CDNS - Earnings call transcript Q2 2022 | Cadence Design Systems, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Good afternoon. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After [Operator you. Instructions] Thank over turn for Gu, now will to Cadence. the Relations I Investor call Richard of Vice President Please go ahead.

Richard Gu

second to Thank on Chief call. and today's our contain and of a conference Due differ Financial Vice prepared those or of Officer; may today discussion our be President webcast available materially everyone to results cadence.com. would and remarks will projected operator. Devgan, website, joined fiscal copy implied forward-looking outlook this will like Today's Officer. on Anirudh operating risks Chief you, to including XXXX The I today's statements, in I'm our actual call from President, and future quarter by uncertainties, earnings business results. John of year discussion. Senior welcome and Executive Wall,

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

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

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

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

to the Anirudh. turn call Now over I'll

Anirudh Devgan

new as a of the expand building TAM Intelligent X financial our will are design our to We are year-over-year the details today. outstanding all solutions results groups. exceeding and key and driving a Richard. in growth for significantly hyperscale joining AI/ML for metrics on as resulting underpinned John such moment all year. provide our results the with the well across for vehicles beat next-generation IP strategy Design introduction driving system data for leader double-digit portfolio. through our of Future are demand XX. uncertainties, accelerating Cadence the Good updated autonomous we on outlook growth year, design our and and through accelerating transformative afternoon, significantly macroeconomic products QX for thank tailwind business the well analytics you molecular space. System acquire us core well customers and semiconductor in from OpenEye In future our intent secular with companies expanding morning, and computational companies the Notwithstanding announced growth. investing investing acquisitions Scientific our for position custom innovation, in This that and OpenEye in as benefiting content Scientific, trends Thank raising quarter, second and our innovative These strong accelerated you, innovative the relentlessly activity delivered broad-based silicon. for financial QX, everyone, us digital we EDA, exciting end-to-end Generational XX% their as increasing a XG, in silicon as outlook our growth and computing across revenue by trends and the robust systems Facilities multiple the transformation continue Rule both industries. fueling guidance

to leadership, increasing process. biotechnology The in success as drug of drug With for along fluid market their disruptive simulation successfully enhance of now growing significantly solver emerging through speed AI/ML simulation, life system leverage the chip companies drive efficiency recently, to the analysis rate extended element and pharmaceutical This of will our management and innovation to allow complex years, infrastructure, an accelerate expanding biosimulation. Over into OpenEye, finite modeling level long us discovery. our first, emphasis discovery computational expertise level, and the dynamics. accuracy multi-decade and, to the molecular are science we and and we past and have data will few acquisition on more solutions the area interest with software large traditionally to

are to and AstraZeneca, deep market-leading science well platform OpenEye the our firms, as cloud-native XX OpenEye's team the excitedly with Cadence. SaaS and Dr. as and forward biotech OpenEye on expertise proven expertise, rich can thereby Nichols Pfizer innovative we of and highly leading knowledge joining look biosimulations. companies, a scientifically pharma Anthony including domain computationally XX top Additionally, capitalize benefiting cloud intensive by solutions used

pioneer also it to the extends CFD we twin datacenters. During our and digital datacenter that quarter in acquired a portfolio Future space, the expands Facilities,

In physics-based Future Enterprise, innovative Facilities’ enable in helping footprint. reduce HP addition analysis, customers and cooling such their to digital thereby datacenter using XD optimize solutions and Equinix Realty power Digital to carbon electronics the as twins, thermal efficiencies

and Hassan team to Moezzi welcome Cadence. are to talented We his excited

far-reaching to our a providing and AMD solution our core IP with Demand QX platform system EDA, element partnership with core software And long-standing of EDA to wide-ranging our best-in-class on their have deepened has and solutions. Now expansion QX, to and on broad-based. innovative extended closely product customers strong we and approach partner confidence In highlights. core for our to based hardware win with a to we and system software by leadership customer our commitment been key moving of A excited Samsung software market-shaping to design our engine. solutions. hardware, EDA are collaboration remains

at of industry's leading in new the as displacement the Our most nodes, advanced digital digital business key year-over-year accelerate quarter, full half significant of close quality flow, with growth to as another the with of continue XX% well customers. delivering year. XX had first our strong competitive Adoption expansion market-shaping results at to several by fueled wins

Cerebrus. XX% our business led meet to productivity proliferation, Cerebrus hardware Broadcom, especially full aggressive a year-over-year Renesas, market-shaping growth to User Cerebrus Our innovative, leakage their Design in Jasper. this In explore power Cadence market. speed included Functional the Strong solution our time QX implementation of Samsung Protium new plan their secular their using across they floor getting to Co-Optimization, see space server customers Cadence including realized schedule quarter optimize up broad ever key XX and and capabilities is self-learning and customers quality PPA users especially accelerating complex flow XX% to from level to than fee during Intel, improvement strong Technology and as hardware. design With and with automated the production orders verification unique remarkable we with XX industry-leading continues intelligently automated allow and and XX from Conference, hyperscale, in NVIDIA, as scalable as PPA, and for transformative differentiator entire recent reduction system designs to and digital our design by Palladium successes Silicon demand our CadenceLIVE X/X the much a for push. becoming up XXx Valley ranging the improve results and platforms. led nearly for repeat more ZX final range to productivity tasks of AI/ML Cadence both presented grew customers, customers QX, At and and orders, the our as goals. best customers, platforms, enable

star drove Our the nodes. outsourcing activity quarter, and as for strong had advanced our especially very a most foundry IP, strong IP growing year-over-year design XX% the business at trend continuing IP

stereo and DDR wireless, at to footprint memory portfolio its markets. IP significant our Our and companies. and and and notable expand wins wins hyperscaler end proliferate customers, automotive, AR/VR to leading continues PCIe mobile true in compute headsets had solution strongly, continued automotive had in while with especially Tensilica Bluetooth

packaging Our our verticals, is for custom momentum driving intelligent can next-generation node leader design, aerospace high-tech QX, XG footprint cost, In for their Design and in the QX, and multiphysics as packaging driving need several complexity, product design in expansion analysis business innovative including integration rising advanced Ciena, and solutions electronics, our Photonics, its development delivering continued heterogeneous in X.XD/XD Exploring time hyperscalers, a increase System manner. solutions. in modular year-over-year handle defense a EDA optical coupled with XX% that we growth Analysis coherent adopted and networking, is that and beyond solutions communications. strong

We integrity truly system-level with floor integrated growth for a planning, that tightly across all in-house system implementation, packaging technology are which provides comprehensive solution, only industry's the solution XD-IC platform optimized is analysis. our seeing accelerating and

and disruptive Analysis benefits compromising is nicely performance proliferating portfolio, with both capacity, delivering System without companies. Our accuracy, and system semiconductor

to a market-leading marquee in For U.S. leading providing hyperscaler. orders, addition RF company multiple and communication adopted and U.S. example, global chips companies, company, was mobile X a Solver including by a semiconductor repeat marquee Clarity

our announced will We Fidelity new also who Racing, partnership airflow. CFD with McLaren multiyear use software to investigate a

speed to Cerebrus average first solution Optimality with and methods introduced with Optimality delivery designs, on product. Ambarella up revolutionary very the in the We of the Explorer, the for Cadence provided XXx having compelling implemented some designs. MediaTek, the than customers which are have seen manual time. AI realize results, is brings Baidu ramping system on faster having endorsement Microsoft, as adopter with up also traditional technology about they early very quickly strong excited XXXx for enables to been This optimized these up space to

our solution that's the companies new upon summarize, on-cloud flexible QX, In secular models on first the as industry's QX the Amazon offers companies launched for for This our Future Services, offering, outstanding setting systems well-established well are we of us and scalable built an task we system acquisitions. for this into consumption-based year Several Cadence financial access, technology, up and To is was also innovate e-commerce and relentlessly OpenEye raised instant with business. a future we our innovation, model the expanding Web platform. our and transformational are platform. our advancing to Bombardier, strategy. platform, cloud-first customers, the approach. and e-commerce this by strategy their CloudBurst drive go-to-market we As our to System endorsed continues growth use SaaS use enhancing have semiconductor new investing end platform while markets and Design for Cisco outlook significance and Facilities including a Intelligent quarter game-changing tailwinds accelerate adopting

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

John Wall

good and portfolio. technology afternoon, by Anirudh, strength results Thanks, XXXX strong quarter driven achieved our of for broad-based across the everyone. Cadence second

QX. all operational All in of saw year-over-year product financial and key exceeded double-digit and metrics categories our we revenue a growth,

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

and remainder XXXX remain share in we expect fiscal place Before that for exist certain I assumptions export I'd what key for provide assume our a the of in take to We for will the outlook. today to year. QX, moment updated the outlook like limitations embedded our

of We range fiscal of GAAP XX.XX%, in operating of in have of we $X.XX Facilities range million operating billion XXXX, midpoint operating of flow have to for use included approximately billion, $XX GAAP due and our XX.XX% $X.XX updated some impact range cash expect $X.XX, that's to will non-GAAP our paid the price EPS acquisitions. of million, our million; acquisitions of to approximately included of of cash flow for into million now billion. these these our both XX.XX%, cash range XX.XX% of outlook the EPS outflow revenue to fiscal cash assumptions the second for XXXX half. largely X-X, we Revenue the to through of the $X.XX, $XX and to operating in to the outlook, of the shares margin $X.XX Embedding $X.X an non-GAAP the in in acquisitions: in expectation flow $X.XX margin that following And the repurchase to At XXXX. the $XXX approximately we free Future expect operating these expected OpenEye Cadence $XX

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

analysis which and XX.X%. commentary, outlook, our includes improve. as non-GAAP be to operating of that website, EPS available and profitability non-GAAP reconciliations. our is continued businesses CFO now all shaping at we midpoint revenue annual year further well items our Cadence. of of outlook non-GAAP I up another growth additional for to to am Our strong growth XXXX conclusion, of XX.X%, of At expect and as is our the on growth GAAP for pleased XX.XX% margin In revenue

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

Operator

Your Instructions] the first [Operator Securities. Gary from of Mobley line Fargo question is Wells with

Gary Mobley

your extend give congratulations me for to channel given business? a -- model these moving to your first us non-semiconductor areas to some as other maybe with sales on software end to of now markets, the you simulation infrastructure and let address my into out your detail multi-physics life of you you could like if along us fiscal customers year. view the off you're the asking to start portion your Cadence. how wanted sciences, now And And systems lines, half non-traditional SaaS as a strong data share same or that by is becoming how can material build if then analysis need aerospace, And additional center

Anirudh Devgan

is a this question. Gary, Anirudh. That's great Hi,

first are then So we computational to our all, and software core very areas. to see, well, new of strategy. the And you doing System expertise as Intelligent are applying execution we Design with our pleased

our important of like emerging businesses molecular also base simulation areas adds into we doing the finite it's opportunities. areas simulation, well. with existing disrupt then expanding And we I and new space, today the announced very that as that and our but think into naturally like to also to all of And simulation. areas, are get we just expand not customer So CFD, did system element with

look will about That's expanding expanding way we it's And in closes later, cloud an customer to like because the overall, we on new and and operate as now Now a offerings. the direct go-to-market. in past in channel And it will it are just not also SaaS business have the the our structured on-cloud, have unit. the base. only of reach different when you our that these there's to as OpenEye, in another areas. slightly terms long go-to-market tail we be -- but channel, it focused operate that natural if indirect independent general, talked at and But

Gary Mobley

license can speak I if diversity could changes backlog -- and guess maybe Okay. Appreciate backlog differently, the that, of on Any notable If to the just said billion. the some ask Anirudh. maybe metric double-click of average I the duration $X.X growth. you to

John Wall

question. great Yes. That of Sure. of yes, that there's backlog an element course, in -- Gary, time number.

that I months. $X.X non-cancelable $XXX think other with if you look at XX% the that's the revenue RPO of excludes It's about in backlog next that is to billion RPO, expected number, million about the XX of commitments. arrangements in from which

XX-month So backlog. it's your

XX% $X.XX roughly it's is percent value X.X -- systems your about a of in backlog revenue I mix very that's mean The X.X of I had think Very that. we've the we're itself that of with number your annual -- business your value billion probably pleased or -- backlog. that backlog similar of RPO X-year number backlog is of a time. X-year annual pleased And of and now. and

Gary Mobley

just wasn't there that drove And in customers the or increase X be backlog? Okay. the to X clear, particular

John Wall

Well, the very We big the first first us. for half renewals had strong was some half. in

we've the backlog, time backlog customers. certainly quality booked quarter. But you then is the renewals reflects of contract. the billion semiconductor I As company we focus $X.X I about on big had again talked the in the when amount had thing you last the second look at marquee recall U.S. record to reflects We quarter, with backlog of X-year and a in the we think which the think that a

Operator

Securities. Bank of America line next the question of is Vivek Arya Your with from

Vivek Arya

of If if when the recurring for suggested what upgrades remember to big to I the the elements. has revenue curious, had you you XX%. of guiding go reported same business year you're year a kind XX% QX, I especially growth don't of delta? start pace through of XXX-point now rate created the year, back the I'm this the and And

the Is now rate I exit growth growth So is revenue what of sustainable pace B is XX%, this this Or it which -- upside Cadence? just so? curious, what is at mid-teens of this new QX for your what surprise? XX%, is, guess is I'm where or baseline of driving the it part And implies?

John Wall

essentially, first I'll to mind. if great of take the or But in -- great we've we done XX% know the nature. particularly up be mix well certainly revenue extent. that's -- start functional half driven year, the the with Vivek, upfront first expected all great recurring half, XX%. business the we questions. a The has to hardware you're that, quite to there. year at XX% a don't think an of that so XX% of it's verification, but our certain I first up half, you in expectation the a been rounding guiding in higher for revenue -- had and to were I percentage our IP

our of year, we've I our all across out, XX.X% up remainder take lines. the you million you to growth $XX outlook extract largely to for the the if the business think inorganic revenue that included due -- impact it's of And the now. in of if that's XX

year really well. the compared and Our revenue higher we business to last mix expected this compared to what lines also all year of But performing a upfront there's start are year. really, of at the

Vivek Arya

is basis longer-term if to growth, But of just model business into quick Has is baseline But is in the to Cadence? you B guess growth? What is in growth right that which sneak had the a of one that. there right, your or it whether this is first? is I Or a CAGR it for XX%, this to from or is resilient. tier part your think will XX you downturn? new mid-teens And the I if changed this there fairly perspective? higher XX I a could something business -- happens part then the way know if in XX, X-year of get of semis, downturn a the still see Cadence about previously

John Wall

in Vivek, there. Okay. number of a questions

cycle. look it sign CAGR unpack over way rate with reflects you're business, me Typically, contract a well is growth how I contracts to has our a the little Let the I customers bit. at it if underlying X-year But in to that the us. good think think because done at look looking business to X-year up one the at

more if you this disclosed been upfront look business Q, quite year. has our some detail. at in revenue And there we that Now

is up if I to you revenue business think revenue The the growing Anirudh much -- probably business at business hand then sustainable XX%. and this our The you'll let year recurring year that there's compared you the unpack about me year that, is downturn. to upfront revenue more revenue recurring this find talk impact but last upfront to -- XX% considerably, is to over the going our a if forward. to

very, I the sustainable. very think recurring revenue is

Anirudh Devgan

which you end markets. Yes. explained, diversified, traditionally our and to to critical that's are gives is both we know, One highly Vivek, and a great maps. thing is business road reason. in is know, geographies as second would that's would customers' are I business, highlight And terms resilient. higher you that And like ratable say where the of very future historically we our point. third we renewal the the main so current some and rates. is visibility in probably reason very also strong are a for And essential as John products as I a the But R&D

the One macroeconomic verticals. the in we the the big good are to we in is about front uncertainty semiconductors But X are generational are So us. I growing watching of we And right? trends overall, position business. and of our semiconductors like whatever mean feel a I weather always talk environment. is digitization drivers the need for and So for intact, all carefully

also beyond then with more to system simulation of the is System growing Design third brings and the and expansion move more system thing big that And TAM kind EDA silicon company. to the more optimization. doing customers our different And diversification. and Second and our Analysis megatrend relationship own being into companies

So overall, the but about we and are environment we are feel watching where -- very good we closely.

Operator

Your with line question Securities. the Jay Vleeschhouwer is Griffin of from next

Jay Vleeschhouwer

important referring X me months you, addresses keynote let made start ago. back weeks a your Anirudh, X both ago with couple you to in deck points CadenceLIVE and at of a

time what I the effect, AI-based is model, are semi said that EDA important. terms in a our for in single-run provide implications services specifically the in you of capacity said support then optimizing point, next X the and that you your systems over And big you've that of runs to in for kind So a are, history and think, ago, EDA interesting EDA. framework things that AE question weeks the to that customers? need very X thing is, One And you at the both EDA. relatedly, is there for multiple needs

So to question still the And getting in there question John. on fact, have that is, working second do you are Or then that now? for you, point?

about headcount balance tech to a are how interestingly, acquisitions, compared thinking as positions. of open you the level fairly of You, year? maintained high additions for other Excluding companies, the

to again, the how ability and of you AEs the for are both your about So bring on ex acquisitions R&D year? rest thinking,

Anirudh Devgan

keynotes. great. of That's you attending the thank first Jay, for all, Yes.

always Now you software, is in I software. want I to as is like simulation. strength our highlight say, And of just terms -- not in know, computational computational

course, it's and in But we optimization expertise have Of also simulation. big design.

optimization in of Cerebrus. probably is excited And and design software. like that's available. with provide really and can more can digital I results. dramatic in So one most see our coupled use about of EDA I'm writing Cerebrus, with Innovus, complex but example, route software what for just digital AI not optimization. flow the importantly, are in has a you of that simulation, the And complicated most mean, history optimization things rich of place implementation

And huge AI or So or with we it of this applied then science-based, okay? for with course, think Cerebrus. a I a of simulation, system inside chip or combination Optimality. also plus design is level, And recently, So simulation-based optimization. is analysis whether out design to the chip plus in excited in outside simulation I'm combination very optimization, physics-based combined megatrend, about of AI, it

We this results based Optimality similar multi-run of applied your system optimization, done. traditionally simulation. technologies Cerebrus kind EDA can on hasn't dramatic learning to reinforcement and have point, to because be And requires which

very another with the requires I are progress. we know, mean as also area, there's pleased like that which can So multi-run. is you verification,

-- time, software. our automation. this our expect to will all with things of analytics what things over should of more more are we product multi-run Optimality customers And to with across second. on you like I applying And able and the overall So that automation more we tying get can comment our portfolio. is, the AI Cerebrus, these do and of is we data together kind and benefit they of R&D can that to be John, their and course, spend

John Wall

bit yes. costs, to in if employee where a relation half that's to in little in our Yes, half, to merit X. first Jay, ticked all headcount, you comparison our margins July kicked on really. I the the think down But due cycle second noticed

has talent you competitive with our as to So of through we Chip very issues systems And And year, with course, market second pay Great activity. and we're to second the in hiring for the the think of the at half been down very last and is had year. semiconductor design and both how half impact for in we've increases our no slowing attracting the expect mentioned, hiring not strong, with we're on of as I us X, performed talent, Work pace continue the X companies. well. M&A the service bringing headcount in we've years, Place activity

Operator

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

Charles Shi

over questions, me of to allowing startups? for it you I last VC I the probably I reason how of going The into want to some years, business would the to why startups added John. kind very Anirudh significantly. a up that semiconductor in much and benefit over ask is like is few exposed your taken last years the to couple that ask of way might business believe has your Thank ask funding to been X, growth. your X And have

secondly, of impact now I EDA fundings worsening thought, can and kind spending. kind startup of the you about first the how into quantify to terms think to condition of especially investors their do your startups, macroeconomic you And of are the are your segment? your to starting So tightening, what next exposure Wanted impact over financial the of in conditions part to in months us pre-revenue? with worry XX potentially the the ask think those business and much your of some this

John Wall

great question. yes, Charles,

design moments As demand very to I I few activity probably a observed think community, ago, I spending, board. the Jay across more the mentioned right startup is is mean, chip we strong. I mean within in there caution but

exposure, In small terms of quantifying our our exposure quite is on the side. startup

to we across don't being so the the of at I is they're in the cautious, I and -- included is We've significant in the Also, have mean that community. already impact demand we already on that for -- startup And the of I all we -- that I in COVID the think that's -- say, exposure there's height any Charles, although small think XXXX $XX know there's eventually. our -- million any think But reserved they everything don't that, of collected -- in like I QX you the think mainly extent pandemic, guidance. back half customers. collected was our original pipeline, at bookings been in at there guidance. And outbreak recall I If peak, probably it right we we were of businesses.

Charles Shi

it. Got it. Got

what want U.S. Congrats XD-IC high-level the roof -- the one this whether XD-IC. been introduced do blocks some was including called little XD-IC they and all of bit Or customer, on know it I XD-IC the question XD new your blocks recently of something mean with marquee and for your foundry you you the adoption second interoperable there? interoperability vendors' what And question vendors. by not of kind attractions obviously, But your do, platform their on product working a TSMC diminish maybe it ask my who they the strategy? have is solutions. is differentiation other things the you would different doesn't to believe to that across I tools of that are full -- trying to design XD in So a tools. mean customer. guys under what flow of some the does that one solution Anirudh are question. certainly, I And see John,

Anirudh Devgan

Charles, that's a good point.

the like in we are work position and with market. First leading -- you all the and to And have happy, of all, are we XD-IC. our a partnership strong I progress foundries, the in with given said, we very glad

EDA, because run this typically, of chooses. Now of advanced even be design I results. traditional as better mean, look the a customer together at so traditional tools EDA tools. gives integrated is customer flows by EDA, But I complexity, the you think But than always our to if put node even can has though. multiple the solution traditional a different and some tools mixture choice not any if other

with best PPA. best about. to work the with we are products the always that. deliver allow will fully our believe foundries and our to like in that We domains, solution XD-IC PPA verification the and what provide a want And flexibility that all digital products results, we leading So to same thing or but integrated we best productivity that's gives all the customers

different critical. benefit the full of even more same other any the areas. from time, So I at But on flow is focus see don't the

Operator

Harlan of next is question Your the with from JPMorgan. Sur line

Harlan Sur

semiconductor focused Good are supply continuity afternoon particular companies recent and of execution. one currently foundry defense, [right risk, geopolitical, given manufacturing are their on national results A and them] on to diversification and more of dynamic that through putting or focused are the to solid forced partners your customers now in place on congratulations partners. are but support

that digital this leading-edge new developed every a to library blocks So going development, I [indiscernible] engineers chip organically have even companies time I both purchased add think a where is for analog. design to is and foundry new this partner. know new with the entail IP they're

businesses as well? IP driver] wanted think [of your I your diversification So focused so and views. would is of but manufacturing this to on get core EDA

Anirudh Devgan

good a point. That's

know, design are more also working all all we on because manufacturing by EDA side. work all several said, on are leading strength manufacturing, great we IT been used foundries more tool require geographies the at diversified by more And the of it the side products privilege our having products. through in the world governments -- design than investment very all the across side the or are onshoring segments of and As But the as there to foundries. that focused these our and enablement have you enablement, improve and -- does with is and now

we So forward. I our think that drives work more move as partners these demand And glad to are products. all for with we

build are any macro our at focused So level, enablement to our the kind customers, end good the side and manufacturing-driven right, business. their we solutions. on uptick for in But design of is

Harlan Sur

Exactly. Yes.

And compute. of Okay. in IP your in compute, some mentioned including on I the you remarks, business, then think this

platforms, We've at processor of year. out new end got AMD, these the rolling this PCIe and [AXL]. supporting are right, processes all then DDRX, Gen rolling out next-generation interfaces. memory, Intel And storage of got X, You've

we're in XXX-gig surveys Additionally, and adoption still optical. kind the early networking, in of XXX-gig days for XXX of

or adopt these as continues have next-gen With strong here in guys business from chip transpiring position of all strong interfaces growth their and You to on these well IP customers looking all in stay designs, the a segments. year-over-year here? these of obviously to standard

Anirudh Devgan

Yes. That's a good point.

QX focus IP with we you you high-speed DDR, like our And just -- we even, mentioned on SerDes portfolio, IP business is IP. design PCIe, saw results. with have we results always doing like think silicon platform. well, our I And in star

and key So is we're all is that. IP and said, pleased strong, design strength with activity are like And now, we I design those a part segments, seeing right across the of activity.

And say the strength also is with are benefits but segments. IP trend wanted from progress. so -- also different also across we product that this to But happy the our I of only broad lines, based different not would And I customer trend overall IP outsourcing. in just the say

IP. on customers know, they core will As outsource as focus their expertise, you

the So pleased trend. on our star years, IP business And and think in are good business. profitability overall, with improved also, of a I that the IP we last it's our few focus has

Operator

of Abernethy from question next is line Blair Your Securities. with Rosenblatt the

Blair Abernethy

Nice quarter, gentlemen.

have looking at in to platform OpenEye partnerships be of you -- like going on Just different of number way Anirudh. it? they areas. right Wondering of looks the expand a with in -- yourselves sort a It a see can this play little bunch the health if you product. acquisition, looks just Is care where almost dig in more this is wanted it a to The that more vertical. like the

Anirudh Devgan

and stimulation markets last emerging good next best-in-class also mean, like to -- are and we think of That over plastics and XX other CFD, we for multiple will said, believe of we And talked molecular which question. applications one all, can't it a important exciting are simulation, area we existing is, materials I software, simulation. a simulation than which be finite course, do emerging applications when go then things, the years. sciences and of it a areas, right? competition simulation I life few to includes like new element And now the the and design better into That's has have areas, optimization. but are and well-established I about system years, lot want biosimulation. but we first space And and of

more CFD, the a XX over thing application have is FE to like will which important like next very more to only about not the system it has should so And is properties, have and vertical, simulation the be the I and the and years. simulation it digitized all

in And of for So it properties, by true vertical. a simulation, the same synergy important thing also but the R&D Future has and -- way, both Facilities. it's very inherent properties those

it's the important acquisition sustainability you that a center is, I it, about in reason consumption. simulation, think a power and like And again, is. you huge but area, a for and and need thing don't in vertical, data that cloud If which system how tell to is CFD company, data which center

OpenEye, which in inherent these and companies and positions important and good to are the used design software simulation SaaS. about strong with to XX competition growing in of also acquisitions go-to-market have ties those. leadership So strength, cloud-native applications. first company our portfolio of and space both and and Talking expertise, They by and the they but they're have top verticals, good also molecular a broad a pharma SaaS XX in go very very to a also

the So and having And is Facilities. team. it has for the characteristics true that at like, multiple Future same talented a same time, thing we

in there. want an but verticals we of horizontal you gives that exciting in capabilities strong So go into simulation, also to idea

Operator

next line from comes of Your Vruwink question Joe the with Baird.

Joseph Vruwink

to against did from rate growth of back wanted go north I to has teens correctly, high that was quarter the all $X.X math on my XX%. RPO. revenue low. on number John, or your the next discussion right of accelerated current just estimates if this estimates, those visibility to I are I like at If looks is the NTM NTM billion either it now the look too XX-month estimates extremely

to point XX whether particularly months. the So I time you so looking recurring ahead is you revenue guess growth activity to as do year-to-date, about could even think your the early might in actually we able your that bookings of and visibility next level actually I'll accelerate be based just good on like at question this put whether on the say feel

John Wall

across question business up but or quarters. pleased up fact last Joe, billion. the backlog X-year that reflects hardware the in reflects very to we've the the amount current of of That signed about $X.XX backlog the all it and Yes. kind very, few Yes. great great observation. also gone strength We're our businesses, has

think, lot been see compared half side hardware we of might to of that the a we the be business second we'd million amount the year, signed last of functional the quarter. And verification half of the You in that up. where we've up second has time the thought year, I because $XX taken this that

the see $X.XX inventory. I a current raw for some probably it new of disclosures last to of But bigger can systems our to in finished as fast think materials this X-year as Q hardware the quarter. goods the and backlog customers. proportion in or in quarter building you'll deliver has backlog as well, we We're billion than

Joseph Vruwink

backlog think of Okay. helpful. answer. topic And I That's macro, and Great. just the on is then the

lot thinking it opportunity doesn't the maybe about advanced on So years might seat macro relative seats X seat. solutions, different actually for level, the is about the make But or been was per pause the We've give any just about this think at to maybe design customers, like on just X this per thinking changing time like customer design revenue more there your or next customers at next I just to all. seem seeing a you're starts in ACV how some talking anything worst at past. Or that past that engineering leverage that which down there spending? is details but Is are the the than argument, things to you truly give hate Cadence true of is cycles? different on I call

John Wall

wouldn't I at different is So this time you that tell all. Joe,

slightly There people still of have on we're down is -- among unabated. I the startup I we're bit And be again, design I still cycle. board. cycle. design past all I seen of the would seen to what be across companies like I more part demand but smaller production design like spending, highlight, cautious. across at think strong seeing might mean demand but mean kind the that the manufacturing the they that's or there we're of times, continues distinguish I is Typically, a really lines is cycle, though, business. in design we've may on would what in caution not times cycle lead this. longer double the But

Operator

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

Jason Celino

new you this? targeting use are wanted e-commerce What to available products ask that remarks. resource specifically about today? then that the in to discussed capability you Great. channel who in prepared the or I And are

Anirudh Devgan

question. Good Yes.

a on We have time, are exciting is and cloud, innovations We lot pretty busy right? of on it's of for quarter, this -- it them working a been a we've while. all and

was our is built with cloud it know, we've so true especially see long higher for for But while doing the now. can been market for is and you tail As think go-to-market and SaaS for be -- SaaS we opportunity word the combining of several the e-commerce. this of And I a the reach that with strategy. years on-cloud

tail. Allegro. reach the is big the Fidelity, some and announcement. Now customers systems PCB we like customers you like the were even the goal saw set use analysis our Services the and Bombardier But long Cisco of reason, of of products Amazon Clarity, surprised to Celsius, tools are with And that system and some and big our initial OrCAD it in for to that are referenced product, the want Web

that's the So a traditionally customers products traditional of initial -- see than much focus, we'll EDA these products. how higher and have those number because goes that

it and of in therefore, SaaS is cloud kind And customers. these and so expand over platform then out good we'll rolled for a to we e-commerce time. that And certain geographies,

for but users So, the there, cloud and far, lot the so so it just hardware are goes. to And and we long you, into we the over remind on-cloud of for so tail. system closely how a we focus But products far, is have good. the Protium, mostly also Palladium have monitoring

So we are positively by Yes. big surprised customers. some

Jason Celino

we through X expected Yes. how think to the the should think the the into you When about, It's that IP quick first one The continue half. we talked that? just months, pace hardware and to maybe that strength at visibility Or the the for just John, second about is same last as clarify. about interesting half? an nice And then a raise development.

John Wall

Yes.

hardware So when lines been more -- There's because in functional I the second verification strength half say has would for business. of been business. characterize rate all great probably it very would question. strength the of by of I driven much across

right QX, I to low-teens saw, QX. boost million had of side, that year-over-year And maintained fact the originally the in we right? But IP the in across the up landed for of split we that amount of a part I revenue IP all IP in outlook the like -- for was -- QX, the despite in seeing because On the XX% of strength all then lines And so is forecast mid-teens. in QX I IP taken other of but maybe M&A, had later the rest it strong the about But growth billion] I raise. QX. in I $XX course, And year think raise there's the is year really But revenue QX. $XX lines [$XX expecting we're happen that for growth most business, we still was of to and at haven't say happened smallest that. the the I million, that is and revenue mean I would but of hardware, business. across

Operator

I time. would this at now questions CEO, over further to no to Anirudh Devgan. are back There like the the turn call

Anirudh Devgan

joining for everyone, afternoon. this us you, Thank

business XXXX investors with to call. again great look evening. have our momentum for tremendous our customers, a speaking our Board our behalf employees about of Cadence. We our and their in Directors, thank opportunities Thank and excited forward are We of On you, on the market and we us. ahead you continued and partners earnings and of trust confidence

Operator

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

now You may disconnect.

Cadence Design Systems (CDNS) 26 Jul 222022 Q2 Earnings call transcript