CDNS - Earnings call transcript Q3 2021 | Cadence Design Systems, Inc.

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Operator

Good afternoon. My name is Jumeirah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Third Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator turn of over Investor now Senior Alan Group Director Relations the will to call Lindstrom, I for Cadence. ahead. go Please

Alan Lindstrom

Thank of December our Lip-Bu at through Financial will cadence.com webcast John Tan, prepared XX, Wall, to Officer. be like Executive XXXX. also Officer; quarter The website call. copy the I Vice President; the call to Chief website am Jumeirah. and Devgan, I by third through available conference is XXXX today. that be available A contain will Please call President and today forward-looking welcome today's today of our will remarks of joined note archived Senior this Anirudh on our discussion earnings you, everyone statements. the would and Chief conclusion

but risks actual include, industry and strategy our or and positioning. known limited development, those discussion. from to Due market opportunities implied not may plans, product outlook, projected in are size, and statements today's to business uncertainties unknown statements results about differ business materially and trends, regulatory Forward-looking and

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

forward-looking our disclaims estimates required future update of Cadence law. predictions rely forward-looking to events. statements as time not available information except and on any statements to are obligation as such should based on at by You any statements and All the

using any present measures business, in results Cadence to or not measures Accounting results. substitute comparable to with results similarly encouraged by considered accordance financial can to or investors standardized or management should believes and the financial and based non-GAAP in financial and non-GAAP today’s be October non-GAAP GAAP are GAAP, other financial may isolation most quarter XX, release measures prepared it potential methodology Accepted in comparable commentary today’s GAAP today. are with results direct financial financial financial results on on Copies release. measures prescribed non-GAAP of GAAP are an financial to we the their titled reconciliation using related evaluating ended from also will These press Investors non- CFO addition tables of non-GAAP Principles our certain for a in for not review companies. GAAP earnings be to measures also measures. not review addition that certain be X, financial In from These useful our press as XXXX XXXX, Generally also dated October website. available the

a re-queue Q&A questions would observe For additional would session you follow-up of time and and one one if today, the and ask ask question you limit we may to like permits. you that

Now, Lip-Bu. I turn will the call over to

Lip-Bu Tan

raising XG, and of a connectivity, such areas markets. driving is for growth trends being and like continued results as by of accelerating data Good several year. you execution and everyone, Driven strong fueled continued and the hyperscale end by which today. demand moment autonomous third the joining computing, industrial turn industries. for QX customer key innovation us IoT across delivered for wide innovative design are in thank solid compute, in about that and analysis, are the the semiconductor provide This John team. the is this by driving storage, digital are in our growth and financial year XX% details we third broad-based business, a expecting XXXX. will outlook and non-GAAP requires generational strength XX% range of secular activity The driven driven updated for our data by for solutions the afternoon, our our for margin and outlook the quarter, transformation both Cadence the accelerating for operating results financial revenue era time

product transitioning quarter, becoming on business XX, very Anirudh of of the as baton ask phase I’m taking an leading grateful the through highlights placed think for of I to eagerly the our and confidence Anirudh, through Executive is has over I CEO the I truly will better for lead that in and years. Cadence of and the I be to go next well-positioned, Anirudh one I December have team’s I remind hand role been the President company with accomplishments would forward customers to look Chairman proud new at time. thirteen the to Cadence heights. Before and and you no shareholders its like that for honor It extremely us. to our the trust growth Cadence that can him and and to to past

I While Anirudh. will to over my I be now earnings call very will will the shareholders, will my that and last support, turn remain much continued Thank engaged be this -- for your with call. you

Anirudh Devgan

Thank you, Lip-Bu.

System computational into Intelligent Our software EDA opportunities uniquely to the as markets, we’re we capture beyond leverages expand that strategy strong expertise positioned exciting talked Lip-Bu Design and our new about.

our As EDA, we see are we pleased especially IP to and by increasingly growing systems of systems being our number execute strategy, a adopted companies. solutions to

and and of Delighting commitment enable to relentless growth broad innovative their customers solutions to a successful utilized accelerating EDA Tesla of a platforms requires the instance, set hardware Cadence delivery innovation. system. Dojo For software

quarter Platform, Virtual and launched Studio. Helium AI Hybrid Midas This Platform the we Tensilica and XD-IC the Integrity Safety Platform,

all introduced now these across our We innovative be of of year will business significant, products our growth. key drivers and groups, this XX have future

which XX% with revenue with Digital business quarter growth. the year-over-year Let had me share some and Signoff, starting of strong another highlights

continued quality the adopted with was results full to proliferate customers, digital shaping customers. of and at leading market most industry XX delivering advanced by new flow Our nodes,

that PPA, technology, with and of transformative significant learning incorporates pleased deliver very are and solution, We performance unique the gains. momentum reinforcement our AI/ML productivity Cadence to power, Cerebrus area, growing

realizing market their shaping launch, have great Cadence customers addition In of to Cerebrus several are Renesas to flows endorsements Samsung time at benefits. and the and added the production

global improve XX% over example, Cerebrus Cadence semiconductor tuned automatically As almost eight total in manually on mobile only design by a CPU reduce used to timing company XX% days. an power by their and

Additionally, power design mobile XX% in marquee over nanometer get by of systems XXX reduce company productivity. Cadence and Cerebrus the consumption improvement to a over their enabled X

hyperscale solutions. a our We with of broad significant business customers, our expansion commitment with that continued a including hyperscaler, digital included growing EDA marquee to software our a

XX, complexity of with year-over-year first to provides a virtual to Next, marquee strong noticeable early underway. development. industry-leading with up. of XX I other customers which where the North is significant drive will time need system and Dynamic a and Helium reap for XX% hardware America software, and endorsed new in We by Palladium strong and get hardware enabling leading Verification customers Nvidia launched especially creation learning ZX as was IP, by global orders business, systems, adopted bring of and Helium regressions, which Xcelium-ML, hyperscale solution comprehensive right deploying business, and new Duo, hardware a silicon This talk our about faster our prototypes and growth. of demand In they the had our momentum in the our Verification Suite, revenue in drove engagements design that software of Accelerating delivering Growing our adoption the led machine Verification and platform the the quarter regressions, hardware/software Protium verification, system Studio, software by productivity are and Hybrid Virtual SoC quarter. continues and accelerates optimized complex customers majority are a platforms. across up quality Asia. our to was simulator marquee capacity early customers, logic performance, hybrid benefits additional several

which engines of also the critical We for integrated faster certification safety the part safety automotive Midas announced Safety designs. and is featuring comprehensive Safety solution of analog flows and digital platform, Cadence

Design and all decades planning, multi-technology implementation database, system solution very reduced system pushing XG to discrete industry’s semi a have a only market accelerated to to segment is XG transistor excited Integrity slowing System onto Analysis, revenue timing and verticals XD-IC, market, houses, over Moving third-generation and to companies. our of launched with SoCs am enables thermal, several heterogenous together deliver strong pioneering and two first and that the defense XD-IC vertical time pleased achieve our to limits, we sophisticated an power disaggregate into in faster PPA we’re leading including increasing in and I unified designers best-in-class growth, communications. we’re AI/ML of integrated packaging continued and die with together ties with and packaging be that analysis by a expertise, particularly system-driven technology. comprehensive complexity grew expansion applications engaged design XX% scaling double-digit as set move packaging our down, beyond silicon can there’s and & With Leveraging along aerospace and and several driving year-over-year, platform foundries, which that footprint cockpit. with this technologies, EDA, This

organically global continued and with Our Celsius, systems system a electro-thermal our XD simulator, our incumbent to plan-of-record developed analysis make hyperscaler. was marquee good solution simulator, at products electromagnetic becoming marquee XD And the displacing Clarity, at deployed headway, a customer.

forward the I defense CFD with And delivered I before results-based and cultural and and want return trusted at solutions market-shaping business a leadership for Cadence with highly upcoming his for grateful our success, with numerous was and our industry With acquired over turn new results, our say on also partnerships along our guidance Lip-Bu leading it to to to behalf innovative Cadence that culture, December recently deliver Lip-Bu creating a our and delight and accomplishments wanted and customer on employees, a over that words on in rooted the as look to transition focus business shareholder his aerospace customers talented on now and shareholders. outstanding a few made we past automotive, delivering Cadence. over his thirteen have the I he drive to of laser Our customers. years, lasting On partnership customers drove our XX. results illustrious of John, CEO especially I roles, Board relentlessly continuing to shareholder and several and about and XXXX%. strong strong and to mentorship new in transformation winning his am thank team, impact

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

John Wall

the are like Nobody’s Lip-Bu. They all same, Thank you, over you them Anirudh but thank leave and everything are you values say fingerprints. do. you

on work been come. Cadence years conducting over for I run for generation, also feel I’d impact truly next and benefit closely the for a so heard with had many, something chance significant CEO on XX the and years, you leave to a past It’s to remarkable the have something has been it last of I’ve thank and many you of like you. to legacy yourself, to will both Your Cadence the but it’s do not behalf such is stakeholders, that, you said all smooth transition. blessed for

combined the key haven’t financial We missed and our team, across Focused and raising all portfolio beat. drove expectations year. another We by and are product entire a top financial strong strength outlook results. our of for our with broad-based customer we for quarter line execution metrics, exceeded base, bottom Cadence the

Now $XXX let’s was revenue quarter, operating for key third XX.X%. Total was with the the results was through beginning and $X.XX. EPS non-GAAP margin million. was go EPS $X.XX, Non-GAAP GAAP the P&L.

Cadence repurchased the at quarter-end, were of million. $XXX cash XX Operating value we totaled during $XXX flow, of principal billion days, and outstanding cash debt For $XXX and the was million DSOs balance $X.XXX the was quarter. sheet flow million. shares cash while

to turn updated let’s outlook. Next our

Our be changes today. no that that to there the export exist continues to limitations outlook will assume

$XXX GAAP $X.XXX billion. in fiscal $X.XX, operating in range range operating of $X.XX $X.XXX cash to $X.XXX XXXX, EPS expect of the of to For $X.XX of non-GAAP to and to range the in of billion. the in $X.XX, XX%. EPS we Non-GAAP approximately margin revenue flow range billion now the million

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

at pleased our Our midpoint is analysis now growth website, Commentary, that three-year with includes outlook our CAGR XX.X% revenue GAAP revenue and available accelerate items CFO Non-GAAP on well our approximately am as reconciliations. to to additional as I of guidance. continues In which further the for closing,

deliver year. of operating the approximately for and margin at billion track We are XXXX to are $X cash incremental midpoint, expecting operating the we XX% flow on over for

employees we’ll always, our continued And course, and questions. want As to I customers, thank partners, of with for our take their now that, support. operator,

Operator

Baird. with come will question first Joe proceed Please of Your line Instructions] from [Operator you. the with Thank Vruwink question. your

Joe Vruwink

all hardware Hi, I'm And begin with next-generation component in by demand I'll or start considering thing. with extended either the does into of outlook, way a or factor a Maybe forward everyone. all let wondering, component best catching factor at just Great. availability that things the in good maybe Lip-Bu. in this either was availability prototype quarter my on to up quarter, maybe meeting in me year. simulation at extending next demand getting to slipped the

John Wall

meet see is the we question. demand inventory fast as we're customer This for as that in outstripping systems building systems the number, we to systems very, demand up. with as right and Yeah, it but demand. is with John. you Thanks building Joe. the as hardware can now, and as we're building I'd pleased that we slightly Hi, say for Yes, like our inventory as quickly supply and we're fair delighted reaction tend to verification can. it's can the very the say quick we're the

Joe Vruwink

That's then opportunity And multiple the happen Cadence actually When Okay. as you of Integrity broader areas and being the strategy industry to Cadence simple maybe between about for a said you or kind package the of And chips that? product platform, it more and the impact, helpful. or, XD-IC of maybe when is new Is needs customers that it to the as trend simple product adopting question. co-design stacked. think happens and across portfolio. than announced as this

Anirudh Devgan

question. great a That's Yeah.

take me is Anirudh. Let This that.

I multiple that the XD-IC technologies. Cadence future, is and which multiple road technologies right? mixed putting on through reasons, believe multiple ability to the systems. to goes and bigger is future So the And mean, for positioned that uniquely a do it XD-IC affects be chips we to package, I for believe So, bigger that

our history. Now of is because some of it

lot five done a Allegro if three analog packaging then the very And then, Clarity So and done Celsius have you you two, over have investment system in are years, a so remember a critical for in platform platform leading of in also with the XD-IC. well digital. last for have Like virtual last leading had over and analysis. we in awhile, with while for and we years,

a is things big you when Given put that terminal challenge these together.

of draws and the a foundries as a if -- Cadence bring company across I leading So, something Integrity, solution just multiple in positioned. a I altogether. Cadence, work to or segments. other do other the have And four comprehensive products, Cadence, And put like is not we believe not to into it's to you uniquely similar even one can mentioned. thing whereas with when -- Integrity as this do customers three And then parts it's come with you companies same we need comparison

momentum are think believe going we I more XD-IC So as forward, takes well-positioned. I

Joe Vruwink

That's great. much. Thank you very

Operator

question question. Jason with next KeyBanc. Your the come of your will Please proceed line from Celino from

Jason Celino

one you glad Great. earnings taking Thanks for on an more have for it's And question. pleasure, absolute been my Lip-Bu, to call.

the and chain a to that announced several some Honda of semiconductors, Volkswagen shortages, we've question, are cycles we So but long with design their and intentions different know investment. automakers, to seen like these own multi-year my design quite it's supply

So how think dollar some from in-house? maybe as those versus do this an workloads market just opportunity customers about we taking incremental of shift

Lip-Bu Tan

semiconductor the you carefully. we Jason, kind global Yeah. the for thank all, the so global words. monitoring encumbered I supply very change first change much of supply

in chip design R&D And product designing far you focused So don't on see much very down our engineering, our any customer our we system. slow as know, then base. is that across activity the

more driving then earlier, your is answer been And electronics design then yes, drivers multiple And multi-year of automotive. question you term increments absolutely lately, really in are more cycle, generation's it’s a of automotive buy And the the a of lot the and correct in this have activity. in increase approach. mentioned so --and I year a and because

driving, and tool. the a mentioned many activity chips example driving. and we about lot one Anirudh using And AI our Cadence see Tesla, That's So autonomous design autonomous think good broad-based of more coming. I like the

opportunity in I will about excited come. automotive think to so multi-years the the And that create clearly platform we're

Jason Celino

-- more in industries is, customers other my these Okay. good the of And thanks then think have type I maybe maybe And the vocal, of are but trends -- automotive for That terms helpful. follow-up one seeing the as you quick Thank that. was been -- that? in with well you.

Lip-Bu Tan

Yeah.

that is I in think opportunity the challenging in realized not important starting chain a whole very it's supply a interesting, in become for very automotive the become time industry the them. this Clearly part, supply whole and very our visibility to chain. to

chain, challenges whole then and And of a and helpful a design to design automotive time And here we throughout different in in and of automation them design available supply to and they in and that term also so to system experienced the be this the so in different them try company, be and to we them complexity partner are help market. as period. then, -- then support level

are and I is platform the you more So, to a more opportunity big and think see going us. for automotive

Jason Celino

Great. Thank you.

Operator

question Please next from of proceed your with from JP comes Jackson Ader Morgan. the question. Your line

Jackson Ader

Great. already my Lip-Bu. Good the Yeah, Thanks echo relationship. continuing evening congratulations said the all guys. for words I'll And and quickly kind that about just to forward looking have been questions. taking

digital? of the mentioned digital what tools have So few the curious, their in place high significantly actually footprint. increase flow, are last the uptick Anirudh, quarter tools been design past increase from just what a route, a in have to hyperscaler or you driving the you maybe at I last this parts that years, XX a synthesis what and least of that of months XX digital level growth, think you just lot also in digital I'm and driving mentioned

Anirudh Devgan

Jackson for the question. Thanks Yes.

notes, digital critical. whole we're the that at think the flow believed of as integration I full lower you always So know, like is

So a this that and route place said, signoff. and is

the deployment tool So our is we wider see, flows. digital to especially months say what are of let's pleased is, last, in a XX

So in. would the But and more see now went the start kind that we years well back we our I ago, do we of that product market and more of engagement signs like was leading think accepted full with flow Innovus few and overall has would that.

synthesis the with becoming that includes signoff is along that more and else. Innovus norm anything than and So

and not think and answer to is Genus well, stay. the your and to Tempus proliferation. are I synthesis with we signoff, And question, So here Innovus but that's the trend Quantus, which pretty only as happy now

Jackson Ader

right. you. we if there get -- this impacts Thank integration were number Awesome. you reading can or, the it's bookings with what what year, curious follow-up into just quick All would of and quarter? this backlog in implied bookings And then, swung terms John, a going just bunch is around implied on the really be

John Wall

had But backlog for read year well. the end year. thanks question. the I Jackson, that's Yes. And a phenomenon the We contract We renewals. like QX. much too a to timing with and started reflected the we expect similar than would Again, RPO it. it's wouldn't as of into in higher

have QX, for in of the because of margin an and to expect sales we margin is slightly some QX. expectation impact commission guidance lot a down bookings higher guides we for for in QX QX If come a achieved in you of at the look what costs through because on hiring QX,

Jackson Ader

All right. you. Awesome. Thank

Operator

from Please comes question. UBS. Your Ramani next the your Pradeep of with from proceed line question

Pradeep Ramani

team. like the wanted for down just you It Verification little September hardware and I on was the doing seems bit seems well. my Hi. for taking June, be yet Thank flattish insight some to get Verification to a to versus question. more

are sense on side. you want side read the maybe go anticipated, And more interpret the used ramp being software hardware constrained might what as the to then hardware I a been have the just get on on this of that side I let well. So or it's that see

John Wall

relation I've rounding growth. can as hardware your This their growth. in raised our cycle, demand. we to too were and as were across on is impacted seeing design But Cadence a We John. after systems. -- seems And And CAGR fast we When on and the hasn't new growth, that much very -- it's -- for Hi, the happy customers with then increase in to all to comments that customer it's guidance year. and the three-year you meet called of them I'd strong with absolutely you commentary, to delighted Pradeep. the at year continue We're XX.X%. CFO demand we're installing business. part mean, up it to I remind reaction that's that is our us accelerating now building look We so but inventory That's out to reflecting XX%, with year. the lines of approximately really

Pradeep Ramani

Okay.

it market seeing it on the Can And to digital of being digital mean, sort qualitatively Are strong. you you're on, using strong? or as so follow-up has been IPs. competitor how IP my very maybe is displacements, well? of you going I speak a increasing forward more

Anirudh Devgan

continues is can Well, market of do think that growing because we market you well, as The mean, share. taking also believe the these are to it in combination like I all we and you it's this and market is domains. connectivity, I digital saw, multiple of see definitely things. a growing,

say things So I these driving digital growth. our it's combination would of both a

Pradeep Ramani

you. Thank

Operator

Securities. Vleeschhouwer proceed question line question. Jay next with Please the will your come from with Your of Griffin

Jay Vleeschhouwer

both Anirudh, Anirudh. working you evening. it's been you, the are certainly on my with XX first, questions but for a forward last continuing Lip-Bu, Good to you. personal for look Thank years. And dialogue of note, pleasure with a the

you're be on Europe So Anirudh, in the additional working week in periodically rejuvenation a with synthesis conference else Cadence in might reinvestment overhauls. to ramped your its which And We or overhaul. cycle this synthesis or be Allegro for new talk question what's years your you an few ago, DC. what investment Allegro they X, at in a patterns, your for major recently overhaul, undergoing version question or do of a of slides, internal internal next launched major Synopsys of certainly see able significantly that example, Cadence is undergone and investments up a be terms about for in so what EDA, saw wondering, presentations of major anything on you said the any seems we if to ago, had terms might first I'm their one based

strategy, ago between you of for computational succeed And the relationship computational Secondly, in and if with to technical to ingredients to announcement software. there you’re need reasons an regard partner Synopsys the was with the and interesting expansion I'm both Dassault. weeks to you two see having more software channel succeed wondering

Anirudh Devgan

great Yeah. questions. Jay, both

think terms -- I of you existing of of kind in new said new products products. or revamp

we the looking So continuously are at in time. that all

to our sure all want You products are make well. doing

see this new you have them As X Allegro Sigrity products are existing products. we improvement XX can launched X. or year, Several of like of

process. think I is a continuous So this

As a you investment R&D our high know, we peers. compared to in have very

more come and So go forward. course, out, constantly we see at as you'll things are looking that of we

second in strategy, the are we that's On results. computational one, software our confident delivering good

that are at with I and like time, at sense, looking side. Celsius. organic you And side which both go-to-market the the to new think demonstrated on partnerships we we product and have the on same innovate, we ability lot Clarity make definitely a of said,

AWS we they're about Instruments, example, always of think was from bought we partnering. partnership. level, when them. but National them talk MATLAB, that we with a a partnered for At with I We has then the system will Cadence culture partner, So great ready,

forward. have looking for continues win-win Hills, with case We so partnerships going to Green and the we're partnership always be that

Jay Vleeschhouwer

Thanks Anirudh. it. Got Yeah.

Anirudh Devgan

you. Thank

Operator

with will Please Your come question. Munda of from line the proceed from next your Berenberg. question Gal

Gal Munda

for questions. taking Yeah. my Hi, thanks

thinking of year, terms margin kind of outperformance strong in one rest and you. the first for this the about to Just maybe John, of again, then

kind of bit we much do about driving but invest kind bit little additional of to investment, a as sense. it is margin line able if with to you'd has inability, now has it How that the you're being performance. top like that to the versus mentioned a seeing, scale You hire the just thinking it do and that makes sustainability or maybe really with right not of little as timing, much the

John Wall

hiring. track And Gal. question great Great, on back with Yeah. we're

to hiring with think activity. helping on delighted certainly to I our our the we're hiring good be XXX really That's top has work of been performance us world. so and these places many around Yeah. recognized

On the that year, revenue IP on on they QX soft to finish business. earlier thought the the like toward recover had a a across year started end to of side we're have all our would lines good really things the strong in recovering and side, them We a expecting outperformance the it's it and of would for middle margin bit right QX.

hardware reaction again, been the performing is are over say the lines and revenue growth. to accelerated if a of On contract continuing side, side, see demand like well. over And has that really three-year look tremendous a customer there. really, software CAGR cycle to demand, on And business strong all really -- you we're basis over

side, on operating the So operating leverage we're delighted the with margin performance.

I if the pretty you think on I we've about for expenses. early an But is businesses guide pretty much retirement the mean, Second year, out is the the one-time half things, double take given overall We of the at year much operating program. up did some which XX%. include we're --

Gal Munda

semis. a mentioned line supply you bit Gotcha. just through touched a follow-up, top we little business on year, when issues in the moved the on royalties. the And chain you said it's And on of incrementally kind the then the as -- affecting again, you the

a demand but Now kind we're of hardware that's kind the the side? of we're there, the is Is impact there from to ability quantify way perspective of the in of to kind being by kind magnitude supply that order your demands kind stronger supply. the understand of limited talking of that about to than

John Wall

is part cycle. production Yeah. design And cycle. it referring you're that's really There's a where capacity us very of comes touches small the The in chip of royalty of impact terms to to us. side revenue Like of saving revenue. the the our constraints that impact from the -- majority

be around million, Cadence recover would year think royalty we'd Yeah. But was slightly that year. but I expect than lower last $XX million. for revenue $XX year this to again next

So impact small. pretty the is

a couple to the chain you supply same our inventory of about -- with just-in-time growing little talked years then see hardware management. side, of moving the we're our in terms from ago a inventory and just-in-case We On happy on bit.

lot So, we inventory. a of carry

well happy on So where side, -- few protected we're which we're with next think quarters we're I very we're the for supply now. the right chain certainly positioned

Gal Munda

kind Right? last I over Once couple consistent you said that down quarters. last year, changed has the of the royalties, from impact slightly you nothing of clarify, said. to mean just kind is what that's -- to they the of

John Wall

right. unit constraints mix our business, of slightly the and IP there's this of capacity royalty but I our on Cadence year down, royalties is production from business and That's licensing very terms numbers. right. chip That's very, mean, it's impact last feed and in small overall into could -- of are year

Gal Munda

much. so you Thank

Operator

Your line next Gary your Mobley from the with proceed Fargo question. come Securities. of Wells question Please will from

Gary Mobley

guys. Hey,

different neutrals asking let and also parallel I to the hardware, for up but extend in bring I chapter Anirudh me increase And in software. for bring my not next that customers it, only to the step facilitate. reasons, products out function Lip-Bu. about XX, in start by wanted For allows way it congratulations these processing power the ZX understand the up

capability? it dollar sort available my opportunity of new how question the increases magnitude of you and potential software market can improves Thank this engagement give with with is, of up follow-up. you each bring customer this the us or, how so And a sense a your

Anirudh Devgan

end doing good same our this with the XX reason for a the that's Palladium more absolutely quarter, and expand if question. I for right. a Helium bring as And great software reach more And you're reason. mean, Protium Gary, front launched same to -- is when we up. the Yes, also to having you -- that's

models, for market software well this but the Helium, not with level and software as more done in well well and historically all Palladium, up. And models we only are -- up. And has but think can RTL, the doing not software the Helium growing combination bring with I is bring can we So, in is with run Palladium hybrid bring RTL, we for -- pretty up. Cadence run Palladium RTL, with with high of Protium now

together. a and the it’s and larger half So the course, the X at market of bring to once those difficult I to a maybe is opportunity the quantify, market, hardware up I one level, two think software are high think you combine but

Of realize the opportunity. market with years is Helium bring for the Protium, and course, several Palladium think fully it much Cadence because software takes all But expanded this. I up opportunity to of

Gary Mobley

lack but this Anirudh. to about difficult more could obtain that to the give export John, ask any any perhaps for sense a maybe appreciate or China restrictions. I is licenses of whether I navigating And to want easier And sense if you us as those service then we various year are China. what and based second -- of China maybe or takes revenue sit puts in gets fiscal the customers here XXXX. And of for serve there half growth thereof a the in

John Wall

China impact and of growth to we're assumes with regulations, all Yeah. with at But Gary, we our question. working pandemic the year at good Yeah. today -- outlook continuously at We're all for everything week have, we all comply controls where required. over the XX% China we place exists China track today. XXXX. and last way a control but in think that's since export look and And our revenue, CAGR easier continue situation monitor I if QX, to that complaints export it's will look in in fluid think XXrd everything in XXXX, period it. probably the is on I it's remains the I the that to When two-year terms we you because impacting have probably through look

that look essentially that, outlook. export we all We of if of guidance, another limitations for that assumed there haven't sake year-end just we you you would at update in XXXX we customers are remain And results give in the take But remainder all predicted any place we'll the in when today certain would changes year. changes, XXXX, for February. to course, our have the then for our of for exist

Gary Mobley

Thanks, John.

John Wall

Thanks.

Operator

Your Davidson. Diffely your proceed of D.A. with Tom next come line question question. from Please will the from

Tom Diffely

taking Yes. Good question. my afternoon and thanks for

So, XX around gone from but Lip-Bu, guess stocks I've been I the $X $X.XX. only then last the years, for to since

I forward the interview the it look but XX, XX impressive, to taking So, next in over to obviously very X,XXX years.

chain, if or angle, capacity geographic are seeing And just little from different steps specific curious the guess, at from reasons. in maybe foundry question either diversify what you're to activity terms the on company I taking So, a supply you a foundries? of

Anirudh Devgan

Well, let good yeah, me -- a question. that's

And do John designs. the world. with all trying foundries, all can that the parts Lip-Bu we so on different we in like to serve work I of foundries, in these of all mentioned, customers to course, we process, all Asia continue sure we that the major make we U.S. and the and and more -- think, are are design as our side, they

with the are investment relationship major see to have in a pretty healthy and we more ones we all encouraged the U.S. So,

major our overall continue all we and are So foundries active the to that. position, with hope we pretty with Tom,

Tom Diffely

and was chips of the I you. manufacturing build design Palladium put your you in more your and wondering what have and on that

Anirudh Devgan

Okay. Yeah. Got it.

So goes of has the a this I system, into big I lot think so it. mean, is set -- it chips Palladium has that is chips -- current the Palladium of

we we them make some of of some And and them buy ourselves.

systems, foundries are of work And ones we partners foundry made by we are all new the we foundries, with at And designing system. TSMC, our the make look ZX. we for of Palladium the but ZX ourselves are and very with which to happy So next leading we always the them. the one is overall generation continue

Tom Diffely

seeing any then an are regions Okay. manpower in kind you impact in the from around curious, that I'm of from And world mini you Great. view? of the of this point participated COVID

Anirudh Devgan

mostly, I India you more we thankfully norm through parts months But in more think months are the home ago. say we few a are was of the just a slowly working it's become and like continue it. that had terms it's mean, we few several I offices. course, to have the work we And in ago, so from and I big opening still now of fair of still impact think of a in improved world. that to impact has -- and impact some

no think three I last the things, So, months. in new

Tom Diffely

Great.

Anirudh Devgan

because delayed return bit, a Our work was to of little Delta.

than to COVID we the through early other working next all we year, are that take that, but up So hope issues.

Anirudh Devgan

Great.

Okay. Thank you, Anirudh.

Anirudh Devgan

Thank you, Tom.

Operator

Your of your Pitzer Please Suisse. John with next question question. will come proceed from Credit line with the

John Pitzer

and it's And ask that And next us And another days let I calendar back we've sort outstripping single on that John Lip-Bu. have that and Yeah. Good talked know acceleration. they've impressive Anirudh you the for got year add is question first this afternoon XX got pandemic. My thanks really outlook acceleration goes in over congratulations numbers yet John, seen to you you guys and CAGR midst Thanks but three-year my of full digits. if a high for give that question, to I'll a look before of guys. for consensus wait growth XXXX, at you earlier to demand the year, last supply. years street the two global me about

Just in stay. are SAM wondering to sort to dynamics of CAGR the your is these some think so, efforts if extent of if sort the this versus double-digit your fruits the expansion business? you And of here what core some of of of labor

John Wall

great a question. that's John,

the I in dramatic think because I is revenue of the changes model revenue XX% our is nature in revenue of recurring three-year CAGR XX% our wouldn't such that nature. expect any to

pleasing at over to have you'll that of that to see XXXX if years, that. XX.X% we're a But you kind we XXXX, shouldn't And function when it going that mean, change. been by CFO the commentary, dramatic accelerate. I up including look and seen last in three-year And not now. XXXX I we'll accelerating, see have continues of calculate we've -- you think so just the So, few you're the slowly over it's really step a to the -- CAGRs but it's end be

running year. to XX% So up this

yeah, So talking going. to XXXX, just very, very to of our so business, the way -- of much. CAGR we is pleased -- XX nature revenue the much through get we recurring QX days until business refrain way expect the going with the But to need the another about pretty and will anymore change that. pleased just of get wouldn't it's very very, with for I Again, because three-year through

John Pitzer

Europe this Anirudh, U.S. the I manufacturing. to guess, is. semiconductor supply, thoughts. to And business not helpful. And had of how rediscovered Clearly strategically regionalization but push seeing I'd have, get important about the sort it's and your just you're That's to love of

domestically incentivize to governments that going are world think sort as of IP well. I

of through things legislation its so, And think guys that's way you act us now. thought through business curious could be EU like impact similar right will what kind I'm and think the chips trying the of to to or your help have the if you kind through from make

Anirudh Devgan

not But the you funding is spend. and funding manufacturing, hardware know, the side all R&D manufacturing And and or it's there -- as chip you the for also Yeah, also all that's a It's as just these details. good point. if we the eagerly are software that awaiting then you IP the other there's but said, enables and for themes. the

investment So portfolio have I think the the parts out. a we about but this think strong have to know multiple different are optimistic in overall, geographies. all of we sorted still But you details in as I world, be

is U.S. is and in … there as positive for I think that more systematically So, Europe, investment a that

John Wall

indication. across secular drivers. going am mean, seeing that's the activity demand I great That's on. Yeah, John, a strong all that's I sorry. these indication all generational design a great of we're

Cadence. globally, for solid strategy, activity a We good indicates mentioned more portfolio that design you great everything kind and execution and of have just that's and great --

John Pitzer

guys. Perfect. Thanks,

Operator

next Your & Shi question of line proceed Needham from Please with come the will Charles from question. your Company.

Charles Shi

question. Hi. Good afternoon. Thank you my for taking

back collaboration to to about first complete just end put I wonder comprehensive your their forXD-IC, I out Integrity, So, mentioned how solution. remarks, ago, but few do want your only prepared industry's release. being days go press I a and product the a right to is they the They platform And you did XD-IC end start see said TSMC competitor forum, of which your the addition, two Synopsys reconcile products. strategic you TSMC, competitor, we that a different in platform obviously two of ahead a comments release will similar around guys kind folks with from not tomorrow. yet innovation these announced coming competing press opening

platform? and kind versus -- positioning progress wonder Thank your XD of your Integrity kind of how So, what’s of you. what competing the

Anirudh Devgan

you. Thank good Yeah. That’s a question.

it’s one a And thing, of So, it’s like not in lot know XD-IC combination thing, Integrity, think in remarks, are terms of lot we of said position. I of my our the pretty I things. of you confident

example, for technology systems XD-IC more package are some are more based. some So, based, package

is Some in Cadence all, a but more all the unique which are platform. more them digital of is most interpolar based, technology,

of with and all in integrated analysis packaging digital in in all best [indiscernible] leadership Celsius solutions. with tools are and analog they We Clarity with and and Virtuoso, class are the Allegro, with

one we integrity pretty are we are and a things, you, variety TSMC with we a XD-IC response to So, including Celsius key your example, things to the with solution working actually was XD-IC. us there a silicon Celsius Cadence. did of that that And And TSMC. accurate them are great leading is XD-IC position the one with TSMC, of question And give is and our temperature confident of do getting. profile used partner thermal And they with the customers to mobile validation and of of on the for simulation.

XD-IC I are pretty confident in big. requires So, think is it we and And products multiple position. multiple flows, going implementation our and

Charles Shi

you probably before too strategy. since want about specific be is question. And customer too comment don’t Thank second give if if don’t question by can some IBM started recently been color my to you. a that you, in Intel this thoughts industry at do Cadence more the following opinion. Intel, on Thank Not to Any X.X Intel how Cadence support Intel’s that the sure know maybe us specific I I And Anirudh. just to turnaround you years. asked level? over material about to guys. turnaround maybe the a offered has I ask want want efforts you coming

Anirudh Devgan

for you Thank Yeah. the question.

foundry -- what including with the is is along public supply partners, who Intel Ramsay ecosystem will Synopsis Foundry. and with our bolster others, already we domestic new they He to says have Head customers Cadence, the of also chain. and the more IBM, Randhir, semiconductor like by just Intel and do the think with I I’ll glad programs Intel. are Intel government. quote And some we Actually announcement

official strategy, think is you. speak comment we and let Thank do to Intel, this the more for Intel. So, them glad I but from with we are

Charles Shi

Thank you.

Operator

Vivek the America. from question. Bank with come Arya final from of will proceed question Please Our your of line

Vivek Arya

and question. my my Anirudh from best Lip-Bu side wishes to for congrats Thanks taking And well. and as

give becoming on and it big System could For next one, the general be Pointwise your today? importantly, just and how expansion into acquisition Analysis my to kind one of that have? can us is accretive, and right, that a of CFD, NUMECA model XX.X% XX% two And does the kind big you start sense over when it year, -- you the How years? growth first

John Wall

Yeah.

pleased We am I are Anirudh. sorry very --

Anirudh Devgan

Go No. ahead John.

Anirudh Devgan

I’m revenue Pointwise, not standpoint but accretive expect them next pleased for just year. saying significant hugely we a M&A we’re from be integration now, very and NUMECA with to the right would but

Vivek Arya

as we one-off it. start costs I the of a follow-up, or John, they are then thinking year? costs kind Got in maybe think you they And mentioned do QX, some become about for baseline as higher OpEx next

John Wall

we quarter And QX hiring QX full -- a partly a half have course, QX. catch-up higher you QX. in cost their QX bit second of hired of quarter full have in of will in -- Great we due QX expect slightly question. of didn’t a in I I in expense of mean, in the Yeah. expense to slightly where versus anyone did

commission because bookings stronger we expect Because then on stronger QX. finish be So, more secondly, then expect I the a we anticipate that. to costs I slight uptick in started RPO for year the will little bit a with And would we that year.

little expense impact forecasted. then a quarter bit QX, So, add we slightly bookings also and we’re commissions higher expecting good in T&E will a which have than of

Vivek Arya

going giving QX? equal, into kind guidance, for but continues not know I you’re else become into of baseline all QX That QX? does being the that

John Wall

the operating leverage. Yeah. about very good continuing feel I

think near operating in any you fifth the that term I more mean, but I XX% than will margins. a we’re that up it’s see XX% now, year on there’s ceiling leverage. So, incremental don’t delivered we’ve row to

we're dropping revenue growth dollar from income. $X.XX that through revenue every now of So, XXXX to growth until through than operating more

delivering continue leverage of margins that we're will as rise. to long over as XX% should -- So, operating incremental

Vivek Arya

much. very Thanks it. Got

John Wall

Thanks.

Operator

back to would now closing Tan over And session. remarks. I that question-and-answer Lip-Bu concludes like turn for it to our

Lip-Bu Tan

an growing momentum. time opportunities business all and for exciting It Thank strong is afternoon. joining this market us you for Cadence with

system opportunities market. intelligence, nicely, and and total we Our expanded new as out design is pervasive playing addressable in design excellence, very intelligent from system strategy innovation benefit an

being innovative World’s are our and have customers inclusive behalf thank we we’ve to our One Most most being XXXX. received of the as of of built are of grateful our of times. lastly, their sixth Workplaces as these Cadence employees Newsweek’s Directors, recently for recognitions and for named during for years, continued Board partners proud at the named time We the and for the And List and unprecedented culture over Best Fortune we the Great well Loved Place trust Work, that including and as to and confidence Workplaces on by

Operator

you conference Cadence call. call. XXXX today's in participating concludes earnings for quarter third today's Thank This

You may now disconnect.

Cadence Design Systems (CDNS) 26 Oct 212021 Q3 Earnings call transcript