Cadence Design Systems, Inc. (CDNS) Earnings Call Transcript & Summary

I think we're live. Welcome back, everyone. I hope you enjoyed lunch just before NVIDIA earnings, which is great because it wouldn't be as interesting, everyone being on their phones. Well, today, we have the pleasure of having John Wall, CFO of Cadence Design Systems; and Richard Gu, Investor -- Head of Investor Relations. And yes, so before we start, I'm going to read a quick safe harbor. Today's discussion will contain forward-looking statements, including Cadence's outlook on future business and operating results due to risks and uncertainties, actual results may differ materially from those projected or implied in today's discussion. Great. Now that we got that out of the way. Perhaps let's begin with setting the tone for the EDA landscape. And I'd love to hear what are you seeing in the market right now that is exciting Cadence the most as an opportunity to expand more of this portfolio in, especially given you have such a close relationship with your core customers like NVIDIA and the likes. it will be great to hear more about that.

Great. Thanks, [ Jenny ], and thanks for having us here as well. Really appreciate it. I guess the most exciting thing at the minute has to be like AI super cycle. I mean our customers are pushing the boundaries of design -- chip design. And we see them like pushing those boundaries with things like 3D IC and the full system simulation, advanced packaging. And it's not really all about one company either in terms of one partner. We benefit from having close partnerships with leading customers like NVIDIA, but also like Intel, Samsung, TSMC, and a whole host of -- we're privileged to have the customer base we have. And I think it's the breadth of -- having access to the breadth of those customers and partnerships and the position we are at a time when there's just huge opportunities right across the landscape, whether it's semi companies, hyperscalers or system companies, I think that's probably the most exciting thing about where Cadence sits right now.

Yes, that's fair. Pretty diversified landscape you have there across all -- that's really good. Well, given that we're talking about AI and the AI super cycle, I think it's good to spend a few words on perhaps the Cadence.AI Portfolio, which seems to be expanding both in scope and in customer base. Would love to hear a few words on when you expect, firstly, to see this materially contributing to revenues? And secondly, whether you're seeing continuous demand beyond the top 5 customer base. Because I think it was well understood by the market at the beginning, when Cerebrus was launched, there was -- it was sort of like penetrated at the beginning among the top 5 customers, right, because it's like obviously used for the most advanced and leading edge nodes and those type of designs. So it would be good to hear like where is it positioned now?

Great question. And certainly, that's how we began that I think we're well beyond the top 5 customers now. I think there's broad proliferation across most of our customer base. It's still probably early days for monetization because we've largely a ratable revenue model. I mean, 80% of the revenue is ratable. The vast majority of that is daily revenue on a subscription basis. And as we proliferate into these accounts, it tends to create an uplift, but then it kind of flows through over time. But I mean it's exciting to see the adoption across the board. Typically, it takes us a couple of contract cycles to fully proliferate. And the first contract cycle, there's a lot of preparation of the technology and use for the technology. But what we're seeing now kind of we're halfway through that kind of 2 contract cycles that we're starting to renew accounts or renew baseline contracts that had AI in them last time. That -- and we're seeing increased adoption, increased usage and the license count is starting to increase significantly on some of those contracts. And like I said, what we're seeing across the board as they adopt more AI tools that not only are they achieving productivity benefits in their own design cycle, but faster time to market and faster time to market results in earlier revenue recognition for what it is that they're trying to release. So there's immense value being from the use of those tools by our customers. And I think we're at a point in the cycle now where they're willing to share some of that value with us, and we're seeing that through the increased license adoption.

Yes, because that's a good point because I do remember that for every license of Cerebrus, there was sort of like an increase -- like a natural increase in Innovus, right? And so it's like a scaling effect. Like if you buy more of those Cerebrus licenses, then you have to buy more of the legacy licenses. So that's kind of what's driving right now in that growth bucket?

Absolutely, yes. Yes. I mean one of the beautiful things about Cadence, I mean we're very diversified. We have multiple lines of business. But we did analysis a long time ago, just to understand the profitability profile of all the businesses. And Cadence started as an analog franchise, really. I mean Virtuoso team there has been tremendous for us for decades. And when you look at Cadence, of course, there's no surprise that the most profitable business at Cadence is our software business. But in software, you could bifurcate our software business into 2 groups: software tools where one license needs one driver, like a Virtuoso license, is 1 engineer uses 1 license of Virtuoso. So if you were at a 100-person analog design house, they're probably buying 100 licenses or Virtuoso from us. They won't buy 110 until they hire 10 more engineers. But same with Innovus typically, but on the digital side. But what we had with Cerebrus is that 1 engineer controlling a Cerebrus cockpit has the ability to use 10 licenses of Innovus. So not only are you selling Cerebrus as an AI tool, but it's pulling through an extra line licenses of Innovus. And I think you've seen that happen as well in terms of the whole -- how the stack works. Do you want to talk about any of that?

Sure, John. So we have this fantastic platform called Cadence.AI, on which there are like 5 flagship products with Cerebrus being the tip of the spear. And we actually recently launched Cerebrus AI Studio, which is truly a game changer. The industry's first multiuser and multi-block agentic AI products. What it does is allowing 1 engineer to parallel-run multiple kind of designs concurrently, dramatically enhancing the sort of like the time to market, you can reduce the time to market by 5x to 10x by doing that. And in the meantime, it increases the -- improves the PPA benefit by 10% to 20%. So I think we talked about customers like STMicro and Samsung using the technology and really benefiting and harvesting the tremendous improvement. So I think we're knee deep in that process of launching various agentic AI products to help our customers on their AI journey.

Pretty impressive. Yes. So I guess like beyond Cadence.AI, I think the word agenetic has been thrown out in there more than [ Crypt 10:21 ]. I'm just curious to hear what you think about whether you see a real path for agents redefining the actual design workflow, i.e., providing an opportunity like a customer such as, I don't know, NVIDIA, Broadcom, Qualcomm whoever, to actually cut a single step process, which is synthesis of place and routes? Or if this is like in a -- fictitious in a way or something that would pop in maybe 10 years down the line. You hear Synopsys saying about that touting them with agentics. I'm curious to hear your thoughts about that.

You sound skeptical, [ Jenny ].

No.

Agentic AI is real. But I mean, our JedAI platform is an agentic AI platform. And that's allowing our customers to use agentic AI for things like, I guess, verification, test optimization, I guess, and -- or optimization loops and test generation but they'll use it for things like that. I mean the Synthesis and place and route, that might be a longer way off, of course, right but there are some benefits that customers are getting in, they're real benefits, they're real productivity benefits and it's allowing them to cut design costs and get more done faster. Do you agree?

Yes. Absolutely, agree. I think in the back end, we have a lot of, obviously, agents for implementation for verification. And -- but there are lots of opportunities in the front end too in terms of how do you leverage the large language models to trends like the language to RTL code and the test bench, things like that. So our engineering team are hard at work to make sure we capture fully that opportunity to help our customers on that journey.

Yes. There's a long runway here. I mean it's still in the early days, but I think the benefits that we've seen even in the short term are real.

That's fair. That's fair. So maybe just like talking about system designs. Given the recent closing of -- I know I have to ask the question, but it's major news, right? So given the recent closing of ANSYS, Synopsys merger, I think it will be helpful for investors to understand whether user chatter around an expected material increase of pricing or their licenses could ultimately benefit Cadence. In that there would be at least initial opportunities for exploration of alternatives. And secondly, maybe even a natural pull from any integration support issues. I guess what I'm heading at is, given the incredible demand we're seeing in anything simulation these days, is this deal net negative or benefit for Cadence?

I can't -- look, I don't see it being a negative for us. I think it's neutral to positive, but -- well, I got to get kudos to Synopsys. I mean they're a great competitor. You can't have Yankees without the Red Sox.

Exactly.

But -- and the competition between the 2 companies drives us both to be better. But I don't think Cadence would be as good as it is today or Synopsys will be as good as it is today without the competition, we have between each other. But I do think in the last kind of 5, 6 years, we have made significant advances. And I think the boost that they'll get from adding ANSYS will make them more competitive against us that -- and look, I do see that there's huge benefits that you get from putting everything together. I mean chip design, verification, packaging board, right through to system analysis, if you can do all of that in one platform. That adds a lot of value to customers. So I can see how they're likely to deliver more value as a combined offering, but -- and maybe that results in higher prices. But whenever there's a change like this in the market, it's always a catalyst for customers and incumbents or customers to review the current incumbent against what are the alternatives that are out there. And I can see that being positive for us over the longer term. But yes, I don't see any downside really.

I kind of agree. I think there's also like an element of customers who are really dying to see that shift left of simulation prior to everything else because I think Digital Twin have never seen -- I mean, hasn't seen innovation so long. So for them to be able to have that concurrently when they design their systems is like it's such a clear obvious hence why there was excitement around this deal, for particularly on the investment side of Synopsys. So it'd be interesting to see where the market, the CFD and FAE market, it will be heading in about 10 years from now. But yes, okay, cool. So shifting maybe a little bit into financials, John, given you delivered an outstanding Q2 print, like fantastic and surprising quite a few of us, especially in China. Could you share some color on how should we be thinking about backlog development for both '25 and '26. And particularly, and I'm pressing on this point, any detail on upcoming renewals that allows us to shape our model better.

Yes, Okay.

We know Q3 is a big new renewing quarter.

Let me unpack it a little bit -- so in terms of backlog, we finished last year with record backlog, backlog of $6.8 billion. Now we've eaten some of that backlog in the first half of the year. We're -- I think we closed at $6.4 billion at the half. We're seeing a strong booking environment in second half that we're confident that we'll finish this year with new record backlog. So it will be above the $6.8 billion. That's based on strong renewal activity, but also strong add-on activity from customers. But I think we're seeing strength, broad-based strength right across the board in all lines of businesses at Cadence. but we're privileged that we have 5 businesses under the umbrella of Cadence. And typically, there's always one that's dragging their feet a little bit. We just -- at this moment in time, it just feels like everything is delivering right across all geographies and across all businesses. So that bodes well and is very, very positive for backlog for the remainder of this year and heading into next year. Also, I know there's a lot of focus on -- in some businesses, there is a lot of focus on the timing of renewals with specific customers. But we're blessed to have such a broad diversity of large customers that you really can't design electronic product without using Cadence. But -- so we've such a diversified group of customers, but we're not dependent on any 1 renewal in any 1 quarter. I think we have strong renewal activity over the next -- right through the remainder of 2025 and into 2026.

So even though this was -- I mean $6.8 billion was a record backlog. And so we should see that be higher by the end of the year, and you're setting up yourself for a pretty tough comp next year. How should we think about it, particularly because there was a big hardware push this year, obviously, from the generation of emulators and prototypes. And so you close out the air pocket quite impressively. So how should the investors think about you set us into '26 when you have a tougher stance on well, tougher comp on hardware and although you might have a record backlog by the end of the year, you're still facing that hardware and IP and simulation, strong backdrop.

Totally understand the question. It's the -- I guess, the nature of printing record after record after record you give yourself tough comp.

Exactly.

Now I think one thing that you should make sure you're aware of for this year is that -- I mean, last year, you mentioned the air pocket. We launched our new hardware system, Z3, Palladium Z3, our new emulation system in -- at the end of March, beginning of April of last year, and it kind of created an air pocket for us where pipeline opportunities for our older Z2 system, people kind of waited 6 or 8 weeks because they wanted to see what Z3 looks like and how long it would take to get access to Z3. Many of them still followed through and bought Z2 because they get access to that quicker. The -- but as a result, this year, we had easier comps Q2 over Q2, then we'll have in the second half the year because second half of the year, some of the hardware activity that got sucked out of Q2 just kind of got caught up in Q3 and Q4. So second half of last year was very strong, and we're lapping those in the second half of this year. Still very confident, though, that we'll beat those comps. The revenue from our hardware business is really throttled by the -- our production capacity. And we keep raising our production capacity to meet demand, it's hard to keep up with demand. Because the both in complexity and design shows no signs of slowing down. But our verification group when they're pitching to us for budgets. They'll often say that, look, we know everyone's chasing Moore's Law, and that's tough when they all lead investments. But if complexity is growing by X, complexity and verification is growing by 2 to the power of X because they're trying to deal with all the variables that you might have in a verification situation. So when they're trying to emulate all of that, there is no slowdown in that emulation. So the pace of innovation has to keep up. And the customers' requirements. That's why the -- nobody wants to miss their silicon first time round. No. So you have to spend money on verification. There's huge demand for it. Nothing is getting less complex. But -- and we've proven -- I mean, our Palladium Z3 is our showcase product. It's Cadence on Cadence. It's our own custom chip designed using Cadence IP and Cadence tools. There's a wide moat around this. We think we have the 2 best emulation systems on the planet right now. The second best is Z3 and Z2. So that's a strong position to be in. And bookings are quite volatile. I mean, you can -- bookings in Q4 will be a lot higher than bookings in Q1, but it's just that way every year. People kind of use up the end of their budget for this year, they're probably spending some of their budget like they have visibility into the budget for next year. A lot of that gets signed and committed in Q4. I think Q1 is kind of drive by comparison that but we manage that volatility at backlog and in the booking side. But from a revenue perspective, revenue is based on the amount we can produce and issue from time to time that -- and that's that we keep increasing our production capacity. We don't want to increase it too much that -- because we like the price points that we're at, we like the availability, the scarcity works for us. The -- and we try to manage lead times somewhere between 8 weeks and well, ideally not as high as 26 weeks, we did -- it went as high as 28 weeks before, and we had to really ramp up production to get that back. But somewhere between 8 weeks and 20 weeks is probably the sweet spot, and it's kind of pushing towards 20 weeks right now. So we're ramping up production for the -- in the second half of this year to help us deal with that.

That's good. I think you had mentioned that if someone wants to buy an emulator today from you guys, you don't have it ready by the end of the year, right?

So we have systems, right? We have systems, but there's such a backlog of orders, like if someone has an immediate requirement and often, the desire for a new emulation system is probably triggered by an upcoming project. So if you have a project starting in November or December, you're probably looking for an emulation system now. And right now, it's tough to get that -- get in the queue. Like if I just put you in the normal queue for that, you might not get it by the time you need it. We'll have to work with you and see if there's a way that we can meet the deadline.

Makes sense. So maybe shifting a little bit topics and speaking about renewals. I mean, I think everyone has a few key topics on the top of their minds, and I believe Intel is one of them. I know we should be cautious of any direct customer mentions. But I was hoping you could share a few words on how do you view the upcoming Synopsys renewal? And how do you think about your internal IP development for 18 and 14A. Because I think the market is mixed about this. Some are thinking there is a clear in to steal market share given the obvious relationship with Lip-Bu, whilst others investors are a bit more skeptical and receptive about the shift as a sudden replacement will be seen as radical. So I think there's sort of like a mix between, oh, you can -- you clearly have an in and there's more upside than downside versus -- or maybe there is upside only in the incremental portion of spend of Intel. So I'd love to hear your thoughts about that.

Okay. I'm sure. The -- I mean, Intel is clearly an opportunity for us. I'd prefer to be more indexed to Intel that it just so happens that we're probably more indexed to the likes of a TSMC than we are to an Intel or a Samsung. They tend to spend more with our competitor than us. I do think that creates more opportunity than downside for us as things change there. We have IP and tools that are all silicon ready for 3-nanometer, 2-nanometer and beyond and signed off with these foundries that -- so we're in a position to help them as much as they want to help. And I think the biggest opportunity there right now, I mean, basically, if anyone is going to turn around Intel, it's probably Lip-Bu. Lip-Bu, I've seen him at close quarters. He's an exceptional person, one of the greatest capital allocators I've ever seen. But -- and I think he'll realize that Intel could -- I mean, what they're spending on EDA is probably 9x more on people in EDA than tools. And I think that ratio of people to tools probably needs to change. If you're going to make changes there, you need to spend more on tools, which might end up being that there's more upside on the tools side for both ourselves and Synopsys, even though Synopsys is very highly indexed there, but they could probably do more with less people.

That's interesting. Yes, that's fair. So about -- on the IP side, particularly, how indexed are you on the most advanced nodes for the foundry business?

Sorry.

For the foundry business of Intel. So like 18A and 14A, are you continuously updating your IP for those nodes or...

Absolutely, yes. And like I said, we're ready to help as much as they need us, and we're silicon proven at all these nodes. Yes.

Okay. Well, maybe going back to China. I guess this is how I think about it is the elephant in the room is what do you think about the region in terms of it being a sustained stream of business. Or whether this will slowly die out and its customers shift to local vendors. The way I'm thinking about it is that China will still stay a part of Cadence and customers in the region that cannot access the U.S. technologies or are being pressured not to will likely move their operations in other APAC regions, but that China, for the time being, will likely be a bit more volatile with revenue growth potentially being flat to declining as a baseline. Am I thinking about this the right way?

I think if there's volatility at a regional level, I don't think you'll see as much volatility at the top level. But -- so our regional revenue is based on consumption based on where licenses are used. If there's any trend, what we're seeing is that, let's say, maybe 5, 10 years ago, you might have done a software arrangement with a customer in China and 100% of their engineers were based in China and the licenses were being used in China. These days, that's happening less at the bigger customers that they might still have a large R&D group in China, but they probably have multiple R&D groups around the world that -- and the licenses are being used in different countries. Now what that does to our geographical mix of revenue is it means if the previous deal, if you had 100 licenses all being used in China and then on the new deal, maybe it's 150 licenses, but 110 are being used in China. So China will grow by 10% from 100 to 110, but then you'll have growth of 40 licenses in other parts of the world that -- but it's a consumption. It's based on consumption. It's very hard for us to predict that. But we're much more confident in the top-level revenue line and the growth that we can generate there than the actual geographical mix of that revenue.

Yes. I mean I was at DAC this year, and I was talking to a few of the folks at Imperion. And it was surprising to me to hear that they're actually not doing the full flow end-to-end EDA software, which means that even -- so say as a baseline case, China is not an issue in terms of the geopolitical tensions, that China becomes like it was 2, 3 years ago. It's still -- there is virtually no end-to-end competition in China, right, for you guys. Like the people there are still over-indexed to either Cadence or Synopsys or potentially Mentor Graphics. Are you seeing any competition heat up from the result of these tensions? Or -- because as far as I see it, which was only in June, they're not doing physical verification, not doing functional verification, not doing place and route. It's not -- you're not catering the full needs of a chip designer, so...

No. I mean if we're seeing competition, we're seeing competition for headcount in China in terms of talent for China. But in terms of competition for like bookings opportunities, revenue opportunities with customers, it's not so much. The -- I mean it's taken decades for us to build relationships and close trusted partnerships with our largest customers and to build out these full flows and the sign-offs with all the foundries for those flows. It's very hard for anyone to replicate that in a short space of time. That will take decades. But I just think it's hard for anybody starting off to catch up with Cadence and Synopsys at this point. Not impossible, but we're talking a decade-long journey.

Rights definitely high. I think even the big guys, like if you think about Google with their deep -- it's like a deep chip product that it's like a point tool solution effectively in EDA, but it's like an implementation point to solution. It's not really -- I mean, yes, it can help -- there was like some studies about some research scientists using it and saying it's purely academic, but it's not fully replacing even the single implementation point tool EDA that Cadence offers.

That's right. Well, we don't see those customers sitting down and having meetings trying to figure out how to replace them.

No, exactly.

I mean they're basically trying to figure out how to leverage our technology to solve other problems -- to solve their problems.

Yes. Well, now a final one on AI. It will be helpful to also frame the AI landscape in terms of start-ups coming to play in the space. There are a fair few impressive ones at DAC this year. I'm curious to hear your thoughts on their claims of trying to reshape EDA landscape and whether you see these as like, again, to my point, single point tools, threats, but not real competition given the end-to-end engine that Cadence provides or whether you're starting to see some real speed. I'm curious to see both if it's a threat or if it's sort of good for you guys for even M&A.

Yes. So not a threat for the same reasons because like I say, it takes trusted partnerships and the full flow take decades to produce. But we love the fact that there's innovation in EDA again. and AI is generating a lot of that. We see the start-ups as well. There's been a dearth of start-ups in EDA for the longest time. And that's probably because of the size of ourselves in Synopsys is really, really difficult to compete. But now that we're seeing some innovation coming through, I think that's really, really positive that we might see some really good clever point tools. And like you say, it's an opportunity for us to pick off the best of them. But I think the best of them will end up as part of the flow at a company like a Cadence or Synopsys.

That does make sense. Because when you're doing these kind of acquisitions, it's more like talent-wise acquisitions, right? Yes, like you're buying the company because there's maybe 10, 15 of those engineers that are very hard -- they're working very hard on a single niche tool, a niche solution, which you might be able to leverage in your bigger end-to-end solution.

Absolutely. I mean, the character of Cadence is -- I mean, the company has over 13,000 people now more than 90% of the company -- engineering qualification. But I mean, an incredible engineering base there. The core nature and DNA of the company is that it's a company created by engineers for engineers. And they're always trying to solve their peers' problems for them. We're always trying to help everybody do their jobs better. That -- and the nature of those engineers is they always prefer to make rather than buy. So even if an acquisition is out there and there's an acquisition opportunity, just because there's an opportunity doesn't mean we'll go after something like that. Typically, what we look for is will it further our strategy? Will it accelerate that our time line in terms of the strategy that we're trying to implement. Does it bring new technology and new talent to cadence that we don't already have? That -- and the most important question is, is it at a price point that makes sense for us. And often, the answer to that is no. And we'd rather invest in our own team and our own people or hire some people to go after those opportunities. And just the nature of cadence is we're long term in nature. We always say we're farmers, not hunters, that we would rather plant now and grow over time than do an acquisition.

That makes sense. And I guess like on this point, it's interesting because we're living in this year and even in 2024, where the AI talent war is huge, right? So we know that on the one hand, electrical engineers, so people that go into becoming a verification engineer, that's already a limited supply of those people. But the people who are doing AI software development and hardware engineering, it's even more of a niche. So I guess the question would be, how are you retaining your AI talent and especially given the big shift and the big push that you're doing with Cadence.AI, which requires knowledge of both of those things?

Yes. I mean great question again. The -- in terms of AI talent, I do think people are interested in that field are naturally attracted to a place like Cadence because you get the opportunity to work on that. I'm not sure AI is the greatest name for what it is that probably confuses a lot of people. I mean, applied statistics might be a better name for it in terms of more -- a clearer description of what it actually is. But -- and engineers at Cadence, I mean, for years and years, like when Anirudh was looking at our simulation capability and the power of our matrix multipliers. When we started doing that exercise, we realized that -- I mean, maybe 30% of Cadence's revenue was coming from simulation activity and -- but just having that like the capability, the knowledge, the opportunity at Cadence, I do think it tends to attract talent. And we can always engage with our customers. Many of our customers that we compete with for that talent that also rely on us for tools. So there's opportunities for them to outsource some of their AI needs to us as well if talent is tough to come by.

That makes sense. I guess I think we have one last time for maybe 1 to 2 questions, especially both because there's NVIDIA earnings call coming up. No one cares about NVIDIA, just the biggest company in the world. So I guess I'd like to conclude with asking about, to your point, acquisitions and you'd rather -- you mentioned you'd rather be a farmer than a hunter, and that's been the case for Cadence, right? If you look at it over time, you've done very few acquisitions and the ones that you've done are quite small. I mean the largest one was BETA CAE, which was sort of like a needed one, right? Because you're now competing against ANSYS they're doing structure analysis. You ought to compete also in that space and you have the customer and the customer base to do some cross-selling. So I guess the question would be within the M&A landscape, what -- like what is your vision for the next 2 to 3 years? Like are you still going to be doing some small bolt-ons? And if you're doing these small bolt-ons, do you see them being more in IP, simulation or a combination of both? I don't see it to be an EDA, but maybe I'm wrong.

Right. Well, there's not a lot in EDA to buy.

Exactly.

But ultimately, it's customer-driven. We're not opportunistic. Just because something is available for sale doesn't mean that we're interested, but we'll basically take our lead from customers, and we're always focused on solving customers' problems. But -- and then when we look at like M&A opportunities, we prefer to make rather than buy. So the nature of the M&A we've done have been what we describe as tuck-ins internally. I mean, I don't think we spent more than 1% or 2% of our market cap at any point in time on an acquisition that -- naturally, as you're getting bigger, maybe we're doing slightly bigger dollar value acquisitions, but it's just based on the size of the company. But it's really tuck-in opportunities that -- and the type of thing on the system design analysis side, there's great opportunity. We're very focused on driving profitable and sustainable revenue growth, and we're focused on that bottom line, making sure earnings is growing. We like to cannibalize our own share count by buying it back. But when we're looking at those opportunities, often, we're looking at areas to where with limited investment, it opens up new revenue streams for us. So if we have a lot of simulation talent and capability internally within Cadence as a core competence and then we can make a small acquisition, small tuck-in acquisition that gives us access to some domain expertise, it's a pretty low stakes bet, but you're very limited investment and opening up a new opportunity. BETA was a great example where they had capability that we never had. That -- but not only did it create opportunities for us with BETA and being able to work with them more closely, but it created a whole bunch of pull-through opportunity for the rest of our system design analysis portfolio of products. It's been very, very successful so far.

Amazing. John, thank you so much, Richard, too.

Thanks, [ Jenny ].

Pleasure. Thank you, everybody.