Perfect. So we'll go ahead and get started. I'm Joe Kojarki the semis semi-cap analyst here at Wells Fargo. Excited to have the Cadence Design Systems team here, John Wall, CFO, as well as Matt from the IR team. Thanks for joining us. First, I think I've been asked to read the safe harbor, so let me get through that real quick. Today's discussion will contain forward-looking statements including Cadence's outlook on future business and operating results. Due to risk and uncertainties, actual results may differ materially from those projected or implied in today's discussion. Great. Perfect. With that, maybe before we get, like, just into kinda more pointy questions, you know, John, curious, like, can you talk about just what you think is underappreciated or maybe not understood by investors from the Cadence story? Great, great question, Joe. Essentially, we're, well, I guess Cadence is so central to the whole AI infrastructure stack. And it's an engineering software company. I think we get bundled in with a bunch of well, we get bundled in with semis sometimes. We get bundled in with software companies. But it's engineering software, and the workload is growing exponentially. So therefore, you know, when you're central to AI and everything, it's, it just generates so much, so much work for us. And the there's a whole flywheel of, I suppose, with the amount of work that we're doing with customers, it just, it gets more and more work. If you have a look at what we've done over the last 10 years, you know, double-digit low-teens kinda revenue growth with constantly improving operating leverage kinda speaks to the strength of the model, I think. Mm-hmm. Yeah. The so, so it's just that essential nature and working with those biggest companies in that are driving the whole AI world, the it kinda informs our R&D kinda roadmap as well, but so it's, it's, it's quite a good ecosystem here. Okay. you know, you started this year thinking total revenue would grow, you know, somewhere like 12%. Now, your latest guide's about 14%. Can, can you just talk about, like, what, what's been the biggest upside driver as you, you think about, like, relative to the beginning of the year? What's been the biggest surprise that, that's been, you know, to the positive? Right. I suppose that AI workloads are getting so complex that the growth in license cap is taking off on the EDAs and the core EDA side. But we're seeing strength across the board across all our businesses 'cause it, you know, Cadence used to be like an EDA company, but now you've got that core EDA business and IP business and the system design analysis business layered on top, and they've all become quite sizable. And, of course, they all work in unison together. And I think we're just seeing, like, strength across the board. But nothing is getting any less complex, which is probably good for us. Yeah. Yeah. you know, you think about, you talked about, I think, last quarter, you know, exiting the year with record backlog, you know, and looking into '26. Can you kinda help us understand, you know, you touched on it a little bit, but, like, what, what is driving that record backlog? Where are you seeing, like, the area, like, the strongest orders from customers and, and what, like, what are those things that they're, they're really focused on, you know, just trying to, to accelerate their roadmaps? Yeah. Sure. I mean, that's strength. I mean, we have tremendous momentum right now, with strength across all lines of business and multi-year contracts. However, you know, we ended Q3 with record backlog. We backtested the last 10 years. I think it was only one year where Q4 bookings didn't exceed. Mm-hmm. Q4 revenue. We've had such a strong start to Q4. You know, it looks like we'll exit the year with another record backlog, which kinda bodes well for planning for next year and everything. The, yeah, it's just, I mean, there's so much strength across all lines of business that, lots of design activity. The complexity is kinda through the roof, you know, between AI, high-performance computing. You know, all of the automotive companies are, are you know, we're kinda pulling in new customers, I think, across the systems landscape as well. Mm-hmm. Yeah. And, like, when you think about 2026 and, and relative to prior years in, in guiding. Yeah. You know, and I hear you say you're gonna wait till February to get the guide. But, you know, it might be more. You know, it might die. It might fail. I'm not trying to speak up. You know, I think, like, I guess as you think about '26 and you think about, you know, your visibility, right, and this year you've seen really strong demand for, like, systems and hardware refresh cycles. How does that how do you think about, like, your visibility in '26 relative to prior years in that dynamic? Yeah. So I, I'd say the visibility is probably, as good, if not better, than than what we had before. the like, in, in the past, we, we've always been strong considering the core EDA side and, and particularly on the software side, particularly for the businesses before and in, in the, in the context of fire. so we know we're gonna come up with a little, a little, a little, a little, a little stronger. You know, I think there's so much effective design and computing that's gonna take AI into the fire for, like, the core systems and technological stairs that, on the hardware side, hardware is typically usually the, the, the six months for the hardware. But when you're, you've got such a large install base now, there's no way there's gonna be a firm that is, you know, that's coming in, that has purchased it two years ago, coming to, to help their, their, their hardware systems. On the IT side, we've invested there, in the software side. But, and we've, we have a much broader kinda licensing and, portfolio that we offer. But, that's been a solid investment as well. The, and then on the systems side and announcement side, that, you know, we're we've been doing it for four years. We're not expanding anything new. But, an We're trying to get through some of the, the annual, like, annual terms and all that, you know, which gives us more visibility, so it's quite significant for us. Okay. That's helpful. Maybe you can hear me. I don't know. So, so maybe on, on the core, you know, EDA, let's stick with the core EDA side for a second. Yeah. You know, h-how are you thinking about, you know, when you kinda parse out the business, like, AI growth versus non-AI customers? You know, w-w-what does that what does the growth algorithm, I guess, look like? And, like, how do how do we think about, like, the split of that, like, distance? Right. so, I, I guess most of the growth is going to be digital and, and remote growth. but then you have that AI layer on top. But, where it's like many of our customers are using that big negative AI, tools to, to do more with the existing computer of the vehicle. like, in the past, when we looked at our software revenue, we would we could bifurcate the software revenue between, interactive tools and tools where you, you, you run back processing. Mm-hmm. That's a real incineration because we would we had one engineer who could calculate something with AI, and with the attended AI, but we had one engineer using multiple licenses of interactive tools and everything like that. That was a very useful thing. So, so that's in a layer on top. so that's the, the key to the vegetable, I think, for, like, the core EDA. So, so I guess, like, you know, you think about AI as kinda broadening your customer base, or, or is this additional spend by existing customers? Sounds like maybe a little bit of both, but. Yeah. Yeah. 'Cause, 'cause we're becoming more and more attentive to those kinda areas. and, and the deeper you go with it, the, the, the growth, the, the, the revenue power, power profit and everything. Mm-hmm. But, so that's, that kinda deepens the relationship, not just as a customer but as a partner. And then it pulls through a bunch of extra, customers, across the board, right across systems and things. Okay. m-maybe, you know, I think in the past couple quarters, I think what's been interesting to me is you-you've highlighted particularly, like, strength from foundries. Yeah. c-can you kind of, you know, maybe expand on, like, what is driving that? Is it the, the foundry itself? Is it the, the foundry cus foundry's customers? Like, just kind of help us understand that dynamic. Yeah. Well, they're, they're key ecosystem partners since, you know, everyone wants to design silicon these days. But, and then I, I don't think it's fair for TSMC to bear all the burden of. Yeah. Of producing the silicon. So, they probably don't have the, the cycles or the, the bandwidth to cover everything that. Mm-hmm. The world requires that, but which I think is great for the Samsungs and Intels and Global Foundries and, the, of the world. The, the yeah. There I mean, there's, there's so much going on there. And, and of course, they're, they're key partners for us because the more we the more closely we work with them, you kinda build out the flows for, for future customers. And then you, you get, you know, people tend to adopt their flows. Yeah. Yeah. So it so it's, yeah, it's a key relationship for us. What we've seen is, I mean, we're very, very strong with TSMC, but we've been increasingly engaged at places like Samsung and, and Intel. the and, and more recently, I think you've seen announcements on, on what we've been doing with Samsung and, and it's kinda it's a new relationship for us, really, 'cause we, we were never that strong with Samsung or Intel before. Mm-hmm. that's helpful. maybe spend a second, like, on, you know, non-AI semis, right? Like, we've seen obviously, it's gone through kind of a, a pretty difficult, you know, cycle. maybe things are kinda bottoming out, starting to maybe bounce a little bit off the bottom. Have you seen, like, a change in, like, their, you know, EDA discuss like, it will there be, like, discussions or just kinda their planning in terms of, you know, if the market is kind of their market or their, you know, financials have kind of found some stability? Like, ho-how does that translate into kinda thinking about EDA spend? Yeah. We've seen them come back a little bit. I mean, the, the last, last couple of years have been lean years for. Yeah. For many of those non-AI semis. But, but they seem to, be gradually doing more and more. But, this year, we're seeing bigger engagements. and, and I think they've probably found their base now at this point. Yeah. Do you think that accelerates into next year? it's I mean, it's hard to tell, but, everything seems to be accelerating. there's so much complexity in, in design that, the tools become more and more essential to what, what our customers are doing. Okay. That's helpful. maybe back on AI, you know, you guys have kinda been explicit in saying, like, we're not ready to kinda quantify things in terms of the benefit of AI, what we think it could drive for EDA. Like, are we getting closer to that, or ho-how where, where should we kinda think about where we're at in that? Yeah. It's, it's I mean, it's hard to bifurcate it, but, 'cause, I mean, you've got so much re so much revenue coming from the traditional kinda EDA workloads. But the, but these, AI tools that you can layer on top and the ability that it gives engineers to use multiple licenses does pull through quite a lot of, additional revenue for us. Now, it's, it's mainly recurring revenue or rateable revenue, so it, it kinda shows up a bit, more slowly. But the, but we're definitely seeing that pick up faster than we originally anticipated. Okay. That's helpful. m-maybe switch gears a little bit. You know, the hardware cycle. Mm-hmm. Has been a really strong year-record. Yeah. Year again. I think you talked about last quarter thinking that, you know, you could see further growth next year. what, what, what any movement we're in in that refresh cycle? Like, how, how do we think about, like, that relative to, you know, prior cycles? That's, I, I just sa it still feels like early innings because. Okay. everything's become so much more complex, which means the, hardware emulation becomes even more critical and more important. And, and, and there are strategic purchases for our customers now, not just, not just the need for, for design, but, but it's really, really important for them to, you know, get silicon right first time and, and do what they can with, in terms of emulating the system 'cause it, it, it speeds up their, their time to market, essentially. The, a-and with the large install base we have, I don't think there's anything out there to touch it. We're seeing we're still seeing demand. Customers asking for our Z2s if we can't get them in Z3. so it's, yeah, they're very, very popular. the, you know, I think you guys have made try to make some investments, like, in the supply chain to, to ramp up that. Yeah. Like, where, where are we at in terms of? We, we're kind of a, a constant kind of rate of expanding that, Mm-hmm. Production line. We, we like to keep a strong backlog of orders. Sure. But, so we're, we're constantly, increasing the, the amount of, of hardware we produce. The, the revenue in each year and each quarter is probably throttled by the volume that we can produce. That's fine. Yeah. and we're still building a backlog of orders. We're, we're, we've tried to aim for somewhere between 8 and 22 weeks of, of lead time. We're somewhere in the middle of that right now. Okay. and it's kinda throttled the, the we, we kinda throttle everything from a, a, a revenue perspective based on, on production. it's, it's kinda the sweet spot for pricing and, and maintaining visibility into the backlog. Okay. No, that's helpful. So I mean, when you think about, I guess, like, you talk about six months of visibility in hardware. I mean, it sounds like, I mean, it's a bit maybe a bit more than that right now? Well, the, the BU itself, like the, the business group, they, they would tell me they have a lot more visibility. I, I don't. Okay. I don't like we're very prudent with the way we guide. I don't like including things in the guidelines to see them in the pipeline. Sure. But, and then if that will kinda will factor, you know, the typical kinda percentage closure we have, or conversion rate for those opportunities. But, you know, they can see now from the large install base and the kinda pattern of behavior from how customers purchase and replace older systems that they feel that they have more predictability there. I'm just cautious. I don't want. Yeah. I, I don't want any inventory issues. And, and we'd rather slow and steady, and we keep the, you know, what, what's working is working for us. Sure. But how does that refresh work, like, in terms of just customers kinda do a trade-in thing, or do they do they actually keep some of those, like, Z2s and things like. So, yeah. For use for different. What tends to happen, like, you take a Z2 and a Z3. That, the what you're what you're trading for is, like, server room space generally. Right. But, you know, on a Z3, with the same footprint, you probably do twice the, the capacity. Okay. If you can swap it out, you don't like, if you have a limited finite space in the room, when you're swapping out one system for another, you're getting double the capacity for the same, for the same kinda footprint. Same footprint. Yeah. now, they tend to pull a lot more power, though, but so often, there's some power, Requirements then. Changes that need to be made for, in terms of the building's infrastructure itself. Then we have this company that we bought a few years ago called Future Facilities that, people use that software to basically create a digital twin of their server rooms and, decide optimize what they can fit in and the, power requirements, for the room before they actually, make the changes. Interesting. Okay. Yeah. That's interesting. maybe shift gears a little bit to, to SDNA. I mean, you know, in September, you guys announced the, the acquisition of the, the Hexagon Design and Engineering, Business. May-maybe can you talk about just, you know, where this business fits in the Cadence portfolio, you know, what you're most excited about? Yeah. Sure. I mean, we're building out the systems design analysis portfolio, and Anirudh's focus is always on solving the customer's biggest issues. At MSC, which was the company that Hexagon bought and called it their design engineering group, that's what we're pulling out of Hexagon. We think it's been underinvested, but we do think there's more we can do with it. They have specific solutions there we think are very important to the physical AI space, and just the breadth of what we offer now in system design analysis, we're basically trying to repeat what we did with Beta. Beta was a tremendous acquisition for us because not only did it bring top technology and top talent to Cadence, but it pulled through so much more other business, from their customers, and it kinda opened up a, a whole bunch of doors for us in the automotive space. The, we, we think similarly with MSC. It's, it's an opportunity to kinda land and expand. yeah. The, their customer base, I think you talked about in the like, just in the press release in last quarter, I think, you know, that, that there's not a lot of overlap or, or it sounds like there's a lot of new incremental potential customers there as well. There will be. Yes. Yeah. So this is I mean, the issue for us at, at Cadence in terms of starting is that so with Synopsys buying Ansys, you're, you're not just buying Ansys, but you're buying the whole. Sure. Shop and mall, right? That's right. So they have the whole infrastructure. Yeah. The sales infrastructure. with us starting from a, an EDA company and you're, you're adding tools through innovation, and then we're, we're buying smaller companies, that, we basically have to build our own shop and mall. Yeah. But, so that-that's what we so that's where we saw the value of Beta, you know, a, a marketplace where those customers naturally came. But, so was, was a conduit to, to selling more of our, our other offerings. We think it'll be the same with MSC. and, and we're kinda building out the whole Cadence licensing platform to, to be able to do that so that we can add more and then kinda have one kinda unified storefront, I guess, on, on the Cadence brand. Okay. You know, you kinda touched on, on that a little bit, but, like, can you walk us through, like, the integration process? Like, just how do we think about, like, the model implications? I think the deal's supposed to close, like, you know, first, first quarter-ish next year. Yeah. what does that kinda look like in, like, timelines and things of, you know, what you normally would do, like, in a closing an acquisition of that size? Yeah. I mean, the I, I guess with all acquisitions, and we're getting better at them, the more we do, but, so there's a there are integration teams throughout, throughout Cadence. but, but essentially, we, we'd expect something like that to be diluted in the first year. Mm-hmm. When we bring it in. But, now, we, we, we, when we pick up these things, we normally we've, we'll identify kinda revenue synergies and cost synergies. But, but it'll take us 12 to 15 months to, to extract those. You saw that with Beta. now, we, we normally aim for 50% incremental margin. and in 2024, we missed that 50% incremental margin target. Now, what, what I told the team and the board at the time was it wasn't so much that, we failed to hit the 50%. It was just that we ran out of time. But, because we're bringing in Beta so late in the year. Right. It's, it's kind of a headwind in the short term. And, and I told them that we'll prove that in we'll prove that we just ran out of time in 2025 because once we extract the synergies, you'll see that incremental margin in 2025 will be so much stronger. And if you look at 2024 and 2025 together, and actually, if you do look at 2024 and 2025 together now, you're probably getting incremental margin of about 53%, which is kinda 53, 54%. Yeah. Is what we've been averaging. we aim for 50% plus. We generally get a bit more 'cause we're, we're normally prudent with the guide. But the, I think it's similar with MSC. you know, the first year, depending on when it closes, but I mean, I think they were doing about 280 million of revenue standalone, but they were doing multi-year business. I think on an. Okay. Annualized basis that, if you flip them all to annual contracts immediately, it's probably a run rate of about 200 million a year. But, and we're kinda modeling a cost basis on that. We, we would think within 12, 15 months, not only will they be, kinda in, in tip-top shape for as part of the. Right. Cadence portfolio, but they'll probably be adding to our incremental margin by that point. Okay. Yeah. So, I mean, in, in terms of, like, cost, there's probably not a lot of cost you can really take out or, or. Well, there's, there's a lot. There's, there's a lot. There's a lot 'cause, I mean, it's, it's not just, so we'll, we'll probably spend more in R&D than we spent. Right. Right. But, but we're, we can take out a lot of the, the infrastructure cost, the G&A cost, and. Okay. So that, that would come with it, I guess. Yeah. Okay. And there's a lot of synergies we get from the, the sales and marketing cost. Right. When you, when you add in all the other portfolio. Sure. of, of, products that we have on, on SDNA. Okay. Okay. That's, that's helpful. So, I mean, I guess, like, net, net we think about, like, you know, you're not obviously not guiding, but, like, you think about, like, the leverage or incremental margin structure for 2026 maybe looks a little bit more like 2024. I, I think the next two years will probably have the same kind of profile as 2024. Yeah. 2025. Okay. depending on how, how early, MSC closes. If it the earlier it closes, the. More time. The more time we have to, to go, fix things up. also, we're getting better at this. I mean, you, you saw one of, one of the things I suppose is I always feel stupid looking back at, you know, we, we were always like, you know, we I'm, I'm, I'm at Cadence now over 28 years, and we, we, we operate with continuous improvement in mind all the time. Sure. So, so you're always doing things, trying to do things better and better. But, and I shudder to think, like, what how bad we must have been in the past. But, 'cause when I look at Beta now, one of the silly things that it did was we kinda waited. We, we when we were finding synergies, some of those synergies were coming on the Cadence side. We didn't have to wait for Beta to close to go get those. To do that. Right. But, so, learning from that experience for this one with MSC, we've already taken some actions on, on the Cadence side. And you saw that already come through in, in margins in, in Q3. It'll benefit Q4. But, but it kinda clears the playing field for, for when MSC does something. Yeah. Hit, hit the ground running. Yeah. Yeah. Exactly. I, so, so I think we'll get faster at, at converting these. Okay. To the level of profitability we would want to guess. Yeah. And, and the, and the pull-through opportunity we expect, I, I think could be significant as well. Yeah. Yeah. Okay. That's helpful. you know, you've grown, like, the SDNA, like, business, like, organically as well as inorganically. I mean, you when this acquisition closes, you look at, like, just kinda the portfolio you have. Like. Mm-hmm. Are there still holes that you need to fill, or do you feel like you've got, like, the right kind of portfolio for where the market's at today? Well, there, there's, there's always gaps, right? Yeah. I mean, 'cause the, the market moves as well, but, but the gaps are small. But, I mean, if you ask, Anirudh and I will spend lots of time dealing with general managers of each of the groups coming asking us for more investments, because they want to invest in something organically, or they want to. Sure. Plug some gap. Generally, it's stuff that we can address organically with more investment. There's not a lot out there from an M&A perspective. The occasional small tuck-in. Yeah. MSC is the biggest thing we've probably ever done. Yeah. I would imagine that our concentration will be on that in the next year or two. Right. But, anything else we do will be small. Small. Okay. Yeah. Okay. Maybe shift gears a little bit to design IP. Mm-hmm. you know, it's been an area of more focus for you guys over the last few years. Can you just kinda talk about, like, that journey some and, and just kind of, you know, where you've come from and where you're where you're still going? Yeah. Sure. I mean, the we, we were we were allergic to IP probably a decade ago, but, we just thought it was it wasn't the most rational. Mm-hmm. business that people were offloading their own, IP work, I guess. and you, you could you could print anywhere in your growth you wanted if you didn't care about profitability or capital. Sure. Yeah. But, yeah. And that wasn't that's not our style. We're farmers, not hunters. The, the so we, we're always thinking of the long term. And, and so we, we kinda backed away 'cause it wasn't the right use of capital for us. But we're always trying to, I guess, optimize the, the value of the scarce resource, which we think is engineering talent. Yeah. But, if you if you look at the, look at the operating income per employee at Cadence and adjusted for share-based comp, or you 'cause you gotta. Sure. Take share-based comp out 'cause some of them get Cadence shares. The, Cadence and Synopsys, probably 2016, 2017 timeframe, were generating maybe 45 to 50 thousand dollars, per employee in terms of operating income. if you look at where we are now, we're up to about just over 140, and I think Synopsys is at 70. Yeah. But, and that's been the benefit of, of applying or, or allocating that talent to, to the most productive use, I guess, for, for the company. Yeah. But, but what we've seen over the last number of years, we, we also have all these data metrics. So Anirudh and I love the whole money bar idea. So we, we were kinda trying to get metrics on everybody and identify who are the best engineers, keep them, and, but, move the other ones on. And the, and, and, like I said, always trying to optimize for, for the value that we can create, and, and allocate capital to the right areas. Over the last few years, we've, we've found IP has become much more rational. But, customers are asking us to play there. But, of course, though, it doesn't make sense for us to go back and, and build an IP portfolio for older process nodes. Sure. But, so you're building it for you know, so the, the market will gradually come to us more and more because we're building out our, our IP portfolio, to where the market is actually going. The, So where, where do you, like, draw that line of, like, is it 28 nanometers? Is it 10? Well, yeah. They, they, they kind of fill it. Customers draw the line for them. Yeah. Essentially. I mean, things like the ARM, Arcs, and the libraries. Sure. And just customers coming to us and saying, "Okay. Look, if you're not gonna build from scratch, how about you, you take this?" And, and they're trying to do matchmaking. Okay. Between ourselves and ARM, because they think that, "Oh, well, if you take it in, just a little bit more investment, now you can broaden your portfolio." But, the but it's, it's thoughtful. It's done in a thoughtful, very thoughtful long-term partnership, way with, with our customers. And, and, and our customers get it that, I, I think they knew that they were taking advantage of, of companies, that were willing to do IP business, for, for kind of low very low margin, low, low margin business. But, I mean, at one point, I mean, I freaked out at one point 'cause I remember seeing, a contract come across my desk, and it was like a bluebird, you know, the one of these $20 million bookings. Yeah. And, and I'm like, "Wow, what's the $20 million IP booking?" But, and of course, the sales guy was all for it. I called a, a friend of mine, who's CFO at the company that was giving us the $20 million booking. I'm like, "Guys, you're trusting us with this?" You know. Yeah. 'Cause, and he's like, "Well, it was gonna cost us 24 million if you guys can do it for 20." And I thought, "Well, why do we think we can do it for 20 when they have years of experience of doing it?" But, and it was gonna cost them 24. And, of course, people are dangerous with spreadsheets, and particularly if there's commission involved. Sure. But, so I remember sitting down with Lip Buh and Anirudh going, "This just does not make sense. It scares me. I can't sleep at night if we're doing stuff like this. So I'd rather let's redirect the, the business elsewhere." So that's why we shied away from it. Now, I think, and, and of course, customers knew what they were doing. Right. But, but now it's gotten to the point where they really want us to play, and they know that for us to play, they have to be more rational on pricing. Okay. But, I mean, you think, like, a piece of that is just also just the compli you know, we talked about earlier, like, the increased complexity and just. Absolutely. Yeah. Because everything has to I mean, it's, it's so complex now, and it's not getting any less complex. But, and everything has to work together seamlessly. So it's, it's the portfolio right across system design, analysis, EDA, and, and, and IP that, that makes the whole partnership work with, with, our customers. Okay. Particularly the bigger ones. Yeah. But again, and I guess, like, as you think about the that portfolio, right, I mean, you guys have maybe started adding some more things, like, in foundational IP. Yeah. you feel like that is you have a good portfolio there? I mean, it sounds like you're kinda going with customers on that journey in terms of, you know, progression nodes and, and technology. But, like. Yeah. How do you feel about, like, just the, the foundational, you know, library that you have today? Oh, I, I yeah. I think it's, it's very broad now. the very it's, it's, like you say, mainly customer-driven. But, we engage with customers for them to help guide us in terms of what the road map is. and I, I met with our head of IP yesterday. He's delighted with the with the way everything is going. They, they have their own gaps where they want to build something themselves, but he thinks he has the right critical mass now and the talent to be able to do us. I don't know if there's anything you wanna say about. Yeah. No. I was just gonna mention that, you know, we're focusing in on those advanced nodes areas. Yeah. But AI, high-performance computing, those five areas really being on the design IP, CDR, and CRE. Yep. CIE, CIE. Yep. High bandwidth. I mean, those are extremely important areas that our customers want us to get better in, like John mentioned. That's perfect. And, like, can you remind us? I mean, you know, obviously, your closest peer had some issues with their IP business in terms of, you know, they talked about some maybe more idiosyncratic issues, but also, like, go-to-market or changing the way that maybe there's some pricing mechanisms and things. Like, can you remind us kind of, like, how you go-to-market with that and those different pricing mechanisms that are involved in the IP business? Yeah. It's Tom with Synopsys. Yeah. Oh, yeah. The, a great company, right? Yeah. And, and we know lots of people over there who think they're great, great people as well. The, the, they have a slightly different approach. I mean, we're, we're very much, like I said, farmers, not hunters, but we're. Yeah. We take a long-term partnership view of everything. I, I get the sense, like, just from talking to our customers, that Synopsys maybe over the last few years has become more transactional rather than, Customized. Yeah. It's, it's kind of. Customer-focused. You know, it's, it's about bookings or whatever. Sure. W-with us, normally, it's, it's solved. Like, Anirudh's always focused on, "What's the problem we're trying to solve, and let's do it together, and what's the plan? Yeah. It tends to be a multi-year approach, and then we're throwing whatever we have in the tool bag at it. Sure. But, the, yeah, I, I, I, I think what we're seeing is that, of course, they had a big head start in IP. Yeah. we've started playing now in IP. It's more like and customers asking us to play. Probably didn't wanna be captive to Synopsys or ARM or. Sure. But, I'm wanting more choice. but I think as, as, as the business has moved down the process nodes, there's probably more competition from us. That's, that's probably what you're seeing. Okay. Okay. Can you remind us just last question around design IP, like, the profitability profile of the I mean, you talked about there being very focused. Yeah. On, like, you know, maintaining margins and, and. Yeah. You know, the, the fitting in your framework. But can you remind us kind of, like, where does the profitability of that business, you know, sit relative to, you know, kind of the corporate average? Oh, I mean, it's, it's very, very strong. It's getting s I mean, it's getting. Yeah. Stronger every year. again, because it's rational. But. Yeah. it's, the, it's tremendous for incremental margins. the, the importance to us in terms of I mean, we're getting a lot of incremental margin 'cause scale company scales really well. Yeah. I mean, when I look at organically now, we, we were aiming for over 50% incremental margin. We're probably hitting 60% organically. Wow. Okay. But, the and then with the M&A that we're doing, because it tends to be diluted in the first year or so. Sure. That kinda pulls us back towards the low 50s overall as a as a combined unit. But, but if you if you look at, you know, Cadence, we, we normally we budget for double-digit revenue growth. Now, we, we typically achieve low teams. But. Yeah. but when you when you budget and, and, and I guess I was looking I was talking to the board yesterday about, like, we, we look over the last three to five years. We've probably been averaging around 14%, revenue growth. Maybe 2% of that is coming in organically. Yeah. Okay. 12% or organically. But, but as, as we, as we get these new acquisitions in and we, we, we clean them up essentially and get them into our kinda workflows. The, they, they adopt the profitability profile of the organic businesses. Sure. But, and it gives us a lot of bandwidth to go and, and kinda buy the small tokens and, and, and continue to invest in. Yeah. In R&D. I, I would say I mean, Anirudh will tell you that we're innovators, and innovators lead, innovators follow. But, you know, that it's, it's really important. We, we, we continue to invest very heavily in, in R&D and, and help our customers go where they want where they need to go. Okay. That's perfect. we just got a, a little bit of time left. Quick, you know, kinda kinda have to ask about China, right? Oh, yeah. you know, I think it's been a, a wild year for, for, business in China. Yes. But, but maybe talk about just kinda the demand demand trajectory that you're seeing. have things been back to, to normal? Are we seeing, like, customers kinda still being a little bit apprehensive in terms of, you know, potential further restrictions or restrictions going back in place? I suppose the, I, I could have I could have used China for the, the, surprise question 'cause it's, it's, it's, actually, we're surprised with the resilience of. Right. China customers. But, it does feel like back to normal there. There was there was a strong desire when, when those temporary restrictions were lifted in early July, there was a strong desire from all of our China customer base that, "Look, if we've ch if we have hardware backlog, can we have it now?" Yeah. Sure. And, the so we prioritized all of China hardware backlog. Like, when I look at hardware backlog at the end of Q3 and probably end of Q4 now, there'll be much less of a percentage of China in it. Okay. Than there normally is, because we're, we're kinda prioritizing that, at, at the moment. I, I would think if you step back and you look at, at the way the business is going in China, it'll probably be a smaller and smaller percentage of our overall business. Yeah. But, I think because they don't have access to the, the, Leading technology. Yeah. Yeah. But, that they don't have we, we don't see the same AI pull-through there. Sure. As we're seeing in other regions. Yeah. So probably slightly less than average growth is what I'd expect over the next three, three to five years. but it's still I mean, it's still, a great region for us and, and a and a source of, of strong kinda revenue growth and cash flow for us. Okay. Perfect. I think we're out of time. Great. Thanks for joining. Thanks a million. Cheers. Bye.