Joe Vruwink

Joe Vruwink followed up on the Rule of 40, questioning if the margin-led improvement is a continuation of a trend and what the outlook for revenue growth is. He also asked if AI is compelling customers to increase their volume on the platform or attracting more collaborators.

Answer

CFO Howard Fu confirmed that profitability will drive Rule of 40 improvement next year, cautioning against expecting revenue acceleration due to the macro environment. CEO Craig Courtemanche explained that AI enhances Procore's value and accelerates the existing trend of collaborators joining the platform to own their project data.

Joe Vruwink noted the recurring theme of 'acceleration' and strong Q3 bookings, asking for early insights into expectations for 2026 given the current visibility and positive setup.

Answer

President and CEO Anirudh Devgan stated that all five lines of business are performing very well, with double-digit growth expected across all in 2025, and Cadence is well-positioned with leading companies. SVP and CFO John Wall confirmed that while 2026 guidance would be provided later, exiting 2025 with record backlog and broad momentum positions Cadence well, with a disciplined framework aiming for double-digit top-line growth and operating leverage.

Joe Vruwink noted the accelerated bookings in Q3 and asked management to frame expectations for fiscal year 2026, given the current visibility and positive setup for the company.

Answer

President and CEO Anirudh Devgan stated that all five lines of business are performing very well, with double-digit growth expected across all in the current year, and the company is well-positioned across products, geographies, and customer alignment. SVP and CFO John Wall confirmed that while FY2026 guidance isn't provided yet, record backlog and broad-based momentum position Cadence well for next year, aiming for double-digit top-line growth and continued operating leverage.

Joe Vruwink of Baird asked about the impact of 'physical AI' on Cadence's recent booking strength and whether it's altering customer spending patterns.

Answer

President & CEO Anirudh Devgan explained that while AI infrastructure is huge, 'physical AI' (e.g., autonomous systems, robotics) could be an even larger, long-term opportunity. He noted that this trend drives demand for both specialized, power-efficient edge silicon and the data center infrastructure needed to train these new models, benefiting Cadence's broad portfolio. Devgan emphasized that this market is still in its early stages.

Joe Vruwink asked about the risk factors associated with Manhattan Associates' fixed-fee and time conversion strategy, specifically regarding implementation scope and budget. He also sought clarity on whether the preliminary 2026 parameters for subscription growth, services growth, and margin expansion align with previous expectations.

Answer

President and CEO Eric Clark explained that the fixed-fee strategy relies on the repeatability and similarity of customer cohorts, allowing confidence in scope and budget due to known extensions and warehouse counts. He added that leveraging automation and AI in conversions helps monetize acceleration and maintain margins. Mr. Clark confirmed that the consensus 2026 estimates are generally appropriate, with clear guidance to be provided on the next call.

Joe Vruwink asked about the risk factors associated with Manhattan Associates' fixed-fee and time conversion strategy and how the company manages these risks. He also sought clarification on whether the preliminary 2026 commentary regarding subscription growth, services growth, and margin expansion aligns with prior expectations.

Answer

President and CEO Eric Clark explained that the fixed-fee strategy relies on repeatability and similarity within customer cohorts, leveraging existing knowledge of their software deployments and extensions. He noted that increasing automation and AI in conversions allows the company to monetize acceleration while maintaining margins. Mr. Clark confirmed that the company is comfortable with the current consensus estimates for 2026, indicating that things are generally tracking as anticipated.

Joe Vruwink from Baird asked about the potential impact and timing of the four go-to-market investment areas and questioned what drove the strong RPO bookings performance in the quarter.

Answer

President & CEO Eric Clark detailed that the go-to-market changes, such as new sales leadership and partnerships with Google and Shopify, are expected to have a material impact next year. On bookings, Clark attributed the strong performance to solid sales execution and customers adapting to the macro environment, noting that the last three quarters have been the company's best ever for bookings despite market challenges.

Joe Vruwink inquired about the timeframe (e.g., two years) needed to fully implement changes in the IP business and diversify the customer base. He also asked for a breakdown of what factors (IP decline, Ansys addition, China) are driving the changes in the current guidance.

Answer

President and CEO Sassine Ghazi confirmed that contract lengths (2-3 years) are relevant for IP business changes and that Synopsys has de-risked part of its exposure to a large customer in FY2025. He emphasized Ansys will significantly diversify the portfolio in terms of customer and regional concentration. CFO Shelagh Glaser reiterated that the updated guidance fully incorporates the three IP headwinds, with Ansys's addition partially offsetting the IP decline.

Joe Vruwink asked about Synopsys's efforts to diversify its customer base, given its historical exposure to one outsized account, and whether a two-year timeframe is appropriate for fully implementing the planned IP business changes. He also requested a baseline understanding of the changes in the current guidance compared to previous guidance, specifically regarding IP decline, Ansys addition, and the China factor.

Answer

Sassine Ghazi, President, CEO & Director, Synopsys, affirmed the company's diversified customer base in EDA and IP, noting its success in capturing a large wallet share from leading semiconductor companies. He stated that part of the exposure to the large customer has been de-risked in FY2025, but forecasting future impacts is difficult. Ghazi emphasized that Ansys will significantly help diversify the portfolio in terms of customer and regional concentration (e.g., Europe vs. China). Shelagh Glaser, CFO, explained that the updated guidance fully incorporates the three IP headwinds, which are partially offset by the addition of Ansys. She reiterated that the biggest decline was due to the IP update, with Ansys's Q4 contribution being for the full quarter, but its historical strong period (November-December) now falls into Synopsys's Q1.

Joe Vruwink from Baird asked about Synopsys's efforts to diversify its customer base beyond its traditionally concentrated exposure, the timeframe for fully implementing the strategic changes in the IP business, and a clarification on the baseline changes in the updated guidance, specifically the impact of IP decline, Ansys addition, and China factors.

Answer

President and CEO Sassine Ghazi confirmed that Synopsys is actively working to expand its business and diversify its portfolio, with the Ansys acquisition expected to significantly aid in diversifying customer and regional concentration. He noted that the timeframe for fully enacting IP business changes is difficult to forecast due to customer situations. CFO Shelagh Glaser explained that the updated guidance primarily reflects the decline in IP revenue due to the three headwinds, partially offset by the addition of Ansys, with Ansys's full Q4 contribution being for all weeks but its historical strong period shifting to Synopsys's Q1.

Joe Vruwink of Baird asked whether Synopsys would typically have received advance notice from the Commerce Department before news of potential restrictions emerged. He also inquired if the broader R&D landscape, including auto and industrial, is returning to the strong levels seen in 2021-2022.

Answer

CEO Sassine Ghazi stated that past experiences with advance notice have varied and reiterated that Synopsys has not received any notice from BIS regarding new restrictions. He confirmed a pickup in automotive and industrial design activity, noting that these customers are now focused on integrating more AI into their next-generation chips, which implies more sophisticated R&D investment.

Joe Vruwink of Baird asked whether Synopsys would typically receive advance notice from the Commerce Department regarding new restrictions. He also questioned if the observed pickup in non-AI R&D spending could signal a return to the very strong market environment of 2021-2022.

Answer

CEO Sassine Ghazi stated that past experiences with advance notice from BIS have varied and reiterated that the company has not received any new notice. He clarified that the current pickup in non-AI segments is for more sophisticated, AI-enabled chips, which drives new R&D investment, rather than being a simple cyclical recovery.

Joe Vruwink of Baird asked about Autodesk's strategy for AI in manufacturing, questioning whether to buy, partner, or build, and inquired about the implied growth rate step-down in the fourth quarter guidance.

Answer

President and CEO Andrew Anagnost explained the AI strategy is to build a new IP moat around custom foundation models, which will be available to both Autodesk and its partners, while also partnering with promising startups. EVP & CFO Janesh Moorjani stated that the Q4 growth outlook is simply a function of maintaining a prudent guidance posture for the second half of the year.

Joe Vruwink asked about the new pricing model, specifically how the transition is proceeding for large commercial customers and if the model helps widen the scope of customer engagement. He also asked how first-half bookings compared to the internal plan.

Answer

CEO Sean Desmond explained that the new outcome-aligned pricing model facilitates better conversations about efficiency, which resonates well with customers. CFO Greg Orenstein added that about a third of the 21% of ACV on the new model is from mortgage. He also noted that first-half net bookings performance was strong and supports confidence in the full-year ACV guide.

Joe Vruwink from Baird asked about the evolution and elevated stature of Quality Cloud, its potential role in labs and manufacturing, and its impact on the five-year plan. He also questioned the monetization strategy and strategic importance of Veeva AI.

Answer

CEO Peter Gassner confirmed that Quality Cloud has an elevated focus, particularly in the LIMS area, but its trajectory is in line with the existing $6 billion five-year plan. Regarding AI, he described it as a transformative new layer of 'agents' on the Vault platform. While he expects it to create billions in customer value, he noted that material revenue contribution is not anticipated for fiscal '26 or '27.

Joe Vruwink of Baird inquired about the key drivers for the 200 customers migrating to Vault CRM, asking if new features and the AI strategy were influential. He also asked about the potential impact of macro uncertainty on discretionary revenue streams like services and Crossix.

Answer

EVP, Strategy, Paul Shawah confirmed that Vault CRM adoption is strong, with about 200 customers expected to be live in a year, driven by its superiority to the old CRM and new innovations. He noted that non-adopters sometimes prefer a more custom product. CEO Peter Gassner addressed the macro environment, stating that while uncertain, Veeva has not yet seen a material impact on results or pipeline, and noted that a high-ROI product like Crossix may not be significantly affected.

Joe Vruwink from Baird asked if the strategy to stem Life Sciences down-sells is tied to a higher-touch service model and questioned the drivers behind the prudent second-half revenue outlook, which implies a sequential decline.

Answer

CEO Kevin Coop confirmed that Life Sciences clients often need tech-enabled services and data science assistance, making integration and a 'thought partner' approach key. CFO Casey Heller clarified the H2 guidance, noting the midpoint for Q3 implies a subscription revenue decline consistent with Q2, while the upper end implies stabilization, citing continued upsell pressures in Life Sciences.

Joe Vruwink from Baird asked if the strategy to reduce down-sells in Life Sciences is linked to a higher-touch delivery model and whether the second-half outlook implies weaker new business conversion.

Answer

CEO Kevin Coop confirmed that the strategy involves a higher-touch, tech-enabled service model for Life Sciences clients, including data science assistance and deep workflow integrations to become a more valuable analytics partner. CFO Casey Heller clarified that the prudent second-half guidance reflects some upsell pressure in Life Sciences but does not assume a slowdown in new logo acquisition.

Joe Vruwink of Baird asked for clarification on whether the multi-billion dollar addressable market for New Approach Methodologies (NAMs) is incremental to the existing biosimulation TAM and sought Certara's interpretation of customer preferences between PBPK and QSP for NAMs.

Answer

CFO John Gallagher confirmed the NAMs opportunity is an additional market. He also noted that QSP is a high-growth area and a key beneficiary of the NAMs trend. CEO William Feehery added that PBPK and QSP are often closely linked, and since QSP is a newer branch of model-informed drug development, the survey results showing lower QSP adoption were not concerning.

Joe Vruwink from Baird asked about Bentley's strategy for the 'long tail' of engineers with lower software spend, questioning if the company has the right product set and go-to-market model to effectively capture this market segment.

Answer

CEO Nicholas Cumins affirmed that Bentley has a comprehensive product range, with MicroStation serving as the key entry point for engineers, particularly in the SMB segment. He highlighted this strategy's success by pointing to the consistent addition of over 600 new SMB logos for the fourteenth consecutive quarter, which often start with MicroStation before upselling to more specialized applications.

Joe Vruwink asked about the new packaging for Windchill, specifically the enterprise user and role-based packages, and whether this new structure is a more effective way to drive deeper adoption and ecosystem expansion.

Answer

President and CEO Neil Barua enthusiastically agreed, stating the questioner 'nailed it.' He explained the new packaging is strategically designed to simplify PLM expansion, ease migration to SaaS, and facilitate customer consumption of embedded AI capabilities. He noted the timing aligns with the broader corporate strategy to position PLM as the epicenter of PTC's vision.

Joe Vruwink asked for details on the impressive high-teens bookings growth, which businesses contributed, and whether this backlog could drive organic recurring revenue growth toward double digits. He also inquired about the P&L impact of AI, including on R&D spend and revenue timing.

Answer

EVP & CFO Jason Conley confirmed the strong bookings, highlighting Aderant's record quarter and solid healthcare performance, which supports the second-half guidance. President and CEO Neil Hunn explained that AI is already yielding internal productivity gains and generating tens of millions in direct ARR, with a larger pull-through effect on the broader tech stack. He emphasized the compounding nature of AI's impact on future growth, noting it will gain momentum into next year.

Joe Vruwink asked if the non-recurring revenue benefit in Q1 signals a change in client engagement models or customer support, particularly for higher ROI opportunities.

Answer

CFO Balaji Gandhi clarified that the revenue was from the 'related services' component, which is an existing part of their business model and not a strategic shift. He stated it was called out for transparency and reflected the team's ability to quickly execute a project for an existing client, rather than a change in how Phreesia engages with customers.

Joe Vruwink asked about gross retention rates behind the net customer counts and whether the economics of the established installed base have improved. He also inquired about the expected conversion rate of EBITDA to free cash flow.

Answer

Executive Balaji Gandhi confirmed that economics within the established base have improved and stated that gross revenue retention has remained in a tight range of 94% to 96% since the IPO. Regarding cash flow, he noted there will be a strong pull-through from EBITDA to free cash flow but did not provide a specific conversion rate target at this time.

Questioned the reported slowdown in higher education deal closings, asking for the reasons behind it, whether RFP activity remains high, and the potential financial implications for 2024.

Answer

The slowdown is a matter of pace, not activity, as RFP levels are at a six-year high. Customers are temporarily pausing projects to re-evaluate their strategies due to macro pressures like declining enrollment and budget challenges. The company is well-positioned for when these deals resume but is not providing 2024 guidance or specific financial implications at this time.