CDNS - Earnings call transcript Q4 2021 | Cadence Design Systems, Inc.

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Operator

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

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

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

XXXX the reports on press and include Form could And Pacific Time. the factors with difference XX-K Commission. release. earnings cautionary statements a filed our Form Exchange XX-Q our please on was please comments recent Form information the refer XX-K our Cadence's today's and filings cause most results, These to about note X:XX forward-looking in For in that Securities and today, that regarding

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

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

Q&A question also we’d the of ask observe follow-up. that today, you limit session and For one a one

to You may like would you ask and re-queue, questions time permits. additional if

the to Now, call I turn will over Anirudh.

Anirudh Devgan

outstanding delivered and Cadence I'm to results XXXX. for financial everyone, today. afternoon, us report you thank joining pleased Good for that

and propelling As expect we XG, as and trends provide non-GAAP computing, robust John details revenue achieving golden growth and cash activity markets growth XXXX, will AI exceeded operating hyperscale end XX% solutions design in tailwind, a a innovative business momentum XX% and to profitability. and of fueling Generational continue such for semiconductors With accelerating our and a $X moment. our more driving we of in providing target, ML era strong XXXX revenue growth, original billion. digital over operating flow are transformation multiple margin the broad-based electronic systems.

to capture computational strategy available system our design software chip, of positions range portfolio wide exciting board package, And Design System market. solutions, a our us total of compelling leveraging Intelligent Our and triples expertise opportunities. our uniquely

in our experience introduced year, provide life is our XD business their IP for exciting today, future footprint solutions significant Dassault's leading growth. expanding cycle customers design, groups and our brings key differentiated strategic of XX Dassault strategy Allegro with the Central we to innovation. products initiatives. customers, market-shaping providers service systems expanded strategic key announced optimizing virtual will system our platform and value our Earlier the as for and commitment accelerated twin we experiences Systemes to together entire management. cloud launched product new modeling, with IP our partnership that During electromechanical to adoption chain XXXX, foundry, to And partnerships we and across and EDA that portfolio. be core the relentless significantly simulation with We deepened an Cadence

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

leading in digital Our We we most XXXX, and digital and who adopted products. system expanded automotive hyperscaler Signoff it used flow, year. delivering industry-leading of had year the full relationship and phone the our results China out with several revenue advanced a our node Deployment customers during XX% with analysis XX to flow delivering of relationship an Oppo, tape our of and mobile our design to design. our business successfully nodes at In expansion best the manufacturer advanced growth. Socionext, with quality full strengthened with another digital results flow, than accelerate as of Digital more additional strong our quality full continue

that power flow by incorporates and weeks. blocks production ML Cerebrus power, area automated manner. customers critical AI space transformative leading in automotive of the a optimize designs SoC including increasingly X-nanometer technologies XX% just in exceptional are benefits, two Cadence nearly full deploying gaining and digital and sophisticated Several performance, consumption company productivity U.S. market-shaping intelligently reduced Our to the explore solution in design an series the Cadence entire

critical a XX% enabled marquee the Cerebrus premier Additionally, power other manual And their X-nanometer then model one-tenth system Cerebrus-trained their a ML on throughput. of power company industry's the up Asia U.S. demand heavy company to a designs, full verification optimization escalating drive Pacific further effort bring productivity. SoC software the continue and to of blocks. next-generation to applied and with reduced system Cadence design leading with and improving verification their out Cadence semiconductor by challenges verification flow productivity delivering our tape solutions, Rapidly Xx for several improvement

grew fueled year-over-year, business year by hardware. XX% record a verification for Our

compelling their embrace well Palladium Our earlier and system than value expectations, as debug capacity quickly half best-in-class as capabilities. front-end solutions by and of purchasing customers to year. as software these platforms during led offered Protium to both The provide compiler performance, complex Protium common platforms platforms the next-generation our XX customers superior and bring-up more the address Palladium ZX exceeded design. launched of greatly verification for Demand gate has that multibillion were our last year challenges

hardware networking orders over year, in and with during Our particular over mobile and XX family customers added seen hyperscaler, vertical. new XXX strength repeat the

strength software and new year, Today's verification the particular Jasper the customers which Xcelium with an very high-frequency adding Our continue complex compute and to Simulator underscore having and Logic Verification product, and Jasper accurate simulation. hyperscale. circuit XX Formal need memory proliferate, for exceptional includes high-performance in Platform with design mixed-signal

circuit their flash provide including next-generation and and designs. production has improve solution Several verification tech with In long-standing leading the platform. addition design And simulators, deployed Our evaluated adopted recent XXXX, the platform Hynix design. and cross-domain large customers has design, advanced Spectre in and Such we have performance DRAM simulation methodology gave Spectre design. FX, as and their and automotive. analog been SoC Spectre as accurate deployed Spectre Micron mobile, memory compelling simulation the of phosphide productivity DRAM markets, the successfully grew already Spectre in of a FX simulation simulator simulation vertical industry's it hyperscaler most IP RF to for comprehensive FastSPICE our leader business SK FX verification. our multiple solutions FX XG, on now And very for in for

Our IP process at proliferate significant portfolio leadership marquee and DDR customers, company. lower US including at portfolio wins a several and our X-nanometer continue nodes, top semiconductor the IP had design expansion a and PCI at to

Our energy-efficient simulation applications. we to design, the on processes. the imaging, computer AI a ML HPC complexity in and And system application across and seamless AI device Tensilica automotive, platform, and platform need the is analysis. its for edge delivering advanced footprint vision audio, continued Tensilica XG, DSP and scalable for during solution portfolio year, introduced Pricing expanding driving

its sophisticated analysis tightly traction. multi-die for Our System is our beyond continued solutions driving EDA demand XX% expansion been packaging that integrated delivering momentum, and year-over-year customer growing gaining our Analysis strong business solution, Design integration planning, revolutionary and providing implementation has strong technology rapidly is XD-IC and There growth. integrity system

building NUMECA automation. winning XXX new TSMC's We our for Integrity platform year, development joint well domain energy for has in XD of multiple CFT of nearly strategy well XD-IC XD-IC digital at by our by Fabric solutions as expanding we Pointwise. and choice and The logos, out the competitive on Last a collaboration aerospace Year platform wins in and a into transformation Partner furthered design of a across markets, acquisitions notably Schneider comprehensive including winning was defense. with analysis integration and system through leader customer expanded added OIP ecosystem Electric, we end the have gone recognized management disruptive, industrial Our Award of award multiphysics design. as forum

product, enable will wide-ranging well our significantly develop with As deployment Design advanced with our they analysis. PCB standardize Solution System strengthened platform for on XD to with as along partnership for our for solver and more X them ultrasound end-to-end Clarity our our adopting a design, as Analysis Butterfly we In design. solutions, Allegro for of customers. QX, solutions which their of Clarity Networks leverage system EDA EDI, And expansion complete mobile

performance of Cloud-ready using to continued Lastly, in and scalability, our Cadence are our flexible use meaningful models. Cadence enabling products usage realize with the availability productivity several to of our XXX solutions benefits over customers Cloud portfolio customers the scale through cloud.

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

John Wall

and non-GAAP I'm our billion flow customer pleased solutions focus business. technology to of to than our with to fiscal and strong key helped our inclusive drive and XX%, revenue for report success year which to Thanks, greater in essential demand for XXXX. the achieve strength and of in XX% afternoon, contributed XXXX, of quarter all to underlying $X.X culture execution, relentless consistent metrics operating fourth and year. fifth to year on for margin incremental increase The growth the combined Cadence finish Anirudh, exceeded cash and employee operating we growth the our an continues innovation, consecutive A the continued of good everyone. across

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

and the turning Next, to balance sheet cash flow.

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

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

billion. remain margin the of of from into very XX%, to the QX, will due outlook in GAAP Our XX.X% XXXX. Cadence in in EPS our our of we that fiscal is billion will assumes of At expect XXXX. of revenue range of $X.XX, of range to at of outlook finally, $X.XX our XXXX. $X.XX XX.X%. of from XXXX, the to slightly $X.XX, XX% outlook shares billion, for expect $X.XX percentage are non-GAAP XXXX a these strong in use assumes export increase flow in assuming all $X.XX billion we EPS XXXX And to to free revenue range upfront cash the operating primarily least non-GAAP flow a in cash range our our finish annual in XXXX. operating outlook, to the assumptions non-GAAP higher the And resulting repurchase tax hardware place $X.XX revenue rate limitations to This for to to midpoint we $X.XX exist that bookings to today Embedding upfront

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

entire take Cadence commentary, website, which revenue delivering a available a in analysis to as the moment incremental our CFO includes row. our X CAGR over to is for years and to X-year margin In conclusion, I team acknowledge XX% additional outlook non-GAAP for Our as on further like GAAP improving items, reconciliations. our for would well continuously and growth

of that expect the operating of of our result and of outlook, XXXX. a all As non-GAAP the compounding we XX% pleased I am midpoint their at impact over margin growth for efforts, XX% revenue

our As with like partners to and by their questions. now employees operator, that, always, I'd we'll And our for customers, continued close support. take thanking

Operator

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

Joe Vruwink

question. if in to the two to upcoming might outsized new to the certain I maybe XXXX, wanted questions. course product One, alluded cycle there of the maybe I Cadence ongoing an any growth coming more could verification having region that Cadence you ordering. this year. in Great. start Xb past, maybe And rank on give bit growth a growth opportunity has year? alluded I'm the given product faster you for guess the curious contribute segments over to? an updated over maybe a Is then towards And

Anirudh Devgan

is Yes, question and and great let me Joe, this start John comment a more. can

all I are feel that I time. performing business this think well say areas all and we regions that, would groups all is what in product at like

feel design the we activity we see. pretty in are good So we where

And expecting good I are growth we So we portfolio. are good we our across positioned. think how feel

John Wall

the to CAGR we've look would by CFO interesting Yes, it's that add at view X-year Joe, the find XXXX, finish kind because category. on most I that, strong X, you Page if me have outlined of look product contract lines is if which across that for of X of exception I the revenue you we the customers. And growth. how with double-digit business growth Custom you typically single-digit all IC, at with cycle high commentary

guide with the teens back for There teens. low feel bit XXXX. we hedged I've got but growth The those, IP. for I'm little in the to over upside on XXXX. may at for that low I of Looking now, right IP be slight expecting XXXX have improvement one with a XXXX. that, guide I've for comfortable all

Joe Vruwink

about on remainder Okay. the XQ That's if seems product outlook are great. focus contribution, these leave the XX%, -- too but maybe question, far aside, rates year talking like the just of more then given And XX%. and not the elevated it growth midterm the three-year We're of a upfront from of I for CAGRs.

space. a and mid-term, XX%, like peers much your your sustainable, you As there. from seems you that XX% rate some of good Cadence kind of growth you it these kind Would to on gotten -- but as of expect degree you midterm So say, may XX%, of of be from seem deviate to it frameworks curious think we've have some quite visibility? thoughts in the

John Wall

can Anirudh. I take that Yes,

I So right you're on that, that. Joe, think to the yes, assume --

we So of into have we're very QX. visibility a And core expecting a strong EDA. lot

low called aim to continue double-digit for I typically We expect growth IP, like there. out we teens. IP.

teens, analysis, And upfront on growth the terms some the profitable Yes, not driven it's it's kind teens on challenge kind to probably because highest want level don't from you business business. I for typically low sustainable, nature if want. we If we've revenue but aim the in of there. visibility, looking the three-year away of in the then -- expect give we to is high The we're I profitable opportunity that, look on of we've that. of to team there. the at mid-teens achieved typically walk CAGR, for system

the we to the the visibility until hardware half get it's the second on On into side, verification side, functional the of tough summer. to year have

Joe Vruwink

Very Okay. you. Thank helpful.

Operator

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

Charles Shi

of coming versus team you my XXXX, exit Maybe companies. how could thank on update Good we management companies as your us an system kind for of the much from question. afternoon revenue provide and taking semiconductor

So how with stack years? does up previous that the number

Anirudh Devgan

know, used companies XX% silicon about Richard, becoming companies system is think is companies now over trending doing companies. and I there -- towards semi more system as coming and companies. versus more are our increased semi more more XX%. that that to what becoming companies are we years, system it semi And you companies revenue be has of is say And the and system XX% from

other us the is you portfolio system product design for more our a industry. is good trend products, know, analysis us is more thing the So work that as the also with for and that adding, And and system company. makes

So that's be is a future. Cadence to extra for that trend positive, I and positive expect for the

Charles Shi

Got it, got it.

Wall. So is maybe next really the to John question

XX%. for is north rate. your XX% flow know margin first operating of you think, this I have well flow-through through quarter metric guidance called the that I out

to expansion, one operating do through, rate? you just XX% your margin thinking change you. going some at your at XX% that point, want of updated margin it's thoughts, think any flow wonder, if don't here, that you plus, point. raise target, As moderate kind flow-through to when to get the I you Thank

John Wall

Yes, And Charles, pleased I'm those incremental years good the highest It's fact very the that on on over the incremental observation we've now. our included delighted is margins I our margin have outlook. for in embedded actually start over X for – our mean, record initial or for X operating the the we're running averaged I Cadence think this there. of XX% through guide with Yes. at the come that incremental that years. year, margin outlook XX%

are to we'll targeting that year. this operating as and that higher continue incremental to the see than to margin, XX% and driving naturally, try as we're higher that expand. long So we're certainly But underlying for drive up again margins margin

Charles Shi

you. Thank it. Got

Operator

with the come line Jackson Ader JPMorgan. of Please your with Next question. proceed Your will question from

Jackson Ader

product side, through the the analysis steadily Good the taking came growth interconnect The rate my for Thanks year. questions. evening, on precipitously pretty that in down and segment system guys. and --

kind the in confidence in rate this double low to of curious the be fourth from growth embedded what back gives quarter low that that I'm So you go just single digits to might digits the outlook?

John Wall

one this that growth I this given forecast there. Like guide the easier coming John. of like we're to you into we've of said, mostly ones Jackson, segment. most recurring And recurring high-teen That's the embedded say, is in that revenue. revenue from

Jackson Ader

Easy from partnership -- I Great. what guess also, like? will maybe commercial that thought already guess Okay. PCB XD the relationship have curious kind enough. to Allegro of I to the then I go electromagnetics. actually just mean would then look I with trying Dassault, your And on was Cadence And business

does that organic so with solvers you've And -- your developed. own how

like this puzzle. how together into business the I'm and curious your just fits all So what electromagnetics organic fits

Anirudh Devgan

Yes, that's is say the a this like excited leaders that's really becoming and is, about is with more like and in that Dassault where I great the to coming would together think question. And X what is their respective spaces I address problem because important, to industry more this I'm partnership going.

electronic you side, and know, washing engines. the then these the right, all see first the combination a a talk data driving a towards PCB. or software as or it's I with And silicon airplane, is whether So and we is from chip, machine of car And then moving package chip. and come and an the you market the you the when mechanical electronics on mechanical the mean and and megatronics, then –

then, are platform XD the it Dassault, they life position So with and chip Allegro, management. a gives with package there’s mechanical a Allegro leader solution design and with in of then us with a and product course, and our in cycle great

seamless -- doing data concept combination to integration design of of the from from natural span manufacture. a and now the this that way the to is application all also So a

completely to one specific in of developing, Dassault we it's we and are management. what and your it. are, are things beginning that's we things partnership orthogonal like but their XD life partnership, product broad-ranging that a does, are there have Cadence So is and and mechanical like design, in cycle it's our are leadership plans truly lot which things on a a specific application of question electromagnetics, that the the to And multiyear

together address think, to So electronic I the between plus mechanical whole a leaders there's space of coming good this synergy systems. two

Jackson Ader

Thank right. All you.

Operator

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

Jay Vleeschhouwer

from Good this growth reflected X for inflection that we increase to year? increased of a has call it the R&D. semi semiconductor and been past semiconductor in your And Anirudh, large extent last companies. has a look as we've When XX least R&D years. fair your over Thanks. inflection We this R&D say expectation seen the a accounts in material accelerated over it the even at of the a EDA of or business, held evening. Qualcomm what quite Would great AMD, Intel, be so to R&D recent steady XXXX. for spending numbers perhaps hence, in backlog number that percentage months, is NVIDIA, million forth, it of good in increase the $XXX your part in at in part for already to

you the you've you theme of The the across in recurring and organic second else whether years meaningful the number and of last of question, or in line. to AWR mention for might your perhaps integrations, anything most technology have had product a acquisition business? For which incremental for example, integrations care and might of development organic Allegro terms Could mention. commonality been you the or

Anirudh Devgan

said, to system That beyond and semi and semi to and the traditional -- is mean, R&D design -- think, thing just including are to our companies also, Yes, this discussed. increasing portfolio also analysis other spending okay? the know, system we you Jay, point like is I the adding I design, is, like all semi as we is you doing out

to are to see I So And verticals. continuing all lot activity strong design these very, regions, very think see of across any contributing a I multiple across we -- don't be factors multiple strength. the

are where to as market and the So is we feel we growing. where good pretty

question part terms of On your second integration. of in the

design mean, comprehensive across complete our And XX of have tools have that to XXXX also, from with these for implementation X, it a solutions. same that a happen more and analysis. right with ago always years that leaders we partner industry like solution. few move MATLAB driven And digital as we So makes to the beyond Dassault. to it's time, system all at has ago verification did the starting believe we used to sense, and we with years segments, point provide I now whether to now

compiler there think common excited this nicely then there. integration I lot verification would is suite, of truly hardware chip to area I of which a think the terms chiplet-based and notion of with whole driving is growing design, with return, in with growth There's integrity the together this design. third Cerebrus platform, can legs and areas rest provide of that's a and the a good Now analysis a are I integration the solution Cadence and AI the a of growing. whole and think Protium Palladium are whole implementation And has The of go of and can a factor. XD-IC lot lot I the highlight happen and still then overall

that we think a I And think going are can in results growth of are forward. early the provide still lot phenomenal. and innings I

another highlight Jay, XD-IC design So the just one. to pick software up top and whole things, being and these design an like being them, the verification bring X to Cerebrus AI-based with and of one third one being

Jay Vleeschhouwer

indirect Would it pertains that Okay. fair clarification direct on your direct channels? and to and indirect relationship. and channels it be both both perhaps the say their A to Dassault

Anirudh Devgan

Yes.

market. wide-ranging it a is arrangement other and of said, and the you with the enterprise then will Jay, go start like So parts to this

Jay Vleeschhouwer

John. Thanks Anirudh. Thanks

Operator

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

Pradeep Ramani

results. on is hardware I margins strong QX, roughly had a full very a at for guide question big the trajectory you And XX.X%. question. of guidance about could yes, what like midpoint year. Congratulations margin the thanks is taking the despite argue year the feels It in quarter. the very strong the through Hey

So conservative. Maybe mean, if big that trajectory? follow-up. And way on sort IP -- or you guidance help going just back with is us can the I the mix? of understand have there is too a half, something I it's a

John Wall

half and do probably half half July we probably Sure, This we've half. XX cycle first side, our got second mean, Yes. it's second the increases effectively, versus what promotion XX% in -- But is I our because first effective typically the pay John. on Pradeep. and revenue got I've expense X. XX versus is

started So last second so to in half you something and similar efficiency side, probably certainly we the higher we previous half, where hardware it's I see on next year pipeline that's are And the upfront year to the improve on the a probably year. And first continue benefiting then margins start the business. we than mean, the to it's that QX. through compared year piece, higher then -- the just

So it's year. of the see into half to second the tough

right half be second don't of the may So the year conservative now. I know.

Pradeep Ramani

the And maybe for hardware, your of, to think customer QX? respect into growing installed half where respect are my maybe penetration? the is base, maybe even penetration that you with call base where clear. second as and do you with I just to it are follow-up on of visibility can speak mean, not it, you I to we get But in terms

Anirudh Devgan

like have we bring you have there more multiple right? companies stack, reason more system system of would is up the X helping develop there a Yes, verification say, is that So and semi for I up us. is companies software companies mean, are let hardware And take on said, is hardware-based I bring more I software because is One system to growing. become big think the I and also increasing. this me software. business. the become verticals market that are companies, trends, as are course, chip true then semi-company, the they

overall thing that one the is think I increasing. So is market

I thing, position our improving tremendously second is think The that. competitive on top of

Palladium with market. in the prototyping much side, now how we we the and So we systems in strongly wouldn't pretty the terms the side, Palladium these participate but feel brand-new more in are and that positioned we Protium the and of and old in days, combination are on well of

with So position pretty and I with the think growing system Palladium new and our Protium together the market is is good.

are So we me appears I think positive. continue pretty net there. of years, our of it few -- into in the next far good terms will your that, exact these it, question and to predict like that to but expand of still feel market to it's how position The about over difficult both market

Pradeep Ramani

Thank you.

Operator

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

Gary Mobley

guys. the backlog a of up is pushback finish start is the give to fiscal congrats at as take my your wanted year Hey, strong XX.X%. If the bit so a pushback, Thanks about to little a on look and Hope, XX-month year in way. XXXX. all strong I guide. and This year taking XXXX a question a on your to next for wrong XX-K, it first-class it's fiscal I your don't disclosed well.

back year extra the you grew fiscal XXXX, you If just week from XX.X%. out

And that do hardware backlog on a view assumption fiscal revenue you're XXXX quarter, growth? why the sales so, the in expecting the first increase year as conservative result the didn't the how of

John Wall

I the there's but So, structure great sure But Gary, question. I'm nothing okay, growth, unusual about on of the not backlog backlog. followed logic the

the think for I next year's XX% have of out we guide coming backlog. about guide of

of plus coming RPO Is backlog. the numbers, or what access Now at at? the billion you're includes I backlog number. getting know piece at $X the not essentially, our $X.XX I'm in if billion looking is round the full you're out arrangements. IP of if sure only backlog that billion, about you're RPO $X.X looking But

Gary Mobley

perhaps. frame. a some the that you a in we whatever I right could down late it sat projecting And two-and-a-half back Yes. in more you it past renewals and for can end helpful. going mark. license was years you that’s And And pulled I and recession on you're time to But way think the of reasons for wrong about reason about that now we're XXXX, XXXX note, mean, Lip-Bu talk offline. related be

seeing now or renewal kind are -- given higher to should that we're of we two-and-a-half-year at we see some should so we level activity, expect of And the mark?

John Wall

only and a year. revenue was we wanted slightly called I thing was remarks mean in unusual, there the than make higher but which say, what, the average QX, weighted is into around XX% I in of prepared that recurring strong XX% upfront, in over lot to Yes. Last average I our year, add-ons so you in falling mean time to strong that is the that's higher was they'll our X% if was have kind And up question, XX% billion. revenue, And three-year contract. typically XX% was kind of -- QX. what, to of over my out Gary. XXX, in terms finish that in Good sure that's, in contract that ended in it because throughout generally, understood very, of RPO was recurring, the actually results it to revenue percentage baseline XX% on on upfront Typically, recurring I -- and co-terminate prior and do at you three-year have upfront guide Yes, we I two-and-a-half-year are upfront. generally, $X.X our two-and-a-half generally that's years XX% range. a means of why XX% very it's the roughly XX% upfront We And within mean, We duration. booking frame. of we're typically a up, a most always look of normal and duration, year. the the predominantly then was a I that kind customers a think, the contracts,

Gary Mobley

you. it. Got Thank helpful. That’s

John Wall

Thanks.

Operator

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

John Pitzer

go up would let out But the will question. full full just and plays bit back stuff of QX especially me highest such ever. to maybe Gary's it the way I think thanks as history for year guess about guys XX.X% And SKU about as follow a I that ask know half Yes, Congratulation maybe guide, differently. today, I on if of be year? the this be of year the falling which a sales, is to John, to some back question guided the results. And in the into QX little is and materialize the But visibility be the could hardware other? the that is you year, of around in one or really QX. would start linearity historic when ask of hardware some

John Wall

the think you X-year CAGR to be accelerate. from the it's the CFO going year. continues the commentary to a that I Yes, guide historic see I in can mean in definitely

year. the our is when achieved I XX%, this embedded rounding we're XXXX, XX% we naturally guide think up -- revenue X-year the growth XX% to in for CAGR with

of Now the a strong of it's off QX. back

to for tougher The of second predict hardware. year the half is

guide it's will then But second it take to and in we is that falling So tough half, up. half that's see that the why second visibility about through our of pipeline versus in -- but the it's X because right now our of months. the into typically hardware first I the flow to kind modeled If out revenue half. XX% the demand see at continue

constructed I how outlook. that's we So basically mean, the

John Pitzer

variety? embedded velocity, in impact longer-term of understand down if the What it new Couple would you having entry are out designs it percent growth the What I'm questions. for me the functionality AI That's could impact be higher design help better the the there? intended and cost bringing design impact wondering business of you of the design? on customers? AI see there in higher more Is process. the of Is rate

Anirudh Devgan

have that's there Yes, already question, a observations in good several and key you the question.

but AI, the innings, Cerebrus for at are still almost of Actually, with we I phenomenal. engaged all and demand solutions Cadence this our the we customers. So in is the are point, think AI major early

So I of AI-driven not is like not be a XX will question who's to design XX who a question using. it's think – forward using you it is months, look not if like

of XX%, power purely to process better mathematics. top I you So when we savings; I And numbers And think numbers XX% we of node. of able mentioned are some and get kind customers are mean, that results. process we of like on are another you results move moving get one algorithms and AI from typically towards I are our that. improvement seeing these phenomenal node these to mean most timing. the

is there cars, you cars understood I all to not across like people very the to So used customers. driving just going back analogy value the automated give our recognized And get The think are a it's verticals. proposition to car. and more driving engagements and by are think Once I to all across well regions all old way.

way different in So do with driver in people more we can in being of chips. be will same And AI things be different have to and design the can I these Cerebrus And of the benefits think mostly the are the customers, and Cerebrus productivity how the significant. primary new will of skill solutions. better with of that level PPA geographies and sometimes number geographically, also made kind all engineers kind

So optimistic. I'm very

and through roof are think I results. is the meaningful real demand the the solutions providing

to that, actually, expect thing I is we parts Cerebrus full can design though move digital would run digital, the started to similar even the other So, flow. applied way add technologies customers almost I towards our flow. will the as to this other the And like with be all of

this big think provide I industry. benefit the overall, pretty So a to can

John Pitzer

not a at far does or gains AI allow faster you against made, of over risk the ahead? does getting maintain been you the that's you've open too CAGR Anirudh, skis a addition three-year even of accelerating, rate of the the it your promise growth actually to

Anirudh Devgan

mathematically, typically. run a thing the done when I think good We CPUs thing of XX. is that, them much And, we XX there. just over is like taken the parallel running, how each is is the other see AI. time may when Cerebrus and have in we at the these they human with is or one -- by other like, things, one design typically machines mean, it promise have process to like a when that, of XX But run XX, run experiment Cerebrus I

design or So thousands in we're parallel. running iterations of CPUs hundreds and of CPUs multiple

parallel XX way in driving car So is finding the point like It's what best not to A B. from automatically. get to driving cars automatically it's and point like one

licenses, value customers So that getting. consumes its are more good naturally our I that and think

to of until see, promising. project doing much actually percentage are to don't see flow. to purely mean, And want we what and We AI-driven the it's terms too see. we all, utilization? CAGR counts we I what in license design it's just moving and think a Now to the have of I teams just and have to

the I there, see but months. So more XX you the uptick, we to the next update think But we over XX is yes. will have process to

John Pitzer

guys. Perfect. Thanks,

Operator

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

Gal Munda

Cerebrus me helps stuff. Thanks contract customers do the afternoon. taking renewal? Good and capitalize the to it? goes it the include that like in size usually you of questions. pricing, just on innings, early increase to it you try basically piggyback you on a direct to it for how terms in on when just contracts let understand So, further in contract actually as do contract size, said, Obviously, And Yes. it's and does you uplift it's just it engage existing your first my or a so negotiations, one, like, but SKU new or

Anirudh Devgan

Yes.

product. So that new Cerebrus is a

-- flow. products to sure course, platform So that products are make on the is its So sale right? to our our of when And capability like additional add just full in have then to good Cerebrus customers base AI or customers they part is best-in-class, mentioned, whole flow. top gene so we the and digital typically, tool provide it's will is and the Innovus good, that base we And the I digital and sure is good. think copies I run of make but would But that. the multiple Innovus Cerebrus, important also the not they of run

Gal Munda

it there it in expands more That's core it be usage because Yes, need the why widen the because was products limited number you past, by well? products more could that's if of the that get thinking of my Would of they were the question. and so the companies have. the does actually increase engineers -- together? basic kind it bottleneck does I along potentially of as that

Anirudh Devgan

great Yes, absolutely. observation. That's a

it are manually, or like in parallel. XX when it you running run running XX X or Cerberus X you So experiments. mathematically, experiments you're And when is because running

the increasing you like is of mentioned. the it naturally, base use product, So

Gal Munda

verticals? What continue you there. follow-up, made comment and then versus on the us -- other for there, is just And other And and been the verticals for and talking the Ulta growth you little if around about maybe in you you how what you obviously, Awesome. -- a growing idea the to auto like you've today of a area? is segments – outgrowing kind like that see segment the performance a auto, hyperscalers. how can if the And an great of as important seeing systems give the post example, think

Anirudh Devgan

question. good Yes, that's a

general, have digital we of have mixed-signal historically, Cadence think semiconductor And the analog has There's multiple design in verification. to Ulta Now right? and it, both, aspects it. because we I

We Because company, the of the and auto have auto semiconductor okay? traditionally signal. portfolio chips always done the are had auto like broadest mixed we well ecosystem the with companies naturally

component. And a as a semiconductor our the is I Tesla we for too, dynamics talked which very quarter, electromagnetics of products one being Now key think about, more example, for and thermal is is system or these beyond auto that. the important like customers. of of last just new car This have physical analysis, segment and we CFD actual that,

for high-tech So system analysis markets then market. market overall I are defense electronics, important auto course, the semiconductor aero very there I auto the our X I of includes, think the mean, is and and and hyperscalers. big a which think and

we do system in X portfolio, are X for think in defense. we So these particularly strong and we to made acquisition of pointwise, as aero our we want all markets expand make them, all And I like, is sure example, important. well

design. we semi traditionally system the part partnership in amplifies we the the and with And expanded and now Dassault with to engage connection. been have strong I connection product, of beyond So system have the software auto to on the -- more that overall semi mechanical to question, answer auto the also opportunity the think this and your including

Gal Munda

That’s helpful. much. you Thank very Perfect. so

Operator

will Vivek your with of America. question come Bank Your next from Arya questions. with Please proceed

Vivek Arya

taking increase stay the of expense edge? the market at node question. it with this Anirudh, and leading foundries the from some or customers' given out the use I'm the some edge, of the for cost to at is is putting side customers, about because the N-X leading the Thanks the the engage making any, lot between willingness just what perhaps judicious leading going be are if inflation, a curious, edge, more right, foundry if or it, at to correlation, maybe of designs customers pricing the of most EDA the my that

Anirudh Devgan

Yes.

address I range the says make I always would we think want I we sure whole way of that, think, the So to technology. process

legacy in chips working chiplet-based nodes a more working can and there most of more design, everything So are very advanced are the you than at at the at In more then that, like always three-nanometer XD-IC. I be And and -- some now and X-nanometer, X-nanometer, know, of and And and the key mix were right, one to customers well We process not more, and XD-IC nodes. is we with think RF is that's as with demand are most has some for and two-nanometer. the things going we mix maybe traditional investment node, are that. always at R&D X-nanometer.

their So nodes. and best position different support I customers broad the which solution the the markets part is digital thing are very the And to in end from advanced that for mainstream most to economics, Cadence is fully. think standpoint a as and the and have part, them choices, make we key a addresses legacy chiplet XD-IC

dollar. design choices for and in with together them would I best entire node to are to I how want advanced legacy the solutions customers more the and the I and say and And in make there nodes think they that, it how choose like that node is is chiplet. and of in there customers mean, process what whatever provide the and the position with the set they more we'll be divergence to of to put support systems we So use foundries terms and the

Vivek Arya

And questions. if very That’s I related of maybe two John, a kind may, helpful. follow-up, for

modest earnings flow I under of XX%, growth, to you're flow that, very modest is growth. very activity related guess, essentially is in of year? spending the you're free but growth kind the X%, kind buyback of only this half it doubling, but buyback is mean CapEx does QX, the guiding allocation So, the if And cash on year cash of free modest, rest to John,

John Wall

you on -- Yes. can hear So me?

R&D. for the after we around gives free we've free to repurchase accelerate that cash XX% been at kind then year. look first we map. of priority XX% And a lesser flow. our of look our opportunity smaller every that, our Traditionally, -- tuck-in buyback shares organic to and I it's So But XX% that in to M&A on cash least is road over we flow to when extent, invest side, us repurchasing shares cash or expect do use we'll year. this at using an

Jobs in companies incurred. That some additional has rather XXXX, XXXX or expense that's mean, XX%. the lot In taking also of for the shares week As cash -- some bit and a planning I embedded up today. than taxes. required guidance. a of year, relation And January to into your opportunity to there a creates said amortize repurchase repurchase just cash million to or we're extra that's provision the of the received on that There We lot I observation an a that was we're we was us and the in and in of at free more XXXX, we've XXXX, picking -- we're of $XXX but the cash. cash of decost that those Cuts of that last that’s and the as prepared as cash to effect capitalize Act tax in shares burden costs occurred in or QX, a see extra result of last on X, into remarks, of Tax prices worth than timing went flow,

Vivek Arya

Thank you.

Operator

over for the Anirudh Devgan answers. closing turn We reached I to time for questions like allotted now and have end remarks. the to call the of back would

Anirudh Devgan

thriving you Thank tremendous Cadence system enter It's and momentum strong with exciting opportunity. this business and we industry, time offering for us for as semiconductor joining XXXX, afternoon. an all a market

design Our portfolio expanding innovative continue as customer-first execution our accelerating driving growth relentless and intelligent system we is strategy, with new solutions. mindset

Cadence We employees inclusive our our have behalf you. trust the innovative we Directors, built for and and on have the culture and over the we Board recognition in are are grateful of for Cadence. proud confidence And of received and continued of at years. Thank their

Operator

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

You may now disconnect.

Cadence Design Systems (CDNS) 23 Feb 222021 Q4 Earnings call transcript