SNPS - Earnings call transcript Q4 2017

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Synopsys Earnings Conference Call for the Fourth Quarter and Fiscal Year 2017. 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. the of the conference. time to announce we prior amount the remaining minutes end call, of will Five in the

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

Lisa Ewbank

afternoon, Officer. us Co-CEO Reba. today and Synopsys; Thank of de Pham, Aart Good Trac you, Financial are everyone. With Chief and Geus, Chairman

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

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

In most that that addition regulatory the described will acquisition is Duck the planned factors that and note highlight results subject Software. SEC of affect conditions press not Black refer acquisition call, to The recent in to earnings reports important and during review. are to is our today’s closed release. future closing Please risks may yet the our also we any company and

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

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

the to de posted In I’ll the site With at over addition, the the Aart on turn of be call. the remarks conclusion that, Geus. will prepared call

Aart de Geus

QX share another stock. year XX% both an These three-year of fiscal Synopsys. delivered In with of from generated we stronger XXXX, through IP, bought business the and achieved per month. became XX.X%, flow, by Simultaneously, Software track multi-year report and EPS in of $XXX dilution. with good billion, discuss year, we organic moved increasing results was approximately solutions to Good The afternoon. non-GAAP our upside our record double-digit backlog for Duck CAGRs and groups good $X.XX, $XXX XX% revenue geographies. and announced the earlier transaction as this happy even we non-GAAP in across earnings, our Black revenue we I Integrity growth another operating in all stronger extended resulting margin, and $XXX strong grew with growth, of back for earnings and growth, detail. with the to acquisition-related and $X.XXX outstanding growth scaled hardware in fiscal million revenue of non-GAAP million we planned revenue $X.X it increase cash Cigital accentuated excellent am billion of and our all through by our growth more financials operating both acquisition million further three-year quarter ‘XX product will the growth Trac

our Smart position financial the lastly, And and prospects. the opportunity the business forward our aspirations. years to about years, and we’re next increasing over priorities and market we’ve past XX support five emerging we The Everything. age look as years we the assess well-aligned dynamics. of enter from benefit plus our is vast XX amply As to enthusiastic to the Synopsys built market is

of elements me Let expand our three on proposition. value these

Digital the is Intelligence Everything here. or Smart First, of age

to apply industrial. see then it driven while of is growing, week its unstoppable. is we devices major security learning, and massive Mobility, manipulate decades medical AI the Internet virtual reality, can amounts Week be by machine The guaranteeing the of Computation the Following of third data, impact. reach electronics wave Intelligence through or Things, by need through Digital automotive,

chips and developed advanced possible made is by for customers. our with insatiable complex All this software of an next-generation hunger

Synopsys software. Second, at uniquely intersection positioned and very hardware the silicon of is

and verification chips tools essential of next-generation and design the advanced for are Our systems.

reduces offering time-to-market. IP speeds silicon-proven growing risk and Our

In have company addition, precisely at portfolio from strong our Integrity while Software we maintained And prevents opportunity our TAM broadening solidity for financial the disasters. code hand. becoming flaws security third,

data us lines. years. machine complexity, Our we’re and Even recurring astounding in our buybacks position, TAM-broadening and provide With resulting Elaborating with growth. invest our continued fared across revenue in some bringing the through balance market past non-GAAP earnings high-single architectural both EDA. EDA and managed strong product beginning model value with let and solutions technical and customer for of our over Synopsys the and continues opportunities. paramount consistent silicon advanced sophistication, to me demand competition acquisitions. the shareholder we’ve next-generation strong highlights, lets flow consolidation, well several strong in chips learning continued consistently about enable of others outpacing to enable growth We’ve is success support. development product with big sheet state-of-the-art levels digit, cash long-term, and And on stock driving

We in continue our digital platform. leading to design market invest strongly

largest instrumental on Our nanometer the nanometer ever the XX platform, been largest ever The implemented designs. tapeout, early processor production X world. design solution X has the design, Synopsys nanometer now was first and FinFET many firsts, the was in networking with first as enabling significant in the activity

XX% projects consistently more than and on of is FinFET the is advanced platform designs. digital relied Our on all for trusted most

gains with in processors. applications Notably, the is across industries geometries smaller displacing leading strong networking suppliers supplier, and AI-specific the success particularly IC from the while of the storage growing such has we’re Meanwhile, to move sensors, share top platform. to a competition. XX to IC seeing continues. automotive automotive evident ranging And as nine particularly been enabled mobile, automotive, CPUs, with through and customers at automotive we’re Synopsys Our graphics

successful expertise next-generation of we innovative custom amazing devices. approaches, results our new Simulation acquisition In to advanced during Circuit growth most which New the transistor tapeouts and technical our simulation TCAD reported our designs. TDK/Micronas analog structures our deployments and whose not develop manufacturing Compiler MediaTek, enhance excellent is but solution, design, Custom materials, Custom Renesas, demonstrated to at them. and ability model revenue good In ST XD the year. saw QX, tools specifically and announced FinFET QuantumWise, using new atomic-level require mixed-signal Compiler very Panasonic, the targeted such as Customers have only and

Now at as which and hardware verification continues be of complex, be became to for number and growth more Synopsys. to and verification, an software. intersection years a area that realized systems increasingly of more We would required the strength ago and of chips

solution another market growth One and including at the fiscal development ZeBu resulted our In Continuum, example for as Verification Samsung customers well. Among exactly years, SARC, year share high with Design Over that the emulation excels processor which leading and verification the at their XXXX, Automation advanced last of bring-up. outstanding our highlighted is as platform of customers, formal, profile IP gains. its Strong drove for emulation, adoption designs. of debug developed that. mobile investments while in customer and hardware verification AMD verification June, have in primary early presenting year comprehensive collaborating software a simulation, Conference record we another chose our our products use

saw is solution performance another in emulation. adopted giant, For critical mobile platforms fastest faced and we market. the verification is QX, A our In the inherent software, ZeBu for huge citing superiority. ZeBu in with mobile its potential challenges example speed of the software-rich emulation

another had growth. we IP, semiconductor excellent year to of double-digit Turning

the we’ve of trusted XX and plus leader. subsystems Over years, the IP past have and portfolio built partner become and market broadest titles a

the stages. foundry in Our ensure standards earliest key that processes technology drive in buy leading-edge relationships at and products active groups customers can

with In markets. detection leader our and During development recognition IoT we with ARC designs. collaboration digital XXXX, focus is identity deep further IoT Development Programmable embedded our solutions we voice Non-Volatile QX, Secure with We offering IP, adding our vision new Sidense, One-Time software our in processing and Morpho, automotive, IoT expanded sensor accelerate other among We for IP fusion, acquired security security announced Memory face applications. on used subsystem security. for in the accelerate portfolio, and to which expanded learning for endpoint automotive continued Kit IoT and and to a

a group to who more has customer resources beneficiary outsourcing of IP providing to want consolidation, limited been engineering towards projects. Our their target their companies options differentiating

content such semiconductor products software systems to who considerable lifecycle way supply into and and span automotive chips chain. devices, financial and industrial. quality Integrity Customers development high-impact the as provides to cyber are entire industries all move the these for to their the next software services across build our into medical, in Software security and embedding me and Group, which Let companies, of software and services, solutions developers

services to a key daunting both develop emerging in past leader serve entry Since software deal organically acquisition to companies of years, industry. clear problems. the through the Over platform our we’ve high-growth product a and three-and-a-half security acquisitions initial Coverity, we’ve invested become with and with better this

a and scale in its to our credibility, strengthen. recognition now Gartner As Quadrant brand ranks as continues leader gain Testing. for Security we Application Magic Synopsys

the close offering. the capabilities a broader XX% the highly or to Open announced compliance. Source in During subject shortly, making vulnerabilities Black more up leader seeing is Codiscope customary great, critical of acquisition regulatory The Black progress made reaction testing are and benefits software capability applications, on scheduled and robust combining we positive known for has this Initial of platform. respected Cigital we to now of integrating license deliver recognize Software, closing acquisitions, to as month, a year, and all Earlier is Duck the Source acquisition the demand. they the and With this customer been review good security Synopsys Duck’s conditions. impact Open with

excited with product of Our customers well and group. vision about investments potential we’re and resonating the are long-term this

One solutions I’ve is of momentous automotive. directly vertical that by change Lastly, through a impacted this our is and afternoon. number end-to-end vertical markets going mentioned is key

provide QX. certified certified including me their the Because down strategy. industry chain. solution, and is Let as XXXXX, of critical, automotive We’ve certification automotive which of highlights our portfolio products for our our was such from safety functional standards so significantly multiyear test value expanded ISO in products up some safety requires resulting

that this including temperature electronic process. expanded next-generation the of development Automotive XX-nanometer interface requirements grade IP Center automotive collaboration FinFET we’ve for broad for our stringent industry-leading systems. During a QX, early automotive software massively multiyear a of we In portfolio NXP, offering, year, extended enabling blocks with meet Excellence

on security. Automotive achieved Task XXXX fiscal across well-recognized going was driving focused a serving also excellent well leader Cyber on summary, forward. Engineers’ new results, of positioning for industry, We Security Force strength Synopsys, standards In year, for the outstanding the financial Board. an software revenue us We’re with in Society as the

Our top-notch to leadership market and building in position. IP bring Intelligence, Everything products about chips scaling significant EDA age. security making results And customers the platform Smart for progress we’re Digital are software and delivering our

the Let call now Trac. me turn over to

Trac Pham

an outstanding reflects capped long-term. echo This solid Good growth while afternoon, To results to the deliver financial and what profitability strong year’s commitment our Aart. success finish over XXXX. in sustainable QX everyone. said, Thanks, the creating Aart in near-term, simultaneously our

Over and have the Integrity expand last continued we solutions. also while years, Software IP, broadening with leadership in to our EDA our our portfolio three

strength Duck. not drive of of acquisition our We strength our in our are coming business our which fiscal backlog strategy, coverage we to in about financial sustainable the portfolio ability of executing expansion Integrity in our results, very and on ‘XX, years. Black broad-based the on the into heading Software are planned Based optimistic is the success only of recent well announced group the performance, our also the with reflected but

$XXX We delivered growth groups, hardware comparisons XX.X%. strong across otherwise. discuss be billion I rate in total was highlights, QX year, of million financial will IP. and an particularly and the all I annual the year-over-year As of $X.XXX Business product specify revenue for all unless

$XX a QX. in record another approximately year million that planned hardware, QX shipment XXXX our from was large to for shifted into addition for revenue results In but hardware included

We per Our were to renewals. $XXX reflecting large in XXXX expenses providing the the revenue, higher GAAP acquisitions. the for proportion for Non-GAAP Cigital year. of the approximately the compensation more We three-year annual offshore of costs I’ll for have seen modest and for XXXX $X.XX increased goods were rate talk billion, XX.X% employee operating share Codiscope growth dilution year, in of $X.X million the hardware backlog software stability expenses in of about quarter of enterprise primarily reflecting good Non-GAAP quarter million our acquisitions, in and per for and for with for of year a Total XX%. the $X.X impact business loss billion $XXX again growth margin with from GAAP hand, sales. $X.XX non-GAAP year. a costs companies. often earnings moment. $X.XX already large to timing and the grew cost and an sold the predictability the increased XX% one-time approximately year, the even our associated share, million very $XXX quarter a of earnings repatriation including the quarter, posted billion and costs $X.XX for due and cash, contract $X.X and and which of were not expenses Total to for

the I litigation as damages. excluding expectations. earlier, in to and of exceeded Even benefit year. target. delivered strong overachievement QX $XX and collections the growth for as quarter our from the the $X.XX levels we was million of shift, target operating well of We mentioned due primary which We As versus $XXX received cash $XXX had XXXX significantly million throughout business generated a for the year, flow this ATopTech our original of XX%, exceeding hardware-related million original driver annual EPS upside,

we taking advantage approximately cash QX offshore XXXX. a Also tax payment flow million a XXXX million our resulted authority, tax early X%. the will to million affecting $XX Hungarian in cash in the drive with $XX connection tax of million ongoing This and of During tax one-time repatriation R&D payment tax resulting cash, the one-time quarter, an a cash expense of $XXX dispute. in rate in of credits of in initiated $XXX and a of tax approximately is operating GAAP-only

billion, expect ended cash close onshore equivalents make billion with as required with condition prevail, million of payment $XXX million. $X and of repurchased repurchased free used to and for $XXX about for stock. this stock While XX% over flow buybacks. year to are we total we XXXX, and our cash we our of our to the past XX% year We years appeal. of cash debt In continuing this We $X.X the have a three

remaining $XXX our on We have million current authorization.

share XXXX use for buybacks is plan to to roughly current Our keep flat. count

$XX is Before the will we we pay subject Duck but million approval net Black expected million a on providing closing haircut which $XX acquisition, $XXX deferred Black XXXX regulatory contribute $XX of December. $XX million in purchase-accounting briefly comment to Due conditions, million roughly to Duck closed, close of revenue to revenue will guidance, million, let XXXX. and cash. to me is about in approximately to expect When

EPS, basis and be We the reach expect it on to a XXXX of non-GAAP be second breakeven to approximately half $X.XX non-GAAP XXXX by thereafter. dilutive accretive

primarily profile earnings of between share shares due $XXX GAAP normalized minus revenue week $X.XX extra second million total in including includes and other non-GAAP per are, the to expenses costs of income guidance, first expect revenue outstanding XXX from to $XX between costs be $X we to which and and $X.XX an Now and million, earnings per million fiscal extra half. week, million, million $XXX extra expenses, GAAP $XXX XX%, the expenses $XXX QX half the the $XXX and $XXX to share to per QX from between million, million, share non-GAAP week. and $X.XX targets million total and earnings approximately and greater approximately between $X.XX and between expense a million and $X share, million, non-GAAP and $X.XX of rate million XXX of tax per than

XXXX, to $X.XX growth a For X% $X.XX X%. billion of total rate to billion, revenue of

share expense and to and normalized per billion Other shares non-GAAP total outstanding revenue of Duck, per share the excluding million, earnings per Black rate share to Duck, per million. range $X.XX million million, $X.XX $XXX per per income a between expenditures XXX Black between and capital $X.XXX GAAP to and flow share $X.XX $X.XX billion. cash $XXX $X.XX operations $X.XX or earnings to $X of minus XXX approximately million $X.XX Black to $X $X.XX per per $XXX from $X.XX XX%, target is of share million or Excluding to minus Duck, non-GAAP share share excluding share of tax million of

In billion and a totaling reported Duck. over on long-term $XXX our predictability very shareholder value. turn it summary, goal outstanding the delivering As backlog approximately drive for to cash of questions. I of I’ll the payments one-time Integrity high to Software $X.X With this in products mentioned scaling with Black million. are executing across results while operator that, we reflects with of acquisition level our Board earlier, the XXXX, We well

Lisa Ewbank

Reba, are you there?

Operator

Yes, ma’am, I am.

Lisa Ewbank

Q&A. for ready are We

Operator

[Operator site Mobley, Instructions] do Gary open. go Mr. on have Please I sir. line your is ahead,

Gary Mobley

Hi. me okay. hear Can you

Aart de Geus

Yes. Thank you.

Gary Mobley

Thanks for taking on question. finish Congrats my the year. strong the to

Aart de Geus

Thank you.

Gary Mobley

about guidance, can year ‘XX? quantifiable the be you fiscal $XXX with implying And will And you give any is outlined ASC Integrity can Software whether for year your confirm in the and not million? a with ‘XX guide? as Black Integrity your fiscal finished XXX or contribution where Trac, Duck of from ‘XX fiscal QX you year Software us to sense impact Group there

Trac Pham

SIG. start the had first what pretty yes, the with the described goals is me did start of numbers that of for let we question So achieve and we’d you The your on beginning guided the year. SIG at we year, outlined consistent at with

-- to we Second million we be will $XX in is fiscal Software year, from regards of Integrity implementing part but XXX, about consistent with calling Duck specifically XXX factored as numbers $XX there into range the With that the to separately the next guidance. starting not for And an basis. that of Black for ongoing so ‘XX, is are we ‘XX is for XX% mentioned it growth XXXX. is, is million no out not revenues on in

Gary Mobley

Got you.

RISC-V open looking the we’ve a on curious past business of gathering your is gathering topical does EDA so, this perspective get Aart, example, seen drive had forward impact as you on somewhat that and it and say – is it semiannual as the significant processor this this just to impact and given sales Okay. week compiler wave that a of, And or RISC-V your for well IP as ARC well? it front then for we to relates

Aart de Geus

of it’s processor interest some because processors, is general in and a at processor built more IP right development parties. high it Well, beginnings, sufficient, doing AI-specific perspective EDA bit the optimized can support will and will to one smaller aimed are will is investing more so being but like if designs, also the now. build going But our of a make the purpose to right many processors I people applications, at seeing more to for for some its them as little people that geometries in say, people RISC-V from speed hunger merrier, expect “Hey, focusing be provider, many can are think, being of and sort and maybe This I be so plethora can the is many because processes and among companies application specifically we aimed, we therefore, now the many on not and a high be narrower them. we’re and faster,” and that just of really just

Gary Mobley

you, it. guys. Thank Appreciate

Aart de Geus

You’re welcome.

Operator

Valera, on Company. Next ahead, go sir. Please Needham have we the & Rich line

Rich Valera

your are all you strength, just of whether going the versus remarks the areas got Thank of global do the as on, mentioned to wondering on are to the trends sounds are improving that are it think you as macro of much like you quarter grow year would traditional going kind TAM stronger helping or expanding but you. kind some that just sort stronger. that the in better business areas, it’s industry how market kind EDA affecting things in Aart, of attribute mainly mentioned of that secular underlying EDA there do actually of general business -- the smart the got am macro? economy went some the on you just you maybe prepared that attribute of I each new

Aart de Geus

yes, because done Well, help has I question so there to because regions that is well, think, yes, and the mostly in those overall answer things. all reasonably is no unison solid the yes, having tends economy global are

tend move a a year. [indiscernible] after so strong that very is not these down, think matter factor and and no lastly, that, broad ‘XXs it a of under will that has learning, and up to amounts actually go is names, very down I artificial because wave years is than fairness, big no very consumption of IoTs of the is in and most generated. a about like other and question of to question and growing leaps are up there of being being just this and but outcomes particularly a this that of semiconductor digital things think of billions machine as very, feels electronics had the long-term sensors that. enabling by intelligence, And of And call of next all this better was generated being data notion few camera by that then, various that strong set data, I’d into in in Secondly, Everything, that drive will the the any intelligence bounds, semiconductors, Smart forms really pixels

one utilization, hardware of Secondly, our need security compute as manipulated this big part for on in be to very which And a also learning, is security, software component modules a through the interpreted in it will you there say more but then that, in a then example. will let’s data impact and terms, learning variety of business, in And is which car very, terms the that extremely to inside is added. of of security. get to top needs aspect, the add machine gets it machine

new So, that impact of that just reasonably therefore of semiconductor whole I stay on think, basis a heart is wave the really would enabling -- at and at healthy only.

Rich Valera

growth rate, for Trac, you’re the how am if you not sure, have can revenue revenue that. willing to to on a lose think deferred roughly say couple that can what expect of that you Thanks. and accounting? share, And I from questions and perhaps I was growing also, you Duck, if Great. accelerate Black you much purchase you Thank

Aart de Geus

about this the growth rates we sure lands and of really can job always some of on Source what comment closely quickly on that that that there goes one are least vulnerabilities, Synopsys vulnerabilities of the at think, productivity lurking financials give large frankly, and this Duck the our of I true course, Synopsys or building is by aspect on software catalogue our can to whole the with is it the use virtue pay for make said company in delinquent first is when what thinking grown is Open that directions. on a that And out increases many that Having look software for exciting and is the well secured IP, refer assemble and they chips have software There of dangers Black think, and when them software they in And integrate that, use of have of the both them, already are Trac, can about really of I normally, true known, that are sources known fact biggest Source to don’t at material with Open it and a Well, to the impact you people attention with is as upsides though, we number I for software and that’s code specific think acquisitions. and Open quickly. to software. up don’t is, quite Source.

for on a software. of And and natural us so quality as our it’s security extension an just of focus

Trac Pham

to is and about $XX is to $XX for Rich, Black the about million million haircut then $XX guidance for deferred XXXX revenue $XX million. for Duck our million

XX% and trends is market well and that we’re Integrity very similarly demand -- the Duck to expecting -- SIG, market in in and secular range. Software there then the doing being that expecting Black As in -- we’re would described as Aart range growth space drive the the very grow well for

Rich Valera

you, That’s Thank gentlemen. it. helpful. Got

Aart de Geus

You’re welcome.

Operator

ahead. Farhan have Please we line Ahmad, the Credit go on Next Suisse.

Farhan Ahmad

question autos, particularly and you your on for about IP in autos, My there. role opportunity the the talked to Thanks in Hi. in relates growing my XXXXX ISO taking it is question. as

just the So could in about IP? your auto how much and both and is have that exposure market the you opportunity to talk what EDA is you

Aart de Geus

because many, any semiconductor so automotive many slow that invested the the we ago technology is it are the and need challenging automotive because many in their adoption ever touch find is industry difficult that what a It’s exactly would have traditionally automotive that happening is in I such was actually we what for in very child focusing and we because right part and the I the semiconductor in computation automotive all quite it to though, and on certified specifically space highlighted fact chain regularly FinFET because companies value automotive know in that a mind that the what are of FinFET car. in nobody in in of question, big in today reason in substantially three the the IP are word advanced big of ourselves technology. had is providers associated that, years to they Having said more super highlight bit deliveries. an inside XX, a the like changes poster

also certainly but made that evolved now all are to the gradually we security for up well. fulfill you being a that the those only existing not suited tools provide standards we’ve so designing into And that and towards with as and safety can the investments modeling what that car, are that goes are really and for words deal only built are initially were very mentioned

So provider we’re to I good think well-equipped chain. value in that a be

Farhan Ahmad

some giving mean, you Duck, be And you Software than once Software will XX%. then start is question you think larger it. point the I for disclosures business separately at will Software portion of Integrity second integrate us Integrity Got Integrity the Black business? the Do side. on the total the

Trac Pham

throughout very year. the a that’s good we Well, question. That’s as something actively will consider we progress

is got the competitive the disclosure insights But as we avoiding will clearly make want the that can flipside making that balancing opportunity. progress, get in very near-term issues, well look of provide drive the business sure we information, we business keeping that closely sure planned enough investors the evaluate as Our on at as increase amount that to the between on year. for to to that focus the and we’ve we growth

Farhan Ahmad

you are share, just some growing of Got industry the your peers one market it. last year. significantly And higher than question this on

been the the Some at strength product talked year? the year, share in that EDA portfolio gaining of areas hardware you’ve portion this core are and about throughout of you’re the when you your of on a the has throughout obviously look market big but the manufacturing, what some growth,

Aart de Geus

careful out questions I get of am that, always because answering hand claims like the often Well, quickly.

competitors digital in In a competent has like faster some Mentor, have design. been ones. We extremely and areas, of are growing the course, Cadence Cadence largest bit

forth. aggregate quite verification. in the We that’s have at constantly growing But we competitive, Things go to as back because in edge. technology faster an develop and been ebb flow industry, leading and and we’re have

think, I any over the negative a of investments doing companies, I right a nothing very so, so striving and now. that the well are to we’ve right we making be benefits in other market providers the is all good had that well are of a have years number off paying particularly say to And now about of

Farhan Ahmad

you. Thank That’s had. all I

Aart de Geus

You’re welcome.

Operator

on sir. have next And with the JPMorgan. line Go ahead, Sterling Auty we

Jackson Ader

all pulled forward explain so a triangulate explain in we’re hardware Trac, guys. you to time-based the Jackson question on $XX it side, shipment -- Sterling two? up a licenses in that had looks for the mentioned that trying would revenue pretty the spike Does Great. Thank -- that One quarter. Hey, was necessarily tonight. shifts the our Ader you. from and licenses, This don’t is into million like significant I from that just think the the time-based

Trac Pham

Jackson, drive on as at it also doesn’t would contracts. And in drive the fall could that not -- that the look over that do of and products. we keep that well. can mind quarter-to-quarter time depending actually, vary from it nature into time-based the hardware Royalties the

and within issues really there hardware not no core at related all. that’s So, the to is

Jackson Ader

Okay.

was what the increase? then So drove it sequential that

Trac Pham

strong across look the to growth, business the very mean things of We rate very you even was drive -- of Overall, very so so number strong at very a strong. number the can year there’s crisscross I geographies, had solid on the different the run customers we did business cost is growth any end healthy. the it. products, with the top that very the growth

Jackson Ader

come to mostly revenue something follow-up, Duck from we quick there dipped the or backlog else XXXX into? Okay. should that the XX%. of expected expected Black down reading And then to is Is because one be is that

Trac Pham

a of business, larger changes that be little to mix our of It’s gets hardware really function bit. a No. as it hardware, part a

same we in the have we’re percentage running hardware, historically. as Excluding generally

been there’s model to -- that no no change regard. business with the there’s So

Jackson Ader

All right. Thank you. Okay.

Aart de Geus

You’re welcome.

Operator

line And next Securities. the on Vleeschhouwer, we Griffin have Jay

Your line is open.

Jay Vleeschhouwer

business semi-R&D Thank last to or of the you. last trending quarters lagging industry quarters Good that effect perhaps still real-time course real more in that in see of accelerated the that’s for time what as positive IP of unscheduled the be number from semiconductor software that’s saw would XXXX? we your in correlated principal year there say for to less the the spending, Aart, higher been course that terms begin over we’ve the -- evening. the quarters clearly with three R&D or it’s of you to the inflection out pointed of that or over have or respect in more and revenue a was the seeing for now of or the four year, you been might over in strengthening you as and source business hardware you

Aart de Geus

Well, emulation no a that, there’s spending customers is when they everything been you meaning less said hesitant and have bit semiconductors do are your question well, true, doing the extremely this the very, a it FPGA predict center boards hardware of the really little the to in little right and in and that that’s gravity money I more overall is complex follows a to is that we’re importance. what increase -- the the expected to software, want done to said, verification timing, has bit. run for people a before well. continue now With but the the the prototyping going and space, time, and At completely have software verification includes platform, the have our software solution same therefore because well in we somewhat difficult between and hardware they in. model not the surprise, in is they very which hardware And basis which

so think in least, cases with one business as terms good nodes up strong know IP that pillar the I the definitely and Integrity because in And on the to be living that embedded technology of providers is third the keep And Software expectations is you rapid and which our the each a far the to out company has advanced last is complexity advanced pace, and what investment do. but is in both platform, nodes, difficult our to to been situations. that, would is other. open probably adjacent many The aspect very of not I completely for in IP are mention rolling most partially at hand already continued we very do result competitive

a hand, now sometimes in with. to Samsung actually I so is past space. would customers Jokingly, as us very from never a in Starbucks, and we other fresh clearly the opportunity TAM were it’s talking is customers of we have have big fact say, that to interacting it’s dreamed for On true we the that

Jay Vleeschhouwer

acquisition, Duck thoughts and/or about in thinking your with so any talk SIG in it with prototyping of verification, about technology say you system concept and think can of your When parts hardware-based are portfolio integrating your you of how perhaps to portfolio forth? case on the about Black you the integrity other overall let’s the terms expand integrating software verification the

Aart de Geus

we a very, say responsible very have discussion, saying, security being mass, this would This of of extremely to is feeling from or of very gives in starting And to and that -- now positive able past, that people rich we a them strong security around. a already domain. that going we’re are makes I That’s very software has CIOs long and interact better we’re the that a some that longevity just get for to in because for the in domain technologies feedback been fractured with way this another has the number company be of are need there a many that, process our in Having and they of variety immediately Duck that it different understand Black them to levels. well-equipped not think, at I we together is defense software customers sources we automatic will and integration always is that three-year is resonates to capabilities. this some them said But we an a understand with checks that work be area lot and after a forward. continually well is two-year of many really integrating so with and drive on really comes of from so, they ahead understood mechanism good doing are very well that

Jay Vleeschhouwer

right. All

the IP the or of Lastly, more services was mean, in also quite looks could the And there, one you relative ZeBu in revenue IP with comment from some business, product? million had contribution it for Trac, from similarly, that like it to accelerated either then, than $XX I more into QX, other. upside than HAPS on hardware the respect you was good

Trac Pham

Okay.

the year won’t So very let’s But hardware with one We’ll on did We for we now. more on -- it leave easy. the we which both give is well HAPS first start at actually for continue hardware. emulation. detail and the

So, as I was the very broadly business it was broadly said, strong. --

services As a it with products. was far IP, combination and of

Jay Vleeschhouwer

Right. Thank you.

Aart de Geus

You’re welcome.

Operator

the Next Pacific Monika Please with line ahead. on go Garg Crest. KeyBanc we have

Monika Garg

Hi. Thanks question. for taking my

about it just to growth and the revenue I at without take spite X%, $XX $XX week XX% X% Black your to are organic million like million if to growth First the components security seems of out that business. extra in fact two from those of you talked is, Duck, question guiding you software

such So, two low in growth take from XXXX I if these out extra a stuff -- why guidance?

Trac Pham

had the we shifted taking basis. into to on earnings actually that are Black We’ve do we that Duck planned for just and the Black share math you got revenues QX. high on fact actually single-digit mid normalization Well, million growth per actually -- single-digit full we on $XX and Duck. that account growing was the a We ‘XX, did did -- that

over this this seeing running that, very high And getting a you’re we month period. sense significant multiyear to continue of as think a I in in quarter, very in So a particular shift one describe we’re business you’re because revenues. really

growth And on for pretty growth, at back the and a multiyear go good job it’s to look a basis we’ve against best if at so, that. revenue and done our look executing earnings charts business you and

Monika Garg

right. All

security how are Could the at walk you metrics So three investments, last four if the I side three you’ve on years, the from spent Thank next you through at years? the have billion. four flow you free generate you. look $X.X ROI almost look years, software to looking years done, over the M&A cash you’re what these

Aart de Geus

number this understood to take financial they a that, we haircuts, like on for start complexities to multiyear a the Well, they on need a to be look via that some perspective, time starters, term have of side longer at always acquisitions perspective. have integrate, because that they

the in predict. in We acquisition based value with We of of with that company saying, we always up process years. that comes been exception. but down continue We and has many exactly surprises, an some not it value the which on it is our word how this have to trying the of cash we flow metrics, the discipline that. for good aggregate, and difficult Board, well-honed to a always create some over But part is context actually fairly another acquisition exact disclose it’s understand Duck Black the of years fairly many to for for a have of the after out review don’t

because in also sense technically valuable reducing because but position fills of it is of that the by can acute it particularly own the Our value the very acquisition, create this strategic portfolio, profile for a is risk the customers.

follow. the do is sure have Nothing long-term us. we better, we process that pretty experience has am and that always So, is worked for do that out perfect we a well I can but

Monika Garg

right. All

to acquisitions. your you develop strategy especially Just you Black security marketing of industry software, software maybe on last one segment? need side sales ramp security are customers more about financials so software look the sales channel more the for the and in would talk Would Duck given most again, or are to still this

Aart de Geus

when and so commentary did is in sector Well, my just we same the Cigital many focused question, automotive because that was acquisition. this because earlier of the financial your as Cigital are the are as opportunities time, people the the At is there excellent of sector. anything on correct was those in partially an issues mentioning else. software interested security and particularly interesting,

example good horrific is paranoid a are and seen can happening highly medical what about some you’ve that happen there. acts areas also other really The

can think, done wide the I is be software time, so, immune over by damages area, essentially no verdict leaving doors for the hackers. And to that open no vertical

And a very But do have sectors sector, been a steal money this bottomline, must that and going to attacked. And to the also rapid financial is so the sensitive become ones goes means clearly, most quickly attack trying brings that everywhere. most the more the that more it to the reaction. because and are

company requires is with. the that, we’ve are more in think But to requires we understanding and continue verticals, put in prudent our the understanding do our best skills, and will who think so broadening, are effort each but it understanding channels what vocabularies to executing opportunity I interact I vertical of because requires some part we will space grow So this been to reasonably in investing it well. with far

Monika Garg

Thank you so much.

Aart de Geus

welcome. You’re

Operator

[Operator Instructions] Capital Markets. the from here question Steves RBC next comes our line And of Mitch with

Mitch Steves

had one and two, just Trac. I for one Aart for

kind have $X.X Duck high in a and the I about perspective, level billion original acquisition. about guys from TAM Aart, a with start billion will I or publicly talked sorry, TAM the So, so believe $X.X Black have of talked you

a then, us in kind on all is last transaction to you that? the update broad get secondly, So the the need top capabilities this of And business? four can of side you give the

Aart de Geus

Well, go let me backwards.

while time. executed integration at that opportunities, this, acquisitions important number always We take of the at people shop sure on not fractured or of about that do and far. a skilled reflects as because team, in coming there reality, make I different, is it you very what very because call reports case need that continue, positive that time, I done that high us have the are of market actually well the that then words, different satisfied how the some and the and so read our many And number have if it we’ve and don’t up like also rapidly also your to look to course, we a but and the extremely am bring is they forecast To it’s to we be members TAM developing at same just of least a of new so any that that same it to been to are teams on there’s companies to it, DNA size typically opportunity, says is that where And most now, perspective, this course, effort. because think to the skeptical have is adding all companies, and we right equally question, that’s fresh honest still allows development is of are fresh the many, when those people I field. sort bring need are we but that still interesting mostly they our these be the is able I to of when want TAM negative important, spreadsheet the do our extrapolating And whatever also trying from issues. indicates perspective, every

challenge is have our are are to call I on, many there and more with on customers we not there to quickly run can open this, we how think more. space execute

Mitch Steves

combined it. is it’s of business secondly, kind the track for, to question tracking you of sort one Trac, is And guys? then, the Duck combined Coverity so, to a Cigital half? excluding actually the we the get Got from calls update And that way health quarterly of being still and piece Black back small there business the on any profit besides the of financial kind

Trac Pham

the start far then profitability there, as said we to update as the that for to Software throughout the And and the provide quarterly Software this a best Integrity earlier, think, calls, I this revenue business numbers The for as as analysts, our as on and how evaluate we’ll good start that’s I year, well we’ll more business. investors that insights with getting for to Yes. Integrity both more then tracking progress and on had the year. business was discussed

Mitch Steves

it. Thank Got you. Great quarter.

Trac Pham

you. Thank

Aart de Geus

Thank you.

Operator

are Please no queue. ahead. in additional questions go There

Aart de Geus

so year, to big ‘XX for the a be from few out And and at now hope XXXX first on talk by feels thank very preparing perspective point to on a old fully of soon. during us year. Fiscal from we to results and of So but having you on importantly the like us most already us for a and view, proceeding point reported not it the little good years. only next you turned to this supporting in time, are

As much. be few calls Thank a usual, individual in for available we’ll very you minutes.

Operator

our that gentlemen, and for your does We thank participation AT&T. for do and Ladies you for conference using conclude today.

You may now all disconnect.

Synopsys (SNPS) 29 Nov 172017 Q4 Earnings call transcript