Cadence Design Systems (CDNS) 13 Feb 232022 Q4 Earnings call transcript

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Fourth Quarter and Fiscal Year 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

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

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

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

will of Reconciliations in financial results. isolation earnings earnings the In addition, as in considered not non-GAAP [Operator are GAAP or and for are quarter related included release Instructions] present should available which we commentary on Today’s measures substitute fourth also today’s a GAAP from fiscal be to of XXXX, release. measures, non-GAAP tables for certain CFO our website.

to over the Anirudh. I call turn Now, will

and increasingly non-GAAP am in pleased we that operating XX% yet goals. solutions Good and the customers as joining revenue achieving guidance growth environment, their design report everyone thank today. relevant Richard. essential to innovative enabling afternoon, Cadence’s again, to and I current you, delivered for for our achieve are Thank record you challenging Cadence margin. especially exceeded XXXX results over XX% us

making sustained and long-term megatrends Secular uncertainty, design continue activity. next-generation in driving companies growth computing unchanged. Amid that as AI/ML system ongoing investment products, semiconductor resulting significant in robust remain XG, hyperscale are and their macroeconomic such

a broad-based fueling driving to and solutions will revenue pioneering growth John our business continue profitability. strong in XXXX, momentum expect We moment. details in more provide

System leading end-to-end EDA to broadens opportunities. position Design total wide portfolio Our expanding available uniquely strategy our us Intelligent greatly market of IP, range and analysis system capture hardware market a and

introduced big During business all we key at X both drivers across groundbreaking analytics upon platform. us of provides these we our and The system AI differentiated several AI generative our innovative level our data to computational year, expect groups unified age is chip significant products of by and future Cadence growth. and the software-driven of be the technologies JedAI,

optimized these seeing customers results, with gains. designs are Our delivering efficiency solutions dramatic highly and unprecedented

Additionally, to by and high-value up generative opportunities new for engineers activities, automating up focus frees on producing repetitive AI opening more our ideas, innovation. more advanced tasks

market-shaping analog products extended across QX, solutions to our core an leader system global and a and our analysis in portfolio, system and relationship our of and PCB solutions. broadened storage flow QX, have in multi-physics our solutions with memory systems proliferation digital And digital expansion and EDA broad and proliferation a we full custom, of through and During system and our including and of the core materially solutions. customers. In design EDA, IP our we IP expanded year, with system our AMD our partnership innovative with a EDA deepened software In to footprint QX, collaboration we core solutions. also we BAE our Systems far-reaching commitment hardware, extensive

and with renewed our solutions. IP in EDA, a through global networking core telecommunication to commitment expanded and also partnership strategic leader We system their our

with and the leading foundry, partnership providers awards won Open In IP further cloud addition, six service Year and of Innovation TSMC. Platform our we Partner from

both QX product the XXXX. and of some about talk let’s for Now, highlights

nearly advanced finished XX% digital of full-flow XX accelerate, at our delivering adopting industry-leading the additional growth. another business most with customers year, during revenue results the Our year. quality continue of with digital IC strong Deployment it to nodes

Our digital companies. semiconductor software XX now in top all deployed is

We with of products such and front-end our complementing accelerating as signoff Joules Tempus proliferation Tools and Genus the the growth Innovus. board are of pleased and Qantas,

AI-driven and while Cerebrus GUC designs, Samsung using of reduced resulting the and In gains wide design including and others, of with several significantly XX our their productivity X% deliver In Cerebrus impressive continued QX, productivity. technology, and HPC semiconductor hyperscalers. of adoption conferences. and Cerebrus major proliferation. shared an transformative CadenceLIVE Cadence XX a it now at Renesas successfully across X% solution deployed to XXXX, NX customers, Our PPA in accelerating area at top and Cadence the remarkable at X is design and our engineering XX advanced several flow top market-shaping Intel, including improving range delivered user improvement Among TSMC on semis broader Cadence digital successes a delivering CPU full power process Broadcom, a NVIDIA, companies,

for Escalating system Functional relentless drive our and demand software silicon solutions. bring-up combined to Verification requirements, strong complexities, first-pass essential continued with

fueled by trend hardware, had another XX% year. grew year-over-year, business secular Verification Our record for which

Our dynamic Protium software auto ZX platforms, and increasingly, EV segment. solutions, accelerated verification across best-in-class system saw HPC bring-up Palladium strong and XX and duo growth momentum of and providing mobile, hyperscale,

family year. hardware new orders added XX the customers and Our repeat XXX over during

two-third the than greatly platforms. with year, the Due expectations, compelling the offered to front-end more in value for exceeded compiler, by common the of orders both pair including demand our

Verisium several enables XXx cause a root in AI And in in improvement improvements Verisium Verification up dramatic customers, productivity. Cadence market-shaping Our to analysis. debug usage efficient new production delivered early Platform at

gain digital Spectre increasingly becoming electrification the in franchise transformation Our And our custom analog, challenges trends and Virtuoso mixed toughest to customers. and are design crucial solutions signal, they RF as IC simulation. momentum, tackled and circuit

leadership, photonics time revenue to strong in risk with new Spectre, by market, XXXX, advanced the for with more making grew custom growth market memory XX% XXX heterogeneous logos IC logos our IP led which emerging year-over-year reduce for Increasing Building Virtuoso with year-over-year in applications. business, our FX in in coupled blocks IP and Spectre to headway grew spurred IP year Virtuoso preconfigured demand and XXXX. our segment. a star of to strong on FastSPICE XXX XX% added our usage integration We nodes, than and silicon portfolio,

Demand was and and helping node XG interfaces silicon with key high-performance proven, LPDDRX in our designs. PCIe secure strong Ethernet HPC, advanced particularly automotive Gen wins in X, segments,

strong its the and packaging, smart seamless portfolio Our expanding True speakers complexity continued for footprint Wireless of platform are and and imaging hyperconvergence applications. Tensilica physical solution system driving in learning from across Rising DSP Stereo electrical, simulation analysis. a machine the challenges headsets, stemming and and worlds design, the need mechanical growing

tightly Industry XX% business Integrity XXXX, TAM system notably Our comprehensive our technologies. in is the System implementation that strong year-over-year continued packaging EDA integrated in solutions interest customers advanced XD-IC solution, embracing expanding growth. beyond platform and our planning, and with its spiked Analysis only momentum, Design analysis delivering industry’s providing revolutionary

Our ramping solutions comprising leading strongly electrothermal, and multi-physics portfolio multiple of continued end-markets. integrity and electromagnetic, signal across CFD power

wins solutions customers, Our significant with and several shaping our proliferated in-design and HPC platform defense while had CFD customers. Fidelity analysis market hyperscaler aerospace with

to first improvement and demonstrated Fidelity to meshing to their results. Toyota up time industry’s system customer chosen to XXx preprocessing. year, Motor efficiency in the standard numerous optimization Optimality by software the workflow were be Europe capabilities leading engagements, solution faster Explorer, multidisciplinary During CFD’s has CFD space analysis AI-driven exploration, And design a for in

he with Annual continue May. our seek Stockholders’ an upcoming Lastly, Lip-Bu our me. will to will reelection not plan, to He XXXX notified Board as Tan in keeping in Meeting that transition at Cadence advisor has serve the

to our will closely I the We role. with an and to Chair becoming meeting. Board structure The working chair ML of with forward following look return independent Krakauer in next that new ML her Board rest

XXXX and opportunities In closing, we in are us ahead are and execution strong business thrilled pleased momentum in the by with our XXXX. of market

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

would XXXX. good and I growth a exceeded am our technology began for Robust momentum of operating the our that drive revenue report with fourth continued and from the XXXX all a and for key everyone. recurring of and quarter XXXX Anirudh financial Thanks, customer afternoon, resilience activity you Cadence design excellent to the strong confidence expect to had across lot metrics of we businesses. pleased demand predominantly of and portfolio back strong stability and all on we our model. and an

financial the the was XX.X% and margin quarter was starting was year $X.XX Total year. the Here for revenue and million quarter year. and and with EPS quarter for P&L. GAAP year, EPS the the Non-GAAP quarter $X.XX operating the was for quarter XX.X% highlights XX.X% fourth and for the $X.XXX are XX.X% the operating from year. GAAP the non-GAAP for year. the of $X.XX for and for billion $XXX the some for and the quarter for $X.XX the margin the was for

flow. cash and sheet balance the to turning Next,

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

our for comments. I like Before outlook share a and XXXX, QX provide I’d to few

export XX% on on for year. year annual midpoint remainder have the for XX December also expecting XX% are This XXXX. our the control XXXX our substantially will remain our as outlook year. XXXX year. of moved similar for fiscal of with Approximately fiscal most the December revenue to XX, And revenue ended similar calendar recurring. assumes we mix XXXX fiscal upfront year At of the our revenue a a outlook, recent now for Our regulations end we year fiscal was

we operating $X.X approximately the of XX.X% revenue XX.X% for cash expect the use in $X.XX EPS of our outlook margin billion $X.XX of Cadence to $X.XX billion, in range billion. in $X.XX, And XXXX. operating the of in free the of flow billion to GAAP XX%, $X, GAAP we shares $X range to of flow expect XX%, non-GAAP EPS operating of our in repurchase $X.X to margin cash In to XX% to range to to non-GAAP XXXX, range

billion, of revenue and XX% margin the as further the in XX%, QX, to range of in document $X.XX range expect well For published $X operating which items to EPS website, in the non-GAAP Investor XX%, outlook to billion $X.XX. for GAAP additional commentary as and GAAP of non-GAAP to GAAP we Relations margin as range our analysis usual, includes And reconciliations. the operating CFO in $X.XX on non-GAAP $X.XX of to our EPS of the to range XX% we $X.XX,

In annual businesses, especially And conclusion, double-digit am to that pleased expand our pleased achieved the into we increased revenue across all continue that CAGR growth margins. X-year we I revenue operating am I mid-teens. of

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

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

Charles [Operator Instructions] ahead. Our first Shi question Company. & comes from Please Needham from go

open. is line Your

imply questions. to question. Maybe year you your seem two-part a of year. the to upward first you QX thank for guidance heard is through the profile appear be through Maybe fiscal a will my this revenue seeing Hi, it John, like And to I taking kind there is one John. flat seems year. profile am their relatively and fiscal a sure – slightly trending

year, fiscal a the let matter a know side Is yours or and me of or I matter part. second on Maybe end mix slightly theirs just it Although conservatism of product more different the difference market mix? different end is your the ask months.

once. are I kind of will at think I they related. ask all

ago, one I your hardware quarter hardware record year said, were it’s just think you ‘XX into XXXX sales for you because fiscal the a like cautious, sales.

hardware is that the the is in full Is year you. year? of you your there the ‘XX fiscal Thank profile it some year? half guidance on is in what – assuming Or second the your are assumption flat? in recovery for it So revenue

Hi, excellent see questions. strength in start as those The for – year yes, business. the our strong continue we expecting we’re hardware questions, the another to Thanks Charles. to

to ahead And the the customers, was see the ability we’ve up meet think revenue confident we that caution to is can hardware outlook, to XX-XX expecting because production last the head increased from XXXX. and new quarter year. last that entirety demand split XXXX. We more case with the we to upfront for hardware. able for You our demand. produce we some to for and as the you discretionary But expect feel that mix, did hardware was ability I pick to And outpacing our we’re not in strong not continue. for last in of be recurring our was capacity demand the year, were really into all really, proving year up as revenue at keep our Demand that

later. why harder And can we year, year. with expect If quarterly a is we And the wait lot we of because of we’ve the in the typically, half of take at Now hardware, second second little kind middle for question until half of impacts up. hardware. half year have bit year second the so in the half started your we then second because first that of the increase the to this see strength the the of year. the of the second the to into And predict you I we continued the risked flat. I profile hardware half half if year, felt the see de that’s a second the demand for continued will And the pace, to of deliver year think half

for Thank second my you. maybe That’s Maybe Anirudh. excellent. this is question,

I it and kind reduce of some projects around to although investors jobs I suggest probably of about I obviously, in hyperscaler mean, spending sustainability seems on could accelerate. AI there – spending layoff a not going long-term tech, in recently near-term is going about the lost the near-term, smaller chip a think are and engineers. both the mean, design the on that think to hyperscale investors long-term, some I going the strength sense. probably for are design I but think is I the down And worried to in worried a of mean, portion strength, people chatter EDA, well, mean, the that,

So real your what’s side? your hyperscaler X, the like Thank observation share demand horizon? you. from can any what’s X-year your coming – And current thought into insights, going outlook a you or

thanks Yes. for question. Charles, Hi, the

and both our is customers our demand broad-based, Our right, customers. system across semiconductor

trend lot a think is companies. our before, about silicon right other a are long I continued success. hyperscaler reversible business system that XX% optimistic system Because companies I’m companies. and a time, we of this They coming having for trends okay? is system from of now, of of includes mentioned doing very some That And as are of design. these cautiously already kind So

multiple whether the systems companies different car companies, and development. in or And look are stages see of phone they the design social design you at on they companies semi strong or media have If companies center activity or data we overall, side side. projects on

right? is there there. and here a This always straight Now some do customers more. not Some may is reports line,

companies more overall, less. portfolio SDA designs system also is may customers part include by you expanding like as be our But & system Analysis Some the will done with do know, our System companies. to there other segment. and more of our And interaction Design products,

part on are So CFD. the the or working also with see And you system business growing but is system not it’s silicon side side, on just we companies, our XD-IC very that whether or thermal of simulation can strongly.

So we is business, business. traditional which system EDA about year, XX% in our reported the growth last beyond

System of by I Analysis. driven activity to So think pretty and pleased. am overall, portfolio our X-nanometer design very other and And I strong, the expansion remains Design things &

Thank you, Anirudh. Thank you, John.

Jason Celino Capital next go ahead. Our from question comes Please from Markets. KeyBanc

open. is line Your

guidance year, in quarter. you any I XX% the best good and the year’s to to John, at terms growth you start invest tougher last guidance? to change on thanks much Great, how seen When comp. I’ve philosophy of a guidance, growth look set XX% and

we do. the to year, great for were a pipeline, guidance question, if No, we’ve That’s about hardware. until the way Jason. conservative recall, we wait had more visibility approached wanted normally we second increased we Last into you bit a so hardware half the same

year. – in it really, of mean, the had just we And out is strong confident we similarly, through really the the there of momentum year. we this approaching backlog, feel year much I very coming We’re but finished very so with guide,

that this on And in means to mentioned to How is side, hard level terms confidence toggle just Thanks. the I down? and pipeline? what think trying up and capacity. Okay. understand I’m of it hardware then increased you you

it’s access production Jason, we’ve more got Yes, capacity to – now.

lines additional added have the We to build hardware.

capacity, For the it didn’t I year, couldn’t than so last We production but last XX% build did sold demand. enough. we year, up fast keep we more with think, ramp up that we

XXXX, production produce production can we want and the we the customers in and up extent have that need ramped of that to the cloud. to inventory systems, or also feel again demand. hardware we extra access confident But that for to the underserved unserved a components number to that have very access capacity we So we we our meet

So the generate, we can into can production excess capacity any that any can we excess or cloud we put offering. generate for

you. John. Thank Thanks,

question from next go Gary comes Securities. Our Wells Please Mobley from Fargo ahead.

Your line is open.

questions can discovery not tools. I guys. accretive which the of you Hey, the plan be average in for us was from my your investors where mistaken, you’re phase with accretive if and if We’ve about will a becomes And to included this to lot size. JedAI taking I’m revenue question. Thanks deal mass to, and about finish to guess, in market how that learning and getting price ask AI-enabled share Want to your to it Maybe this all it? just machine think growth. terms how becomes overall related at growth IC, to of you the how all to your dilutive rate and in price how year digital been according

we So that? AI/machine into line simply read how Is item just should impacting yet? learning not that

Hi, question. Gary, great

AI and have all, very of or automating first about it’s for system optimization. producing more in and design, applying in about or chip better AI, we mean, I the EDA design always I’m results. design So process optimistic about talked

complicated more if and add have X inch. XXXX, So it So look X on be transistors, terms XXX chips then it. even okay? will get of it size, I trillion at now, have look then more. chips they X you top by transistors, of you XXx will just are you inch software of at in the by And billion at right you right, if some way on it, look if – even these the And

do need complexity up XX, X by go design our to will XXx customers next the that X to in the at least years. So

way that industry. in best the the now moving course, is history by to only other level our ways industry. gate have more from done meet do to is our level. way do the And to So using by to automation. automation higher of started okay? level of And design, automation we right AI, transistor That’s more We more doing

product Over tasks going can is the lot on that running But improve cloud. mundane And biggest real have by done and done portfolio. mundane designer be of we a repetitive AI. lot last be to you massive productivity of the X, things can And of so virilism, benefit by XX more that ways see move the using CPUs, tasks one the tasks, across a using forward, to the is can right? our more higher-value the tasks AI, done years,

we through very a then analytics this we critical, okay? it, the so it is And we AI So is you data is of multiple top implementation. key on too, And applications way – approach as one to because have analytics JedAI a for build know, data data platform. Cerebrus and comprehensive a

months also only not and And Verisium all-consuming on then is which very our for on are for another problem customers. focused we launched, but side. the also a few system verification, ago, We chip difficult side the

with are that optimality, well. or on is the has industry have to optimization getting as the But dramatic And seen. automation the system customers the system which side. success not we So typically, of are improvements optimality we level this chip great used having

comprehensive optimization, on that have we we of most believe been called years. for I And generative together, which, working the AI now portfolio. it X course, AI. always taken And focused have AI have on So we

even several companies the products mentioned years Renesas, Samsung, are about the they NVIDIA, prepared X my I talked remarks, Cerebrus, all I were And Intel, think ago. in results for they seeing. leading introduced like about

business And if almost and because our And designs growth designs believe the Cerebrus. XXX years, we will more that we of tracking driving in Verisium hundreds few by in and have on that designs have than the that done is being are seeing you’re We some have optimality, you the include And AI AI. outlook. I component. next all

job XX-month that, diversity in for And that, year. you in Was backlog quarter? that of came Or backlog large a up up of XX% XX% again. renewal terms fray the or on the that up quick in Nice Thank the a year, the growth? on could speak fourth there next just you into maybe for deal Anirudh. John, the follow-up

finish and for contract in the mean, growth year. particularly timing great to pleased years we the with consistent we’re I And But know, X-year CAGR Yes, you’ll any you typical that’s to over mid-teens now, guidance the growth the cRPO. midpoint to last cycle, question. I and the as we see a Gary, X mean, cRPO typically had over tracking It’s achieved implied you look our impacts the really if contract to one very strong the that’s of mid-teens quarter. that growth on at XXXX mid-teens XXXX. a

Thanks, John.

next go comes Vleeschhouwer question from Griffin Jay from ahead. Please Our Securities.

Your line open. is

Thank that you. Anirudh, a said companies. increasingly companies are becoming silicon becoming wise and systems like man semiconductor once companies, systems are companies increasingly like

you different CFD custom some here, priorities go-to-market? you, becoming of your And up, CFD could and then course, AI, that here? would course. in you example, and still Synopsys to R&D alike go the and, or of in you different if The either mentioned, matter, last remain say years, R&D ways the in – second priorities they for verification, systems AI? for about your opportunities talk R&D your example, in perhaps are earlier thinking from ways is and number investments for And of significantly In synthesis, you, like how you more are customers so enough that question where about and ramped from of areas influence have even though your represent the for alluded do companies classes these that two in you or your other You of what additional that forth. for

said as you that before, of XX% are any questions. valid in about know. for okay? is and of are companies invested the in semi one That’s trend, highest Jay. our R&D, Thanks, percentages And like I companies semi becoming Yes. companies irreversible revenue irreversible. of I course, And this S&P invest This system heavily point company. great becoming us, R&D. of XXX is And is system Very mean, we companies.

your reference, we for computer always are that X,XXX sure may the is or scientists. core Just the be in in engineers core people have roles customer know are support best-in-class. make already, good, XX,XXX okay, this has Either we And because they you company. or R&D. the to in

the three true So is have synthesis, whether that’s you come. place simulation, of will that route, that analog, to is AI. highlight, mentioned, so for is and both we on, and class. the given, are are that’s that making I think And core of that best like in circuit things I companies. sure top years that, which I thematic a for One verification, to want investing there course, And effect then design in. AI a will is, certain then mentioned, And which semi like thematic work. – big system be on

we And the are no and emerging now, of customers. chiplets engagement to the both a benefits design heterogeneous are best so and chip do and Cadence longer there But companies XD-IC, talking and because and value of of our area set system our are to extent, course, Everybody to take design provides unique of companies systems, our better more move is then of AI the system wants of analysis to productivity with system the results with is system designers. with less and and semi lot portfolio to companies. this. and in analysis positioned emergence is third integration, advantage the Second similar, to this

basic advantage big base and mechanical. the no the other semi, of base. always this, the See This question, take come. will okay? the on is the top your going to the the to system So the Cadence the themes algorithms. better company talking designs architect, years the to and But of coupling overall, important, system convergence mechanical us systems between is to happen XD-IC these and best-in-class We’re positions with between electrical of there for us. is three and than designers, be electrical And AI, to answer are of positioned uniquely

Thanks, Anirudh.

Sur Our next go question from Harlan comes Please from ahead. JPMorgan.

Your line is open.

for afternoon. Thanks Good Yes. my question. taking

first how spending verification, as of also maybe here. digital like, more about pullback But a have, nice-to-have the on not it some these hardware platforms. the guys we’ve sounds know you need-to-have, platforms complex year. the still team very need-to-have on right, half relates visibility SoC becoming hardware concerns to to but talked So has discretionary-type good are very a a these I

well into have We’re if you already have semiconductor industry cancellations the concerned. assumed shipments pushouts would some downturn. seen customers or hardware I orders were would in in that

So of type figure trying what’s of this activity? has conservatism just team seen on the hardware. to any I’m out the driving here

thanks This is the Anirudh. Well, for question.

I it. said think you

if think mean, the them. no-no, use money, it any delays the I you mean, spend chips, chips that work. hardware verify be hardware to verify discretionary whole this it then that’s I it’s you product big – them these are I the to complex what designed doesn’t expense. we know platforms chips properly, And back could no comes don’t any the and a and have you is longer CapEx, part right? see It all is customers. today, of but I our no longer spend for

are and So Protium both no hardware platforms, longer Palladium nice-to-have.

need to provide we a now You And Chip them, strengthened then has with software not we Protium, unique. been verification have have Palladium. portfolio bring-up. okay? And just of chip us bring sense traditional also our with verification but by

So, is so far, demand strong. the

position year record too. our that, think – see last And had a year we pleased in the we competitive And hardware. These I in But had growth year, continued have where days, we year. we we after hardware. record are very

And is like very now. with markets, complexity to are chips have. much automotive demand nice happened as It automotive, no what longer has pleased the so also We So end talked we it’s in higher about longer also multiple – right? no discretionary. is

the is So are now that. the expanding hardware to chips. of use used data are even chips other the Almost also we like require positioned well kinds automotive is thing of But almost to whereas all markets, it traditionally, very take chips other networking. advantage And center chips hardware systems. end it with will of do these big to

apply And simulation digital learning-based of of and around ML take advantage your is Perfect. Is also parts could design and part your and done analog integrating on your team cell verification, team ML your and of analog follow-up, IT analog the on needing team SoC to job like has iterations machine my design many then and customer’s portfolio? and many still and methods working the seems as different Virtuoso the a nevertheless, custom integrating variables, franchise. custom other into Although but a custom frameworks great and it the verification

very a good That’s point.

like I right. plus of which is very It’s all AI good is mentioned, in inherently more have aspects math, So mean, at. science than computer AI. software, what we we’re XX I projects computational

assume announce several you way we working now. are markets So to that with in make can flow. then them. throughout And sure customers, design products our they with We a conservative are end announce we want we then working more and different

more PCB. The year, about parts analog implementation. year, we custom we the year, in hear and will talked talked of the more digital us verification. And packaging business. last I year you JedAI is this Last ripe other for So automation about and before, business think from

it stay you to wherever apply is rest assured, can AI are applying please tuned. it and possible So everywhere. But we possible be it is

you. insightful. Thank Okay,

go question ahead. next Vruwink from comes from Baird. Joe Our Please

open. line is Your

the RPO everyone. Hi quickly to topic. back current Anirudh. go I Hi wanted to

trend outlook growth. north you type even probably hardware or mid-teens is visibility growth has of as John, Can It said, I XX% finished XX% for usual. a some mid-teens it recurring the good, that if be backlog is closer higher more growth to very was now. appreciate And quarter starting like it, number in growth. I fourth you So, then just that than XX% help reconcile like implied from does come think seem to would the with revenue? that

hardware And there software that’s into applies year? those is factoring so the implicit to like bookings entering bookings XXXX may or this, assumption an also in applied to be it conservatism,

Very QX. Gary any earlier, just about we there finish in was was strong as Great strong question, of lines that customer year big Joe. I year. one was across number customer, out closed terms strong bookings. asking mean customers, very big in as the of mentioned very there a and wasn’t We all had of he the business to the particularly finish hardware

systems not hardware think our discretionary I just spend. are

customer As people their R&D become on the and to in end Anirudh of spend wanted part have before of said the get the side, indispensable orders earlier, they our year.

So, of to you to the a quarter-to-quarter in lot closer over lumpy next where And from years, you in if like for for have up if last X to I you year is as can the mid-teens and be we that’s over look to mid-teens. And cRPO, into ‘XX. ‘XX, a you nature. guiding growth visibility year. say, X years XX%. revenue want But reconcile know, And the cRPO, think between for we if are it’s look mid-teens probably CAGR, our basis,

So, some looking period. kind think you I average take X-year out a the over can of of by noise

using And a the the Cadence Okay. obviously, That’s design helpful. large is stay language guess of reinforcement I already models. and And learning any around then and guess kind will flow of verification. lot thoughts attention recent I on of I AI. topic on

what see, started are maybe maybe the I within entirely to of generation new think verification. supplement some code tinkering products? have does already this you potential doing, it or with You RTL bring like Does to have about certain aspects or

to AI the all at I one mention thing technologies. of look Yes. we mean is, kind always Good point.

results application have can pretty better customers. mentioned, team. you is I much We the for a And optimization, like because for plus simulation talented us, the biggest generate

using now. are of XX%, typically, kind And improved some one lot from example, while ML of improvement this PPA we by a going you reinforcement That’s learning give okay. see So, for from an – of node to we XX% of spending the improvement. And results the all like can next, dollars, you billions are a okay. seeing, of other the kinds techniques be to to and okay,

from algorithms. can You that get of better AI kind

tools will support. that. results, Now, possible ways main for other be ways, we which all I applications. customer are and mentioned, some There could of better the our at applications, language customer-facing the give improve we when doing continue especially of could look we models, are to as to better productivity, in there applications But already the be interface multiple with

you Thank Okay. much. very Great.

Yes.

go next Our Securities. Vivek Bank comes question ahead. Please Arya of America from from

open. is line Your

you System Thanks the that just look think does you different or my aspect Analysis continue do how And over the and a think Design outperformance? change? your market, when X you seems I for growth the has lower as to years. the competitive in taking off obviously, the drivers? driven last that your relative get you particular in about question. growth of Can Anirudh, bigger to market, that segments, at base outgrow fastest-growing be the landscape segment, do What

businesses I great. Vivek. Hi first want are all just to pointed out that Yes. doing

was If business, okay. few ago, XX%, very a our you okay. business, stable be that’s business, XX%, look okay. remarkable numbers, at XX%, analog a That years Verification are used These Digital grew to business okay. okay. even

this good put remarkable was chip to X business, in design at what very in I time, just context I and So, to same like growth ago and a that our profitability. is to happening years mean mean the EDA now, in

more operating We have than XX% margin.

So, and growth want because And are And better. earlier, to systems, mentioned on and And the I companies growth. your with Jay XX% had companies. mean system we like year focus like that’s a I that on strong I come customers products our question just this semi profitability. to integration mentioned, very think

like is, and because analysis, one the performance position faster XXx a thermal in at think the computational our products When will XXx, of of is mentioned again, Cadence I you simulation. power before trend. need things XD-IC, our analysis. So, run best There have simulations, look provide software for higher this I trend. an that. biggest is to Electromagnetic is thermal irreversible

that. the near-term mean anything is continue, So, I to that this in see will going don’t right. change I

you space, things in are simulate optimization. car barely my – barely I a in right. confident That are irreversible wing know, the we investing dynamics simulation. the I heavily using which are. in the as And we fluid biosimulation. that where we mentioned that trend, still, thing that prepared expertise, simulate areas and this And you or they computational So, to remarks, could is or properly, think of could a we area And pretty AI other another it’s need whether are is expanding other

loop optimization. put can about has give results simulate, engine optimality, can in space we automatically that only But of Forget not a with that, not inner to the seen. reinforcement-based we AI that

So, to entirely I am capacity actually very optimistic improvement. because about of regular performance AI-driven along new customers, optimization set space like that with in the and simulation it’s system

but rapidly. small think market, a of still part growing we So, I are the

And in crossed that think we segment. a is think in million to lot revenue I $XXX important room there I grow there. of

for managed over And seems follow-up, margin all, that achieve this incremental for than year, lower my when Understood. you at at look it last John, margins I have average few years. incremental the implied to complaining EBIT but not the the somewhat

make Just to we missing restrain perspective year. from not cost incremental that could sure wanted are EBIT leverage anything a this

question, That’s Vivek. margins. a for thanks great incremental mean and pointing I

you As carefully we very on know, focus those.

X XX% ranged margins. the we that – XX%, the I we margin over are And over I mean period a I year time I from row of incremental XX% that that Over last was the the in sixth achieved have over range pleased to incremental achieved have years. last think XXXX, very think we think

in we pleased guide. very, with the are less that. with So, very starting slightly year this And

of I years, – But start is is the and guide the years that guide. to the and initial X any of strongest largest the right. think XX.X% largest the implied it’s what is strongest – in last X the

in a have And So, year. about that tried and throughout year. achieve seventh that find for years to very, know, feel year, sustainable to running, the starting we as be position to pleased X the the through you And this revenue that profitable managed we growth doing very to off confident improve year.

much. very Understood. Thank you

Rosenblatt ahead. Blair go from question Please next comes from Abernethy Securities. Our

open. Your line is

and great Thanks quarter, very much guys.

there to the is wanted if acquisition update summer. anything last on to Facilities see Future Just

You seeing couple How your simulation are you of that space? for now. a have it is other trending? cross-sell software quarters to that And had opportunities into

if now , algorithms. that we look system also kind space, because molecular centers is the in are CFD, one and this way end a point. unknown Great through of our I CFD, of finite differentiate vertical to And to our because a smart the about in there space is and is very of building vertical further one we Yes. other power, And like simulation is the biggest is even But are and is kind of it are way excited There the Facilities But the simulation. bigger differentiate to you CFD markets, at offerings. compute faster. Future CFD right, element, differentiated there differentiate things buildings. few there mean end the things doing only think by one thing way okay. data lot way doing market. differentiate I

of they engines not So, we only core with have the Future thermal lot also is the But can it Facilities, CFD couple a simulation CFD products. the good, like with rest and the built all building of racks they for the are AC have like, AC center, components, systems data a or go you they that. models or models all and for and vents a whether into if

actually And digital So, data building, center. the very just can a for center. customers any data to that accurate be applied twin the get can technology very, not

center consume lot Now, you And we market. know, that’s of power. started data as a because with big a they

as much right now, energy the airline So, industry, like consume centers data okay. as whole

lot picked that the reach. because And that’s a home are have of Cadence we now of they – whole energy since are So, with up engagements have they we lot a bigger consuming. a that in

picked on lot centers, So, cloud. companies and even industries lot they we which hyperscalers, because the are a in of have data or internal a with the other of big whether are up companies, engagements other have with

that That’s of optimistic I it. we am having in from the So, acquisition CFD you this vertical verticalization why see will solutions these of pretty made of more about and that us, space.

great. Thank That’s you.

Financial. from ahead. Our go Roy next question Stifel from Ruben Please comes

open. is line Your

I more moving guess that hardware, from orders as designs, and most Anirudh, question think SSD up. I because ask to out you on is firmware commentary and new are hit and those in think to of you. likely of on bunch Protium. sort was interesting Carlin’s wanted that it and together to designs, that seems Thank were we selling move like more Palladium thing things And ‘XX Palladium to questions to one on that got your, me software of for I me that Protium both But a the about. I stood two-thirds your was that the of

So, I how revenue either are expansion about longer term kind that thinking or on you. guess interesting. that if you could you of TAM would be driver as just Thank comment hardware and growth a behind

all, our address to of point. mean more Yes, in Protium growing, it Palladium predictable mentioned, are both growth business. absolutely. Great provides growth always also we multiple for that of them are but why thing have good secular it’s it’s but which and parts, of with complementary, different that’s products. hardware, trend first addition I a like the the And

the like last record So, because even need because and though a don’t you, hardware most year software we product I still we bring-up, of software-defined had to tell year the in year future growth this mix, of are designs this now see design.

the for design. is what is Software hardware requirements the driving

at and in on chip end, comes then again. comes model in and Palladium to what Protium the that they the kind do the then out of actually initially, design, figure Protium So, start to run with do. And once you software architecture then is

two a and customers silicon And is between between to need bring-up therefore, chip the a design. we believe that too, a do have forth of compiler platforms, like there having So, unique value also our platforms. okay. gives But just move and seamlessly can that software that common lot I back you different it

time is differentiated software We design bring-up, right. ourselves, our it of own with reason good. partners. is is advantage that the use FPGA unmatched, that Palladium, our terms built gives So, for of well is in it compile But we Cadence one And silicon. foundry

like logic simulation. on then offering thing with with built And like systems differentiated Jasper Protium. we Formal have So, our platforms, and we same use and a XLM verification regular FPGA

We multiple offer also hardware platforms.

software to they because systems ARM-based course, Of in also especially we been performance. has all platforms, our but verification offer that price xXX, can traditional, ported have

So, with on. multiple not are have at run Protium, and Palladium we only hardware we them the right products always to looking

ARM, we of to a case of silicon. xXX both to and variety simulation it’s custom and full logic give then of it’s Protium, Palladium, in options And customers. Formal, in In look so case our So, FPGA. at a

thinking quick just you for all just talking environment, of the watching megatrends about as ask the for John, were that how that backlog Thanks for up I John, and context in think all wondering, is I don’t in Anirudh. am a about – just pricing things on that are well. asked are the the given have ‘XX? you you. you pricing But the understandable Thank are light kind of macro, going etcetera, that if the guidance and detail of could If I again you follow-up move

– driving and we The I our very yes, Thanks. mean for are for Cadence value on disciplined customers. focused and

days As It’s is everybody the need we our like that on tools us. the too, not to us don’t with drive our productivity, much our quite tools that. and wants hardware spend software these really customers believe on side, And help I customers to we all indispensable focus said, a that’s of provide from they improving on very side discretionary. that lot

So, I the a at sweet think in moment. spot are we

getting we the extracting the our increased tools. we of disciplined are that So, But are on from are from value tools customers for our that our pricing. the come use has pricing

sense. Makes Thanks John.

a John lot to are from to we design’s X-nanometer. think what when but to move you already, people said, node X.X-nanometer, X-nanometer, emphasize, the like so thing One Yes. X-nanometer, X-nanometer, typically, add I know to at one one right, then thing this at another, of

XX like migration of us. node years have we ahead So, of

go time node effectively from next chip. doubles in node, number So, to the one of you the the transistors any

effectively and doubles blocks complexity number So, doubles. of

normally it being more software. it our for of chip same that has things in the more use done, So, requires so

thing XX happen one and there just past, to our this a that’s transition, happening in is years. the next to So, is will whenever emphasize node that is but investors continue this to for

route even can So, be That productive. and of course, runs more that AI, requires That that make more requires also done. to And with we more more hardware capacity. simulators. requires place

years, years of XX That XX slowing not is you on Law another add And Moore’s least and adds – down that, XD-IC. for okay. at So top of.

will more of that. growth do amazing So, we have hardware need software a the they and products, lot to more customers of and that and sustained build our

mean where talked of from Anirudh. the the top how kind question. guess of with think – systems you – it going about just budgets portion into Yes. and you I I to Innovus. just guys companies this, and greater offer. I tools semiconductor obviously, of have that going both seems, about I R&D on kind trying was running Thanks of Cerberus of with that’s going And am suite

and So, very anyway, a on thank congrats you quarter. great much,

ahead. Andrew DeGasperi Please go will question Berenberg. final come Our from from

Your open. line is

of it to taking to it timeline customers, that of steep my it that curve mentioned, I processes? I the wondering for in a of terms question. first products when kind kind guess from adopt them what of terms them introduce And just is in how to you they the typically was for in your terms learning analytics is day-to-day of us? using takes are when of it their you Thanks

Yes, that’s a very good point.

AI, So, is I very right it’s our are think model something what doing like similar Cerberus they use now, okay. to

trying The running different interfaces of don’t Innovus, we And running will cockpit, do will on they doing they are automatically. commands that it, do automatic used they to to experiments but interfaces. were of if those will similar. they So, top are the are it running used then change will in things, almost way. instead the manually, run a that like any But Cerberus But and are it manually similar. Cerberus do an of

to doing. are it lot these tasks but some some Verisium. similar away AI-based true things new the always and kind gap, just So, are users is It that’s our very were have – Cerberus why that working seen similar are typically, right. of anyway, these of They things require designing learning takes is, tools seen don’t And customers smart model. we for true chips. the are fundamentally they of complex customers all for a optimality, There have you uptick because mundane a

quickly. So, nothing pick is in they can’t up that this a pretty

different Is of M&A you I you then wondering, bit in the what different additional the R&D was the of planning themes for that year. John, X for guiding That’s that. for are you mentioned the – one behind helpful. question so the earlier, a are I bought just And potentially last below thinking in was share in you Yes. repurchases, or is a terms it of investing terms think year? This for three function or the year, that? billion it

Yes. XX% Andrew, started That’s are share changed way for flow hasn’t shares. our to our effectively of for expecting this and we capital the free approach allocation repurchase again, cash we too. year to that last use repurchases, year,

We have a number programs. of repurchase

general repurchase refresh the stock have we kicked when kicks certain also, had of QX program of And QX. offset year to in But in, from middle in We merit our middle baseline have the because opportunistic do last are program. We dilution price that an and we repurchase QX, in accelerated in year last levels an share the met. year. that repurchase year, the

XX% flow buy of free at will repurchase We that So, opportunistic shares. cash more. right guide were kicks we we bought repurchase now, typically least shares prices our to back if in, but program when the don’t to we back This assume using lower. year,

you. Thank Great.

I will Anirudh over to now turn the closing remarks. call back for Devgan

XXXX robust Cadence and for this business opportunities. you an us joining all activity tremendous for market time as strong afternoon. Thank exciting momentum we with It’s offering design enter

X,XXX Our priority, are our portfolio culture and newly the exceptional innovative high-performance of ESG driving and as while Intelligent List, EDA core execution our we on are the for Board our we Fostering a grow the confidence of top business investors Cadence. in over released strategy, of their of solutions. a we And expanding companies Directors, sustainable and thank trust and customer-first employees is mindset partners have and customers, Design ranking and top-rated group. software services in continued thrilled Company innovation XXXX accelerating in our included to System new with growth our inclusive behalf out been number XX and

Thank for Cadence today’s concludes year fourth call. earnings today’s participating quarter and conference fiscal in This call. XXXX you

disconnect. now may You