Joe Vruwink: Great. Thanks for squeezing me in. Just to follow up on some of the earlier questions. So, I think of your growth as being tied to the R&D budgets at your customers, not the revenue at your customers. And certainly R&D budgets, they tend to move around more steadily perhaps. And then, Anirudh, you mentioned earlier, a lot of your revenue is ratable at the same time. So basically, changes can take some time to work through the model. I just wanted to ask though, because I think 2024 has the potential to see a pretty big inflection in R&D spending within the semi-customer base. If you are maybe seeing that: A, is it included in your outlook starting the year? And then, B, if it does end up moving higher and influencing kind of renewals and purchasing decisions, does that actually manifest in a bigger way, probably more in 2025 than it really would in 2024?
Anirudh Devgan: Yeah, Joe, that’s a very good observation. I mean, definitely the — we are like — we are very diversified. We are very ratable. We are tied to R&D, which are all good things in our model. And then, the mood seems to be changing a little bit. ’23, as we have mentioned before, was a tough environment, though we kind of grew very well. And there was some change, I feel, in Q4 in the overall — I mean, you guys know that as well, in the overall macro sentiment. And maybe there will be more investment in ’24 and ’25. But I think we based our outlook and John can comment more on the backlog that we see rather than guessing what will happen in ’24 and ’25. But if there is an improvement in R&D, then that’s good for our business. But we do see that there’s a lot of design activity and then we see our position improving the EDA and IP especially this year and continuing expanding in SDA and AI.
John Wall: Yeah. Certainly everyone’s field seems to be more optimistic this time this year compared to this time last year. This time last year, everyone was asking me “When was the recession going to happen?” But this year, design activity seems to be strong. Even when we talk about China, we’re still seeing strong design activity in China, but I de-risked the guide for that because part of the large outperformance in China last year in achieving 17% of our revenue was because of that hardware backlog. And now that we’re back to more normal lead times, it’s prudent to assume that China revenue drops back to prior levels of between kind of 14%, 15%. But so that’s embedded in the guide. I thought the right thing — I mean, we always — the approach this time of the year is always try to de-risk the guide for the things that we think people might be concerned about, and then have the business focus on doing the best business with customers for the long term.
But we always feel our Cadence employees do the best business when they’re not chasing.
Joe Vruwink: Okay. Yeah, I think that’s all smart. And then, I guess, John, just on kind of your approach to forecasting the up-front revenues, I think in 3Q, you were kind of intimating that, look, we’re running at kind of an elevated share of total. We haven’t typically been 15% coming from up-front products. So, maybe it normalizes. And now it’s changing and suddenly it’s going to remain a higher share of total. Can you just go into what changed in 4Q and is any of that kind of AI — obviously, verification hardware, I mean, these AI designs basically need the cutting edge. Is AI acutely being seen in the strength of your hardware order activity?
John Wall: Yes, yeah, of course. And partly it’s that, I mean, if you’ve seen over the last number of years, we’ve seen the up-front contribution to our revenue mix has been increasing and it went from 15% in ’22 to 16% last year. And I think what you’re referring to is that we expected to go to 17.5% this year. That’s a virtue of an expectation that we’re going to have another record hardware revenue year, that we expect stronger IP growth this year compared to last. We feel much more confident in contribution from IP growth. And of course, we’re launching new products all the time. Now, in relation to things like Millennium, we expect a large part of Millennium sales to be cloud-based, but maybe not all of them will be cloud based.
I think that’s another tailwind potentially for up-front revenue for the year. But I’ve hedged back slightly what I expect in the second half, because I’d like to see the pipeline in the summer before we take that up even higher. But the forecast is higher than 17.5%. But I’m only comfortable with going out with a guide of 17.5% for up-front revenue for this year.
Joe Vruwink: Great. Thank you very much.
Anirudh Devgan: And just to add, AI contributes to — I mean, the AI design activity, as you know, contributes to hardware strength, given our strong position. And also, AI is more HPC and chiplet based, and it does help our IP business as well, and then, all the comments on Millennium. But let’s see how it progresses. But yeah, I mean, the IP is also strong this year along with hardware and Millennium.
Joe Vruwink: Okay. Thank you.
Operator: I will now turn it back to Anirudh Devgan for closing remarks.
Anirudh Devgan: Yeah, thank you all for joining us this afternoon. It is an exciting time for Cadence as we enter 2024 with product leadership and strong business momentum. Our continued execution of the Intelligent System Design strategy, customer-first mindset, and our high-performance and inclusive culture are driving accelerating growth as we grow our core EDA business while expanding our portfolio. Fortune and Great Place to Work named Cadence as one of the World’s Best Workplaces in 2023, ranking it Number 9. And on behalf of our employees and our Board of Directors, we thank our customers, partners, and investors for their continued trust and confidence in Cadence.
Operator: Thank you for participating in today’s Cadence fourth quarter and fiscal year 2023 earnings conference call. This concludes today’s call. You may now disconnect.
