Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2023 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 Investor over go Relations now Vice ahead. Richard President of for the will to call Gu, I Cadence. Please

Richard Gu

our Thank welcome earnings would I call. first to conference you, XXXX quarter like of operator. everyone to

and I'm and Executive and Financial John Devgan, President Officer; Officer. Vice Chief joined Senior Anirudh today Chief by President Wall,

A remarks on available at cadence.com. will this our and copy a call of be webcast of prepared today's website

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

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

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

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

Now, call to I over will Anirudh. turn the

Anirudh Devgan

afternoon, Good Thank you, us for you joining and Richard. everyone, thank today.

will to are the start in of our the raising of driving that solid strong growth. more the for XXXX, I'm double-digit we for John the results pleased and moment. and outlook quarter report to solutions innovative our Cadence view continuing for with first business, a demand details the strong delivered year. essential ongoing robust year In financial momentum provide of

areas, to our to by benefiting X with chip optimization portfolio. the introductions Allegro systems chip revolutionizing are Customers productivity Virtuoso generative unmatched the and solutions unprecedented of recent tools delivering to in from have AI have AI systems package an and verification and already digital, we board design and Studio system AI, and benefits. now AI development been generative ground-breaking Generative

powered Leveraging TSMC and analog heterogenous Virtuoso provides for the Analog average industry testimonials AI an including domain. Studio automation provided layout complex XX through the launch. boost customers and and Several of optimization Renesas, accelerates MediaTek, notably in productivity Devices years for leadership designs system design, Xx

X the generative with launch, recent was PCB reduction more latest Allegro by utilizes Kioxia. the technology to at in endorsed AI accelerate in a time, AI and innovations Schneider than and design Electric turnaround XXx it

All and to unique, of unifies of platform these insights engines data learnings that amounts differentiated analytics by future carry our forward to designs. massive data verification powerful and are JedAI fueled big design

AI while and Our solutions improving to reap rapidly better proliferative generative significant are greatly optimized through benefits designs accelerating and design performance productivity enabling engineering customers closure. area power,

other verticals propel generational digital design and differentiated for XG across to end-to-end our EDA, trends semi companies, systems as and activity such across continue AI, and with the hyperscale Along multiple systems rich solutions. transformation computing, creating thriving opportunities IP market

EDA us into I with as and our that am provides in expansion well the continued our revenue opportunities. margin core business systems both pleased as momentum area

broad our giga-scale to we verification full and Cadence QX. as Microsoft, digital accelerate aerospace includes significantly We analysis our for our with TSMC our we expanded highlights company, In included which RF Now collaboration with expanded key let's talk Cloudburst QX, products, And solutions. collaboration a collaboration system with and defense solutions. base verification about analog, MediaTek, a custom, our our Pegasus its flow, design systems our as marquee of that the systems proliferation the deepened and digital, cloud. physical of verification in platform analysis and Verification and as leveraged well System and

in system verification growth. a propel XX% our to continued verification Ever business, year-over-year to revenue and increasing complexities bring-up software

the on part remained quarter strong have must flow. demand during nearly solutions. of record and And more included record year, market than of customers Protium as heels XX XX XX the and for the a become has best-in-class orders a platforms Palladium verification XX% QX hardware the repeat customers, design delivered a these Hardware-based ZX our of both With platforms. customers new

hardware for aerospace was segments. with automotive Demand defense and particular and in broad-based, seen strength the

shortening bugs. to big new to efficiency analysis for and realizing AI Our seeing its market up root with debug R-car Verisium workloads, leverages accelerate platform significant a to improvement data optimize in cause gains, verification and boost Renesas coverage the are productivity, time designs. of Xx Customers

business customers. nodes solid especially advanced at with quarter, digital growth market continuing drive IC another digital had Our shaping at to most the our full flow

an Cerebrus several the remarkable benefits described has Our full customers innovative intelligently digital tapeouts. well CadenceLIVE Cadence flow manner. And provides now entire generative Broadcom, automated fully with in at last explore design the over to Cerebrus AI solution and applying the a Canon optimizing Cerebrus. Cadence customers leading week's XXX Cadence AI-driven Renesas, by cockpit space TI, including and arm event, realized they

analysis and which growth. is design QX, system momentum its year-over-year beyond our Our EDA, driving expansion XX% revenue continued in strong business, delivering

requires implementation, and Accelerating system hyperconvergence and analysis chip between domains seamlessly silicon integrated design system solutions.

platform Our to by required natively that all integrating provide the a flow. advanced comprehensive and engines exemplifies Integrity packaging multi-chiplet XD-IC

provide prototype just designs. require more that also but Additionally, solutions complexity capacity designs the as not optimized performance of virtual sophisticated accelerating as well growing higher and in trends result of multi-physics

with Our optimization in physics-based system are customers end-markets. AI-driven our multiple results couples modeling analysis expertise delivering to portfolio across and superior

the as our new products, We organic repeat and CFD growing Clarity and with technologies. orders Celsius wins as for our well pleased are

benefits twin Nvidia's we our based partnership week, Cadence's technology. and with San the During Nvidia's Jensen about computing that's efficiency last digital accelerated a on announced running focused and XXers talked Nvidia Future our throughput Francisco on GTCXXXX, platform. CEO and by Facilities Huang offerings CFD And joint partnership, multi-year technology sustainability offered the energy on

computational innovative spend investing in massive In of to summary, Exploding complexity significant by up system software for the the with pleased realize opening results. drive R&D QX opportunity a these in automation. I'm non-linear and requirements, more design will chip our help growth workload a products

Place again business one our to Fortune by consecutive addition the proud that culture of for of In ninth selected Best the year. have our I and inclusive For, am high-performance XXX Companies XXXX Work strong as to yet Work been to and Great thrilled we results,

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

John Wall

Thanks, Anirudh, and good afternoon, everyone.

I am financial to exceeded and we our quarter metrics first that the key pleased report of for XXXX. operating

improve lead strong As our increased planned, resulting capacity from for our solutions. production hardware hardware to delivery we demand times,

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

million sheet million. the of Cash Next, Operating balance flow. flow million. we quarter-end turning was at to cash balance repurchased shares. and $XXX was And cash Cadence worth $XXX $XXX

year. upfront remain the to provide regulations the and the that XX% today our of experienced Also, that for exist like export mix I the our similar outlook and year, year, for to assumption I'd recurring be our that with revenue it XXXX. remainder the we the control for Before highlight QX that mix XX% usual continue consistent expect to substantially revenue we in contains

operating to flow our revenue $X.XX to EPS in of XX%; XX%; updated With XX% to repurchase is: the the non-GAAP outlook billion $X.X of billion; range approximately $X.XX shares. in to of XXXX cash margin fiscal range XX% $X.XX to $X.XX; expect XX% of Cadence $X.XX range non-GAAP of in range and the cash range to $X.X of to the that our the GAAP the margin EPS for range operating we to in in in billion; in GAAP free operating use $X.XX; of billion mind, flow

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

our well published website, which Investor and items, As for on analysis GAAP further our to additional Relations we've usual, Commentary CFO outlook reconciliations. Non-GAAP a includes document as as

the start a good had we conclusion, to In year.

in increase outlook, for expect our at growth approximately at XX%. now the we the year the With midpoint, revenue

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

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

Operator

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

line now open. Your is

Gary Mobley

for revenue, your Thanks upfront question. is I verification in and everybody. the functional taking afternoon, my to Good wanted China-related your that observation revenue ask first your an very revenue strong about quarter. all were

expected? of a verification function So, I'm were it bit business some quicker of if know the maybe specifically or customer and turn around to those pull-forward some having some or deliveries customer relate than the was so to ability hardware little more curious orders, to a related all

John Wall

able business. be successfully they're Yes, it all demand solutions Gary, had benefited were the for because hardware We to of up and verification, benefited strong upfront China. very We that to great our production QX And, we the in related. ramp yes, in functional the functional subsequent revenue verification up such hardware pleased ramped question.

QX, China driven. think I mainly of for up that's our revenue XX% is hardware to

the increased quarter. recurring year. XX% because rest expect that the We the XX% last But we the expect total this to year. did we hardware the again, We the -- our fact recurring XX% mix still in wouldn't year upfront the upfront. deliveries, for be for repeat of revenue XX% QX, case reiterate And was and mix revenue, wanted of that to that our for was of to

Gary Mobley

Or Okay. initial you. half mistaken you And hardware from for second me. of year And business related tail you to into it running I'm guide, are verification fiscal near the maybe that, 'XX the the year. still hardware-related not Is months two-and-a-half when backlog expectation? if expecting Thank still off that John, that's you revenue gave ago, the the were to record business? that

John Wall

Gary. at much very want didn't pleased I with up wait year. in again, hardware very a We take until second question half hardware to have of the a bookings because Great again pipeline pipelines, QX. the we to summer is look the Yeah, business. the were

that of and still the QX, raised But that's up for of and the software throughout this for which that. year system half side, beat However, we up of businesses the that expect year. mean, take to -- for is wait middle we year design like And the But in we We kind to year analysis space. that taken year, strength rest year. was hardware. we expect I'd of predominantly strongly the was recurring second grow some $XX by on the the million, I of in all probably until did the part haven't the hardware. the the

Gary Mobley

Thank you.

Operator

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

Your line is now open.

Jay Vleeschhouwer

know revenue expected had of end that decline remainder -- for and expectations with can just for the RPO. Thank according that of move in from that I like first for you. the XX-Q, you any and next XX so to in the sequential about my around, the decline magnitude months of a timing looks $XXX you it and but hardware and from contract about QX, sequential from course, sequential follow-up. forth, RPO RPO, maybe of then, on And talk year? the the decline John, also And perhaps million

John Wall

Yeah, sure, Jay.

of year for software for The light for this total second very very year half in heavily the renewals. We're bookings weighted the is year. first half the of

mean the The year, of the big was second any have don't last in six year, first this number at quarter. the second renewals like half strong a renewals renewal this have of months that last are now year, first at that of end of half, year, QX very think end look months year. cRPO we and year. of we QX in I the at in nine I and course, it's you big we last only the for had QX, And -- software this half, had half the when you for Unlike software

first of year just fact timing the is timing. renewal light the So, it's the for really renewal and a of that function half

you this pandemic after quarters in the terms of back the as the are like remind years of and I'd the renewal that's are XXXX. QX well breakout two three in kind QX timing, -- of

light So, of for renewals. terms those anyway in light were us

it's a much year, in the see you impact and on second the drop the cRPO. software heavily because a off but So, renewals, half towards there extent, the the year To lesser so for second QX, hardware renewals. hardware much the RPO of we weighted more some timing of half of was delivered mainly and on that

Jay Vleeschhouwer

of investments the just comment you dozen on But some group, in the the ad certainly last of your that per the large launches in interesting for the conference Anirudh want ask development conversations what customer including few management conference teams understood. AI." product relatively necessarily is week couple headcount. very that "massive perhaps very but the week, a Okay, to and at are per product And suggested not small, about last weeks, you was making was just of the AI, or that hoc at you presentation last were about interesting. R&D percentage AI

do when So, say ways other what that? you you massive mean perhaps investments, in

Anirudh Devgan

Yeah, Jay, good question.

resilient environment. is the macro business I mean, of fluctuations right? but timing. see So, design that John semi to some companies thing there things products I on to both are first we -- is pleased is sensitive I to are Because kind -- to just would business and lot say these strong, great like in I'm renewal to mean, think a what our it's earlier, system of in about was But saying what mostly be add the ratable overall could activity are that, that we and to I mean, I not very okay?

our business. So, mostly are you diversified, then, and And we resilient know, markets. critical are essential. as and very because are we products then, both And geographically ratable

Now in automation of terms we in this amount having can of of and I is of -- mean, the can we significant provide. course, terms provide a increased having effect automation AI,

our So, in be CadenceLIVE And embedding as pervasive the line. we products. in that, product are last will mentioned we it Conference throughout all year

on pretty But JedAI, five need base system. pleased to top really platform data comprehensive our actually is from are I'm big to AI see do So, which of JedAI not kind way. analytics platforms package chip platform, there to intelligent to so only to in also, board of a you

system layout always we and Virtuoso PCB AI; centering and had XXX and Studio, than Cerebrus, doing migration with X using Allegro, which more So is analysis. for with design verification; for and packaging, then, and for for Verisium phenomenal now Optimality tapeouts; analog Studio design AI

R&D a investment very on of depends portfolio. products. just comprehensive So, it's And amount different

we through sometimes And And it our but will within it allows portfolio. pervasive regular naturally we have before, our regular even rich competition of course, specific outside, a product, We, R&D, of mentioned computational in our have R&D be and R&D, AI. I strength software, to can like EDA history the given -- have have of sometimes but embed regular in our we do product. lot the product the AI software that

delivering big productivity, really of do real comprehensively of it make that difference of are automation, in terms benefit to value the terms to and terms a PPA the So, is in customers. in we

Jay Vleeschhouwer

Okay. you, both. Thank

Operator

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

open. Your line is now

Charles Shi

afternoon. letting question two. you me for Good a Thank or ask

just first half really backlog, are half in renewals, the second to you year? we May So, expected sign the go the the already back to to not backlog are not? they ask renewal they in I in That's the those renewal, second Or or of the EDA the want my expect strength. expected question.

John Wall

Yeah.

that's have at renewals year. So, will be of that a let's yes, left our have of you QX all there's, the renewal September, say, you would backlog of clarification, for had on be months if up But coming renewal nine end last backlog. already Charles, just -- in

Now, in you get to then backlog you you have left and have September, you'll then, And the have renewal come left nothing months will backlog. six through. when in

Charles Shi

Okay.

So, that's those what in yet you're renewal backlog, contracts current are not saying? your

John Wall

we new year. be until the half ones will second of the the So, do them not in

Charles Shi

Got it.

yeah, ahead, go -- ask I may So, please.

John Wall

renewal so that So, the the just bookings come actual then, reduce have be wanted new renewal clarify to we the a backlog, that. through. remainder And that until existing get in date, to will Yes, on date. -- I booking will the -- of the we'll but

Charles Shi

it. Got

John Wall

And the will back up. additive to be that

Charles Shi

it. Got

want really fear to just this up. So,

implied provide -- be I about you to QX. in And the asked want seems booking color, just analyst did but another I perspective. some another down think to think from I ask

it case it indicative a in the like bookings I weakness that details, March you. XXXX -- broader more today? of you not much in Or particular some meaning trend then. that you industry on quarter, relatively some -- now, in think trend. other one-off looks some in trend if back lower hindsight, Thank similar Is in had are the remember going seeing like and this the still you the industry just the terms of in And time? that same was quarter, bookings

John Wall

that was there, was to and bookings for in were see weakness few were therefore had the in for the be of is those thanks that and very we all any especially of renewal that Charles. value Oh, actually QX What in have Certainly, see annual the Bookings bookings those recurring came we of those opportunity that And trying important, of convey growth up didn't clarify model expecting the in the the beauty quarter. of QX than not renewals the software were at annual expected we in it's I to revenue renewals that to growth I QX. The see we the light. bookings, start to but renewals. stronger of is continue businesses. timing value we across

Charles Shi

Thank you, John.

John Wall

Thanks.

Operator

the comes J.P. Morgan. question from Sur Harlan next Your with line of

line Your now open. is

Harlan Sur

in pull-ins recent hyperscale AI customer it's your AI upcoming in and XX they're that project surprise the hyperscalers. strong design XX customer Hi. programs the amongst their pickup and and quarterly last and/or But days, cloud program the companies, SoC from the cloud discussions a very large the meaningful job largest accelerated on pickup of got renewals seen titans. on had seeing given on just have afternoon, design reflected one told their just engagements? race customer a of of guess, We they've the many customers. chip And a week this pull-ins a execution. and call arms not sort in ASIC with design they of nice programs compute to activity over recent activity, design pickup with Good yours, last that you I the us semiconductor

Anirudh Devgan

Yeah, Harlan, a great that's point.

I a strong side, our the of So, talk to when providers. I in mentioned foundries general, on design there earlier, and semi and right, the activity. lot customers, like partners, the both We system I the is ecosystem mean, with our IP see and

activity So overall, I very think is strong. design

And mean, you particular, your -- reasons is, more about we lot generative in or see talk I AI is than the of inferencing new of in know which traditionally of training all of kind new GPUs this specific great which this -- I a the or more traditionally this GPUs, CPU. already in question know mean, one AI, generative is of done done is kind reason expensive search I and as question, think interest. course, AI least this definitely is on a Now, ChatGPT the I it was inferencing, a may when at CPU you lot on to but know -- that, on the past it's platform. always, but even is done ask a the traditionally platform, on accelerating you -- inference AI But tools, a

will look GPU naturally cloud, for the power. it and more customized for computing but only effectively also not and adoption and can in both more efficiently So, accelerated drive much do it and of silicon that more performance

-- need several variety applications you especially for But and generative or which AI to inference customized we and silicon, see for which are correct of expected learning in customized it whether of to drive momentum it, we for this silicon, AI and continue, more and general the in for right, talked based in is of inference, space. adoption the generative is pleased have or years, is more we -- self-driving in continued to your inference are general, more observation. that do reinforcement now about of So, see part training demand silicon an kind

Harlan Sur

hearing right, of and more trend And together entire expansion we appreciate to which them a then, would you physical just of distance, question, chip models, many customers I verification many pull tools. these COT ASIC based design market design extra things right, well? mean follow-on would cloud the No, opportunity franchise, we're to as that have build your may maybe back-end further Virtuoso would what and of the like maybe for I teams also to implementation think their that worked and be large be historically guys this some of right, with beyond seeing call of themselves, OEM Are again your that. do front-end which trying capability just that companies, your design,

Anirudh Devgan

Yes, absolutely.

in are And at I that. this phases silicon. at mobile silicon, the in So, of companies why at other of second look can And the three their look there you when this. I've are think inning transition companies, system own doing the kind doing still space if past that commented we own of I that's least they think like, started of you their in

great we with is So, phase have the providers. provider. ASIC the first using ASIC actually, And, almost major relationship all

partnership providers. deep all world-leading in very have the -- geography, all We ASIC with

more ASIC will then But opportunity go typically Cadence. and more usually typically, they And more flow, back-end and will that the but system tooling. the or companies more in start that, for provider, is with so a owned do customer more COT to -- design and

the And can over customer optimized will but I provider and mean, the to so front-end that do that ASIC be flow go a the time. can COT typically, together. too, back-end

is ones. that already system thing one really newer happened happening companies, has in other the that's in So --

trend, the a once to AI chip. in start one Initially, more go two or more you and of designs -- other they'll in these is will all chip graviton, networking once the the to course, compute chip. and And they do a in beginning public designs they then, moved like ones, server. doing see can that as And successful, like is examples with networking they Amazon also. that is successful, that's And which

chips the increases. number So, also of

the or beginning, like and auto in and do get space, it, is do one more only is companies there system it. third more will Traditionally that new the more will in business the then, then reason two And companies in.

in-house, moving full and flow silicon. and while is I from why more companies there ASIC; a moving think companies to trend is a is in-house last thirdly, done; which the COT part more more from flow being that's for there will and designs more because to growing of See, doing

positive for and So, these the Cadence supply. three trends that products all we are

Harlan Sur

Thank insightful. Yeah, you.

Operator

next comes line Celino the KeyBanc. from question with Your Jason of

line open. Your is now

Jason Celino

guys. thanks, Hey,

questions first I'm system on some expectation? one, was in based mentioned driven to analysis. Maybe was full from doing from or two you guess, me. your my is strength it existing there, Just how curious, up guidance taking this OpenEye? John, the more from I relative OpenEye year business

John Wall

up $XX And Jason, hardware the we mostly Yes, of well. as that about contribution portion so in half spread million, year by because took with But business, other and of analysis about the QX. inorganic QX design half beat of mostly a organic. there and system that was the across big software was from the was some was that space our in

Jason Celino

And sorry, Okay. -- my ahead, second then, Anirudh. go

Anirudh Devgan

Jason. Go ahead,

Jason Celino

we yes. question saw it year sorry, with my then, X%, last what looks by Oh, quarter too. consistent sequentially the And guide, to decline about on second is like second going

refresher quick the what's a driving just maybe here? So on seasonality

John Wall

will it, -- functional at it'll Jason, next verification show quarter. look Yes, when you the it be number in up

XX%. at compared 'XX, functional think like I When QX up to up will was great. teens at probably the quarter I than was look low The up -- closer QX, QX going to teens. verification It's to XX% I great. looks rather was -- again functional year-over-year. I be QX mean, also but up when XX% verification low be look

we expectation at XX% the assuming mix recurring, stays our year. we're experienced our recurring that that XX% XX-XX, it's year last so, for upfront, the same guide, revenue in as -- But what

XX%, QX than it expect QX, open will Now, QX and it so we year. in out XX-XX to hardware average the revenue QX. in XX%, QX, there QX, XX-XX, was In less a for deliveries of be lot was for -- that the the went

the seeing you're in that So, QX guide.

Jason Celino

Okay. Excellent...

Anirudh Devgan

Also, we're if just from John the to look of at said, add up guide, still you QX QX on last nicely Jason, what to year.

Jason Celino

clarification. for Thanks Awesome. the Okay.

Operator

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

Your line is open. now

Vivek Arya

picture of a kind a taking question. term for I my and question. bigger then Thanks near had

sales IP your term, down. have near So slowed

three with Anirudh, think, the think quarters do IP reaccelerate I for driving sales in And XX% down you in will they -- the curious half? growth back entire what's are line help for on those now, the I'm year-on-year. grow expect actually I what's sales to slowdown? company? What the

Anirudh Devgan

general, low in still in XXXX, a business, we Vivek, teens is IP business grow year. the compared good to to IP So, and expect, in last

some fluctuation, to but IP is quarter-by-quarter in we yes. general, well expect business perform XXXX, in So, there

John Wall

I and add And that know deliveries. the and it's revenue because -- what yes, based timing would upfront is so, generally lumpy of can to be of what, on that and it's you IP some

into had Now that half our to deliveries we the way revenue, around, half. the more last IP compared half IP second we year, year, the it's fall first that to fell other the compared second the This more into have deliveries half. first

very pleased performance of business. kind the it So, but with very, of skewed the IP we're the year-over-year numbers,

business, growth low-teen our we're profitable that. increasingly every targeting year generally track IP we're and for for on says, Anirudh As

Vivek Arya

to What the to picture to you AI? how incremental of expect for much best it's some just hardware Got is, to much you're from you're there benefit getting your it. public that benefit accretive bigger Is metric how AI to getting gauge the growth scenario what And much pricing your a is my question is just the kind is how then right or appreciate metric just So where what from And AI? could improved public rate? right, to provides, it best from over have larger of far be So, benefit? just the part us way AI? your it you so time? the of think accuracy the you customer the track TAM and business, kind or engagement? what do or net it seen cannibalize greater longer size accretive even do And is net given software accretive of term, productivity,

Anirudh Devgan

which more AI improvement. and automation, wave That's Yes, our I to -- in way is massive is Vivek, our RTL moving parallelism. that's level qualify level providing And wave level years what is more is like C industry mean, wave up from to say this AI is and another to provide -- industry, transistor I of wave level and automation. would the to would that one going history of third last abstraction I of level. say dramatic automation second the was gate the XX first drove productivity

for invested Cadence parallelism then, of it's what now the XXXX, or learning whether a productivity generative automation or And always call cloud, on-prem is AI using massive the in I paddle of AI. reinforcement third on now, heavily called wave we and lot or has AI starting have products. and from optimization

and increases a XX, this So, done the cannibalize. more over Actually, -- doing designs amount available and the with last happens, the of more and we that activity years and headcount. of amount in used history are of software have kind all resource optimization XX it doesn't of cases,

AI so these expect new more to huge mean, do general, capabilities, you I I do get So the it efficient that design. in much is when you that. to use benefit

tools And XX% XX%, tools Cerebrus to when like of now is to be PPA. went to some XX%, senior easily you comment one X, Okay. Moore's to example, another -- I'll you the or getting they XX actual give even can starting of in has to to like now a slowed terms XX-nanometer, improvement, an from and you been X one AI-based to node, provide maybe get that in improvements amount other you in node it's Law the to X industry, has lot go and XX% when improvement. now very that people -- went used you're X% improvement our of our from

So you get okay? The generative are algorithms, of node or amount wave AI to And improvement huge. from technology that's improvement, third huge. getting half process a using of just you can full of improvement better this is are which similar automation from

lot go and have in can't up time, closely we to think published so because getting, terms we product the metric -- across And digital automation, get other can -- is So to what monitor complexity -- implementation, our that share apply to board of gives thing design, that's simulation. a we much exponentially, and customers. of it that's opportunity just up these us I of R&D improvements are to with we it what exponentially. over and the PPA I think And the in things one not to is how think invested other things, headcount design, I that higher apply package going is, and

still years applied share of spend in our customers, from a R&D can the but to R&D of XX five, expect, I automation. that headcount, get now So, will spend in grow bigger terms we

Vivek Arya

Anirudh. Thanks,

Operator

Your from line Gianmarco comes Deutsche Bank. next the Conti with of question

open. now is line Your

Gianmarco Conti

Hi, there. Hi, my Anirudh and John. Thanks questions. for taking

my AI suite on the piece. I want So, first on one, to base touch again just

you. question industry beyond in those thinking than mode Firstly, other specific are mature complexity, whether the volumes? drivers in optimality secondly, you've to that seeing sort there or at on particularly the accelerating trends what are of we correlated the Thank you're are going you're course, follow-up nodes, of a of understand entering mentioned, be phase here, after. semi price as as increased SD&A? And the the lower track trends specifics discovery Is aware i.e. I'll perhaps more behind of there in that ask the increase whether design what's can we other AI the a some demand should the players, of anything about bonnet? you're like that

Anirudh Devgan

Absolutely.

help I chip, system thing applied and want to can do about AI right, highlight that. But package of wave be talked we the how third at this same and levels. automation. think, I can

then how dynamics. on for semi simulation, semi and talked provide for importance and a have few are electromagnetic merging system solutions also can system companies analysis we We thermal design of years and system like simulation, doing fluid and

could just improved, simulation speed. of raw traditionally, capabilities And -- were the be areas those all, -- the simulation first were

for methods, our do lot So, improvement magnitude more applying we we because expertise, order traditional can of got simulation. computational a example, for Clarity electromagnetic, software versus

jump and seeing But two you're can that growth system and you're that that our even design of there analysis, our to are on seeing. that, things other top

use is about acceleration prepared GPU thing one talked and analysis my GPU think So, is of acceleration. remarks. design And I there. for we And system significant in this

thing simulation. is AI And the applying top on of other

keeping for So, that for optimization, EDA optimization they they the because not has system up, a were even of really AI have optimization capabilities -- capability. didn't design really of new just and barely long analysis, not is history An are simulation. generative simulation but much AI

is optimization but possible the simulation. first the we only because X AI the Optimality huge, is for So, and getting time, of simulation are not Allegro response from

want yes, this in data shape center, it's if want you general, centers. optimize, doing racks the all possible with the or of data but in you whether or the Because of stimulate the thermal some of to design placement you're And to design wing now car, of a the AI. really is generative

things are So, combine company can to those the be that will on two these and impact apart And apply both the I think from AI the this SD&A chip of impact on areas. we profound design.

Gianmarco Conti

in the you. on or in on second or with sorry, Great. buybacks? perhaps is there's cash SD&A sight consistent And in my any shareholders and distributing of plan plan portfolio just M&A, via is -- Thank the whether to increasing one M&A analysis, XXXX systems

Anirudh Devgan

I design, to revenue are silicon strong and And we strategy, and with continue mean, with this to of pleased we the a terms start combination general, and growth data. have and in of strategy intelligent margin. and system well perform very, in system we we Yes. feel very very we our want progress, organically both with grow

So outlook. that's base strategy, base our

always M&A good organic comes R&D. as return and a pleased terms and we in our of general, and up our strategy are But Now, good with we our shareholders it's if it return execution. in for evaluate

Gianmarco Conti

it. Got you. Thank

Operator

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

Your now open. is line

Blair Abernethy

Thank you.

multi-physics Just system called The the year-over-year. around a things, of question on think the was I design. you quick side it, growth, XX%

organic? is the clarify, to want was or acquisitions, that that including Just

and then, in And strategy run on the how multi-physics a of getting side your the close like to million doing secondly, are scaling it's business terms It things, rate. $XXX up? go-to-market you of looks just

side the how in to you're things. doing Just want go-to-market of see

Anirudh Devgan

acquisitions right, a of is new the too. Yes, then, -- with go-to-market, there growth our is of in absolutely. the customers, The rate past. and we some we organic of the And And terms course, in overlap of course, made customers. inorganic, are customers of have of combination lot current a

to that of team kind up to. then sales set we a system try talked we haven't we channel, also traditionally leverage have existing So, our and both targeted new that customers

a companies, one are as overlap that But SD&A very in SD&A, deep lot companies of in leading has relationships. and this to remember already of system the Cadence companies thing semi

just software more of we and the still customers are more maybe and organizations and of good selling it's with EDA combination and and system SDA, -- so the -- are is semi. part different organization, engineering engineering the the So our both but the to parts engineering the organization coupled engineering

go of we at when terms side, in always we to then, approach a And go-to-market. look three-pronged SD&A

have bigger with direct And business. -- sales, indirect EDA relationship And EDA the our a So, we top I channel. both in in do the and we that for is of then, portion are customers like think there great which one is world, consuming or SD&A, SDA.

PCB new we we the a packaging, channel Allegro expanded include throughout the OrCAD channel but is and businesses, our now to and channel had bring world. SD&A So, for partners strong which have to our

then, And is the announced of cloud go-to-market and last part OnCloud, year. third our using we

direct own for cloud So have are go customers to space, especially direct, SaaS smaller amenable who kind want don't IT to of the they systems much especially and in their offering. in department more

an is this progression. overall, ongoing So,

remember SD&A, already really are cloud. EDA us to As good lot one three-pronged approach thing especially go-to-market. plus SD&A existing the you is to and top this we of go customers said indirect the we and direct, getting a But business of a helps that in want in to now as is customers, scale

Blair Abernethy

That's Thanks, Anirudh. great.

Operator

of next Stifel. Your with question comes line from Ruben Roy the

now open. is line Your

Ruben Roy

renewals. had guys and around of of taking question And customers how thinking for just your impact Thank smaller took my how that the you. I you might some Thanks pandemic into account renewals. and software thoughtfully to a some John, your back commentary questions. the on

the given calibrating that and about? worried seen half? macro we've and Are soft Just is or in slowing think that at into second renewals you might wondering, now, of IT your economy you uncertainty do you something point, state not for this the already that year given the some guidance full right in the spending, thinking see some you're

John Wall

for not Yes, lower of large both half I'm Tier did for in softness like in we guidance already are -- with and Ruben, creditworthy have second with worried generally, for we But very, are high creditworthy renewals. renewals customers. really end QX. year the the of creditworthy in big start-ups the strongest But see the industry. terms in that some the really in customers the about QX And The into very the the highly the renewals like year. with that factored our customers at

Ruben Roy

move is come that longer-term should to Anirudh, up wondering percentage are up, obviously. there's XX-XX of systems? on your think And mix I about Thank of on numbers that which of customers to the think think the you, And few strong, relevant is follow-up Palladium all to a refresh to to that about continued metric have now it. what for the continues is. go new Right. your at rate, Just for nice customers take see times, there hardware the now Protium right and company? attach sort Is percentage of of It's around cycle way if up. the coming John. a a kind then, or rate, a that Got about the to quick Anirudh way The call, quite on say, continues the hardware. been the

Anirudh Devgan

the almost good mentioned the become design we with of thing in like an the it past, I essential like that, part is has mean the process. hardware

virtually to it's So without -- these of it's hardware -- design and chips complex impossible almost use the platforms.

customers, say hardware would that anyway. especially using revenue drive all the customers big I of So, all our the major major most are

for there's Now, there -- so using. the hardware is they're of always that of room refresh

as there mean so refresh ahead us. at -- X, X.X, X, like node to of to least X-nanometer is XX also, of -- as chips go And to they to I we X, the different are years going to nodes

the go are a on we gates the of time chip size every So, number the of increases. new node, increases, that chip to

So, you typically need and hardware. more more

requirement So, increases. the for hardware capacity

secular hardware last long years, think for term, only I and not more the period. and is next So need growth that's why Not it in more critical, at you is for be a more. XX to going least if that that's to for going but

customers. the But and smaller at And to for help then a have business models opportunities add the customers and sometimes, Palladium, variety most can vice hardware, but is this of also, to smaller more that of we if they they're growth some there's we using at the increases, of or and there big are Protium still our point, versa. hardware, chip customers look size using because use

John Wall

caveat that Ruben, recurring our that, to back XX-XX. the so with last and see strength we're continued we to summer, XX-XX half to that hardware your of -- And from year we're And the revenue now, add going upfront if I XX-XX. under. that right although rather continued went upfront. would look our the just we're think to was another would on grew strong that the guiding strength, may of take XXXX, the I course, second course, guiding because QX. the into the take question we now. of mix Without the I emanates I XX-XX hardware up And And to take was Yeah, it think fact in over in XX year, the than

Ruben Roy

lead or times done follow-up. That's But just really say, would quick, on I just really side? that more one is only allowed helpful, John. there guess, production Thanks. you the point, work I I'm have on know be to normalized,

John Wall

to to those of sales models times, the the but time we be But waiting through lead normal a have that by but important multiple up the times that. that back the hardware. in quarter was We're the for to weighted deliveries prioritize more heavily middle customers to really and times middle towards want we waiting lead it know, customers We the We working was I year. for by for the first more been set we demo thought been orders. year, to longest things have as to to back still customers deliveries of for normal half the for first mean, should get expect uses those like hardware. the future you lead have long

Ruben Roy

That's great. Thanks, John.

Operator

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

line Your open. now is

Joe Vruwink

the crack adoption. and at me Thanks AI of in. topic take Great. wanted for squeezing I to another

is get think And about think this of more efforts, something you we point? widely team? what are enter engineers an the in share maybe it -- engineers the best could if deployed entire you when your within those So, block round typically that next using renewals, as is example as the product account, the mind, at of about implementation Cerebrus, across the total

Anirudh Devgan

these I for with we then, of I XX are a I think or Because I lot cockpit. it are And think engaged hyperscalers I what of I but that, production. out them -- using. Cerebrus customers And say become customers, time, think, for all about, using Cerebrus I all JedAI then still at -- there's platforms still growth there. they the we especially it's opportunity I Joe, and of think not XX would way is, top mean, the Yes, top five are the or think is look will talked like that over

cockpit. So, in digital the implementation, days, case of old the Innovus in was

customers do the still you that on So, you combine experiments do run the And mathematically try with now Cerebrus would manual in or Innovus of then, can AI. that top still experiments can -- with that. But can different with Innovus.

I three with the designers using be And thing Innovus Optimality, same think to okay? overall, were would AI. in past, using almost would So, what same with in Allegro expect Cerebrus years, five they all I X thing

So, that. ways we are still from

is still there happen. progression this that has So, to

automatic all will engaged the cars. be the rather the are running using customers. over we using than They're But It's I think it manual of from with it. Cerebrus to time, will using products I old think So, way. going become way like cars dominant

manual, drive and Some people using more may still but drive people automatically will Cerebrus. want more to

that, in in early innings. still we think I the So, are

years still in to that's good. So, that. go like And it's

value We and natural in years. the happens the few let earlier, next contract mentioned annual we're looking business, over adoption -- are at our we like

Joe Vruwink

talked in seeing about development organic pinpoint orders system then, just growth update be on repeat the can I reflecting bookings, Okay. of in on and kind -- segment, That's you don't expect you -- at great. the And an the on think on possible here where heard design XXXX? solvers. upside like And you're you the to something in it, then, the to it I is

than upside Are of a important obviously things seen? these the new bigger CFD of business. some You've initiatives. driving channel more built you've any There's others terms in

Anirudh Devgan

year system I analysis. for very think I a good XXXX, and expect still design

whole initiatives of I are think initiatives, a of there terms driving. are we In bunch

I obsessed with is best-of-class first. think are say what always products we we

products If best-in-class that's helps. and But are And the of are the differentiated, most these focused it. our marketing the So making with channel supporting helps, always thing. initiative important products. we products customers always in on the all end, awareness and use developing

So benefits. we've and of made progress on that, a lot

of think I thing optimistic I use prepared remarks. I in I'm GPUs. in in SDA They And -- accelerating worked that kind it very help about EDA, mean, design a physics-based wonders the GPUs And one my but analysis, by simulation. system and it's have more AI, SDA, do in it haven't mentioned, GPUs recently, like traditionally, well about right, because talked more done I AI of help EDA. can computation. is dramatically But

kind AI. it's [Inspirit] matrix similar which (ph) more So, of to multiply, is

like with at in more are for collaboration on up slightly CFD And power CPUs. expensive recently So, in about than is I least that efficiency. Xx I Cadence guess, NVIDIA, our would the to speed with Xx. GPU Jensen a talked and XXx improvement mean, GPUs same Xx improvement cost giving typically,

on XXx speed. that So, is speed GPUs up for in XXx getting you're Xx cost still XXx normalized improvement to or getting

now to it on electromagnetic both we especially improvement CPUs CFD. and our in based GPUs, special huge history have massive that's both a algorithms, SD&A, we a and are because So of for in long parallelism applying

GPUs, talked also this vector. and GPUs chip can even about for that all another OpenEye, think we big compute a provide system, I for acceleration And AI system So, accelerated use I is acceleration. but growth. in of lot on for analysis and

have position multiple our to So, I ways on SD&A, in first, think accelerate that's best-in-class -- always focused we we're but right?

Joe Vruwink

Thank you.

Operator

DeGasperi the of with Berenberg. next comes Andrew from question Your line

is now line Your open.

Andrew DeGasperi

in. investments this and more a do that in But lot you to market share just that to your potentially know if Thanks lot share could but change? market on have the thought just call, there's for you could had you historically, that the competitors, fitting think about I I made of relative wondering not know if you one changes I talked shifts you've me and is, relative been lead a with question this your wondering in I pronounced guess EDA. AI think portfolio we future?

Anirudh Devgan

that. Yes, the real good automation. think so best-in-class industry, R&D that's But more in I focused and in play a do for role share mentioned, mean, I EDA, of SD&A always a we're that point. and more on I right, like the AI going can general, that opportunity both for to big is

I players, to complex. We these heavily. There's best-in-class be things getting solutions be to will things now. are going for But think all headcount the not from will so good these bigger enough seven want to design course, have years that we in invest of five, products. be think also our trend -- I

industry bigger and for good entire to more everyone. the I opportunity for So, the that's, shift is automation, think,

Andrew DeGasperi

sorry, helpful. And go -- That's ahead. then

Anirudh Devgan

Yes, please.

Andrew DeGasperi

ahead. go No,

Anirudh Devgan

and combine way best-in-class think mean yes, I in we the other apply I unique products are but just thing the not is EDA, we chip systems.

been strategy the And have plus unique last And position that's think combination market. us software, the that EDA the differentiation our improves EDS with our applying also but competitive we solution, that's provided years. and computational our customers improves five AI I for four and position. of also also the market implementing in our SDA or

Andrew DeGasperi

general this then, That's trends And maybe just helpful. on quarter.

of have consistent previous wondering or in Just you the side to in center any the terms of systems being the change, terms data relative demand, in business, quarters? kind of seen it is particularly

Anirudh Devgan

and -- all and are news strong, I said, design -- okay, environment is I news. for in the -- mean it's I our -- strong. But in know with results I like think that a the you the tough general, mean general, so activity is our

customer the is more call think the I R&D. new to the invest think, about, center the serve in data uptake, I like uptick and we beginning generative talked infrastructure the automation And new still is to of heavily AI.

really because are I very this think companies, active generative serve area complex data base. big the a to things that's whole complicated for definitely center and AI these

of mix will kind specialized that in use So, infrastructure. hardware, the of different require hardware also

opportunities our I for us. a that's good to be for that's change, think going So, and

Andrew DeGasperi

you. Thank Great.

Operator

Wolfe from Arsenije Your the Matovic Research. question line comes with next of

is now open. line Your

Arsenije Matovic

on Hi. Arsenije for This Josh. is

just quick end to particular strength. Thanks, double within click end companies? kind market changed if to a in changing and last of and I kind of relative the markets dealerships demand or call-outs, any company in terms see have the systems wanted follow-up. those year, end there was how So, on a any And outlook markets, then many of

Anirudh Devgan

always A&D in think -- I generative system also Well, activity companies, prepared data and are I seeing we're center our And would lot that say remarks, is in mentioned design automotive in a driven by of of AI. a lot those. we activity definitely

to more A&D, have definitely pick seeing automotive, with you few if verticals, electrification AI -- would AI, I customers. so and and engagements in data but like we also with centers a So, our are in and then own that general,

Arsenije Matovic

existing level is of Got it. would in maybe much new And kind then, you hardware, high a about if systems think like customers kind large we helpful. how of If semi from the of some from quantify driven companies? could purchases of from from strength that be versus that refresh

Anirudh Devgan

designs, companies, the That's And more combination there otherwise both also its software. both. like it's think has be designs more hardware. system It's nature, more system -- of company require wouldn't the -- by have a and and system I semi newer companies.

So, because then view dual Protium helps, Palladium software bring-up more Protium dynamic really chip for bring-up. is in of and our Palladium system companies, and for

in by would company. both system say the there but nature is I are content So, more strong, software

Arsenije Matovic

you. Thank

Operator

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

Anirudh Devgan

you us afternoon. Thank this all for joining

the strong for time industry. in exciting and an momentum semiconductor growing business Cadence It's and systems with opportunities

customers, and have and Cadence. We our behalf of our for Board are in confidence at and Directors, Cadence. their our of investors And and partners inclusive continued culture employees of built thank on the proud innovative we trust we

Operator

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

may disconnect. You now

Cadence Design Systems (CDNS) 24 Apr 232023 Q1 Earnings call transcript