Cadence Design Systems (CDNS) 24 Oct 222022 Q3 Earnings call transcript

Good afternoon. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Richard Gu, Vice President of Investor Relations for Cadence. ahead. go Please

Officer; I'd this quarter operator. on I'm welcome to today's Officer. will Chief everyone today President remarks Senior Thank Chief prepared and and fiscal like website, a year our third Financial Executive and President of Anirudh webcast call. available John XXXX our cadence.com. Wall, by Vice of you, The Devgan, to and call earnings be joined of conference copy

including differ our results. implied statements, on those discussion future and operating forward-looking Today's discussion. will or and outlook Due uncertainties, business contain projected today's in actual materially risks to results may from

XX-K that and them. our and today's earnings and For factors could today, information during to actual release. All please SEC forward-looking results on we call any estimates to our to on disclaim as statements are including based us of refer Forms XX-Q differ, filings, update this information obligation and cause recent to available most

we'll Reconciliation In earnings results. considered as GAAP for present not non-GAAP today's are a release. substitute included from be which in measures in isolation should GAAP or addition, to of non-GAAP measures, certain

CFO of on release third the earnings tables also XXXX, our are quarter Today's financial related and website. for [Operator commentary available fiscal Instructions]

call Now Anirudh. the to I'll turn over

strong to leadership, that delivered technology excellent Cadence Good Thank QX, business diversified us today. by model. you, everyone, and afternoon, resilient our and report Richard. I'm results thank joining customer you pleased for driven base for execution,

revenue for yet results guidance on provide margin. outlook our and again QX more operating QX details XX% key raising year-over-year updated John financial and XX% We and the on metrics year. outlook all growth will beat the year are our to for our

mechanical intact. hyperscale the and remains driving macroeconomic the accelerating compute, innovation domains, transformation AI/ML the and and design across computing XG, while drivers, thesis as long continued growing storage. our activity software is term markets, and secular the generational across several and digital the systems in These electrical, and connectivity hyperconvergence trends over Notwithstanding multiple robust about for such are prevailing end driving need semis hardware strong uncertainties,

heavily semiconductor purpose-built from content. investing benefiting differentiate platforms expanding increasingly and silicon are to with their developing companies companies silicon system Customers next-generation

comprehensive leading EDA expanding systems uniquely IP, Our while hardware us support solutions, with offerings us of ample our opportunities. comprised end-to-end to growth and providing portfolio position customers

our deploying productivity in realizing the our Cadence results. In chip to AI/ML an Optimality sophisticated design help environment tighter and transformative of greatly solutions development with shortage data JedAI time-to-market increasing and AI-driven augmented and AI platform. of are democratize requirements of Cerebrus the Customers complexity, platform and can game-changing, solutions amazing quality QX, verification And Verisium dramatically and portfolio increasing results. system we growing while talent,

system boost part continues XXx the runs root be and from provides and bugs. optimize being observed critical debug including leading that Verification causing have majority with to consuming and a Samsung Several multiple with STMicroelectronics, a market, to algorithms time largest Verisium moving single-engine shift in to the generational resources approach legacy single-run, a verification, vast the of AI leverage results big multiple for debug in engines, data to to and triaging Verisium productivity. automatically across customers, impressive component.

operates data, optimization smaller facilitate of information Cerebrus, to Verisium. data design our JedAI unifying on is foundational amount vast including JedAI all of types enhanced facilitate verification, analysis platform is and AI-driven, innovations design to our optimization and -- big smarter Optimality revolutionary that and productivity. Cadence AI design, analytics methodology across

products deepened digital optimized solutions. EDA our they our BAE and analysis as our portfolio, our and PCB and proliferation expansion system platform We significantly a with we multiphysics footprint QX, increasingly broad core including offerings. systems analog Systems expanded and of our our In with customers partnership of market-shaping embrace full across flow

QX, in included EDA of software our proliferation a verification our broad business. across which system core Teradyne, digital, significant as analysis PCB of collaboration our as and strengthened Additionally, expansion well with a we analog and

strong core Demand broad-based. our EDA and for software remains

digital a Cadence business XX% fast year proliferation it's for competitive Cerebrus another linchpin derive PPA driven Our been with a digital over market-shaping continued had XX year-over-year strong customers as at results growth, in since QX. and of adopted It's we productivity our most customers they advanced their wins technology SoC just a quarter key on and by customers. flow becoming wide and variety incredible new designs. launched full

are multi-project multi-design, major have of quality productivity and XXx and to customers XX% production underway up improvements. deployments leading reporting Several results improvement in

Additionally, we due to front-end effect. the in and our see part accelerated pull-through Cerebrus sign-off offerings Cadence growth in

We overnight optimization experienced closure launched automated And versus Solution, design methodologies. sign-off Closure savings. closure X% which the hierarchical sign-off current dramatically Certus, chip power realizing closure while for fully sign-off. full by MaxLinear chip and complete full an innovative a concurrent faster untapped architecture Renesas up observed using Certus Xx level accelerates chip to environment and of Using

the this continues it solutions. portfolio. business bold XX% our Spectra driven year-over-year, platform grew to market-leading and technology with QX, IC define analog In best-in-class by by custom in Simulation market growth comprehensive vision, strong Our Virtuoso and

on led business to verification. hardware year-over-year, our grew Xcelium. XX% by moving functional Now and QX, In

verification including customers and ZX new Protium X XX and capabilities, mobile, XX customers. had high-end software hyperscale platforms, from and industry-leading and AI added repeat bring-up Palladium system Our providing hardware orders,

risk faster to offerings the IP continue trend reduction embracing ongoing IP STAR increasing by a nodes, led to Our at advanced and and reuse from time customers IP most outsourcing benefit market. from business, IP for

During marquee proliferating leadership a market U.S. ever Tensilica company. expansion companies. with at had QX, XG U.S. with major contract in extended and largest a and automotive infotainment signed the wireless true safety its company leading its stereo IP functional solutions semiconductor the our we while

also leading DDR PCIe, wins our die-to-die design multiple IP had We and across portfolio.

portfolio This our continued computational strategy strong its expertise software expand in by XX% delivering our as leverage in momentum, across business & with and a increased and choose we our Design analysis increasingly as to tightly aerospace year-over-year broad platform set these several the near customers tenet they strongly A providing and integrated systems of Analysis design, our electronics. resonating key is System broader footprint simulation across our of domains. TAM Our is a verticals, solutions including and defense growth business adjacencies. solutions growth high-tech growing

we broadened nicely further is of and and Fidelity PCB, QX, was analysis global to to energy In leading technology thermal reduction addition CFD our software facilitating a meaningful industrial verticals use system in expanded notably improvement their Facilities, data customers in their that as with they customers efficiency system optimization such AWR technologies. twin-based ramping technology, this our collaboration significantly optimization, solutions, Emerson, footprint. reduce year, software, leader, digital our as and do earlier aerospace, emissions announced marine and and and power to carbon And center machinery the consumption. design Future help will and turbo of

Scientific, Lastly, the the of acquisition computational in we completed space. a OpenEye leader molecular design

We well. Facilities system-level our success process. expertise sciences and speed are life of improve is OpenEye very and the progressing our bring discovery Integration Future market drug of and bio enhancing the rate help simulation to excited both the and to to simulations, of efficiency AI/ML acquisitions thereby accuracy

continued system closing, design and was intelligent as In our QX with advanced outstanding an customers closely our collaborate to next-generation strategy quarter on we designs. their

are drive intense on revenue of both to capitalize well and massive an the with innovation opportunities ahead business to our operational margin excellence managing us. focus and expansion growth and positioned very on are We

to I XXXX Now John details outlook. over more it updated will and our the provide on turn to QX results

third report financial pleased that I'm Thanks, exceeded to good and of Scientific quarter of the OpenEye key we in afternoon, operational quarter. Anirudh, the everyone. Facilities and and Cadence the acquisitions metrics all for XXXX. completed Future

flow to was And the are highlights operating $XXX of Here was Cadence EPS of $XXX margin shares. We million. quarter, XX%, operating totaled non-GAAP and the XX%. EPS million balance used the was revenue million. principal was $X.XX, Operating debt $X the cash while end our some was value GAAP of outstanding the margin was our $XXX $XXX billion, cash $X.XX. quarter. Total million. at repurchase of was from and GAAP financial third cash non-GAAP

I in our outlook. remainder like fiscal outlook a share moment I'd of to for provide our updated take certain embedded to assumptions Before the XXXX, key

the in trade business The and on We manageable. is restrictions to limited our of our recent U.S. outlook. included expect changes to impact impact be the

the Our for the outlook substantially also that assumes remain rest the export similar of that exist limitations today year.

billion to these fiscal operating into EPS outlook assumptions $X.XX XXXX, XX.X% shares to of in we $X.XX $X.XX the billion; range $X.XX; to operating the Embedding XXXX. range EPS to expect repurchase of range of to in non-GAAP non-GAAP $X.XXX range the $X.XX of GAAP margin XX.X%; range for of Cadence our $X.X flow of $X.XX; we our the approximately in and to billion; expect XX.X%; in billion use of $X.XXX to XX.X% margin free in cash operating approximately revenue cash now flow the in GAAP to billion

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

reconciliations. as Our to for CFO our and website, non-GAAP further items as commentary, outlook which our analysis well on additional is available includes GAAP

outlook, financial our outlook, pleasing. business across I'm summary, At margin for QX execution is midpoint revenue our to progress and XX% and which CAGR their all In expect team of this pleased the increase, exceptional exceed annual to At with to I'd year. discipline. of non-GAAP first lines Cadence our continues we especially for time, midpoint thank our the the like operating of our our

like support. I'd employees partners our always, our for their to As and continued customers, thank

now take operator, with And will that, we questions.

question Capital Your Markets. Instructions] Jason KeyBanc [Operator Celino from first comes from

hear you guys me? Can

Yes, Jason. Go on.

Perfect. Perfect. Perfect. Okay.

was the that comp, to It be it growth minds. extent, to here, was easy on in an China is the quarter. you've Sorry revenue some seen largest straight XX% To everybody's but point is period. but in the

would quarter? I'll of the back-half-loaded? that And have I'm it So guess or where you did a follow-up. linearity Or it was the how all strength? and the Was I front-half-loaded see describe strength? then curious, you then throughout

a increase from that during vast saw QX. quarter, the jumped came revenue clarify. hardware of in to the That's China XX% that that into the increase from opportunity and in Jason, recognized of In deliveries for result and a great majority revenue to China, in hardware QX sales of you QX. thanks of the -- was was Most XX% question, QX, our

revenue in revenue So is that all sources. China from uptick upfront

some smidge then that the that And inclusion was new to a the backlog How in due these Perfect. of kind of Okay. quarter. down sequentially I restrictions? was did of much notice of

that of Yes, another X.X China. new RPO, result terms now. U.S. down of our includes quarter, hardware think the it -- partly It into export in great this question, X.XX included delivery to regulations. was I the also of that's the Jason. Last as That's current quarter, we've and a impact

I X.X and that's an the On piece, backlog, and slightly We RPO from largest current commitment total, contract we of The IP. in the think ever, X.X. to -- down went our in backlog. IP our had that portion signed more, it was in noncancelable increase

comes Company. question Needham next Charles the & from from Your line of Shi

John, China, maybe I or question, China to to just from to ahead. Among try little a revenue and really Anirudh want go but of QX not kind the coming of kind various of know the sell to your fiscal customers. like to China to mid-teens you look 'XX, immediate bit I total back

multinationals. got You've

You've got domestic. the companies, large semiconductor

of us But companies. kind the well, revenue have most to China, quantify going could system to Chinese that. this the be follow-up the across export you the of start-ups, much latest And impacted can export spectrum sales different customer, kind to your how the customer, control? of round And I AI of in of what because impacted percentage of the of to wide controls? be the by a got kind of customers You've

Charles, the but That's limited. the QX, forward. good point for impact John. did the limited is manageable. for going out this not there. We is future foreseeable call Yes, just is and -- believe that We impact the

may in you on the any China thoughts market? greater China of specific that -- your type the see in impact customers Any

Anirudh. is this Charles,

China segments. in design base, activity in and China. a in different So designs, we kinds or is lot overall, participate diversified we of or have right, memory To market customer whether think a about all of is digital analog Cadence

So that, be that overall, feel I will intact.

business but on like China think in latest just you there effect overall, other local, is our the know. some as diversified, China geos. I not regulations, probably very foundries But is in

but -- the and year, So therefore, not feel is also and what we of remaining John like manageable. impact just for limited forward. the going said, And

of line Gary comes question from next Mobley Wells the Your from Fargo.

like and I the general semiconductor from backdrop wanted the the for companies the well perhaps to may restrictions talk indirect present challenges market this as export about impact China and Cadence.

of some ship restrictions, one of restrictions. because of export have worth $XXX export can't you your to customers these product can who because So product which various China million large ship of of

of any sell And seeing So overall to any can related end the backdrop, and China? to to get with the various the R&D what activity those be as the it might you deals? license extent, types then related chip like customer respect large impacted, signed markets of budgets change no market in takes to are longer long term, design they off on behavior to companies large and time to that,

both of also macroeconomic and fronts. uncertainties. Gary, are indirect monitoring on the carefully we And good especially situation these point, overall the effect

side than the volume know, As shipments. design on more we the of you on are

trends, there's of monitoring the a lot and of in we on carefully news macroeconomic course, are press, it. So the

now, design right robust see we activity. But

And as market in know, participate we verticals. you the all

even verticals good will So shipment as side, on on still the weaker, some side their be if shipment design. may are verticals still then they some well. But do

on right now, are right, And rest diversified us multiple the results robust being being still we design today, see and us and across very very we that our So combination side the activity. for in year. with outlook this verticals, design reflected of the of reporting that's then

again, effect there's will pretty our observed feel again, we monitor we, that, on are effect to indirect But that's diversified. But -- also. now, some pretty the some are that's forward. we on Now And so of China, And that be then going manageable, customers. on then but diversified. yes, right always we carefully

All right.

some price including JedAI-based So market. AI it your I some days those has early I "price learning of and penetration wanted Cerebrus machine to know been discovery early be others to days there? customers What related and relates the tools, announced. of of as switch in may to introducing seeing to feedback how products you're at you to that, the the you discovery," and topics deeply your recently

environment, add customers. not -- Yes, always Gary, productivity lot the and is but a runs of time, EDA for like this mentioned the super look like solution our that's great if right? historically, tool customers, by are been when multiple our you're I have for run EDA running improvements has because like you a You to do great has multiple great more then opportunity design, we times. X our always a we have has about it managed at AI-based point. tools done X you're you a value time, earlier, our running single-run excited Because it And done been this been customers. new Typically, -- to the

solutions AI, environment. So with we offer in these and can this analytics really data multi-run

data have JedAI kinds then that. new all we new so a all are design the of across on It's is unifies process. that And the to a very you analytics of to tools top this platform also have But run environment, X, apps AI data And this solutions of we data on proud like, key manage on of this is of a space. our part JedAI, top platform. data data that in because of analytics. AI the in top And big And capture multi-run generated.

generates Cadence system that the the Optimality, the like to last design you amount as which, the hardware space Cerebrus, the most as parts verification, know, simulation; EDA. of which year; is one So technologies Logic applied already is of time-consuming by most the Cerebrus in one and similar on simulation, data which Verisium but the you now launched generates the system some way, and flow was verification data. in of most verification, know, also one of using

all that's in have these also was critical unify more but to get it data So like ready why JedAI for things, verification. to

engaged. adoption customers surprisingly actually are good. the And has And big all the been

endorsement Cerebrus from have in time. big talked Verisium, We see customers. You we last several about

major designs, deploy seeing progress we X script, or these I this just the adoption, want point, with far. do are not the X we really are And all in and at happy broader very customers broader like to and for the So solutions. mentioned so

Vleeschhouwer question Griffin Jay from next comes Your Securities. from

that for bookings you us or last years, would given introduced Anirudh, the that at you new contribution tools has core the to even at momentum again, been X other would assume when the those back gain -- out X nomenclature, part growth from and that incremental that rank respect? other perhaps and to EDA Innovus X I and and/or some look X various you've from the first, what you of your you nomenclature? But in years your or in how rank go contribution look over next the that how sign-offs size. of you under when the under the products share look as define ahead we various

you, is your increasingly the for terms China, John, but has free in China-specific for not rev your of predictability services rec Secondly, related feel IP seen experience terms engagements of upfront This well a talk as material in IT. of to for to business? date what specifically been about the that component IP question, your as we've to

actually, because core system have in like apply been. new critical analysis like portfolio that ever then to our the those areas always say leadership maintain I and And has And our core super couple Yes. comes and apply software with first. to want And the expertise we system analysis, strength portfolio areas of to and been strong systems. a EDA well very it's to we I'm over know, take computational question. core Jay, but new can -- expertise design good And in in of is the that's we pleased it doing as as Cadence EDA. years. last And increasingly core you

So on we are always focused first. core the

say, parts verification high a big have a digital, core And And and let's areas, level. I EDA, at are, very core in portfolio analog now. that we strong X right, feel

In always to some areas analog, last over the X which I strong, years. improve fixed of been terms were were contributions we growth, Spectre and in there think of simulation, in have

steady. with I But it but come can healthy and in of grew just and this lot is So Cerebrus. the has growth route, a see you from digital which even also more not is sign-off now a XX%. analog And placed think Innovus, synthesis and quarter,

would well terms growing the strengthening of in I very also the say is So position in digital market.

especially I'm verification. then And pleased with

Now is that with there growth some verification, that becomes pleased of systemic is simulator. our drivers is it actually more logic is of verification, strength think design portfolio. our and portfolio, it hardware, critical to the helping I I'm in also hardware But some but of Verisium,

are I the over now we it Jasper, then the with strong overall hardware And strength platform. because verification platform the in And think really completes year this doing and last of completes always that's And in have verification. of leading formal Palladium Protium. in and we solution with couple well our Xcelium, years. our that verification been

say is in then would verification, growth by driven second; EDA in core analog. the strengthening I position our So and digital, close number and maintaining one;

target differentiated run from highly remains the pleased In and that growth that business predictability question very and your ability on reusable to of to IP that's been profitable more and for relation particularly with management discipline IP team revenue us sustainable through revenue, and I've our the their to the growth. focus And easier STAR scale. IP profitable

what We sustainable, can and them your to components course, upfront want amongst if public to for. to in business was IP there's always a run recurring also more that family just do it's this that you'd to up not business, us That's sign family our like of profitable, with revenue, we that regular have business, IP, ask IP But variability. some -- company. ask

macroeconomic we of Naturally, revenue we're going numbers. we'll year, see that impact but look lot this forward, that for cautious upfront on the but a at the on have in to of next year our environment

for on is year. up year-over-year. next XXXX growth for track tough comps XX% be That pretty revenue upfront to think some almost I sets

we'll at look carefully. that So

on predictability side. growth very and year. hardware track they're Now most low the of like particularly across I at look businesses or more growth I to of all business, teens said, for the coming this But pleased profitable And very, sustainable that's business, when on of the the because with on revenue the go all us. they IP all Cadence, by focused

of Your from question Arya comes Vivek Securities. Bank America from next

of I leading tools. How guess just your you're wanted or question in edge restricted or just to to not sales not ask got XX% is logic NAND edge, much leading yet involved sub China in DRAM? were it's any just involved would me in a seeing were China at be XX-nanometer different or eventually the not in intuitive way. leading-edge I the that design all. China customers way. without to that of from doing to design It's intuitive possible not restriction your

how Vivek, our mean new broken I our the And steps we've But do haven't China regulations. to to and be company impact in is taken export sub manageable. impact. the But out the is the limited with of compliance full guidance revenue the we believe XX-nanometer. full we much necessary includes

But because of contracts? it Or deficit? revenue you in help think that is that near-term X- X-year are or China is of is kind is in outside can involved because other analog? you offset are it it sources because that that Is that in you you John, view, more there a

and these an Again, say, redeploy the guide. we resources. rules. also like maybe I We've applied export These manageable of limited believe it's going it's we've included to And feel impact Well, our those look from new management R&D at some And applying mean We forward. restrictions, some we I in limited. perspective. have resources we're U.S. the them. in

different my is scenario guess would slows for down from year? growth to mid-teens? you I'm next happens way, rate a year? down if next Cadence's decline, growth down I EDA? budget the rate semiconductor XX% what even the slow for What under Or what And Like curious, asked happens go in sales or don't follow-up, the possible Okay. it XX% if that

is Anirudh. This

already, that course, our resilient. to high think more I you just to will -- at right? immune believe if it's very, mild course, how recession severe will is want very First a a it's not is it or is recession, level, recession? right? all, depend very remind there So of know depend like on then, it severe So are the a situation, we business immune recession recession, we I it. you nobody a it is, a macroeconomic very, But severe on of Is to if of

But in general, think are from factors more our I kind of X resilient. business, it makes there that

you one, So we know, essential process. design part the as are of

not shipment So the systems. and course, volume to and, design we also in semi or we are tied directly both to activities companies And our of system design the expanding into there, are modes portfolio then companies. activity

we part tied more first is think are R&D. and I essential So to

you we revenue know, and third diversified of verticals. multiple very in Second geographies we part ratable. part, are very are as our Most is And is ratable.

immune it, companies other than course, this environment. resiliency if I said, correction. are kind very there's to more severe of But of not like us gives especially in we that So a

think And color and are for that. provide we'll on so when year. can the you we time next I to more carefully have macro in next situation we January, talk information more And monitoring

impact recurring are more. stream I robust macro And very mean revenue. Yes. the will upfront of really resilient, we

a there's IP because terms we've equipment this that. on business Jay what and you need budgets but And revenue question I the purchase been growth like myself, at severe was do focused on very the don't we've you could in hardware that's I had the that the us are at look think predictability upfront a feel really to downturn know of strong IP things in And in capital about macroeconomic in business. one sustainable there, first the year. IT and his earlier conditions, if confident hardware year revenue profitable impact of things I and of that side. getting

comes with question Your Harlan from JPMorgan. Sur next

Maybe the as question. a to follow-up last

this and functional first growth. we emulation very XX% digital verification the chip of of think these to risk process. talked that would be verification I portfolio, early guys the this? agree and your if platforms. through the and hardware your relatively semi revenues, very design at least the prototyping and prototyping, your emulation see your months prototyping up you're about significant critical right, flip you and about emulation so next hardware with year now, it pipeline, backlog, side, design which portion upfront in SoC on where strong you next given that's year. industry of Very Do strong your then weaker a X So But about some think think continue and about be, I But actually customers' visibility, And year? remaining pipeline at software into design, development hear hardware to bottlenecks overall continue looking to you next-generation do includes as

a on probably hardware going But another need we'll like But revenue hardware few So of forward. from is assess pipeline But a hardware will front slow climate in purchasing to backlog of any there. issues macroeconomic perspective, kind we the the what probably months increased really business. have X months backlog. down is

X into kind You looks get X pipeline of like. that or about visibility what months

next has the hardware we The next phenomenal group side, more to few year, We'll assess be on think to functional verification year. a before need year. a I anything year again, so some been lapping had can but year. this guide -- it's The tough we months comps tremendous a

correct. But almost in the your design indispensable electronic become to thesis I general, is systems. of and chips hardware mean

And you prototyping you bigger, these as the to -- as that. get nodes, terms it's design previous almost the gate without chips even in and get emulation chips, go near bigger So in size they terms as than has impossible of the to of number of platforms, the is always same node, gates, if next right, the so node more the chip know.

gets So as emulation. verification chip requires more more It and and number the larger. of gates

emulation done. be how support I of is overall, needs to much a of kind and So there systemic verification think

relying just design gets it our on you them. on baseline overall affected hardware platforms general, as indispensable are in and do big required almost depends large how now almost growth all So any that customers are by shifts. these Yes. But macroeconomic

our And mean to from we're the be cloud. provide infrastructure to in out perspective, able business building hardware that I a cloud

that So being spending. expense capacity for to from spend changes emulation capital spend

would revenue used recognize business in cloud, emulation we have the Now ratably. standpoint, is CapEx to cutbacks But a solution have there capacity from a if though, on spending. that's we that do revenue

a solutions, that. focus strong the this more we're about Cisco, XXX space longer-term are some either But appreciate is of optical on driving have photonics-based on all And ] you on higher a NVIDIA, data center, and here. I to all strong portfolio integrated [ question of pretty maybe silicon I pretty more working Broadcom, optical the your or in insightful hearing module-based and this. Intel, know guys just move Marvell, gig because big more co-package a electrooptical. solutions. customers

Virtuoso photonics. got You've

think got see design of some few you partnerships packaging guys for of the module and market modeling well. as years? pretty advanced next team also with you've this power thermal manufacturing and solutions, some guys guys. solutions I do the unfolding over How your And you have strong the opportunity

that's mean you on package-level and integration. big, is photonics then point. Yes, touched I a also great

Virtuoso the again, packaging. A are lot position is, play to flagship are So Cadence. is advanced there and platform the the based Allegro, we things these in to then done I in of mean flagship which also these -- things strength platform, platform, again which of for a a good

and for And for which critical then and all built have Celsius analysis tools, like Clarity XD-IC. thermal, we X and over these photonics the electromagnetics are years, last

we a as possible is other broad there multiple that's definitely with have And you are Cadence. that this is growth are of vectors exciting And area, pretty a very So know. part exciting the solution.

in are position the and new important tools, all this Virtuoso we analysis working very our Allegro So we with market. -- are of and working in the because

comes with Munda next Gal Your Wolfe question from Research.

the When in into number. that heading one, just kind you is guide of Or the that first think around to XXs John, -- in think terms guide? need it especially hiring get get I of for it the you. to the implied How accelerated? of Maybe I was there kind that of Anything kind Is profitability. OpEx, assess on to think level the margins side? would factor about you cost implied do you of we anything low more conservative? there that Is QX, to part of to incremental

question, course, intend we a did full Gal. QX. OpenEye in of for hiring plus QX operating biowave quarter again expense you get to Yes. effect of the side, the Scientific on Because in do now during QX. any Future incremental includes Sure. [ and expense and Good hiring But that it of Facilities, full ]

full a in have expense quarter You of QX. that

seen on have increase bookings year, good. our compared front, substantial Also, this we've very bookings that had very, to been in forecast the sales

guide QX increased And will embedded commission so well. there costs into that as be

helpful. Okay. That's

you the Was As the third throughout that is row, allowed it's a itself, QX, else to this most? back really what hardware Or is top -- hardware surprised the keep about X But back that's line the year, thing a it year? been when raising months, you year. guide guide raise well done obviously, year? if you this you anything the on been the this has in how strong the and there then follow-up, has think look for the introduced it what

Like tremendous. said, been performance all showing with lowest-performing well. I businesses. very growth one Absolutely exceptionally is businesses single year-over-year. The the every the our teen I've of is pleased performing of business very,

wasn't upfront would of have almost I through expecting I that XX% seeing think what Now that. you're hardware. XXXX. revenue upfront But don't of grow over by a revenue lot to was ever from coming us any predicted

systems determine to Just long charts. it's it hard continue, the long emulation for. but that just popularity the our been will of has how very off may is And continue

making have we possibly do already as substantial a those and time, backlog as fast we're can. systems and lead We long

of out you a that vast for comes if a the majority line. on there. is There's demonstration of getting a customers. -- the $XX triage But goods we've as out at have as that finished possible. less million so already think that every with look situation a The inventory, on that production than goes quickly system I customer plan off to there's

Deutsche from Bank Securities. next Conti Your from comes question ] Johnny [

great another quarter. delivering on Congratulations

the give imagine decisions performance customers on follow-up analysis could ask EDA generally I'd strong clear given similar bucket spend that this economic some a seeing given is the I'll to system customers' the category to companies, consumption? of Cerebrus, had you Now in reacting speaking. climate? and more defensive, perhaps this how of that Are economic are you've for to more after. Or your [indiscernible]? JedAI this in stickiness spend volatile software regarding current and color design you particularly are bucket, budgetary

This is Anirudh.

So tools provide I pleased than can The done And automation they more some mean extent, -- what AI-based the also it it's to good real with the think of are these because solutions have question. a EDA in like deflationary. mentioned, I are adoption past. I we

more the to from I have people We the opportunity, work tools. to from industry move to automation, entire people think, for of

A our same very be move And higher of of possible the can on theme value lot focus make help you of terms lower-level the because Verisium. designer were resources, kind and do need can the the and JedAI solution this designer have more That's work, of value-add, the tasks Optimality in mundane mundane focus tasks. is on and can work? automated, is then the we work, we Cerebrus, AI-based more higher which you

or which And And uplifts is this the because that the companies, all the one I've a countries timely, popular, more even Cerebrus same, organization big productivity launch it's is teams, last your organization AI-based all in from productivity over AI-based for And popular because run enough are very the solutions, of actually environment so the very locations. question because automation. of the of the launch and Cerebrus, you a of they up other. the the algorithms in the value because talent part of like they its lot of also months. always met have getting to deployed And goes is, need tough locations? of issue theme And more whole there's X CEOs across naturally large these and are multiple are solution or that's even world X is or -- talent whether these something X

we is do with will us timely and platform from more. I it. X next solutions, in then good the this solutions very see we think on area. this appropriate in JedAI year think you'll I AI-based I this have So and kind major And top mean a of have more And very of we environment. tough

the So I we situation. and the the it's timely are to situation with we very progress, pleased macro are think in, very

Right.

to expected you happening half cycles, been report of of could over on that revenues what's flow QX changes shed any would any Just X whether XX unchanged you're software? here some any any there months. year understand to have will your there's the sales in kind great. commentary pipeline sort how in in economic changes backlog all just to to yes, given And be impacts it in I'm Maybe expectations Are of ago. to conversion, pipeline your on looking whereas color the the if fantastic. of lengthening [indiscernible] backlog to to at be conversion material backlog compared for next is months color trying growth of next there

latest including current feel the -- -- we've when Fair in and point, fact that the China The very to QX, but I that [ confident that the look it's RPO pleased but there. fact hardware from impact the the more despite growth into -- down, QX we ship I'm U.S. in very, Johnny of the ], slightly current down restrictions, I and the very also with including that at RPO, very, RPO export the seen slightly QX.

we you've revenue in about us. turns up But of XX the we know what what I I to QX pleased But -- a just growing very good covering terms of generally, that -- tend current quarter XX% in see next in typically have is started That's backlog in -- feel so RPO. where and are. we typically, for of add-on kind months. us is for But

total a The off time, revenue is -- And to the the predict lot us annual billion, year revenue. $X.X and that year value next $X.X now because it there. up value would billion I billion set $X.X more grow to through is more to represents annual billion $X.X should well that, recurring billion. the about is anticipate $X.X be of of backlog upfront backlog value but for difficult the end lumpy. our tends a But of for is Annual

how actually much It's to Yes. see generated fair. very from this is enough. revenue interesting That's Yes. year. Right. Fair

Joe from Your & Vruwink Co. Baird next question from comes

Great. year? go I back ask that this at big a looks like kind there so Is this it in reading went IP the noncancelable from $XXX award. visible I about normal value award? And length, million. the step-up kind $XXX specifically wanted then is topic term this If see of is of of look next primarily that arrangements, that access in to we what's hitting record between anything your to should backlog, to and lines, reflecting the unusual? kind revenue Or million

that your and current of in results look that quarters, in increase I RPO biggest Yes, great a sometimes when backlog. in delighted Joe, the contract always well in is not as -- intuitive bookings in how interesting, is kind you in for have our not at our particular you find may of noncancelable business. number Cadence's we're that performance record What's included The team with IP commitments, what doing. the our IP the they're

you of leave quarters you we for often your big then RPO the later. quarters, have But play on tend so current RPO. growth generate to bookings not when can contrast, you big a bookings the lot defense around, renewals amount there's drive room growth those of then find renewal I a where have add-on huge that opportunities And So company. in opportunities increase get in a coming might may and and in quarter add-on and have lower current for can booked

this contract. particular it's record in a case, But

on more like pay something that. to defense trying you're So

I this RPO but think later. you IP So seen uptick come for that huge current quarter, haven't will in a

Okay.

X-year mentioned was growth in on sustainable CAGR of think And revenue. forward. that past, the you framed XX%. And creates revenue the appreciate kind rate thought how just this John, I focus on deliveries year, Last recurring been was, to and of think, to That is a number recurring you component how but comp. I going XX% I year, tough basis. a helpful. to other then that good quarter, conversations upfront Okay. you're not there have then guiding the been obviously, And has I next just around wanted you and some take

rates have kind Just hand you that kind things revenue? XX%, on any CAGR but a it would of given as difference you other in XX% recurring comment have the to a pertains quarter later, some X-year some changed, visibility of today, just or on basis

Joe. question, Great

more characterize this I revenue, recurring in confident revenue my -- think now would forward I what export on now the opinion post quarter. time confident U.S. more restrictions I I'm think our than are, that was know last we I'm our the recurring I going now

-- I need climate the what to toughest macroeconomic just to next macro that I for think extra we months the year. challenge our the mean standpoint from predict. an to one why That's that's upfront what does the few business for how a is out year. means next figure

from next from Securities. Blair comes Abernethy Your Rosenblatt question

guys. Nice quarter,

Cloud, versus thinking between are decision approaching you how coming hardware to walk an -- are Just And wanted or particular, you and, as Palladium to a at us solution to about this you a bit. a Cloud. little just cloud us customer in maybe on of the talk how little walk you looking having a Can make through that the on-prem Cadence How you're pricing? about cloud-based through just emulation? how bit Palladium sort

Blair, this this question. Anirudh. Thanks asking point. a very important for That's is

in the moving across So is they're a Because OpEx in the regular to really cloud with amortizing and multiple they're hardware cloud by general, the even CPU big like these especially think vendors, more about cloud -- CapEx customers cloud, doing from we offerings, for you hardware. right, what if a model. from

cloud has on then kinds right? hardware you of the in solutions model And So been first, software build all top. successful

it more is the smaller our cloud business that to the also have cost offering companies for and now to flexibility gives more it some get of is Whereas and access a the We it more to Palladium they're doing lot of if rack. the and So companies are lot customers of than to and issues small full with sometimes ratable companies go there because like second a also reason, big because ratable. more to Palladium gives course, the this even use as the emulation our a would And cloud, makes want the is more and more you to hardware complicated deploy the our as same upfront customers them being as business. to they one more Protium makes able Palladium are on of that designs. because of also not then more and popular more hardware much hope

to all And with encourage some data move built big prefer cloud. we together the cloud. in -- our have customers to So to we capacity partners have data we center centers in infrastructure this the

more buy customers kind see Cloud the the in I terms our this support years, So from what it and more we more in I they we general, I want okay? the Now choice, want But think customers we'll or on in move is hardware right? of of on-prem buy feel to been use, earlier, tough something mean wants environment, customer cloud. And if we I to like saying goes. if all So reduce now to cloud, then was that. Palladium that becoming us. opportunity, gives and for customer want depends in-house on of more encourage deploy whether flexible building that OpEx, are for how this mean, course, John hardware the use to and CapEx several to But then have to it they they

for that's think departments talked for like department and the on call, mean software centers. start-ups -- don't also is in last On also about we have companies data the -- on which system that IT cloud, and piece, great earnings big the I IP I

on cloud. lot to a way. And their more long data feel really in be helps smarter like much because suitable also prefer products started we of us that and of not go system -- for cloud, in from as this them tail of system that XX,XXX XX,XXX, they have it own And why of Cadence, are big course, big, first there and centers, that's we is could customers with space. some the but then So a companies, them are kind

side innovate to not want We go-to-market just side. on the but product

Palladium even And customers EDA flexibility and it the ratability the side, more on buy for good are long great. the on because big hardware. on and they and is innovating especially choices cloud Cloud tail how So system Protium gives

more So overall, cloud And offerings. customers to more want to I think encourage these and areas of these are X our strategic for very use us. we

Ruben Our final question from from Stifel, comes Nicolaus. Roy

you attached you or you a wanted bit a every the I just deals little that maybe for companies to in companies digital days semiconductor nontraditional, on combination seeing? systems displacements about rate both? there attach either of Is you're guess, about of traditional Can drill you customers on flow. or semiconductor And digital up to what design new these hardware maybe new as I higher competitive think then the companies question are sign type talk design? into answered have for customers was. these that, seeing But I

Ruben, great points.

one customers digital knobs driving So automation does like of existing manual of it right? works. unifies mundane I and about it share. all the automatic you. The have also in control don't for does it task. versus having it's the and terms mentioned earlier, what's business, It's in tool general, You both, the and is, think driving, platform. think new more In all like customers tedious taking great general, But the I I almost to Cerebrus,

can I don't work place across it Cerebrus But XXXX. synthesis, whole route and the whole We've think and I been naturally placement sign-off. and too, XXXX unifies talking because about unified sign-off know, platform, or from, synthesis the

synthesis and comments, seeing So sign-off, with pull-through place along like that. I a and we mentioned Cerebrus, is and through there are in route my of

making and place So with are implementation. progress and route synthesis pleased in the sign-off, we with we are along

does it in of then terms help And flow. full

So flow just right, like route. this not full and wins, drives place

more full XX think than new wins. in we have I XXXX, So flow

helping So last had just in our quarter. quarter, growth good had And digital we that's see this you like digital we business.

the they rate company. design as right? more of also there's companies large you companies. in lot I kind companies on semiconductors. system semi system side, attach that software, hardware mean a as hardware the nature, a of system by Now is are know, why But That's used there being have Because

naturally bring-up. software for these platform need you have you when software, hardware So

semi, pleased smaller to semi whether hardware, not traditional new barrier think to to growth for in are I see the they're about, help talked these So lower just like we large entry in I to large of we the hardware. do cloud, then offerings, the system but companies. system for or very also to companies, And try

think it and we So we digital carefully progress going are just pleased overall, both forward. hardware, I and with of monitor the

to I will turn now closing back it remarks. Devgan Anirudh for

afternoon. for everyone, this us joining you, Thank

business We opportunities momentum are the our excited about ahead and tremendous market of us.

recognitions and innovative proud We for time the Great are years, of and one have at named the seventh being Place Fortune culture over inclusive as including recently Work. the we of have for workplaces world's grateful best and most we the we built are by received Cadence, to

also Companies the to XXXX, Business Daily's Best in in that be for ESG are recognition. We fourth we honored the row included Investor achieved a XXX year have this

Cadence. trust continued XXXX confidence evening. in and employees speaking your have and of thank great you we call. Directors, partners behalf On look our forward of and Board our for and again investors Thank our on We QX earnings a customers, our you, with to

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

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