Jason Celino

Jason Celino from KeyBanc Capital Markets inquired about the embedded organic growth rate within Synopsys' fiscal year 2026 guidance, its implications for IP growth, and the overall level of conservatism in the forecast. He also asked for details on the operating margin and EPS guidance, specifically regarding synergy numbers and any additional contributing factors.

Answer

Shelagh Glaser, CFO of Synopsys, confirmed the organic growth rate was in the ballpark, highlighting a $110 million headwind from divestitures and anticipating muted IP growth due to workforce repositioning for HPC titles. She noted that Ansys is expected to achieve double-digit growth. Regarding operating margin and EPS, Glaser emphasized the 10% workforce reduction and accelerated synergy realization, contributing to a 12-point margin expansion since 2020.

Jason Celino asked about the conservatism of the Q4 guidance, specifically regarding the IP business, and whether the historical sequential Q4 uplift in IP revenue could be expected given the ongoing headwinds.

Answer

President and CEO Sassine Ghazi reiterated the expectation of a transitional period and a muted year for IP due to the persistent headwinds from China and the major foundry customer, balancing this with other opportunities like subsystem delivery and serving various markets and foundries.

Jason Celino asked about the conservatism of the de-risked Q4 guidance, specifically questioning if the historical sequential Q4 growth trend in IP, driven by seasonality, could be expected again given the current headwinds.

Answer

Sassine Ghazi, President, CEO & Director, Synopsys, reiterated the expectation of a transitional period and a muted year for IP, attributing it to the two primary headwinds (China and foundry customer issues) which are not expected to disappear quickly. He noted that this outlook is balanced with opportunities to scale and deliver on subsystem opportunities across various markets and foundries.

Jason Celino of KeyBanc Capital Markets asked about the conservatism in the Q4 guidance, specifically regarding the IP segment, and whether historical sequential Q4 growth trends in IP could be expected to continue given the current headwinds.

Answer

President and CEO Sassine Ghazi reiterated that Synopsys expects a transitional period and a muted year for IP, anticipating that the previously mentioned headwinds (China export restrictions, foundry customer issues) will not disappear quickly. He emphasized that the company is balancing these challenges with opportunities to scale and deliver to new areas like subsystem development.

Jason Celino of KeyBanc Capital Markets asked for a breakdown of Synopsys's China revenue by software, IP, and hardware. He also inquired about the variability of the company's expense base, referencing the historical precedent of the 2019 Huawei ban.

Answer

CEO Sassine Ghazi stated that the revenue mix in China is broadly similar to the rest of the world but did not provide a specific breakdown. Regarding expenses, he explained that it is difficult to conceptualize variability for a specific region as the company operates with a global, integrated team and there are currently no changes to its operations.

Jason Celino of KeyBanc Capital Markets asked for a breakdown of Synopsys's China revenue by software, IP, and hardware. He also inquired about the variability of the company's expense base, referencing the 2019 Huawei ban as a historical precedent.

Answer

CEO Sassine Ghazi responded that the revenue mix in China is broadly similar to the rest of the world but did not provide a specific breakdown. Regarding the expense base, he explained that it's difficult to conceptualize its variability by region due to the company's global operations and noted that no operational changes are currently planned.

Jason Celino asked if Synopsys's assumptions for China have changed since setting initial guidance and, if so, what areas of strength are offsetting the weakness. He also inquired if the frequent hardware product upgrades could create a temporary 'air pocket' in demand.

Answer

CEO Sassine Ghazi clarified that while the underlying assumptions in the annual plan haven't changed, the company's communication now reflects a belief that China's growth will be below the corporate average. He stated there is no 'air pocket' in hardware demand, as customers are purchasing both prior and new generation systems, and demand exceeds supply. CFO Shelagh Glaser added that hardware availability is weighted toward Q4.

Jason Celino requested clarification on the Q1 guidance, which shows a sequential decline from Q4, asking about the seasonality drivers beyond the fiscal year changes. He also asked if the divestiture of the Optical Solutions group had any impact on the revenue guide.

Answer

CFO Shelagh Glaser clarified that the Q1 sequential decline is primarily due to two factors: eight fewer days in the quarter from the fiscal calendar change, impacting revenue by about $80 million, and a difficult year-over-year comparison for the lumpy IP business. She noted IP revenue was up 53% in Q1'24, and Q1'25 is expected to be a lower quarter for IP pull-downs before a stronger second half. Glaser also confirmed the Optical Solutions group revenue is still included in the forecast.

Jason Celino questioned the narrowing of the full-year revenue guidance, asking if any areas underperformed, and also inquired about the demand environment in China, given its quarterly and year-to-date performance.

Answer

CFO Shelagh Glaser explained that the guidance was narrowed due to confidence from strong Q3 results and broad-based strength across product lines, not due to underperformance. CEO Sassine Ghazi reiterated the company's pragmatic and balanced approach to China, citing continued impacts from entity list restrictions and the macro environment, while noting the business is still executing and growing well there.

Jason Celino asked about the two consecutive quarters of acceleration in usage revenue, specifically how better fintech utilization contributed to this trend. He also inquired about the momentum in Pro product attach rates, especially following the launch of Field Pro at Pantheon.

Answer

CFO Dave Sherry explained that increased adoption of ServiceTitan's integrated financing and payment products by customers, realizing their benefits, has driven up overall usage takeover. President Vahe Kuzoyan confirmed continued strength in Pro product attach, noting it's a main growth driver, contributing to the overall platform earn rate despite GTV growth and expansion into new markets.

Jason Celino inquired about ServiceTitan's lead generation, particularly from SEO, and any observed changes in behavior or sales effectiveness due to AI's impact on search.

Answer

Co-Founder and President Vahe Kuzoyan stated that ServiceTitan's demand generation is strong across corporate and enterprise, with a consistently performing pipeline. He clarified that ServiceTitan is not a PLG model, and while organic search performs well, it's a small portion of total demand generation, which is balanced across various channels. He acknowledged AI search will change SEO but believes ServiceTitan is well-positioned as a brand and thought leader.

Jason Celino of KeyBanc Capital Markets asked for a clarification on in-quarter sales linearity and whether there were any changes to subscription sales cycles or pipeline generation.

Answer

CFO Dave Sherry reported that sales linearity was 'much more normal' in Q1 compared to the previous quarter. He also confirmed that it was a strong quarter for pipeline and new deal volume, with nothing out of the ordinary to report.

Jason Celino of KeyBanc Capital Markets asked for a clarification on sales linearity during the quarter and any changes in sales cycles or pipeline generation.

Answer

CFO Dave Sherry reported that sales linearity was much more normal in Q1 compared to the prior quarter's exception. He also characterized it as a strong quarter for pipeline and new deal volume, with nothing out of the ordinary to note.

Jason Celino asked which areas of the business could be affected by macroeconomic pressures and sought an explanation for the guided revenue deceleration for Q1 and the full fiscal year 2026.

Answer

CEO Ara Mahdessian stated that historically, job volume remains stable during macro cycles while average ticket size can see variance, but no impact has been observed yet. CFO Dave Sherry explained the guidance is prudent, as Q4 benefited from a unique alignment of tailwinds (weather, IPO, product launches) that are not expected to continue at the same level.

Asked about the difference in take rates between commercial and residential customers and inquired about the competitive landscape in the commercial sector.

Answer

The take rate in the commercial segment is currently lower than in residential because the product is less mature. As the company builds out commercial-specific features and becomes the market standard, the take rate is expected to increase. The competitive landscape in commercial is very similar to residential, comprising legacy systems, point solutions, horizontal platforms, and down-market players.

Jason Celino asked how the take rate, particularly from payments, differs in the commercial segment versus residential, and also inquired about the competitive landscape for commercial.

Answer

CEO Ara Mahdessian explained that take rate drivers like Pro and FinTech attach are naturally lower in newer segments but increase as product maturity grows. The company's focus is on becoming the market standard in commercial to drive this maturity. He described the competitive set as similar to residential, comprising legacy players, point solutions, horizontal platforms, and down-market vendors, detailing ServiceTitan's specific workflow advantages against each.

Jason Celino asked about the drivers behind the elevated deployment activity observed across GitLab's platform. He sought to understand whether this increased activity primarily stems from customers developing applications for AI or from improved productivity due to AI coding tools.

Answer

Bill Staples, CEO, GitLab, explained that the elevated activity is likely driven by a mix of both dynamics. He emphasized that increased code volumes and engineers taking on more projects faster lead to acceleration across the entire software development lifecycle, including planning, testing, security, and deployment. He noted that these downstream activities haven't been AI-accelerated until the introduction of GitLab Duo Agent Platform.

Jason Celino inquired about the drivers behind GitLab's elevated deployment activity, asking whether it stems primarily from customers developing AI applications or from enhanced productivity enabled by AI coding tools.

Answer

Bill Staples, CEO, GitLab, explained that the elevated activity is likely a mix of both factors. He highlighted that increased code volumes, driven by AI, accelerate the entire software lifecycle, and the upcoming Duo Agent Platform aims to bring AI acceleration to all stages, unlocking new monetization opportunities.

Jason Celino asked about the drivers behind the 12% normalized growth this quarter, including any inorganic contributions and factors leading to a slight acceleration. He also inquired about the behavior of EBA cohorts for Q4 renewals, specifically regarding early engagement.

Answer

CFO Janesh Moorjani clarified that there was no unusual M&A activity affecting underlying growth rates. He attributed the performance to continuing business momentum, strong execution, and outperformance in upfront revenue, the Autodesk Store, and billings linearity. Regarding EBA cohorts, he noted strong engagement and expected closure rates in Q3, but emphasized that Q4 is the largest quarter for EBA and product subscription renewals, with much business still to be done in January.

Jason Celino asked for clarification on the inorganic contribution to the 12% normalized revenue growth this quarter and the specific drivers behind any modest acceleration. He also inquired about customer behavior regarding Q4 EBA renewals, particularly early engagement.

Answer

CFO Janesh Moorjani confirmed no unusual M&A activity impacted Q3's underlying growth, attributing the acceleration to consistent business momentum, stronger upfront revenue, Autodesk Store performance, and improved billings linearity. Regarding Q4 EBA renewals, he noted strong engagement and expected attach rates in Q3, but emphasized that Q4 is the largest renewal quarter, with significant business still to close in January.

Jason Celino from KeyBanc Capital Markets asked what drove the underlying growth acceleration to 11% despite a consistent selling environment and sought clarity on the confidence level for the 2029 operating margin target.

Answer

President and CEO Andrew Anagnost explained that while the overall environment was similar, AEC stood out with strength in data centers, industrial buildings, and infrastructure. He also noted strong performance in EBAs and the Autodesk store. EVP & CFO Janesh Moorjani stated the margin target is achievable under various growth scenarios, supported by on-track sales and marketing optimization plans and inherent operating leverage.

Jason Celino asked about the drivers behind the acceleration in normalized revenue growth from 9% to 11% and questioned what cushion was built into the full-year guidance.

Answer

CFO Janesh Moorjani attributed the Q1 revenue acceleration to strength in AEC, upfront EBA revenue, easing friction on the Autodesk store, and an easier year-over-year comparison. He clarified that the full-year guidance now incorporates additional caution for macroeconomic uncertainty, which was not factored in previously, alongside a benefit from favorable currency movements.

Jason Celino asked if the FY26 revenue guidance assumes extra conservatism due to potential disruption from the recent workforce reduction. He also inquired about the status of the large EBA and multiyear renewal cohort that was mentioned on previous calls.

Answer

CFO Janesh Moorjani confirmed that the guidance was built considering a range of outcomes and prudently factors in potential disruption from the restructuring and CRO transition. He also affirmed that the large EBA and multiyear product subscription renewal cohorts remain a significant opportunity for the upcoming year, and nothing has changed regarding that outlook.

Jason Celino asked for more details about incoming CFO Janesh and inquired about the potential timing for the company's next Investor Day.

Answer

CEO Andrew Anagnost detailed the hiring of Janesh, highlighting his experience at Elastic, VMware, and Cisco, and his focus on driving "optimization at scale." Anagnost noted Janesh's industry knowledge from his time at PTC. Regarding the Investor Day, Anagnost stated it is unlikely to occur in the spring, as the company wants to give the new CFO time to acclimate.

Jason Celino asked if the quarterly margin beat was driven by any specific internal actions and whether the raised free cash flow guidance was due to timing or underlying business strength.

Answer

CEO Andrew Anagnost confirmed no unusual actions were taken. Interim CFO Betsy Rafael clarified that the company intentionally drove underlying margin improvements to offset the known headwinds from business transitions. On free cash flow, she explained the change was largely a timing issue, as more customers than anticipated purchased ahead of the new model's launch in North America, pulling cash flow from the second half of the year into the second quarter.

Jason Celino inquired about the expected OBBA (Omnibus Budget Reconciliation Act) benefit included in the $1 billion free cash flow guidance for Fiscal Year 2026, considering the cash tax implications from the Kepware divestiture.

Answer

Kristian Talvitie, CFO of PTC, confirmed that a tailwind from the new Section 174 decision (related to OBBA) is included in the guidance. He noted that the final accounting decision is pending and that this benefit is partially offset by incremental CapEx for a major R&D center relocation.

Jason Celino asked CFO Kristian Talvitie about the expected benefit from the OBBA (Omnibus Budget Reconciliation Act) in the $1 billion free cash flow guidance for the upcoming fiscal year, considering the cash tax implications from the Kepware divestiture.

Answer

CFO Kristian Talvitie confirmed that the $1 billion free cash flow guidance includes a tailwind from the new Section 174 decision related to OBBA. He also noted that this benefit is partially offset by an incremental CapEx increase for moving a major R&D center to a new office.

Jason Celino asked about the potential benefit from the Bipartisan Budget Act (BBA) tax provision, noting its absence in the discussion and questioning if it would be a tailwind for the next fiscal year.

Answer

Executive VP & CFO Kristian Talvitie confirmed that the BBA benefit will be a tailwind for fiscal 2026. He explained that as a result, PTC's cash taxes will not increase as much as previously anticipated, though specific details on the exact impact will be provided with the fiscal 2026 guidance.

Jason Celino asked if PTC observed a similar demand pattern to a competitor, who reportedly saw strong activity in late March followed by a normalization in April.

Answer

CEO Neil Barua stated he couldn't comment on the competitor's remarks but affirmed that PTC had a solid Q2 with strong demand and notable competitive wins. He clarified that the revised guidance is not due to a drop in fundamental demand, as the pipeline remains strong. Instead, it is a proactive adjustment to account for potential customer caution and decision delays stemming from the increased macro and trade uncertainty that emerged in early April.

Jason Celino asked about PTC's competitive position in the PLM market amid intensified competition between its European rivals and whether this has affected win rates.

Answer

CEO Neil Barua asserted that PTC is a full participant in the market. He differentiated PTC's strategy as focusing on the integrated value of Windchill (PLM) and Codebeamer (ALM) to manage product data and software development, positioning this as distinct from competitors who are more focused on the manufacturing execution space.

Jason Celino of KeyBanc Capital Markets noted the shift from an initial 'double-digit' ARR growth framework for FY25 to the current guidance of 9-10%, and asked what had changed in the preceding 90 days.

Answer

CFO Kristian Talvitie provided a direct response, stating that the adjustment to the guidance range was primarily driven by conservatism to account for the potential near-term impact of the go-to-market realignment.

Jason Celino (KeyBanc Capital Markets) asked Tooey Courtemanche about the primary areas of digitization for the construction industry over the next five years, particularly leveraging Procore's data, and later inquired about the progress of beta testing for new pricing and packaging adjustments.

Answer

Tooey Courtemanche, Founder, CEO, and President, highlighted the immense potential of Procore's proprietary data and AI to boost industry-wide productivity and address labor shortages. Matt Puljiz, SVP of Finance, reported positive customer feedback on the new bundled pricing models, emphasizing simplicity and improved customer consumption rather than a change in financial trajectory, a sentiment echoed by Tooey.

Jason Celino asked Tooey Courtemanche about the future of digitization in the construction industry over the next five years and sought an update on the beta testing of new pricing and packaging adjustments.

Answer

Tooey Courtemanche, Founder, CEO, and President, Procore Technologies, expressed excitement about Procore's proprietary construction data, positioning them to leverage AI for significant productivity gains across the industry, addressing labor shortages, and optimizing businesses. Matt Puljiz, Senior Vice President of Finance, Procore Technologies, reported positive feedback from customers on the pilot program for good, better, best bundles, which aims for simplicity and clear graduation paths rather than a change in financial trajectory. Tooey Courtemanche added that this meets customer demand for simpler pricing models.

Jason Celino inquired about the strong large deal activity in Q2, asking if it was a seasonally strong quarter and whether the deals were driven by duration. He also asked if the success was due to GTM changes or broader execution.

Answer

CFO Howard Fu clarified that Q2 is not typically a strong quarter for large deals and that the reported values were annual contract value (ACV), not inflated by contract duration. He attributed the performance to the progression of the company's long-standing strategy to focus on the upper end of the market, which is being aided by the new GTM model.

Jason Celino asked if longer contract durations are driven by sales incentives and questioned the conservative guidance philosophy, particularly the implied revenue reacceleration in the second half of the year.

Answer

CFO Howard Fu confirmed there are no special sales incentives for longer deals; the trend is customer-driven, stemming from a desire for flexibility with multi-year pooled models. He stated the trend should normalize in Q4 as they lap its inception. He also described the guidance as very conservative, able to withstand a significant demand decline, providing room to beat revenue and potentially deliver incremental margin.

Jason Celino of KeyBanc Capital Markets asked how inflation and tariffs impact Procore's business and whether any of Q4's upside resulted from the go-to-market changes.

Answer

CEO Tooey Courtemanche noted that customers are in a "wait-and-see" mode regarding tariffs and stressed the industry's overall resilience and diversity. CFO Howard Fu clarified that the Q4 outperformance was driven by strong execution, and the benefits from the go-to-market changes are still expected to materialize in the second half of 2025.

Jason Celino of KeyBanc noted the stable sequential CRPO growth and asked to what extent the go-to-market changes were disruptive in the quarter. He also asked if the 11% growth outlook for next year is a good framework for Q4 expectations.

Answer

Executive Howard Fu confirmed that they are seeing the anticipated disruption from the transition, which will continue into Q4 and fiscal 2025, and that the CRPO number may contain some noise. He affirmed that the 11% growth floor for fiscal 2025 is the 'right way to think about' expectations for Q4, as one can re-extrapolate from it.

Jason Celino asked about the impact of the U.S. federal government shutdown on Trimble's business and sought more granularity on the AECO segment's strength, particularly across its Architecture, Engineering, and Construction components, and the confidence in sustaining ARR growth levels.

Answer

President and CEO Rob Painter stated that the company had correctly anticipated lower government revenue early in the year, quantifying the impact as single-digit millions in the back half of 2025, which the business had outperformed to contain. Regarding AECO, Mr. Painter highlighted strong, broad-based performance across all components, with BIM and engineering solutions (E) being standout performers due to strong product and go-to-market execution, including TC1 bundles and cross-sell. He also noted the strong performance of the construction portfolio, including ProjectSight's expansion into Europe and Australia, and Viewpoint ERP's role as an anchor tenant for cross-sell plays.

Jason Celino of Needham & Company inquired about the current macroeconomic sentiment among Trimble's construction customers and the rationale for not modeling any financial impact from potential tariffs.

Answer

CEO Robert Painter noted that while new project starts are slowing, contractor backlogs remain strong, particularly in North America, and customer hiring is driving technology adoption. CFO Phil Sawarynski explained that with software and services now comprising about 75% of the business, direct tariff exposure is significantly reduced, and the company has contingency plans for any minor impacts.

Jason Celino asked to unpack the strength in the Field Systems segment and questioned the implied deceleration in the full-year organic ARR guidance, given two consecutive quarters of 14% growth.

Answer

Executive Robert Painter clarified that Field Systems revenue was in line with expectations, while its strong ARR growth was driven by new products and as-a-service offerings. Executive Phil Sawarynski explained the full-year ARR guidance is biased toward the high end of the 11-13% range but is tempered by known churn headwinds from the mobility business in Q4.

Jason Celino from KeyBanc Capital Markets asked for details on the performance of the Field Systems segment and questioned the implied deceleration in the full-year organic ARR growth guidance despite strong recent performance.

Answer

Executive Robert Painter clarified that Field Systems revenue was in line with expectations, with strength driven by new product introductions and strong ARR growth from as-a-service offerings. Executive Phil Sawarynski explained that the full-year ARR guidance of 11-13%, while biased to the high end, incorporates a known headwind from customer churn in the mobility business expected in Q4.

Inquired about the drivers of strength in the Field Systems segment and asked for an explanation for the implied Q4 deceleration in the full-year organic ARR growth guidance, which has remained at 11-13% despite two quarters of 14% growth.

Answer

Field Systems revenue was in line with expectations, driven by new products and strong ARR growth from as-a-service offerings. The full-year ARR guidance implies a Q4 slowdown due to a known headwind from significant, expected churn in the mobility business, which offsets strength in AECO.

Jason Celino asked what customers currently use for asset and identity management, and if Paylocity competes with traditional ITSM players. He also posed a philosophical question about whether Paylocity might expand into front office areas long-term, given its presence in HCM, finance, and IT.

Answer

Executive Chairman Steve Beauchamp explained that customers often use manual methods (spreadsheets) for asset management, and for identity management, Paylocity offers its own capabilities or integrates via API, aiming to help with onboarding/offboarding use cases. He expressed excitement about the current TAM in HCM, finance, and IT, focusing on powering the back office, and indicated that expanding into vertically based front office solutions is likely not on the horizon.

Jason Celino from KeyBanc Capital Markets asked about Paylocity for IT, specifically what customers currently use for asset and identity management and if Paylocity sees itself competing with traditional ITSM players. He also posed a philosophical question about whether Paylocity's unified platform could eventually expand into front office areas, given its current reach across HCM, finance, and IT.

Answer

Steve Beauchamp, Executive Chairman, explained that customers often use manual methods like spreadsheets for asset management, and for identity management, Paylocity offers a combination of its own capabilities and marketplace/API integrations. He stated that Paylocity aims to power much of the back office over time, leveraging its large TAM in HCM, finance, and IT, but expansion into vertically-based front office solutions is not currently on the horizon.

Jason Celino of KeyBanc Capital Markets asked about the expected shape of recurring revenue growth deceleration through fiscal 2026 and sought confirmation that the majority of R&D operations are U.S.-based, relevant to potential tax benefits.

Answer

CFO Ryan Glenn explained that the Q1 guide reflects strong momentum and the final impact from the Airbase acquisition, while the implied Q2-Q4 guide of ~8.5% recurring growth reflects a prudent approach. He also confirmed that the majority of Paylocity's R&D operations are in the U.S.

Jason Celino asked about the client workforce level assumptions embedded in the Q4 guidance and whether the implied Q4 organic growth rate is a reasonable proxy for fiscal '26.

Answer

CFO Ryan Glenn confirmed that the Q4 guidance assumes flat client workforce levels, with any growth representing potential upside. He also suggested that while early, the Q4 exit growth rate is a 'reasonable proxy' for initial thoughts on the next fiscal year, though official annual guidance will incorporate additional prudence.

Jason Celino of KeyBanc Capital Markets asked for confirmation that Q2's recurring revenue growth, when adjusted for Airbase and a revenue pull-forward, was similar to Q1's rate. He also asked for the reason behind the earlier-than-expected client starts.

Answer

CFO Ryan Glenn confirmed that after controlling for those two items, the core growth rate was indeed very close to Q1's. He explained that the pull-forward was a result of strong bookings momentum, which allowed the implementation team to onboard some clients earlier than originally scheduled, and was not related to any external factors.

Jason Celino asked about employment level trends on the platform during the quarter and whether there have been any recent changes in the competitive environment or win rates.

Answer

CFO Ryan Glenn noted that workforce levels were modestly better than expected in Q1, but the company maintains a prudent outlook for the rest of the year. President and CEO Toby Williams stated that the competitive environment remains consistently intense, but he is pleased with his team's execution and the continued strong performance of the channel partner program.

Jason Celino asked about the impact of second-half renewal opportunities on the Q3 backlog strength and the outlook for renewals in Q4.

Answer

President and CEO Anirudh Devgan attributed the better-than-expected Q3 performance to accelerating AI infrastructure build-out and strong demand. SVP and CFO John Wall added that the backlog is healthy across all business segments (EDA, IP, hardware, SDA) and is weighted towards multi-year recurring arrangements, supporting durable double-digit growth.

Jason Celino inquired about the impact of large customer renewals on Q3's strong performance and increased backlog, asking if significant renewal opportunities remain on the docket for Q4.

Answer

President and CEO Anirudh Devgan attributed Q3's better-than-expected performance to accelerating AI infrastructure build-out and strong demand across all geographies. SVP and CFO John Wall added that the healthy mix across EDA, IP, hardware, and SDA, with core EDA and IP backlog weighted towards multi-year recurring arrangements, supports durable double-digit growth.

Jason Celino of KeyBanc Capital Markets asked for an estimate of what China's growth could have been in Q2 without the temporary export restrictions.

Answer

SVP & CFO John Wall responded that it is very difficult to speculate on a 'parallel universe' scenario. He reiterated that the company's focus is on the full-year outlook, which now suggests China's revenue will be slightly up for the year, though the guidance remains prudent.

Jason Celino asked about the pending acquisition of Arm's Artisan Foundation IP business, questioning why this market is a focus now and clarifying if the deal is included in the current financial guidance.

Answer

CFO John Wall confirmed the acquisition is not yet closed and is not included in the 2025 guidance. CEO Anirudh Devgan explained that Foundation IP has become more critical due to the global foundry build-out and its deep integration with software tools. He noted the acquisition fills a key portfolio gap with a high-quality, established product.

Jason Celino of Cantor Fitzgerald asked for a reconciliation between the record $1.2 billion sequential increase in backlog and the full-year 2025 revenue guidance, which appeared conservative compared to prior years.

Answer

CFO John Wall explained that the record backlog was driven by an exceptionally strong Q4 for renewals. He noted that for 2025, the renewal schedule is more heavily weighted to the second half, meaning some backlog will be utilized in H1 before being rebuilt. He also stated that the guidance prudently assumes flat year-over-year revenue for China to de-risk the forecast.

Jason Celino followed up on the bookings pipeline, asking if its strength was primarily driven by hardware. He also asked for an update on the China business, specifically if Cadence still expects it to contribute 13% of revenue for the year.

Answer

CFO John Wall clarified that the strong Q4 pipeline is broad-based across all businesses, not just hardware, with all segments on track for strong 3-year CAGR growth. Regarding China, he stated that while 2024 revenue will be down from 2023, the business has shown sequential recovery from Q1 through Q3, indicating strong underlying design activity.

Jason Celino from KeyBanc Capital Markets asked about the investment priorities driving the fiscal 2026 operating margin guidance of 24%, which represents a modest compression.

Answer

CFO Joe Binz explained that investments will remain focused on the core strategic priorities of enterprise, AI, and system of work. The 24% margin guidance reflects a conservative revenue outlook and these continued investments, while reaffirming the FY27 target of over 25%. CEO Mike Cannon-Brookes added that the company was ahead of its sales hiring forecast in Q4, demonstrating a commitment to investing in the enterprise opportunity while carefully managing profitability.

Jason Celino of KeyBanc Capital Markets asked about the investment priorities driving the fiscal 2026 operating margin guidance of 24% and whether sales headcount for Jira Service Management was a key factor.

Answer

CFO Joe Binz confirmed that the primary investment areas for FY26 are R&D and Sales & Marketing, focused on the strategic priorities of enterprise, AI, and system of work. He stated the 24% margin guidance reflects a conservative revenue outlook but reiterated confidence in achieving the FY27 target of over 25%. CEO & Co-Founder Mike Cannon-Brookes added that Atlassian was ahead of its sales hiring targets in Q4, viewing it as a prudent investment to capitalize on current momentum.

Jason Celino noted the strong large deal activity in the data center segment and asked what is currently preventing customers who are renewing multiyear data center contracts from migrating to the cloud.

Answer

CEO Mike Cannon-Brookes explained that for large enterprises, the cloud migration question is 'when,' not 'if.' These migrations are complex, multiyear projects, often involving dozens of instances and workflow consolidation. CFO Joe Binz added that the vast majority of these large data center deals were hybrid ELAs, which provide customers with cloud rights and the flexibility to migrate at their own pace, and were a significant driver of billings outperformance.

Jason Celino asked if the strong Q1 results were influenced by any deals that slipped from Q4 or any deal pull-forwards ahead of recent cloud pricing increases.

Answer

CFO Joe Binz stated that unlike Q4, deal timing was not a factor in Q1's results, with deal flow being healthy throughout the quarter. He explained that as Atlassian pursues larger, more complex enterprise deals, sales cycles naturally lengthen, and the company remains disciplined on pricing rather than being deadline-driven to close deals. CEO Mike Cannon-Brookes added that the focus is on building long-term strategic partnerships, not short-term deal mechanics.

Jason Celino of KeyBanc Capital Markets challenged the characterization of iWant as the 'biggest release' for a non-charged product and asked for other mile markers to track its value. He also asked for clarification on any one-time items in Q2's recurring revenue and the reason for the implied deceleration in the second half.

Answer

CEO Chad Richison defended the 'biggest release' statement by emphasizing that iWant removes all barriers to value by making the system command-driven, thus eliminating training needs. He said its value will be recognized in go-to-market impact and improved retention. CFO Bob Foster confirmed there were no one-time revenue beats in Q2, aside from the timing of marketing spend, and noted the back-half guidance reflects their current visibility.

Jason Celino sought clarification on the recurring revenue guidance, noting a subtle language change, and asked about the strategic implications of receiving payment institution authorization from the Central Bank of Ireland.

Answer

CFO Robert Foster confirmed that recurring revenue growth for Q2, Q3, and Q4 is expected to be consistent, averaging around 10% with a slight acceleration in Q4. CEO Chad Richison explained that the Ireland authorization is a key step that allows Paycom to process payments and move money throughout Europe, which is critical for ensuring end-to-end quality for its U.S.-based clients with international operations.

Jason Celino asked about the timing of the last sales office openings and whether the decision to expand was influenced by macro views. He also sought commentary on workforce level trends in Q4 and the assumptions baked into the 2025 guidance.

Answer

CEO Chad Richison clarified that it has been a couple of years since the last office opening and that the decision is driven by internal leadership bench strength, not macro factors. He noted that they saw stability in client workforce levels in Q4 and are not forecasting any significant macro employment changes for 2025.

Jason Celino from KeyBanc Capital Markets sought clarification on the raised free cash flow guidance, asking if the $15 million increase was solely due to a recent tax bill and whether this benefit would extend over multiple years.

Answer

CFO Werner Andre confirmed the $15 million increase for 2025 is a direct result of tax policy changes restoring immediate R&D deductions. He clarified that it is a multi-year benefit, with the normalized annual impact being even higher, though prepayments will cause some of the benefit to roll into 2026. He also stated the company does not plan an accelerated adoption.

Jason Celino noted the impressive 12% constant currency ARR growth for the third consecutive quarter and asked about the expected linearity of this growth throughout the remainder of the year.

Answer

CFO Werner Andre explained that the 2.1% sequential ARR growth in Q1 was in line with expectations. He reiterated that quarterly sequential ARR growth is expected to be back-half loaded, similar to 2024, aligning with contract renewal seasonality. He projected Q2 and Q4 to be higher, with Q3 being the seasonal low for year-over-year growth due to the timing of acquisition impacts and large deals.

Jason Celino inquired about the potential for U.S. permitting reform, asking if there were any early signs of its implementation and what the expected timing for its impact might be.

Answer

CEO Nicholas Cumins stated that while an executive order has been issued, it is still very early for any tangible impact. Executive Gregory Bentley added that permitting reform is a bipartisan priority and he is hopeful for its passage during the year, cautioning that project flow would not be immediate even after legislation is passed.

Jason Celino of KeyBanc Capital Markets inquired about the water infrastructure sector, asking if new EPA regulations have led to a noticeable uptick in demand or if it remains a longer-term opportunity.

Answer

Executive Chair Greg Bentley confirmed that water is a growing, long-term, and non-partisan priority. He acknowledged a recent uptick in orders but clarified that the increased demand has been a global phenomenon, not specifically concentrated in the U.S. due to recent regulations.

Jason Celino of KeyBanc Capital Markets asked about the recently passed 'One Big Beautiful Bill Act' (OBBA), questioning the proportion of R&D operations based in the U.S. and whether the cash tax benefit would also impact the non-GAAP tax rate.

Answer

Executive VP & CFO Jeremy Johnson explained that the change to immediately expense domestic R&D costs is the most impactful part of the act, resulting in a $40-50 million cash tax benefit this year and a ~$20 million benefit annually going forward. He confirmed a significant portion of R&D is domestic and noted this benefit was a key factor in raising the full-year free cash flow guidance.

Jason Celino asked if the early 2025 guidance should be viewed as more conservative than usual and inquired about how the sales pipeline coverage has trended with the expansion of the partner channel.

Answer

CFO Jeremy Johnson described the early guidance as 'less focused' rather than 'more conservative' due to its timing but noted it reflects confidence in the business. CEO David Ossip added that the pipeline is better qualified than before, with a healthy mix of opportunities from the existing customer base, driven by a more robust product suite and new packaging.

Jason Celino noted the strong sequential cloud growth and asked if it was driven purely by consumption or if the large Q1 enterprise deal contributed. He also asked for help understanding the implied deceleration in the full-year cloud guidance.

Answer

CEO Shlomi Haim clarified that Q1 strength was 'across the board,' including consumption, new contracts, and security adoption, reflecting broad momentum. CFO Ed Grabscheid explained the conservative cloud guidance is due to derisking the largest deals from the pipeline, maintaining a conservative overall stance, and not yet factoring in sustained consumption overages.

Jason Celino asked about the drivers behind the increased free cash flow guidance and inquired about any anecdotal evidence of the GitHub partnership boosting top-of-funnel interest for security products.

Answer

CFO Ed Grabscheid attributed the strong free cash flow to excellent collections and the closing of several very large, multi-year deals with upfront payments. CEO Shlomi Haim commented that while the GitHub integration is a strong differentiator that creates momentum, it is typically not the sole reason a customer chooses their security solution.

Jason Celino questioned the reason for the guided deceleration in Q1 subscription growth to 9.5% after a strong 14% in Q4. He also asked about the potential impact of tariffs on customer spending habits, drawing a comparison to previous years.

Answer

CFO Stefan Schulz attributed the Q1 growth deceleration to deferred revenue recognition from some Q4 travel bookings and a one-percentage-point negative impact from currency fluctuations. CEO Andres Reiner stated that market volatility, including potential tariffs, actually increases the strategic need for PROS's AI-powered pricing solutions, which could be a growth driver.

Inquired whether the expansion in the Digital Grid Management (DGM) suite is driven by customer demand or the company's strategic vision, and asked what the Q2 revenue guidance implies for Q2 ACV growth.

Answer

The DGM expansion is a mix of both strategic direction and customer pull, with the Open Grid acquisition being specifically accelerated by new regulations and customer demand in Europe. The Q2 revenue guidance is lumpy due to accounting standards (ASC 606) and renewal timing, and ACV growth is expected to follow historical patterns rather than being directly implied by the revenue figure.