Synopsys (SNPS) 21 Aug 192019 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Synopsys Earnings Conference Call for the Third Quarter of Fiscal Year 2019.At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] Today's call will last one hour. Five minutes prior to the end of the call, we will announce the amount of time remaining in the conference.

As a reminder, today's call is being recorded.

would Vice turn President I to conference time Ewbank, Lisa of this like the to over At Investor Relations. ahead. go Please

Thanks Financial Officer. the Hosting Geus, of afternoon, are and Good Synopsys; Chief de co-CEO Chairman call Pham, Trac Aart and Anna. today everyone.

conference I'd other this forward-looking financial the and Synopsys we statements course begin, that results. the forecasts, its to regarding like Before will everyone discuss remind during of call and targets company

performance judgment While many today, as we these could and represent to future statements what performance risks to materially results differ that of current actual subject about and best uncertainties results cause our actual expect. from results our are and

we and addition Release. in are call, during described this that today's most future In that important SEC recent earnings results any our to Press reports highlight may risks factors affect our

found addition, during measures information comparable financial non-GAAP earlier measures we and most that today. Release we and the released X-K discussion. be the to will financial directly In to their and financial GAAP in financial supplemental supplement earnings Press refer Reconciliations can

the recent All items plus on at most of available investor presentation our these website are synopsis.com.

the prepared at conclusion be the posted remarks on the the call. site will of addition, In

call the With that, de Geus. to I'll turn over Aart

ahead synopsis plan. I'm happy results. all to cash to Good QX afternoon. well report continues of delivered and very were flow excellent that and execute Revenue, earnings non-GAAP

guidance for year. result a fiscal and of broad-based As the QX raising over we're strength, achievement,

increasing operating billion our These invisibly in solutions $X results. already demand for business. advance our rapidly We're expansion towards and our product beyond, with achievements results and journey reflect strength increased margin technical differentiation our momentum, evidence visible on and outlook, strong bottom-line value throughout while and progressing

the ban affected a broader let Before entities revenues U.S.-China the words few situation. I our somewhat. has The government’s say about me discuss landscape,

the rest we're However, in targets. for fiscal the of even ban remains the place our year, assuming raising

making refrain further for Given any we’ll the our customers comments. from sensitivity

cloud the geopolitical competitive everything global not and customer of thriving. despite activity and our has that thus offer. are in confident the very engagements solutions only design but the IoT, advance to requiring as smart economic outlook, also We're and backdrop, proliferation XG, Synopsis segments, automotive, growing are AI,

substantial years ever the us to companies. investments, benefit are displacements products are strongest with an of the trends. new competitive and systems product they've ideal at five in been, Notably, EDA our platforms from putting dynamic share market winning After leading our position semiconductor

building had a broad with also IP of portfolio We record our blocks. quarter

highly ranging making offering IP advantages companies market Our is from AI startups. customers differentiated to driving in fast the largest growing for time-to-market

investing business IP, While base heavily customer also our we've growth in into security both and the software EDA high diversified TAM. and

of Our amounts are critical increasingly everyday mission products and software for services massive that permeates lives. our the

digit is We've we're at earnings double Integrity raising near-term continues well. and our profitable scale all revenue, growth. margin overall business our and to and Software this, is ambitions. Synopsis solid recurring accomplished delivering financial of Our stability of record on objectives, the our while and our Building significant track long-term beating revenue XX% model, expansion now and financial

the From let our EDA. provide quarter of highlights the some with perspective from me product platforms, beginning

As new including and multi-year design, products in major a of changing updates. push result intense innovation game digital our

revenue especially at Our This in growth benchmarks competitive as and technology driving is increased evident digital our for winning displacements, results is advanced accelerated. nodes. has

applications, strong U.S.-based November. be with It its launch to-date, momentum won adoption across including company. the began a it multiple a and of automotive, quality continues head-to-head significant consistently at computing, all in or compiler fusion benchmarks performance results that high runtime has particular, semiconductor In completed with leading better XG, mobile several had We data AI, at graphics. noteworthy large mobile, networking breakthrough wins competitive XG servers, competitive companies,

and CPU achieved European nodes. all and for group compiler current customer. upcoming the company benchmark decisive IP GPU an a computing X-nanometer at and Taiwanese new based of hyper arm at QX, very the mobile We fusion internal in designs designs international well-funded for on advanced won at win also Also standardized a core semiconductor a large company

A U.S. Fusion for systems its large selected cap Compiler company as implementation. digital has platform primary

business. of a Finally, is more aggressively standing company XX% semiconductor U.S. premier mission of Compiler representing than critical deployment for its Fusion programs, its

Turning over plus XX bolstered for the to Compiler custom last by design, Synopsys four Custom revenue is growth gaining percent quarters. share,

the chip in Tier company. server markets, Our a fueled XG, AI including American server by expansion is key X wins North and

productivity customers, multiple communication won U.S. began chip also the contract we a result design, These Xx benefits, are and major node by especially competitive at unique partnering technical our another innovations We've mixed team. to world and Xx are flow quarter for full the signal class wins at maker. our advanced yet during analog that large speed traditional including a with driving displacements, IP of advantage powerful high

early debug one software large, led and number scalars with strength impact vision in America our our the have integration notable North engines substantially cloud market, to segment tight is evidence of influential of contributing our on on reflecting Continuum our where position. this power market hyper static and the Moving fastest technology to strong, solution. the the simulation, Verification of growth are of to Verification growth Platform,

is verification well. as strong Hardware

hardware preferred capacity subcategories. row, the a in highest stand the solutions, as provider one ownership as fastest, FPGA a with designs. as delivering and number for and hardware By complex in emulation lowest cost For well overall, the of based year verification choice we third software the in prototyping

houses, that market to still Hardware optimizing appeal, companies in based is development. processor software based their leading hardware companies on broad systems have emerging to from systems large

and The revenue by year-over-year added new a emulation hardware our demand, product base broad in significant of shipments. customers and first the orders. secular largest has customer, continue growth the winning year have repeat decline customer adoptions XX substantially. we from offset grow market driven timing alone, In In high to important quarters addition this XX design are of to three slots, we

match or year total that results from expect We exceed banner the year. this last hardware even revenue fiscal will

IP, order with including IP semiconductor in strong double-digit portfolio a in prominent to history U.S. demand where Now our single was record driving company. largest our QX are market unmatched growth. quarter, a

as competitor, in than We expect interface momentum to are to a [ph] the larger along we nearest also four market. our record here with memory IP, where see where well. We times logic lead especially deliver five we strong and IP

the We're of ongoing driven technologies to our manufacturing high record generation vital success quality This positive proud our from to IP of one of track early has long key providing commitment processes. availability IP next. the at

alone, cumulative in past As billion an this quarter. titles our bookings X example, USB

is AI and makers and Market Cloud across IP strong by are computing, data driving Asia processers, in America, particularly vision, Europe for Pacific our North rapid portfolio growth. engines accelerators embedded top particularly a and substantial and AI learning driven Also centers semi systems our machine pace. hyperscale adopting companies. at

milestone automotive our our another Management and for for we further important the Certification After significant of enhance standards, investments safety ISO IP Quality growth. reliability to achieved with XXXX portfolio System, setting foundation

impact services, not driving tools broadest adoption growth we're of with and offer of new saw only next and ease market combination our We momentum with Software multimillion Which needs agreements approximately level global Software we are this strong of Integrity, the growing where moving of Integrity mobile, our leaders. and wide-ranging multiple and Polaris dollar XX% evolving at portfolio to the rapidly brings Finally, in continued the me year. Platform. portfolio to

cloud with the networking compelling drawing rollouts Polaris growing continual roadmap received range Announced next in a a several to wide interest May, recognized we months. the a beverage XXX QX, a insurance positive platform Fortune XX it's first new integration a is from adoption by QX in for in company based on and customers. company. Building services ranging from from over to of customers financial orders highly

of and level flagging Cigital engaging essential today, fundamental customers, relationships. with and have analyzing leadership The acquisitions recognized position suspect technology open quality in management building code have Gartner as down been the high enabling and source security, up and enterprise code and strategic Forrester. we Duck both integration by and are and Addressing Black

multimillion we $XXX revenue million enthusiastic profitability longer up the long-term more are increasing to in current rates of and than about Renewal agreements. business. see this of Building continue off base and potential duration the dollar we're

revenue, excellent cash continues our and strong execution we’re earnings summary, In and annual guidance. unabated. activity delivered QX Design raising flow results, non-GAAP

ever Our driving they're platforms wins are displacements. strongest competitive been and and technology product the they've

and a you, to thank the sincere long-term customers employees of company. Finally, to success our our our for continued commitment to their

that, it turn over With I'll to Trac.

Thanks, non-GAAP flow. another for Aart. Good executed strong operating QX, cash we quarter, afternoon In results everyone. earnings record delivering and revenue,

non-GAAP the buyback margins of basis our bringing reaching deliver approximately million for we expansion repurchases the Further, to operating expect total expand a at operating of continue $XXX points also year, midpoint guidance. XXX XX% nearly to to million. year margin We the and for implemented $XXX

shortly. I strength the reflecting robust year, outstanding three another for and that the track provide quarters outlook a on are We of first will

I'll revenue of unless our or $XX both based Software comparisons was total Integrity are otherwise $XXX We & results. across broad $XXX consolidated QX System revenue Semiconductor with our million review design strength X% a First growth segments. was revenue million, All while year-over-year generated stated. million.

segment Semiconductor strong downs by timing and bolstered products. quarter, IP of our This Design & was the demand of System pull customer our customer

perform Design within & Semiconductor segment. the to System very well EDA software continues

year's Although for exceed do meet Despite EDA hardware XXXX. hardware the our business quarterly to in declined QX year total last we strong year-over-year hardware revenue a results. variability, expect against or record

costs. million, $XXX approximately $XX and costs in GAAP total which Consolidated million restructuring were includes expenses

operating work resource Total allocation for of design, $XXX optimize level non-GAAP our Semiconductor growth. in margin non-GAAP & the At operating to for segment -- we System adjusted a million, and XX.X% long-term As Integrity. XX.X%. resulting costs were for expenses and sustainable Software adjusting XX.X% were margins approximately

of to Note were expenses per such managed segments. GAAP level and as other not at non-GAAP $X.XX per that are earnings share certain have compensation, been consolidated the share amortization expenses earnings $X.XX. allocated and stock-based that operating our intangibles,

we with cash Turning million debt quarter of cash million. $XXX million, and ended to flow cash, and of the $XXX balance total $XXX operating was a

in targets, government’s from to revenue QX Entity our the Now excludes currently List. any companies which on

billion; million; billion For to of XXX and and project XXX midpoint fiscal million operations to $X.X between $X.XX $X.XX approximately million, was approximately minus $X.XX a $X total and capital per margins expenditures expenses fiscal share; of of billion; GAAP tax billion million; of non-GAAP $X.XX the million; other costs non-GAAP between share; XX%; earnings $X to at due resulting flow earnings as operating of -- XXXX million margin and shifted shares rate expenses outstanding of Cash minus $X.XXX $XXX and spending non-GAAP in between non-GAAP to operating per timing. $X.XX a $X.X billion GAAP $X.XXX $XXX costs total approximately $X.XX and of and and million from revenue of $XX XXXX expenses between to income normalized a billion; XX%;

$XXX million; total expenses and the GAAP and to income zero; and the and million million costs million; $XXX quarter: fourth outstanding expenses to $XXX total $X.XX shift. and expenses non-GAAP a and non-GAAP $XXX between rate a tax $X.XX non-GAAP Revenue $X.XX million $XXX earnings $XXX million; Now between targets minus share; for earnings costs $XXX shares million between million; normalized other of per between between million of GAAP XX%; and and $X.XX $XXX and to per $X

our three To variety our our term conditions, objectives. a in execution focus quarters longer on maintaining to of growth operating conclude, while demonstrates ability macroeconomic pursue to

both continue financially to operationally. and well, very We execute

We beginning digit margin growth. EPS operating high-single double are substantial objectives and our expansion year with growth, solid the exceeding significantly digit of revenue

portion of And large flow a we cash buybacks. of free form the shareholders continue to our return in to

business and With shareholder in we portfolio the power ability of our sustainable, are our value. long-term deliver model, to confident

turn over it operator to questions. for I'll the that, with And

Instructions] go & from Please comes Rich with Company. Needham Our question first ahead. [Operator Valera

perhaps to benchmark, surprisingly tone off, mentioned significant. pretty just is your I all Maybe side that your won positive, start guess was on to the head you. of you Thank you head basically which digital

the digital So of going out year in two. get your thoughts that's how and over of a of wanted on just state or next the sort to sort play to there market

obviously sort a you admittedly of from came here. lot and behind being I invested think perhaps of a position

sort digital get to thoughts updated of So wanted the on your just marketplace?

as come any at to investments. position And them has had last results at together. make made for And clear bringing very that big few get the over investments, to because to lead we've one have when big would some not conclusion to start of instead the gradually multiple in individual time, the Well, years, point we products good we actually decades. look

and And route prime example the of few so other generating that, really place synthesis where for the good Fusion a is results. is now with Compiler intersection and capabilities,

benchmark attention. set course, And and results institutionalize of a and such high And record go then for pay plan few over it's have have utilization but a of to even chips. of you until much they hopes to broader thing, through blocks customers then actually that you then gradually real trying

introduced we believe, And November last so I Fusion or so. Compiler,

making the And truly rapid results very far, so And we're advances. are stellar.

lot because this platform doesn't means for it that So be of But I also better still that mean there's we to not deliver think to have a is work us. results new the done.

Got seeing the deals, of then to just assuming it more lumpiness on is still business does larger it. a and growth here? that's term third Integrity, have and this sort slipped it that but the of a see which may sounds longer see you're medium with bit And like sort I'm Software hope in you what duration you like just look of little XX% sort as quarter. growth Polaris,

at looking we're Yes, that's way the it.

of some the to Polaris after stability It believer with sort not ability companies security want some place. I'm to productivity, for software the only in they all going company, at can it of have in of all up, the quarter-to-quarter, over well. in who's anybody there's can you though. highlighted snippets right have in-charge of you're the from dealing course, all particularly productivity that bring Because so to now IT you bottom the is destroy many useful point CSO, strong an if that or because security companies a large Head all Of how or And vary. not else a more time,

controllership actually bring verified. of what as top some just been to portions have But as code of the much degree down

and it's implementation that with we is vision more context is well. products. Polaris more positively that, Coverity and multi-year so while actually development the effort, will the and our gradually is of bring the And in doing in a tools of clearly first The viewed

very you Aart. Thank much, it. Got

Thank you, Rich.

Davison. Diffely Please question D.A. ahead. Our comes next with from Tom go

is to on, of a of comes again the number customers course How today? little work I completely to clarity by long bit of you? action get is good just trimming on? when was the complexity of And you impact take the designs that hoping that projects how bit? Yes, times concurrent afternoon. they a see during little What down slows that business being offset does normal

that all lowest or equipment, But for to all with question. people multi-year up the that to industry, do example. or deal multi-faceted a as of is down function change with highest R&D for this plans. And that generically that year variability is the supply because is in because speaking, plans And Okay, weak, are the actually that and a doesn't have everything strong semiconductor has revenue volumes R&D, a people just really much. is particularly for

from Synopsys say, remains of really poor the benefited that and when But to first go bringing than the are well. customers I’m we things particularly has better one ability a fact scale customers. are times Now to in nonetheless, segment and the that, rapidly in stability of rich questions,

growth how in we many gotten the complexity. gets question you never of of think it that. transistors to that fine. also And just I not on [ph], And old sort Moore's ways Law ever good and but managed the easier more easier, it we've know a simultaneously, always Now, do asked there,

if investing I I very well. effort, I think, And also a of done. are perfect connected problems systems, at automotive that of new electronics honest, automotive wanting where we mentioned, to are the To test before is the forget to interesting specifically, the we're that. software. be software in the that's example you when substantially doing people the semiconductors intersection And and

anything. much systemic as of opportunity for So as an is complexities us

Okay.

right go R&D now, you budgets, customers tough period when like world? impact semiconductor a of material to see through kind So don't they’re major

and will Well, they would people. when actually tough through people go reorient towards their fairly do it's a look But the time, budgets, at they they impact. everybody, cut what have most R&D that rare

And up. so a those potential that back downturn they things have prioritize it's come biggest to more that the away fades as

of is these sophisticated where and that make valuable And comment the lot difficult accelerates to large a look relook at that is we extremely good companies a having their maybe blocks. provide a of discover to do still their other because while blocks. own use also that to their ability The to can most not they IP, market, on go people IP number engineers this time

So we opportunity actually us downturns fundamentally, because are enough for and have interesting need. productivity enabling company, a what they that's

Okay, thanks a That lot. clarity helps.

welcome. you, Thank You’re Tom.

Our next ahead. question Steves Mitch go comes with RBC. Please from

question. taking my Hey, guys, for thanks

off now. down we So I'm the quarters down behind been then to now? core changes. But kind understand I Can secondly, how around high-single one comfortable going one, start couple year-over-year us of accounting a it's got maybe tougher a business actually two, the considering And couple we first quarters you at when it? growth get but one, the the for that’s look help EDA given is accounting the for digit

answer Yes, -- and that the -- emulation in places let question up mind IP at in two year in profile seeing hardware. for look FPGA emulation just your you is the EDA, with this Keep variability shows should directly. what systems me is start The then show EDA, prototyping the and piece you're when integration. up in the half hardware in

seeing you're in number. so variability that And

that very line to range, communicated. mind area. EDA for high single EDA. we've in that's software much digit in year that's And growing previously showing in much hardware to If the pretty up for is with in year -- that line the that good, in you in And mid growth the keep what was with you see emulation, were piece should last a a adjust record very

technical for out but with a interesting of large maybe is tools EDA transistors, [indiscernible] of chips I X.X trillion other one, then more Okay, and these of perfect. including some meta own they platters more is kind came And design, their made Aart, the tools. or one second we had just this

can guess, future? maybe then on designing future? or model I Synopsys So, the you that, how would viable And maybe something a that's the that in in into potential like comment if fit

well. Well, we know very them to happen

what be And we so I'd comment. careful

it’s and to the whole You to creatively. that questionable too essentially of already would them do XXs that, in effort was may yields know to could chips I time, make And the that think at wafer there see cover just that one able sort effectively. that were be connect an

actually pick now, be you on very, good. node Depending the yield can what very

well And attempting a number to on Guinness wafer is such be put fact how transistors can this clearly to finds they're utilization by that's on the of Records. say AI using the after. going that so I've customer. an what you interesting of get any of the one the see it to learning astronomical not seen in Book of the problems. terms will that they're And yet least for But But results this machine

all would say power, I connect cool. in speaking, hunger next generically levels how whole think do be, going those must I I doubt the things? for you actually is The decades, efforts that And it of you learning more least that. do manageable it do a whatsoever with no do will say forms. of in be the were the how computation pretty how approach, to pictures And multiple machine think, I do there at of at unstoppable. is you And practice, plethora packaging the different there's so challenge wafer

Perfect, thank you.

Please Sterling Auty Morgan. from comes question JP ahead. next with go Our

quarter? to will a should and IP that thanks. the Any Yes, strength little bit color drawdown was into color on IP the if drawdown. areas the us more from mentioned give you additional continue the if we of just think you go and Hi timing as strengthened could in fourth that Wondering, guys.

is the of acceptable. is Well, now years I that seen in is reuse we've because general, over reason not completely IP is multiple IP only think growing, what

a you there's of acquisition, has long problems best So course. your can longer macho got any by sort is of solve do people as own no that solve right, price to of my that to form use there is as the IP --

so that -- two a different different And continued from has dimensions.

grown in IP many these themselves that complexity is blocks One have dramatically. of

different so aren’t the pretty But look that I USB last simple. definitely first the through versions. family simple. And mentioned not And ones ones most the went

on implemented silicon then and computation generations And blocks top technology. the are that advanced in of these of most these different

Synopsys. multiplicative precisely And get and of business through And these Because, pretty of difficulty. this is gone why to every effect we've a so you I in is things much sort difficulty very this a think strong getting challenge for work.

relationship far provider me where from we continue but it's customer that at we to perfect, I end day, trust make the to that. to And with are things think see say we And the work. the a great of have

times comment. utilization. the market increase more to can how one on put in have may grow IP ties I directly productivity startup think And companies, Large observation new starting it's -- be to that about previous Maybe more they never what can companies IP it, question it their often used is other now actually, you and on that the list. But twice challenging. shopping immediately the of

all the And have the And suddenly, to I fall in that all category. now startups rest. AI do

think we path Not or a So they're I be is ever IP think very that that roadmap the these for good this. us. I box complex very will but simple, that run fact good for do have

anything looking second the outset think have was the flow outflow about straight in should at deferred the just in of renewals then or that of would that? And quarter. we to Sounds like the for follow-up to for timing revenue contributed quarter. either cash good. Anything buildup you, actually Trac one cash looks It terms

our rate deferred an the look from No, I next show run look quality bookings, when And was our Q at up we're healthy. wouldn't and we of backlog that it report steady we'll business actually this as the I -- going in week QX, for at was the to quarter-to-quarter. When issue.

growing very perspective, nicely. business that from the So is

you. thank Okay,

Please Mobley Our Securities. with next Gary from ahead. Wells Fargo question comes go

you a think agreement sort millions platform mentioned and customer I with was I question everyone. with a key license a of cited. IP the the multi presume start I strength. U.S. some history, tens largest in want dollar you repeatability to Hi, this specifically about And company's of order the

more types of agreements? IP there's So up I'm to rather in just these be specifically, was license the the revenue, curious of substantially increase that. to if in related going spite of mix And

design the for Semiconductor & You showed in margin business. operating a the sequential improvement System

So the there? what I'm catalyst wondering, what's -- was the

do IP that continue the to grow. think business we general, will in Well,

get think about every as it very don't customers. And that day and You available yes, But from very, years. or prepaid. of but the make go a that in deals large multi-year they transactions. also little can offering everything it's is it broadening bit over we’ll And, but to to terms of sort general, -- it's makes a menu, simpler restaurant, they pick and multiple in the

was? in said that, second the heavily question, the foundries be evolution silicon things with well thought a is aligned on half we of And to so that this because Now, quite that technology was time. semiconductor forgot will I ready also investments the the have that area, rapid. provide there what having I the it means continue that so are

question Yes. There was margin. a on

Yes, on margin.

me address the for look piece. the been number hit margin the XX% FY the pretty year. at Let you look the year, address that, at margin to when running And on Overall, we're profile for XXXX. business, for track we've when steadily you the midpoint at for let that me

from margins last strong pretty a in increase to this year. there's year So

seeing you're opposed the to as less increase what a is concerted deliberate a effort operations. mix So and to

Okay.

One operating year achieve goal question. fiscal XX% glaring of margin is no that operating margin for the is high to to XXXX. up follow thing mention a the Just

omission, So wondering committed was guys I'm you to that? conscious that or if are a still

we Yes, longer term. when the we last the and FY to to XXXX in XX%. investors driving about the talked April, talked high-XXs margins over by

no Because outlook. we'll that come and we our FY XXXX. mention guidance, to -- no is to There remain about committed there We to specific December change is are back give margin that. in you specifically more but

in Okay. glaring cash buying the you're than and your definitely But flow free a I from flow generating cash almost operations, back flow amount. so maybe question, cash if you're much Last can, this more stock, year. not

be to And pace Should or so about in allocation acquisitions? being maybe buyback? think debt, your And your four time? presumably skewed five paid off slower capital increasingly months' a with of as we stock

job use a last and few investments the we've good M&A, organic pretty between think balancing the years cash I buybacks. done of for

has returning shown to that about a flow amount free diligent Our substantial via -- pretty cash history we're buybacks. of

that. and the but our haven't allocation From to We capital changed depending situation, our the quarter-to-quarter, to overarching returns capital remains may vary it approach same. approach on

results. guys. Okay, the congrats Thanks, on

Thank you.

Thank you.

Our comes from with next question Vleeschhouwer go Please Jay Securities. Griffin ahead.

again Good you. for billion. to of that first Trac backlog you earlier, QX the clarify of your Sterling to as you end Thank just gave evening. saying you're answer the $X.X was

That's correct.

Okay. Aart mentioned, will and year you match hardware XXXX. the that Trac, did I fiscal for believe that business you're the you anticipating what in

record for in impact revenues hardware would year-to-date, in quarter magnitude effect set the fourth hardware the XXXX? combined and are declines Given fair beyond prior in back fiscal would that QX emulation a in for of you the prototyping, the it record be to substantially anticipating that of say

year. mix it different throughout fairly routine that's a up Actually But actually FPGA not we're the in ramp steady The steep and Jay hardware the anticipating prototyping last it's is was -- is the been the not -- than case. year, emulation QX.

question on Okay. And related though, hardware.

time, we've that for observed versions for all hardware demand the you some longe quite have the or the for of seen out current been is years, out some mentor things mentor so even the couple the has cadence of last of market for been has systems, strong this had and version been though of that aging have longe the big time. One longevity has over in three, cadence quarters of

but hardware, possible customers reorder generation somewhat the older both order my look of at would a hardware incorporate to refresh want coming chip that for it question FPGA, [ph] or chasse when announced what the fall seem is ZeBu technology? to Xilinx you it's large in today, kind that not So earlier HAPS, very till induces a is, of would which next And and year. you of be out to next your

you do want chip to particular incorporate the next how generation so? So your hardware, year hardware over sustain assuming next the into you that demand for or of

at starting the different the us, very your of is. at intersection the one I we space hardware question, least and and a beginning between the focusing because software, of reasons that's we biggest Well, our really hard are competitors, than are little opportunity think for we where think at

machines be cannot also with that just Now used acceleration. simulation our

systems its to don't it to risks time is the space And check the my in if the people grow that software they is miss market. out that will going the on so to more on systems want and windows, they own, is on because the to more build run opinion, long, continue where early and

So has the be software to parallel. the hardware in therefore, developed and

And that better. well, and so day-to-day from I think we support literally extremely

example together takes And seven again, maybe where the is a putting five most years. to visible simple automotive, car

if so last this software never at hour, the go to thing to will market. start you And

specifically comment is The technology. second now on our

We benefit are the we those. have with able move have forward with FPGAs, to provide we of of the people FPGA based that and being relationships generations different so excellent the

just matter are to what time clued And what will as any will not. so And in continues. and developments in point we well our

substantially number customers. And return think time? in for you old on new Synopsys systems Yes, that years said what and has a precisely ways. a time at I investment Lastly, unexpectedly that for our And But are can around the wrong capacity. have with of they driven successful for same it's systems nothing great is long do. hang more that faster

may you demand question of and ago, talked services, on role I comment the the the context particularly is, about to or looks, you that, pipeline services Cig magnitude are engagement services, with now two only respect not recall your as with Polaris. particularly your engagement not in IP. again, for My seeing given introduction the only perhaps pipeline, of for one we Cig? you're for can of Cig, of at well, think Lastly, looking but How you IP services for how calls but for

Cigital is at looking of high Cig, focusing. companies acquisition of team start who absolutely is and handle Because of in the mind have most and the where for do lines And as the others, level Well been capable Duck being getting Okay. importantly, how but question a software of there's they Cigital, with people developed. that with a Coverity few and Cig that’s the extremely our are integration on essential. precisely is no product we're Black security, that engaging

under than product. And better so, IP, would I in many you have is the products full and continue hoped in it's get I the in and or probably think utilization IP with think integration to customer because sell forward. technologies. of to to right that other IP that for term number the the together services capabilities services. we're specific specific gone is ways assembling cores drive has now use their between or directive, A customers increasingly, And interesting that something subsystems we optimized and It's on,

of particular really out these kinds don't have invariably development we associated plans with all IP a call transactions them. while so, And service business, multi-year

Thank you very much.

You're welcome Jay.

is our John Credit Suisse. go with next question from Pitzer Please ahead.

semiconductor me are how supply products critical as guys. are just the become Yes, evidence just happening, plans, curious, ahead to given and has could What's And of that up? what would or visible their I'm of I buying accelerating that chain you letting see? how the follow chip out question. and that? a the given evidence good other see you Thanks risk if Chinese your kind were what kind IP to And then have for happen. Huawei fear? afternoon, just ask of just any makers Do of

sort to our make of, it's are And certain of number think we as cautious a situation. comments early in to degree to hard happen as I not predict of need what's privacy about on in that that customers say, too a Well, we a really the let's China, going many situation. said, little preamble,

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And so norm. multi-year absolutely transactions are the

are of sort business chips, basal going the on chip you think the of about how conversation that and going level of your logic, both upon about talk the benefit time? does have stats stacks memory some over because even packaging building technologies, and chips, this desegregation week we to on another that with [ph] was about I'm dyes you spend there Aart, of the then, strategy, And where

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hopes I And of these overtime because approaches. pay of demand on expensive why have will actually do some this. more That's the in high all that for we're that

the it’s curious, sense get and op to Integrity margins, scale the kind of basis drag but margins. last part Integrity about guys vision point the business of growth. And business ops to start XXX plus is XX. question revenue you small and Software That ops level driving then still my more march my the volume you more a of just I'm margin make some that the on on still scale roll what's business the guys, the kind Software are when a given

the of that part is or company So separate? that overall

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we and want sure to tradeoffs make between that profitability. So we're making the growth right

guys. Thanks, Perfect.

welcome. You're

next Munda ahead. Berenberg. is Gal go Please Our question from from

Hi, guys, hoping questions. is Thanks my Gal. for taking this for Joshua, on

you see displacements, digital, then to tech looking of making competitive mentioned driver on forward signs follow-up a starting due that? Fusion of capabilities? key Just Fusion the stickier And its are backward is to you customers and

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And so also for of optimize power, some degree for maybe and timing for you the for want lower so example, to yields on.

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company. phone a -- company, now provider so a system And -- mobile phone would phone be a

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you with progress certainly I by is XXXX. Hi, the average this necessarily earlier. the hit not the will average my corporate to just that, FY John, have again. corporate in It want at but to Integrity going clarify left high may I to impression XXs. be the remarks Trac that was Software same

go Jason comes last KeyBanc. our Please ahead. from Celino question And with

can for portfolio? fitting color then just to that Thanks I of One your around up. QTronic how guys. have some one that question maybe Hey, with acquisition. not me clarify and your in provide that's fits rest in you And I the in. follow want And guidance?

looking at test just situations you I at Sure. is simultaneously. put And it into company the exciting Yes, of But particular of not the in guidance, painted right that size. very technology companies the experts of how terms in acquisition, but hardware an that looking has because that. yet fits that's and acquisition that's and not software picture would center material closed and an it automotive in we not in it it's also like good therefore this

topic. the in deep it’s in that's aficionados on too the going software the called For loop, room probably this but

I how mean, be -- employees you And can would many adding? that

About so. XX or

anything there or perspective, Okay, is that pretty points quarters a investment up seasonality QX of basis than that great. Trac, the for which is good. previous But spend one from XX about And be seen? follow-up from quick perspective any we've margins quarter-over-quarter, an XX.X%, would Cig different the were

affecting see don't seasonality at number I that No, all.

overall while that with we've mass is being XX% small. still revenues of about think, fairly critical I reached business

depending good But that bounce the of over around. quarter-to-quarter, multiple going the to course in years, is on revenues it's that expenses, from or the news So right the profile direction. of see you're heading

That’s all me. thanks. for Great,

welcome. You’re

earnings I of away Okay, guess time so and forward. both doing good that brings us, Thank for that Hopefully, very well, we of Synopsys And actually is I the in release. that took momentum this think some around this with push very turbulences stable context. much notwithstanding the you sense end us. of to us quite you spending a degree

questions. So thank you for your support and

And that ladies you our and conference your you gentlemen, participation may and does disconnect. now for today. conclude for Thank