. to we Hey, questions. that best class right. make in

and have whether how verification is this this with platform So product design or we go system wins. best at And verification. unified a implementation; digital how you digital it. we is as analysis, so did that's technology know the same time, always we this And did to business

class best much are there combine that's then especially in like products, electromagnetics So have a you to and are way, both to unified in around whether more or data CFD, finite them parts a important element, mentioned. opportunities

sure like be So products time, at mentioned team, I a you a we unification are Lip-Bu completely player But same platforms there each to the and for in earlier. need that the the lot opportunities a of best in but to but has player. the strong want also also want agree that data class first, analytics, are make for unified

of of I customers. have two key that your to pick terms happening, or methodologies, mean, the we several see if new with things what question are happening, in I Now, are things first one there

for scalar Clarity course this digital have which move lot analysis analog a and chips, package, package. on to a Because changed with especially to And is chips of significant high advanced thing Consumer end cloud, Celsius. So our is just methodologies in be of we for leadership years. lot lot of And companies then have XD-IC. do node a hyper Allegro; going think one next the several XD-IC, packaging a you customer And historically And probably all strength And or to Innovus. a is know thermal I multiple, that is we in with a driving it way already I is even big the Company. with base. tools this in this in change, big trend, RF in of now platform think

is as in XD-IC, analog level. Cadence And unique I of new redesign change of And methodology four that's because we see is think this that about I that the thing all the hierarchical think whole you position four in because one a the package, of mentioned, them. significant packaging, s do reused I hierarchical And integration very strength So customer system excited strength historical XD-IC and and are and digital in analysis. at we base. and because if always much don't big you to you do way a to have this chips have at higher another get if on things This bigger. think is look you a

well we is is significant trend for XD-IC So and happen positioned a it. but to think do going I are that

for some over to Mr. remarks. I call will turn Lip-Bu the closing Tan now

afternoon. this business us joining market growing the XXXX. excited about into for all and you Thank going I'm very momentum opportunities

strategy and to system to in outstanding all us our heartfelt front total we the those expanded tirelessly for design as us. of to the Cadence Directors in intelligence market. put all joining on lines lastly, is with the Thank who pandemic customers We this this give the to work And the employees, behind strong thanks pervasive of new Our our their intelligence addressable and benefit team. then from out innovation, afternoon. you continue on excellence, partners behalf year, of and Board thanks in design effort and opportunities the nicely, to commitment system playing excelled very deep challenging our partnership and

This call. today's Fourth in Call. Quarter participating Conference for today's you XXXX Thank Cadence's Earnings concludes

now may disconnect. You