And like I said, we’ve kept the production levels at the same level all year. So, every quarter, we ratchet it up in Q1, and we’ve maintained that production level to try and reduce those lead times, because we think we’re more competitive with customers. I mean, I was impressed this time last year, people were waiting over six months for our hardware solutions. But we’d be silly to assume that that would continue is important to get the lead times down to eight to 10 weeks. And I think that’s more normal kind of — more normal level to get to. But yeah, very, very pleased with the progress we’ve made so far this year. And again, we’re not really talking about next year, but we’ve got a very busy Q4 ahead of us.
Joe Vruwink: Great. Thanks, John. If I can squeeze one more in, I think we’re about to lap the OpenEye acquisition. I just wanted to see how that generally is tracked relative to your original expectations? And maybe just get an update about how Cadence is thinking about the opportunity from the Molecular Sciences group and the role you can play in life sciences looking forward?
Anirudh Devgan: Absolutely. We are super excited about that. We’re super excited about molecular design and the future. It’s almost like where EDA was maybe 20 years ago. And before I talk specifically about molecular design, I want to tell you in terms of our product strategy and how that is synergistic and similar to. So, I see a lot of activity in our main products, which I would describe as like three layers. So, the middle layer is actual software products that we have, which are like either you’re doing like EDA design or they’re doing system simulation or they’re doing finite element, computational fluid dynamics or molecular simulation. So, that’s the middle layer of the cake. And below that is this new emergence of computational hardware, which is special purpose hardware.
Like we had in the past, we had special purpose hardware with Palladium, which is our custom chip, but now we use FPGAs for Protium. We have of course, x86-based Intel and AMD CPUs, and then recently a lot of activity on GPUs, especially with NVIDIA GPUs and accelerated computing. So, that’s the bottom layer of the cake. And then the top layer of that three-layer cake is AI orchestration. AI can provide this new level of automation and productivity and doing what was typically done by humans. It can be done with AI like we talked about Cerebrus or Verisium. So, this three-layer cake is central to our product strategy. So, the middle is simulation, which is physics-based, biology-based. The top is AI orchestration. The bottom is computational hardware.
And then, this can be verticalized across multiple verticals, whether it’s EDA and chip design, whether it’s package design with Allegro X AI, whether it is clarity and optimality, whether it’s CFD with fidelity, and more importantly, like you asked with biosimulation. So, the reason we acquired OpenEye is that gives that critical middle layer of physics-based biological simulation, which are very few companies that can do that but then we can add to it AI-based drug discovery and computational hardware with GPUs. So, as you may know, the OpenEye has a Orion cloud-based platform. It already runs on GPUs, giving significant speed up for biosimulation. And then recently, and we’ll talk more about in the future, we expanded our collaboration with one major top five pharmaceutical company to do traditional and AI-based drug discovery on top of OpenEye and Orion platform.
And so, I think this thing in the future, if you go forward, I mentioned in the last time also, the application of AI also, I think is going to go into three steps. So, first step application of AI is going to be in building out the infrastructure. Like we talked about, of course, the great companies like NVIDIA and Tesla and now Broadcom. So, the build of infrastructure and then there’s so many other hyperscaler companies as you know, they are all building out AI infrastructure. So that’s the first way of AI adoption. The second phase of AI adoption is applying AI to our own products, like Cerebrus and JedAI and Verisium, we talked about that today also. And that’s going pretty well. And we talked about the progress in the last one year. And that, I think, will still take several years to go.
And then, the third phase of AI adoption is AI applied to areas that were not automated in the past, okay? So, I think that may take longer, maybe five years plus, but that has to be driven to digital biology and life sciences. I mean, there’s a huge application of AI and to do that properly, we need that three-layer cake and we need AI on top. We need biosimulation with OpenEye and then computational hardware with our leading compute platforms. So, I’m very optimistic about the future. It will take some time. This not happens in a quarter or two quarters, but it’s right to invest for the future and it is synergistic with the other parts of — a lot of the biosimulation is similar to what we do in circuit simulation or CFD and things like that.
So, what overall I would like to say is still in the early innings with biology and biosimulation and OpenEye, but it is a good start and we are investing it for the future in a controlled way, of course. We’re always financially disciplined. But I think the potential is there in the future for it to emerge as one of the big areas.
Joe Vruwink: That’s great. Thanks very much, Anirudh.
Operator: Thank you. And our final question comes from Andrew DeGasperi at Berenberg.
Andrew DeGasperi: Thanks for fitting me in. Just had two quick ones. I know most of them were answered so far on this call. But first on the margin, maybe could you lay out, John, in terms of the guidance for the year, I know you took down slightly the top end of the range for the operating margin on an on-GAAP basis. Just wondering maybe if you could lay out what the puts and takes are there? Is it revenue mix? Is it the recent acquisitions that you made that might have sort of crystallized that number? And without having to answer the second time, but like in terms of investments that you’re making for next year, is the pace of all the hiring going to change at all based on what you’re seeing right now?
John Wall: Great questions, Andrew. Yeah, in relation to the margin, the recent acquisitions are more dilutive to this year. So, we’re picking up more expense — we’re picking very, very little revenue. We’re picking up expense immediately. And that kind of narrowed the range on the on the margin outcomes for us that are at the midpoint of 41.75%. I think it works out to be about $5.10 on non-GAAP EPS. In relation — what was the second part of the question? Sorry, I’ve forgotten the second part of the question.
Andrew DeGasperi: No worries. It’s just on the terms of hiring, just in terms of how you’re thinking about it so far.
John Wall: Yeah, I mean, it’s great we continue to attract top talent to Cadence. You may notice, though, in our 10-Q, we did some restructuring. In August, we initiated a restructuring plan to better align our resources with our business strategy, and we incurred about $12 million of costs comprised of severance payments and termination benefits in relation to headcount reductions. But I would kind of categorize that as a bit of housekeeping and preparation for next year.
Andrew DeGasperi: Understood. Thank you.
Operator: Thank you. I’m now going to turn it back over to Anirudh Devgan for closing remarks.
Anirudh Devgan: Thank you all for joining us this afternoon. A strong execution of the intelligent system design strategy and customer-first mindset continue to drive growth as we expand our portfolio with new innovative AI-driven solutions. We are proud of our inclusive culture and focus on enabling sustainable innovation and honored to recently be named to Newsweek’s America’s Greenest Companies 2024 list. On behalf of our Board of Directors, we thank our customers, partners, and investors for their continued trust and confidence in Cadence. Thank you.
Operator: Thank you for participating in today’s Cadence third quarter 2023 earnings conference call. This does conclude today’s call. You may now disconnect.
