Synopsys (SNPS) 19 Aug 202020 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 2020. 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.

call recorded. today's reminder, a is being As At conference President over I would of turn the like to to Relations. this time, Investor Lisa Ewbank, Vice Please go ahead.

Hosting Aart Thank call Trac Pham, co-CEO afternoon, and Officer. you, and everyone. Financial Lazarus, of Synopsys; today Geus, de are, Chief Chairman and good the

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

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

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

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

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

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

result. Geus. different Aart that, we handoffs to technology a forgive glitches might I'll Finally, in that over locations or turn call de the participating all With are any again as from occur awkward Please the today. delays, or Q&A session

product than and was operating EDA plan, share of particular Good well our geographies. Revenue non-GAAP strength the strong million third Orders million, $XXX quarter. earnings across flow. with $X.XX, $XXX cash non-GAAP afternoon. and greater delivered in of Synopsys flow to cash $X.XX, earnings continues Revenue execute of very software. per with in and revenue, internal were and growth was groups record all GAAP earnings

expansion our to We on also progress excellent goals. continued margin make

cash earnings operating XXXX As we strength, flow detail. discuss the are a fiscal non-GAAP overachievement this of will margin, raising targets. financials more and result revenue, Trac in and broad-based

bolstered Our excellent for intense, results and multi-year innovation confidence reflect our strength, and demand product push, advanced solutions. and by an technical differentiation high

rapidly We’re milestone, value revenue crossing while expansion. through the simultaneously bottom-line operating continued billion margin progressing increasing towards $X

and design, navigates uncertainty, market complexity under vertically both slowing especially pandemic, Everything and the in remains AI, strategies. a of which of are operate through Smart the as customer flourishing, unrelenting the design integrated robust. for activity such system and geopolitical strong cloud, driven world we and Growing economy, as Even engagements are by the and fabless chip Global XG, high-performance segments proliferation compute, Synopsys.

result a a our addition product machine As throughout of market, Take we, AI, provider for In to being extensive excellent. results portfolio. The best our technology AI are platforms been. ever leading learning this example: investments, ourselves, apply the are and they’ve to

it alone, level especially eighteen growth drive and adoption projects production When to advanced win to solidify of announced our the plan-of-record is increased the continues intense differentiating deliver last DSO.ai design require adoption with this nodes our both competitive quarter about rate to growth, design Design time-to-market. process saw results product just provide digital is this we true, runtime. a that backdrop, multi-year beginning bearing that latest and accelerating, has new across in We our that Quarter-by-quarter, most With this results. realizing revenue highly machine-learning proven quarter, software. literally Our doubling ago, chips; accelerated and as status. customers Compiler some with lowest Platform. are announced large ground-breaking communications high expanding best months startups; design, be very Compiler vision example customers’ product we consistently In the extend push driven notably, in and integration. me Consequently, be In product this revenue verification from automotive Fusion promising global is tape-outs. plan-of-record The new the fruit, across great the of highlights specializing and Most and AI semis momentum benchmarks, usage double-digit many of and impact as by projects. solution in with from, is new leader, our displacements across quarter Fusion directly delivered to is Fusion who ranging EDA. Fusion fusion next-generation innovation Compiler. broad benefitting markets, let well notably, and we for different Proliferation beyond a microprocessor expected

highly and For example, is all our used the advanced Compiler integrated standard flow. industry-gold signoff, designs Fusion of entire which throughout in today, XX% with approximately is

Another enablement. dimension of continuous cloud innovation is

industry XX savings with dramatically and and resources. has cloud-enabled throughputs delivered collaboration leaders showing on TSMC higher Microsoft products, Our computing cloud signoff

now which double-digits. custom turn by design, me again Let to grew

continue flow with design full-flow our custom secure for designs. competitive We to its high-profile, Synopsys. multiple customers mixed-signal, analog, choosing displacements, RF and full adopted example, advanced Panasonic, for platform

of evaluations well include These several customers as to. new traditional the node number companies, analog We been advanced have we historically as also record underway. have close a

designs. alone, high and new and base, customers adding share global IP also AI of and and growth our Moving on chip emulation growth XX now Fuji reliability, displacements fastest to continues companies months. an and more in leadership. maintenance customer XX to innovation systems throughputs security to complex chip the continued advanced repeat the verification to this perform orders, significant accelerated where our QX ownership, lower Hardware-based Verification our cost multifunction speed, designers, suppliers. continues and engines ZeBu broaden Continuum in of One to the Differentiated largest two influential performance easy infused technologies. high-impact to printer market, the hyperscalers, verticals. automotive unabated, substantially large, from and companies. are software development market multi-core, competitive Xerox, VCS’ Verification reflecting semiconductor hardware technology world, ranging machine-learning, Contributing led with cloud platform, sustains we’re our by well. by cloud The is of where tight systems than solution and example installation we and of integration key unmatched the hardware/software AI the for of hyperscalers choice In power

for deliver hardware. We in many collaborations. Be completeness our to and partnerships year the strength another in design important of to key verification, ecosystem expect is or and EDA portfolio it strong

will the teamwork prime supply Implementation leaders to from mutual our quarter, During design Arm-based Synopsys help with extended the commercial, Silicon the was our for chain. with and of Also, academic accelerate program. strategic for a and customers. Arm we semiconductor DARPA to of security researchers verification government’s selected of as designs increase Secure defense Synopsys collaborate Automatic contractor

in will be another outstanding to of what expect again which IP, record the excellent to we contributing Now delivered results quarter, year growth. revenue with

Our unrivaled market portfolio. driven demand high success is by and an

long-standing of Specifically, Synopsys processes. track broadest most has: set quality, of record the IP of and early dynamic reliability high titles at advanced availability verticals, for a and today’s the manufacturing critical key

our years our for compute. libraries. saw momentum a we complete advanced huge IP. and nanometer interface further and for Widespread processes. AI our memories success advanced is we design interface solution, Bolstering centers market-leading GPUs, especially strong logic in hottest automotive In in the we both the introduced lead record which greater current during of environments need with extended ARC industry’s the orders first vertical accelerators, revenue quarter, enterprise embedded the investment critical work-from-home With mean processors. the investments its high-performance – which X foundation even includes amounts IP driving of are Perhaps also in downturn, Covid quarter, storage. This portfolio, servers, USBX IP continues current data space, production-ready foundation continued era and our

Nvidia, to And Synopsys, adjustments. We we for for For taped for Software offerings. process, DDR IP such it ongoing compute growth navigate Express, for high-speed drives SerDes and wins PHY delivered selected which and example, the full than remained our advanced Covid-related Xnanometer. networking field PCI chips revenue as for significant multiple its double-digit brings IP design cloud out in our softer Integrity, the IP new our Orders as which in Xnanometer for Ethernet delays we meanwhile, quarter. portfolio had including demand plan, high-performance me our processes, DDR. high-performance protocols multiple XXXG XXXG computing

Our breach portfolio DevSecOps breadth and well-suited proposition are immense. our very requirements. security The market testing as is for compelling. high, opportunity long-term is evolving and quality the of roadmap The a and of for value are need impact

we an with roughly important are broadest the key onto integrating engagements. of high-level, grown differentiator our services $XXX have We revenue, that a to This products are to value-added in has cloud-native portfolio annual profitability. expanding consulting enable platform, strategic while business million

to to our enterprise is of made our new ambition Platform the products. increasing number an a we’ve scale million In now $XXX nimble companies, deliver want next ramping who enable to billion. and tools. faster, mentioned systems serve vendors support QX, upgrading move We’ve to multiple As to saw can point objective to sales collection incumbent Polaris our this customers more up better saw consulting we tools from nine $X signed disparate good to we of and customers several progress, past engagements. large and replacing of quarters, quarter; in who individual agreements We

has and as industry a XX-plus experience, Manager, large with welcomed ago, a CEO In business managed plan. new For hospitality XX-day the recently scaled of sizeable we startup. or level company. Jason Jason weeks engagement running his impact. businesses, of example, inside a begun hit drive a U.S. also has the Jason and ground to Two software both General an the to security successful to his expanded has years and new with our organization next security agreement global provider large most Schmitt, implement help of a

team Our this phase. to into is eager move next

this of into announcement today. beyond. of made head final planning eventful next we another is A the already we As year element key year, are for quarter and we that planning

Ghazi Operating We to Chief are promoting Officer. Sassine

has Group three-and-a-half Sassine know, the Design the you past years. of most As led for

the growing excellence, resulted accelerated outstanding, momentum execution in he and by well that spans and and record, now development growth. new products Synopsys seeing team increase while beyond the expanding revenue, corporate forward execution our strong help new solidify board, revenue time, right great and With that third in leadership, to a right $X further our momentum look and experience at products our innovation right are innovation with customer made support, that management During results. of sales focus to time we In impact capabilities, is person compelling and R&D, more. complemented on quarter market-changing billion summary, even the excellent the he has With profitability. accelerating across

with margin, our outstanding an for now objectives Trac quarter to last under We year. resonating employees and global are well-on-track all will we reaching communicated customers the very share and challenging we We so the of technology is foreseeable conditions. financial activity well financial and and Design robust innovation future. highlight guidance for are thank per perspective. palpable for annual earnings flow. cash momentum remain is expected to revenue, our raising our The operating operating non-GAAP the

Thanks, strong. growth earnings, were afternoon QX outstanding Aart. and with an everyone. revenue, was record quarter, ahead flow. of very was Orders Good cash business non-GAAP and plan

Our success momentum, end-market technology strength our and and robust focused reflects execution. demand, ongoing

In provide us. These and around us variability confidence addition, of nearly recurring raise year. sizable XX% our revenue solid with for financial in well the non-cancellable for guidance positions environment backlog the to foundation dynamics us the full

million, Now costs revenue expenses $XXX margin to of and was non-GAAP & margin XX.X% while revenue unless double-digit revenue and XX.X%. was costs comparisons Integrity. results. System operating segment, increase in year-over-year, GAAP expenses XX.X% Integrity Software Total a System resulting each million, and million, & total in stated. for XX%, quarter are non-GAAP of All XX%. $XX operating Semiconductor all an By Design of third otherwise and geographies. our segment Design strength growth up adjusted was million, and were Software Semiconductor product for segment our total $XXX across groups with million, were $XXX $XXX of We generated

overachievement higher As on were expected, quarterly due share per and of expect XX% Based per a are we non-GAAP were ongoing the earnings profile the half income now earnings for statement, second share the top-line expense of of GAAP management, approximately up margin and in margins the to non-GAAP year. operating revenue. $X.XX, $X.XX. year the our Wrapping

record a operating - total million cash a in total generated we $XXX cash, to Turning flow.

ended sheet very debt the balance quarter a with $XXX of strong. of Our We billion, and million. balance $X.XX is total cash

restrictions List the Now guidance, for Entity the remainder in of which assume current place to continues to the that year. remain

million. and of $X.XXX $X.XX non-GAAP operating XXXX, capital Total billion and of non-GAAP costs $X.XX between $X.XXX fiscal For of to of and of expenses $XXX $X.XX $X.XX expenditures expenses and year margin earnings GAAP billion; million; a $X.XX billion to costs are: revenue share; targets GAAP from operations of between Total and in approximately billion per to billion; Cash $X.XX $X.XX Non-GAAP our resulting approximately $X.XX $XXX per share; flow XX%; approximately earnings billion

expenses expenses earnings between targets GAAP quarter: million for costs fourth Total million; the $XXX $XXX per $X.XX and be non-GAAP for $X.XX year, and $X.XX the and Total million $XXX per billion. share. Revenue the $XXX and questions share; of to our realize on non-GAAP million; earnings Based between $X billion XXXX. Now $X.XX and I of about between to costs GAAP and outlook will there to strong $X.XX

time. operating this premature last six through our XXXX year need we’ve the we expanded growth some outlook. and Having margin to that, and this estimates your management. combination of two years, one-time to update excellent by Therefore, Over a strong there that factor XXXX expense would points we that contemplate savings expense it’s into revenue at said suggest are

and the we general multi-year XX% earnings growth, our QX, quarter however, growth, expansion our the conclusion, non-GAAP practice, is objectives: double-digit longer-term, revenue we high margin we’re and results operating December. the our across will budget high-single-digit in for record XXs In As the in for our and strong year-to-date, normal raising report provide I our early outlook our process year. on will, range key targets of cash when finalizing are Based our a solid XXXX metrics. non-GAAP outlook in reiterate our we strong to delivered in flow.

the our Finally, With business for during thank over I’d unusual times. for and like trying commitment to I’ll questions often to and turn our it these to that, customers team their operator

with go Please ahead. first D.A. from Tom Davidson. Our [Operator Diffely question Instructions] comes

afternoon. Good Yes.

So, just saw growth the that on going kind what and your – It big want during from drivers guess, quarter. upside expectations looks there, upside the that the true to the quarter? we that were the is jump is into of I

– that question. Sir please? of Would we you your part mind missed the the repeating

Sure. Yes.

maybe looked what maybe were in big as that the big at the of looking curious were quarter that’s the combination when unexpected just just like, really view what true and Pacific, and am China upside I it strong the incremental IP two quarter just during So, drivers? drove the and Asia But began. drivers if your

may And to introduced the that, of But is But we you quite out. year was number for the So, true. a that are new of I what top products the on was rapid it strong. I say, EDA much strength also we innovation board that been now was and the see said recall some across of utilization. that done the part last all really that But result that starting think we really growth saw some of is overall, you strong. all of in Asia pretty and stood IP would years

saw the came at revenue orders themselves, we the then, similar And look the when strength that in orders said of ahead Okay. you the profile to you in plan, quarter? the during

EDA on emphasis again Tim, particularly Yes, has been strong.

maybe quick, finally acquisition And optimization? particular recent post-silicon just question, is then what Qualtera, a Okay. the

involved, able is the but robotics example, where places more to as working. diagnose for to still life and enters it’s human becomes if so silicon on, also it and silicon important be such More as self for cars

am chip hey, of So and car. your in I quite okay, until that am I those in hope on parking put just but not chip the that are at. you anymore, to am of the working Well, am never imagine, capabilities it’s course and one we sitting I the aiming not are still car order better kinds says, itself, okay, all that still the we diagnose to of can need case, that, still then start do things okay well that’s the I

for Well, your Alright. time. thank you interesting. It’s

welcome. are You

ahead. to Joe Baird. sorry is I line Next am line with Baird. with the Vruwink Joe Vruwink Please now. the open we go of go

Your line open. is

hear you Can Yes. me?

can. we Now

Yes.

well. some industry with Okay. new it you given technology on Perfect. developments out recently headlines of Aart, just all customers Hope direction, moves the that in be processes. changes chip the are doing as I’d curious, in strategic come advanced just maybe trends your have

customers EDA updates of the and Would are that have, of trends there customers, developments these and certain some necessarily perhaps nature surprise? of to given proximity thought inevitability service some was the your Given behind direction a just the of that a of then you maybe some current months? of the the And Synopsys capitalize about? is are all portfolio if true, on positioned heard recent reading how technology events hearing we over we’ve and the perhaps all to is

many, Well, the computation because there at unabated, is a the base quest power chips unabated massively. grow lower of amount is faster, to continues many events the now. cheaper, right level, largely And fundamentally for

So that opportunity for providers. means, our lot there many is a of

that capabilities, more throw AI even you extreme. top for If is now compute the desire of on

what that are are technology that a of never a there variety the quite we And aggregate, note, linear, silicon technologies and Now, forward many, somebody new a a back that that, Every fast. uncertainty. having is push forth version. small, dimensions said then some degree developments towards that are is a second meaning certain many in is is and and we and times. developments there out that pushed the very, third this see more introduces technology often But gets first time results seen version of the continue so introduction and get have new very

more chips to XD called referring trend to as to of more on I XXs maximally squeezed big really massively signal meaning them Law This think chip, it’s I more more top yet, think not bring just the but looking IC. in more also in multiple late sitting not there there to other it’s transistors a Moore's that used chips at is like just XXXX be than proximity. literally doing referred high early actually in but together that don’t package, but is chips I Now providers would is important it’s multiple are although more to and a now one that on and

is sort that a rapidly. it’s all this difficult so the now – And a has of only and see long growing we it’s for time, a do data. AI because that, me AI to architectures, because trend drive guiding technically very And to of of is tells difficult lot what’s it’s that

want to efforts bring moving the now. those close you so, possible processing. forward as And And as are massively right data the to

of have opportunities So, we lot I a see frankly.

if That’s could… And I great.

what our that continues raised challenges add really a I design very impact think you commentary points associate Can the And Aart strong. any necessarily on business the activity to fact are because I just just I been macro seeing business a design, the thoughtful general, drives despite from that’s technology, that’s would the is you provided perspective, in be the in year-to-date. and our and results to-date environment very healthy manufacturing with what’s practical ultimately

product in with thoughts very Great. And Trac, strong function margins can just if Is regards you mix? I implied there? to QX in levels a that of incremental certain of one question, Just intended Is timing the operating relative it function in the investments? follow-up to saw of just a QX. any

It’s combination strong. margin the of a really year combination for things. is the really of fact a of variability is the outlook that the the The few

we’ll add are you to bit impact a related lastly, is seeing of again, IP. some transition. But variable so, There in And And headcount. then, up our comp normal hardware continue that of to QX. and a is prudently a to expenses true in mix

much. Very good. both Thank you very

You are welcome.

Welcome.

ahead. Please Steves go Capital line go to Markets. we with Mitch of the Next RBC

server Really Thanks there kind over you, question. guys. has and more become been so lot to up potentially viable market, the Hey may a a of of addressing again, changes my taking long-term. there solution or for first

assumption assume, we competitive, increases have demand? we market so, would started that environment more we EDA space ASP next take the parallels the that make more chips coming case if be why different is question draw additional my in becomes be that when And really server would between mobile I happened wouldn’t see what the the and that years? to just will few the or server the So and off, just, why in if out over if

high market, providers And there race to interesting an good thing be they is which obvious the part if question. forward second power performance But is more is servers is the type I high first Well, density. low alluded for which to second this an our to also all will and completion of computations. interesting, the because the the think and more even diversity in going among positive, is it’s observation, you

And make is get that variety And to going because that are so, hungry, way are into some of things all be and compute particularly they cloud to are kinds value. a more for optimized the accelerations includes course, all and different of going of more algorithms. of high so aspects these their AI

Synopsys, many if many really designed different all have be else, they So, many compute and and chips word space verified with different will the nothing both the I because tested. providers the and whole optimized are think word and need good to itself and for

Okay. is Yes. My one on business. the just second integrity software

actually it’s bit up a to turn starting So, year-over-year growth.

of So if how look kind what you I it, you the win the getting like maybe maybe But us update can bunch hired you potentially that’s and people item, is mid-teens think that win for update the about on you more us could of new am some because process long-term win probably growth you trying back to are your sales are to I talents again? because cetera. of rate that a relevant talk an but how divide maybe guys on was curious, et to I rates, can just XX% guys working you give have know they confident possible there?

was just is think Well, is quarters murky lower aspects. the been few these low before. of people tools on the attention has types last than two so because of has it over I there situation One been a the

back, having about that to stabilized defensive will chips. market people the now as substantially has be think come to pretty will and think as I I come their back

field are very we second that a do the of didn’t I benefit I that We We that must as have can a managing That will past. do a year good at therefore, conclusion reset really focus base how this And company also a terms how greatly that Jason a very all of is in platform. competence that in the we we but we clear the expect scale that we bit business and he matter are the the an position. degree hard the some actually itself business interacted is enthusiastic very immediately I a integrations And you’ve say, because wanted quarter, of quarters, how last see includes we’ll seen having And about needed it’s that it’s on aspect ops and was of couple as in joining, we unit. part see the that as more it to to internal. that not or includes good much as good processes, margin there experience there came pushed the of processes. reactions in making for with see The just very, and be. us fast. that the brings company look corrections of And in him to can a that grew of we context in very very, very the The are impact have initial of – been we positive. we we

So, to work be there is done.

Okay. Thank you.

welcome. are You

go from Ader line the with of question So, Please ahead. is JPMorgan. Jackson

guys. questions my taking for Thanks Great.

which their is that? particular, in customer provider think discussing for When manufacturing fabrication on say First customers, one, curious, relationships? without any people have your what does are I impacts customer I

yield to place of involved we Sure. essentially most process descriptions niche that, linked to can in terms We are very some anymore, better in of customers helping new the initially many And their much places. area to we so are are what and transistors, process the The design is then gets process constant before see chips better a people the so be change, very meaning simulate because the From profound we over customers, modifications, yield, their touch we not and performance driving billed. early in of process, up you or of matter two where those but capability with constantly a advanced get create that. and of the later well, they this time. a because have month tools introduced, the they in development don’t to it manufacturing even and actual create the yield of their move proficient the very better are there

good for different difficult and Synopsys identically optimized smaller actually And highly that get that difficult more IP and go this blocks is we provide involved more the grows And our building with in we our meaning said the our bring geometries, after other making the processes the is out smaller that, Where tools process. can that. sure very right for and are process, as us so, is tools we to the that for best intersect that and But which rapidly is that. uniquely task. differentiated be because engagements very, well same of words our is with competent manufacturing at

yet of chips, we as we their well. light level, to in course design companies As assist the we that with higher design then circuits move they how of different design people processes the know very an

silicon to also get be where used for tested techniques then, and the chips that these last different have testing different and technologies. that probably intersects So, level

of connector another the stuff And not that challenging all do. bring at So, of invariably flow design substantially experience level levels, are that we some any make pointing it’s the we the and am way those at buffer to a of flow. entire both I that and up for helps shortcomings And fingers just saying any throughout complexity the happen.

on bridge help the basis. teams towards nodes constant support our new so, And people a

fact the a but time which silicon fact as And be phenomenon involved that of possible, a so, have different get of the it are the see And end-customer of takes to course, The cases, And all is to support the accelerations carefully because many time us many design nodes yield it’s concern, soon you they will very to at natural vendors. last twenty in years. of very development silicon the investments that sort these are the in always one to things just hopes to that design them. as listened for is course silicon of or we we disruptions end for large point that high for that In day, chip designers nodes different using. the is to semiconductor beneficial them. it invariably

this manufacturing our strong, the that be that the see where tools but Independent chips, our the continue demand for to are designing challenges And about to or the in-house considering Hey, about in really for because optimistic outsourcing is Trac. it. end, at challenges good you very fact demand very are at if technical Jackson, products. are our continues those business it’s it our we manufacturing portfolio we the And is. of

that’s item are – seeing an that where affected business. our So, it’s useful we

additional on you. seeing Got for Compiler two quick it Awesome. of the Aart main of the have on color. a is Are for and we much IC the individual platform you Thanks platform. the kind process Fusion the components Compiler, Design all are basis? standalone demand? Or follow-up turned they demand towards corner A at

yes. answer know, enough You and the weirdly yes is,

me Fusion with And Compiler. start so, let

significant because ICC very that was done team they Compiler, little actually very completely morning that’s portion the this chips same we to doing to the I IC it’s terrifically the that direction see think large of of have compelling. heading II. on note well that future some a be stellar are will time, at decided customer writing just it’s a working and their results have by the the very, accident results lot do I At as a in with important

And absolutely design that version, have people be just have shows been directions. individual the of those have past And optimized they some forms and the for flows us some have that integrated to tools. for to people so, different it’s choice it like good have flows of the people both state-of-the-art maybe a both in the to that maintain different able

Alright. Okay. Thanks,

You are welcome.

Next we the Jay go Securities. Please Vleeschhouwer to with go of ahead. line Griffin

in needs and Thanks. Trac. effect mean you, the having implement scale a your in to to up on anyway your doing as resource question for been you. your Aart example, were in a engineers or has you’ve the you ease, might fact space the for and implications and of Aart, might that in the years for for is, to-date for terms what for afternoon, financial couple a of For you requirements terms of last customers your question applications particular, exploration it hiring business you what general My technology AI think capacity because you Good and have where of bulk quite application Trac, then to anyway might for question interesting. in comments design heavily AEs any you for the Asia. on very for Aart, have start be been do at that?

think you think requirements AI And you about then, mentioned praise, when affect numbers. for might don’t course such your for Trac, of that where adopted resource might but I how as be geographically, So backlog R&D? the for also you

strong revenue, perhaps of then, IP upfront more in that. business? respect in geographic than your been would Asia the difference it’s than us could regions with of revenue there any terms is and Thanks. terms words, majority be IP in update of IP more is perhaps it infer other you If correct And even other IP upfront to on heavily your is upfront then the numbers, upfront, that to

how it it’s in this. need But in to that’s know use tools phase XX than the did Okay. some what what to try the they question. being design me the past, of apply to it of about Jay, they engineers highest experts inside of you to the the for about a But let knowledgeable in be well that the you fundamentally, different flow. continuation of not get return. application One they course and circumstances like that many need ways types tools one of two any in is AI our AI. had There split we is questions in

other the are engaging now One is AI of actually of sections of look with of aspects design the is to the high community value. they and design flow at more

quite of amazing many working the good sort of connectivity anyway, our of community. as how AEs design though part do continues daily today, the even it’s that job Now, from with everybody their home is

gradually be time. look of cetera. more versatile over the little urgencies, flows, mostly design, an AI over an now, lot very view a et of benefit continuation a the to I we there possible there from the point so, the emphasis that people time, type we’ll bit tools, of anyway, right think And it they But have, that is is see it’s have of because the know that at because to customers complete how know know

I where, to As don’t be the also most think changes that the adopters. It’s the that profile. they advanced people early will

new astounding space be don’t continue all is we Asia to to us rapid that are that Now cases, opportunity in Korea, areas making where change much the In really progress. and quite for no adoption question Taiwan I a all of expect of it’s China, technologies there great that as either. general,

regarding for we pretty finished were planned prepared $X.X bookings importantly more our was that, your remarks, than the significantly. than up questions, the business billion for the runrate better Then Jay, as quarter. mentioned at the quarter, in backlog for be

health the and the good see you function more IPs. upfront business. about The to is when to our With bit a So site on downloading that’s of little are a we of IP, over half year to have regards last our XXX. profile a indicator are of the talked to as logging really with a customers going IP and variability

be a The development schedule not much in So, some helps? based geo to focused saw that depending particular bigger this very subscription. and you and that’s any that to mix, the going to broad be than nature on is others really on multi-year area With maybe on quarters business continues recurring Does issue their regards based. quarter. what

both. Yes. Thank you

Good.

Great.

are welcome. You

Next we KeyBanc. the go go line to Celino Please Jason of with ahead.

for question. just Trac. taking for my one Thanks Hi. Really

cost of the some side quarter Are last before seeing the versus business improvement in SIG those year. savings over margins kind that. big the a business, was Big one savings other there? the You improvement you mentioned at the the referencing over XX% beginning this of cost which one-time quarter

similar one-time obviously COVID work remotely. with to across to the board the travel, companies really savings around Jason, is other related us it’s mostly and No,

in travel level had seeing of not that a are we We the past.

Now that that’s but But as are management. we the and that’s costs think on be improvement year. there we year a some to factored net, we to working those what we and working overall, into had realize really our I this incremental incremental - going be through guidance next what the to the we investments costs good support was a savings costs expense is remotely. strong That’s for of And that’s margin year, going showing largely that are referring to. company for for to growth a function ongoing and that the make are

the SIG as Okay. under see being quarter-over-quarter, And up we the impression that that in then, just to margins relative much year? improvement wouldn’t this

expenses the job both a beginning getting is at wasn’t mentioned, it’s that that, are managing of where travel their light deliberate. We’ll really QX, addition – revenues to the and invest on I it’s really with in improving a doing And events. some business. we that’s managing bookings of the to and but and as sides did we in year. so we since the Not as some of us be good to wanted say, we side in continue teams not job – below that where of good function business savings the would said team still

the color. you. Appreciate Okay. Thank Great.

are welcome. You

of line UBS. We go ahead. Instructions] Please go to [Operator Pradeep Ramani with the

for question. Hi, thanks one maybe. I Trac, taking guess, first for my

one. the have by yet sort full guys through? what’s guess, year the the and of $XX raised I That’s conservative drop roughly was And a midpoint You million. million by beat in QX follow-up. that first $XX then I driving

Yes.

originally the are product us. in shift And pretty into big business a overall, we the geo in would of to quarter growth another that were QX were that, well. is planned the and be doing growth. well for shaping some up of timing That’s there QX. the But as elements some So, seeing revenues I saw that for say mean, mix QX. it’s of really we that good I quarter

on providing whole, balanced we at we are it’s think for year the pretty the are I outlook this a best outlook and So, the point.

you second I they and autos growth. are bigger sort driving And the talked system and picture companies, one HyperScalers of how question. guess, a Okay. about is

you for terms provide I how on guess, can and roughly of what of some of today revenue EDA about In that color growing. they should it’s especially we percent account think that? traction your

by quite value do software, a of we Well, years. the system we’ve in broader interests different much is money actually themselves. the that that a revenue have put number we the so but many years percent selling together It been they more the because add love which has break not would their plus in don’t about also really are chips some using proposition. out that people cases I XX of of that ago a said just HyperScalers, HyperScalers but our number already for by making them maybe quite chips, companies that domain, have and

year And you Having that, so, right that’s many there, a catalyst. the they interesting asked one are earlier a of servers bit how that’s different of different because question the said for about base has investing architectures, broad and their are workloads. well, whatever of all Are customer the people they they in are a set are you function a you of all s seeing seeing?

exploration. different versus some credit but And it’s require for of so, computation. computation, say, a oil research checks let’s there difference doing doing is card between Both big AI very very lot

and to be need. interested are of suits see opportunity. because and to to And so, so have their have an more we more lot there if HyperScalers, even in architectures a of just some I think that opportunity and a that controlling they literally influencing the much continue the going we excellent of opportunity have lot And relationships that create regards, different chips just growth not and

Thank you.

are You welcome.

Rich to line go with Please we go ahead. Valera Next the of Needham.

the FPGA emulation system hardware if and in significant as performance I are just if the could very you wondering was factors of slipped know of orders in prototyping wish did, hardware large one that customer. year business had to and shipping strong some that I IP how integration growth emulation believe overall wondering on was to you the side, the side this get year and on from and a expected? it I sense if last into half in backlog color you give the any you. pushed expected pretty out if contributing I seeing little the those of a was could more year Thank of second the I ship this quarter that Yes.

Let me take that one.

would strong last that a record that’s and year say statement for push this was up I a despite I overall, considering be to that out. is think another shaping year – hardware year year strong for really hardware

emulation both not down We sides. versus good as on ��� the we to break seeing that going growth are are

think XXXX, risk Got it. XXXX, your XXXX you revenue for obvious And of saving said then, or on fiscal to Trac, not – the to since it up margins go one-time EPS, could referring op but your to assumption? specifically on would I want op you clarify at just your don’t changed your of when commentary the you revenue if your or be your change margin savings which could fiscal expense EPS, wanted are impact you

be on and more to trajectory. like until But – don’t want you the patient I’d we December. our that’s all across you just margins specifically report Ideally, I beyond focus board on

Thank the color. Appreciate you.

It was an yes. margin ops focus,

Got it. you. Thank

Mobley Gary Fargo go Wells with of Securities. line the from comes ahead. question Next Please

in. me squeezing for Thanks everybody. afternoon, Good

pretty you by out questions obviously, at don’t Some margin. record about your know APAC revenue I and a break but category, was level China wide the Asia Pac China from

an saw locally perhaps you front us if as update of have in export customers trying in of on you from get are to a month seen any activity some the China? pull based restriction start-ups capacitor give And were that based so ahead speak? the you I China So, to on as am if the can in curious some what maybe

Sure.

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as And for well. But it’s so, throughout true the electronics surrounding the economy, we are there. countries that this doing well partially very China,

in general. East Far So,

a long talk China In the of aspect independent obviously west. is time. high-tech That endeavors, become of every take a competitive to terms wanted lot of will there about of

very compared there are are certainly there long competitive. – manufacturing, EDA very, few too, small a will can efforts in we while a it so, well the efforts as semiconductor time it’s the to side. There it before provide I on take very in what And relatively is and think

all so, But And and that doing lastly, China we are or and do that’s we changing forward looking if the mellowing a the rapidly. a after well are elections see is to in harshening at general in in time see not there point situation. what of happens

back Okay. didn’t A price chase fact that to quick you follow-up read stock wanting is we the the share quarter? the or that in not Is into question during for any line? should guys more strategic it buy How something Trac.

all I at read wouldn’t into No. actually. that

stability continue to out be very Our set prudent been run changed. for business. part sheet to how out just most has of way. and are turned – strategy. were changed. it to didn’t that terms I Right versus QX. key and managing sure managing light this make hasn’t it very the our that investments approach to But a gives of our balance to strategy approach we want the overall, But the current managing Mostly We in making team consistent do organic versus environment. in overall making making my not a that way especially macro the sure now, hasn’t about focus that are was, allocation buybacks M&A, capital our that the to that that’s buyback, of that balance we cash, sheet us we in in flexibility

Thanks.

welcome You are

of line the go Krish Co. to and go ahead. we’ll Please Next Cowen with Sankar

I Yes. had two-part It’s question. of a Hi. for them. Thanks Aart, question. taking two my

for merchant, path, system? moves same the EDA you how to a I’ll they along EDA? impact from away. the look ask to your need customers, move does like what that edge, towards HyperScale impact more for is as And When both cloud the silicon the So, custom right at when computing relative

Okay.

one. start the Let with me first

course, As than how have chips design lot a will they themselves, learn they was of EDA more people need to zero. which do essentially before,

upside. to get to on, I really design are that, I companies interesting that is so, that, IP fast. And hear they need, these that people design is this typically blocks all and because all other what from I But that hired jump parallel in is well, immediately want the

factor we also actually there is a time-to-market HyperScalers number to And really very for their is pushing to a so, own driven for but the the that is doing chips. very business. competent, these are a close teams of very, own different, very – they develop lot space And them markets. they a where them very is of the use in be for think that going what to opportunity their given potential Therefore

to is I think they able through be that’s being will recognized actually differentiate electronics value. quickly going to high

be a over you question. big didn’t say I I Would to second spenders So, understand mind I expect quite want them clarifying? to time. your

Sure.

more for computing EDA? impact the As does moves needs the towards that the edge, how

at the on yes, Well, this the much both think how to is, goes the you – always I simplified edge place And much and to both know, compute to on that concentrated. has rapidly now than how are debate minimum transporting answer data goes been growing center? lot of all center there edge compute rather gets a part the the of and that is a triaged or or that gets it generated some

of broad, see companies. in we lot so, the for of set a edge a of broad development And AI

the can can shorter types And sort reduce continued the more their time. because IP kind of chips. that think reduce time. use are it a do problems, focusing much by is many of you cores I get to much results, perspective, a in better if go-to-market specific broadening see So, data, And why see AI compute-intense, embedded of just cannot those, you or more going to by also embedded amount only intensity we there these of of because of can types more and from that of that, the very you my merrier, we of meaning specific it’s too, on specialties be way,

us. these growth we for see in of camps both So,

negative it. the is can Got just that helpful, happens, business? Super as one to Aart. just more squeeze I edge HAPS If in, like, shift for the

sensors that become have before sophisticated very big No, a I go running and actually used machine emulation that they for enough mean, can some gets the that some plug software fast those as developing not maybe at have chip, as is cannot you mimic HAPS often some board. to prototype connected are software of least actually enough to the to expensive all. chips. but And at into tool the that on just not the not the minute only chips, HAPS surroundings, designing, it, also they the the you you you be mimics to most chip

way is really And so, it. work the imagine the prototype you

well. particularly the to the chip does I think can in that to directly that of is where HAPS but you plug is very what compact, a lot wires bring reality and

continue to very by I to growing it expect It’s way. grow. so, And well the

Thank much, you Aart. very

are You Hello. welcome.

There are no others in queue.

strong of managing thank customers far also it. strong very time that much yet doing Well, as Okay. thanks is team I that situations the working very were you quarter, we that for much over are and with eminently in for years our the very, forward. are so under much due few are got we that with spent. blessed you that sense the you case, And a practical hope well, to how just technologies a last in to introduced ordinary, from that but outlook the with a but

the with your So, up for Thank attention. with you will Q&A thank usual And follow you. individuals. we

conference participation you for service. conferencing for your AT&T And Thank this concludes our for using today. and

now disconnect. may You