Cadence Design Systems Inc at UBS Global Technology and AI Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Natalia Winkler - UBS AG - Analyst : So maybe we can kind of start off with the big picture, right? And when we think about Cadence, what's Cadence's role in this very fast developing, semiconductor ecosystem?

Question: Natalia Winkler - UBS AG - Analyst : And maybe you can speak about the design activity for AI. Like are you guys seeing that more on the data center side, more on in the long tail of edge applications? And where the customer base is expanding for you? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 02, 2025 / 9:15PM, CDNS.OQ - Cadence Design Systems Inc at UBS Global Technology and AI Conference

Question: Natalia Winkler - UBS AG - Analyst : Yeah. Well, and excellent. Because that was kind of my next question. If we think 5 and 10 years out, like how should we map those phases onto kind of your --?

Question: Natalia Winkler - UBS AG - Analyst : Excellent. And when we think about maybe a little bit more near term, so you recently increased your counter 20 to 25 revenue growth expectations from 12% to 14%. And you specifically talked about very strong backlog, right? And I'm wondering if you could talk about a little bit more about which of the segments you're seeing, kind of most of the strengths in the near term, as of this year and the next year as well?

Question: Natalia Winkler - UBS AG - Analyst : Excellent. And maybe we can talk about the EDA side of business. And specifically, as we think about different AI applications like how would that be changing EDA business model over time?

Question: Natalia Winkler - UBS AG - Analyst : And I guess when we talk about EDA business, I wonder how does that really translate in pricing? And I guess, the concern would be in the world of agentic AI if some of the agentic features can kind of reduce, potentially reduce the number of seats of EDA software that you need. Like is that at all a threat or really the pricing per license and the number of licenses people will actually need as far offsetting that potential headwind?

Question: Natalia Winkler - UBS AG - Analyst : And maybe on that point if we could talk about how the hardware business is performing given the traditional kind of refresh cycle? And really how we should think about the synergies of the hardware and software businesses going forward?

Question: Natalia Winkler - UBS AG - Analyst : Excellent. So pivoting a little bit more into the IP side, you guys have obviously seen very strong momentum in the leading edge IP. And arguably, it's in contrast to some of the peers, right? I think like Synopsys, for example. So wondering how you guys are seeing the dynamics of the IP portfolio going forward really and where's kind of the most growth coming from going forward?

Question: Natalia Winkler - UBS AG - Analyst : And do we think about the IP business from the standpoint of kind of license type of revenue or really there's increasing opportunity for royalties as well?

Question: Natalia Winkler - UBS AG - Analyst : And I guess if I think about the growth in IP business going forward, how incremental would be that royalty business you already have to the growth rate, or really the bulk of the growth rate is affected from the license kind of type of engagements?

Question: Natalia Winkler - UBS AG - Analyst : Excellent. I was hoping to talk about the Hexagon acquisition and how you see -- maybe talk about how you see the synergies and specifically, given the track record of acquisitions that you guys have, how you think the integration process will go there?

Question: Natalia Winkler - UBS AG - Analyst : And the physical AI opportunity effectively opens a new customer base for you, right, kind of the emerging physical AI? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 02, 2025 / 9:15PM, CDNS.OQ - Cadence Design Systems Inc at UBS Global Technology and AI Conference

Question: Natalia Winkler - UBS AG - Analyst : Yeah. And have you guys sized sort of that physical AI opportunity to specifically in the fields you will be playing, with the total, kind of total addressable market?

Question: Natalia Winkler - UBS AG - Analyst : Yeah. Excellent. So a key competitor in your space, Synopsys, they recently did an acquisition of Ansys, right? And I think one of the applications there was also the physical and the digital twin capabilities Ansys had. I'm wondering how that has changed compared to landscape for you.

Question: Natalia Winkler - UBS AG - Analyst : Great. So I guess coming back to more financial side. So from the regional standpoint, I think in the recent quarters, you've seen a significant strength in China business. I'm just kind of curious what's driving the outperformance for Cadence versus the peers there. And how does China actually fit in -- kind of actually -- maybe this is more a long-term question in your long-term vision? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 02, 2025 / 9:15PM, CDNS.OQ - Cadence Design Systems Inc at UBS Global Technology and AI Conference

Question: Natalia Winkler - UBS AG - Analyst : Excellent. And so maybe a little bit on your margins. So your [non-GAAP margin] is 44%. How should we think about the trajectory from here? And specifically, in light of the acquisition, I think you mentioned that MSC may have been somewhat underinvested. How should we think about the impact from that?

Question: Natalia Winkler - UBS AG - Analyst :

Question: Natalia Winkler - UBS AG - Analyst : And when we think about the physical AI opportunity, how should we think about the kind of margins in that potential business going forward several years out?

Question: Natalia Winkler - UBS AG - Analyst : There's no structural change to either gross margin or operating margin compared to --?

Question: Natalia Winkler - UBS AG - Analyst : Excellent. And maybe in the last minute to do here, how should we think about the capital allocation priorities for Cadence after the deal closes with MSC in (inaudible)?

Question: Natalia Winkler - UBS AG - Analyst : Excellent. I think this is it. Thank you very much.