SNPS - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Synopsys Earnings Conference Call for the First Quarter Fiscal Year of 2018. 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 for one hour. the of the conference. time to announce we prior amount the remaining minutes end call, of will Five in the as conference this a recorded. And is being reminder, to conference I turn now like [Technical would Difficulty]. the

Lisa Ewbank

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

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

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

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

refer In found earlier release, Reconciliations directly supplement released their today. most discussion. addition, financial financial that and we can the financial supplemental will measures earnings during we press to the and X-K, information GAAP to comparable financial 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 turn de In remarks prepared will conclusion be that, the Geus. With site addition, at the posted of call over the Aart call. I'll the to

Aart de Geus

million we $XXX thank ranges. double-digit was growth target joining afternoon excellent revenue $X.XX non-GAAP us. as earnings. both for the share you were Revenue year delivered our Good start in and QX earnings was to above an and per both and

dynamics; will our systems customer closed semi market with Black a The smart and serve I'm we initiating XXXX. The return in million important XX% Driving to repurchase are high $XXX expectations industry had software Duck XXXX the beyond discuss in universal growth the forecast hardware need and companies, three and software through more and financials acquisition continue a single security. interaction outlook digits. developers we to software detail. three important positive semiconductors, grew the shareholders of for everything, market strong sophisticated the groups; and a the always We capital very for Software. Trac share

age massive machine big investments dedicated growing new and broad storage and of smart are with rapidly capacity, digital are to data early rapidly. results to such in high-performance automotive, learning and the of readily advanced connectivity intelligence The everything bandwidth. support reality IP industrial, Applying digitization verticals is much quantities chips. Synopsis processing, unfolding chips requires race is in First, tools development financial, huge others or and moreover and and AI the of learning center medical, and front as virtual home extremely very many visible. is machine Innovation

hardware of third, life and that prototyping. strategy imperative. process finding vulnerabilities society's infrastructure system. software human development connected certainly virtually aspect high makes proliferation of touch across vast verification, in and both the stated, software with companies. amounts center manifested the with and of Simply core and advancing is Second, systems demands intersection opportunities dedicated compute. software life value and Synopsis of systems gravity rapidly the devices faster for the and challenges And more intersection hardware is of of of of software compute security at faster every The in enables still paramount and is industrial high-performance early emulation This software sophisticated particular sophisticated the an financial

today all to these market unique position Group leadership address too Integrity our has a the and way. participate position is opportunities, out Software well. been growing carved technical in Here of Synopsis in and and Synopsis dynamics a this has Summarizing exciting

intersection particular of from on to the Silicon We emphasis with have unique leading of reaching combination two. a the technologies Software

adjacent while having growth is support opportunities and we've invest in team global and over the executed courage a the feel years of experienced company with ahead curve. well Our to and strong the

Now development designs of the chips. the foundation power state help Silicon, to Synopsis performance, and advanced drive art continues of product Silicon require QX highly yield, to the complex highlights the spanning most FinFET of low area, At Software. new capabilities. to some technologies enabling

pioneer As in the leader circuits. are most and on to development we TCAD, Supporting these XX% enablement, relying of to over and smaller aided of design a FinFIT continues design advance the devices, our advanced chips. smaller computer for technology

individual Now layers nodes. needs These dimensions TCAD to order including in three traditional and evolve of two nanometer five, to atoms. simulate

two TCAD now last the this in doing Synopsis simulation. has capable invested is years, our capability Over and atomistic of so-called

sign continues around place results route customer synthesis, and advanced drive Our and growth. off centered digital to design and platform

AX core its better we and digital driven Success by known on design ARM medical results. also One house results. verification both flow US During competitive excellent replacing automotive power IT integration by compelling industrial CPU won high-profile implementation for company of was IC total significant a consumption at driven with targeted the in a physical quarter, power of China for technology and had continues. process win systems technology Reflecting advanced selected an a displacement low benefits tools. our example business-critical Validator competitive a into incumbent AI the

companies product we've a the incumbent. Our expanding to our custom also continues group strong posted quarter. grow, made inroads analog larger Asian footprint into Compiler Custom semiconductor versus

XD move mixed segments DRAM accelerate their signal for is into In generation design. memory memory simulation automotive our in high as and and NAND next customers addition, demand

Now to to outstanding and verification deliver continue where we grow. results

utilizing a large VCS fastest a systems the most platform the company marquee market the our In solution US Verification and one Our with and hardware QX displaced board number position the semiconductor provider. franchise at and is in simulator incumbent both broad-based software across in comprehensive the the engines verification. Continuum today

growth deployments ZeBu such and and and prototyping HAPS based HiSilico adoption. QX strong companies broad-based Broadcom, again Our very delivered emulation AMD, as hardware NXP. leading ZeBu customer In included

the the industry. of SOC partnership In addition, a enables automotive French as leading technology with and tool partnership a energy energies ZeBu commission, for in key alternative the The atomic we announced emulation player research. advancements European

revenue product, board. IP the double-digit we deliver growth Moving to across strength with to continue our

Our IP global very processor along analog, excellent from of quality support derived and our teams. reliability dedicated broad results and interface, portfolio security of with the and high are our memory, skilled

Over acquisitions several the of the our augmenting non-volatile Sidense our IP expanded Kilopass and further we portfolio months, offering. past memory with

interfaces. continues, in our significant IP our adoption several semiconductor which high-value wins security at processor see autonomous our we Solid companies, embedded its with and IP using Also for leading of traction one continued driving of SoCs. is vision certified of automotive,

Let me pause automotive. on moment a for

and world is sector. tongue-and-cheek a car quip simultaneously an services for verification algorithm ISO development, the automotive becoming extend EDA, to certified critical our used a security and the ranging IP EDA optical to having Software and verticals the Software rely software solutions growing requirements. Which last automotive development secure, While towards development automotive into requirements racing leads and to driving, and to and not security few on on base, many group, of chain. is computer is exaggeration in safety-standard across The are security aid code. virtual and years, me chip OEMs, across whose have Synopsys Integrity supply actually entire tools software to prototyping customer system Integrity certified autonomous the the testing quality security including maintain Synopsys platforms. high-quality smart are specialists, Today at while of build a car electrification from AI to car our all. to IP, wheels lifecycle, everything, our to to we increased providers, address moving products X across and on it lifecycle, In to this tools, suppliers, tier semiconductor focus significantly to safety lighting, and goal cyber drive and and provide therefore safety

accomplish two-fold. is Our strategy to this

years, are and a of systematically second, And them quarter, with provide languages to the acquisitions. off testing the built a scores Software through their a development problem devise to and is brand of solutions. last In four security Top Black critical this highly Group industry help this supplier threat reliable offer the fragmented In from recognizing for process. address for rated current portfolio. a and benchmarking strategic First, to of comprehensive consulting highly throughout attack security testing. broad Integrity application as leaders and this that software Gartner point, a global, our Software mass security high-level by strength acquisition plans platform we've of both market, tools and with experts At execution we've point Leader platform programming Synopsys' our their Magic organic environment, Quadrant Duck strategy and been solidifying, of Integrity is by assess their the company valuable. sale, in range covers

experienced a in application and renewal Just for levels also last security quarter, product we Wave Forrester designation new These access IDC's many recognitions analysis. with difference, Leader company gaining board make achieved as executives automotive. service for large across top a testing, strength in We the across continued a and to quality to ranging the of the named static while industries they facilitate to industries. Marketscape close we also were from and Leadership financial companies contracts

of business is capacity, engagement consulting group and Our increasing. is working at our value the steadily

excellent summary, as further to security In the expectations in fiscal this platforms, broaden license to Black integration started As we're we for our a with on have as brand we The revenue market. good the and exceeding EDA and Black we expansion vulnerabilities respected closed and emerging our XXXX company. Duck on mentioned, is portfolio, of software positive smoothly continue and momentum seeing note, our Software acquisition emerging The market leader compliance. and and well brought progressing quality and open bookings TAM raising strength of with track. very position source testing security guidance; also Integrity invest a full-year attention strong Synopsys our and IP both in in highly progress continued Duck,

Let the Trac. call turn to me over now

Trac Pham

see Aart. strong to were momentum continue QX Thanks, in afternoon business. everyone. and good Good results we very the

metrics. Our expectations our across or exceeded financial results all key met

quarterly Let to an impact $XX fiscal EPS. few the quarter. contributed highest share highlights me We the a from excluding when and achieved revenue week, to our non-GAAP and earnings revenue to even which of per extra million date, provide $X.XX

commitment $XXX XXXX are for and share EPS corporate investments, operating non-GAAP a growth, record repurchase, continuing long-term Based our initiated our discuss we outlook. on QX of tax our detail new favorable which a performance raising to balanced more the also and and revenue I'll M&A internal rate, in million We strategy shortly, accelerated buybacks.

to and specify unless guided numbers, our portfolio. and through $XXX to otherwise. increased Now reflects be will results were results revenue broad The as XX% targets, across million. Total product the comparisons all our the I above strength year-over-year I talk range

$XXX three two-fold; grew tax Total well. million, benefit that as with million. remained forecast we GAAP tax we $XX from a a the earnings expense extra were on approximately QX. Total to of a write-down percent. earnings one-time Excluding per increase in reflecting $XXX GAAP cash XX%. $X.XX, reflect costs our that share week at license rate. to was and due a average $XX annual and assets the statutory non-GAAP margin million our to per were costs QX, The of impact duration offshore earnings rate, were a XX% average deferred new reform. cents, tax XX.X% in share U.S. includes Non-GAAP negative operating our weighted $X.XX and one-time, million which tax transition after years, revenue lower was repatriated The non-GAAP were be expenses expenses GAAP-only $X.XX an

to non-GAAP in rate taxes. our for XXXX. Let tax for moment decreased pause XX% reduction statutory of Because the me the a XX% rate, on from U.S. fiscal

previous of but launched cash and At debt with the we for to expect provide rate of various expect the year. was certain in the share rate projection partially year-end $XX onshore, the a XXX%. of the with our Operating in take be the the free U.S. increase total incentive XXXX, trailing million. through reform QX, time, cash rate, to to due effect in we definitive working is $XXX ended XX% fiscal non-GAAP and compensation collections. year. will normal offset parts changes this $XXX our later $XXX of are million we buyback still flow as and we next international a quarter, normalized XX% and greater that more twelve-month below details than our payout, million quarter strong outflow As ASR Including We equivalents by cash million cash tax

was goal acquisitions, million with our We current buybacks keep significant Kilopass. and year. use on count the using as of M&A two and remaining in cash roughly and have share quarter, reaffirming $XXX Black our flat Duck are a authorization we last also closed of

a million million to million. revenue, Black which to roughly $XX mentioned purchase-accounting about As we Duck $XX reflects $XX December, in deferred revenue to million we of $XX in contribute expect haircut

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

to go XXX transition expected bookings in concrete Before upcoming the of for XXX, the XXXX I'll I Accounting Topic into cannot the year, will impact on on guidance, Topic transition future to Because effect us November. briefly beginning in turn from guidance Standard comment this fiscal we the throughout which will provide depend on actual impact.

based expectations for revenue and However, now the immaterial. impact the our we know what to we on be year, expect

only, We will with think or our business. a will this is not as about provide XXXX accounting And our definitive impact and more cash fiscal change our commentary guidance. how reminder, flow an we

quarter second Now XXXX to fiscal and updated guidance.

requirements, of hardware a expectations, half QX first and difference expected more first in and pronounced earnings we greater than in our to the of Because even second be than is timing be between half. to we As customer half. stronger shift second a original creating December, revenue mentioned expect

of has hardware in seen variable in will as the you've As fluctuate to the past of changes has grown, customer schedules. years, become and profile revenue couple due our revenue more

outstanding million, $X.XX $XXX of positive to share $X.XX $X non-GAAP $X XX%, to earnings million and earnings For million total and total costs Other share. per $XXX $XXX million between million, targets costs and expenses non-GAAP of GAAP share; million. a expenses $XXX and rate and million between $XXX QX, are million, tax million per and between million, $X.XX between non-GAAP income $XXX $X.XX and GAAP of the revenue minus and $XXX $XXX between

flow of $X.XX and share, revised and tax XXXX, per GAAP rate to million $XXX and million Other non-GAAP $XXX strong and billion shares million minus $X.XX and million, a million. delivered by For approximately $X.XX of million, our XX%, $XX million, increase raising of $X.XX between guidance are XXX of per the our excellent over of income and between on XXXX we $X.XX tax from we're reform. of and our for of share, to billion, to revenue previous tax non-GAAP effects $XXX million annualized $X.XX performance XXXX. quarter the favorable outlook, revenue to XXX target. due QX an Based summarize, cash favorable outstanding earnings reform, guidance of expenditures expenses earnings Capital minus operations non-GAAP record amplified $X To earnings. for to $X

balance capital and With over capital strategy execute organic returning continue shareholders, inorganic to the allocation sustainable, investments, long-term well we Finally, to drive questions. for on to plus that, our appropriate to striking an of it value. I'll operator turn

Operator

And line Instructions] [Operator question first from you. Mobley comes Thank Gary the of the Benchmark. with

line is please go open, Your ahead.

Gary Mobley

thanks year. Congrats question. start guys, my the to on for a taking Hi strong

Aart de Geus

Thank you.

Gary Mobley

is parameters be what second half? us second and additional it confirm than the so causing if is of So, - with looks any to the you guidance math do give if that all half week like that conservative adjust QX, in that you and right I give for implies the respect you half the first first X% your the lower could to

Aart de Geus

are what the is weak characterize to first I has that at more going our shipments you a timing that result first the are just skewed been would as than schedules looking half. stronger of to half requiring. fact be the Gary, the a right as second of second customer the half hardware That's the has more half

Gary Mobley

accounting Group Integrity without Software confirm, and just $XXX on the roughly what $XXX And so the roughly headwind to pace considering headwind. million million purchase for what

Aart de Geus

the companies years. acquired you Well, good different we as over the pretty haven't We've numbers. disclosed exact hints given we

that. this strengthened but well sign position the we the disclose course specifics. as above the technical has on All of but in have, the is forward. was acquisitions field critical XX% Fundamentally say basis a year the But that substantially ability going would business ingredients leverage the growing we clear that that this definitely right support see that sense acquisitions organically and group definitely global and accelerated in our us managed a our that don't ballpark, upside to the area you're customer has of very also per we meaning the I for this to is well is the have mass, and reached that quarter well

Gary Mobley

week, growth for Okay. by consideration you that organic that XX%. reported additional the for acceleration one I'm can And the the of assuming and it your the X% so of like point factors out revenue the upside upside included roughly guidance two revenue looks quarter? considering revenue are driving of you or revenue

Trac Pham

extra board the The good hardware and all in Integrity strength lines. quarter, right. see business across less growth and you're the include ballpark. more the Software we would business a extent your across did calculations guidance very the that We I had in say bit did is Gary, week as good well. little the to

Gary Mobley

I'll queue. in everyone. you, Thank Okay. the hop

Aart de Geus

you. Thank

Operator

comes next the question Valera. the Rich And line from of

line Your open, ahead. go please is

Rich Valera

Thank you.

Just the in year-over-year strong of of particularly was business? following-up questioning. on line core were EDA of in strength some on basis. drivers the you the highlight that same what Can Core the quarter a EDA

Aart de Geus

smart with to changing high-tech vertical Well, a towards is impact it's for is I market and very think the start world the fundamentally acceleration useful in still literally every surprising no reasons will specifically continuing. semiconductor investment a really big we're everything sets related that towards picture strong the which market

and that and semiconductors that business and tasks the moved in chips much which will we a we If more will still is do while designed with still see in of faster that's the see our graphics think much it the much AI bunch both state of entrants, computing on premise is even in where being aspect verification the the strong there's and to starts could in the some one design one aggregate and that and new far fact phase side brought now every in help AI all all general this that up specifically group. of this it further. IP sort down could in putting investments us that we within the FinFET over with think the I see pretty chips to whole actually I board is reasonably art has sophisticated a Now, year have normal the across create and industry of chips for we're of it's so continue chips but of the new

that So front. the pretty whole drives much

Rich Valera

Trac then couple by raise you the small I And Phoenix? of it. from the Got Kilopass of acquisitions you made was that $XX the million guidance any think and

Trac Pham

sorry it I'm I from No, organic growth. modest but was mean, most not. to the a extent part

Rich Valera

sort that And there looks tax of of benefit. think the similarly, by if it you'd you I rate like the get around roughly X% lower $X.XX

little You're raising from that electing less tax a of your you or reinvest rate little dilution from the EPS bit the a Are there those be is guide that. a than to bit may upside by acquisitions? kind of into business

Trac Pham

I part, think the left our outlook at wouldn't questions visibility. deliver turn We're the most giving the that's And on. on we to in pretty several we're point the From I so to in this best a year, it year got QX. good off have the based the dilution. for with we've start results early to

Rich Valera

quarter. on enough. Fair Congratulations the Thanks. nice

Operator

next was Company. line question Thank from Tom I from Needham Mr. you. from apologize comes The Diffely of the Davidson. And D.A. Valera and

Your open, please line ahead. is go

Brent Thielman

Thanks taking Hi, for for Brent is Thielman actually Tom. questions. good my afternoon. This

it how is your on it First up much ratable business, IP front? one currently of

Trac Pham

I'm missed question. that sorry, we

Brent Thielman

business of currently how ratable upfront? is much that versus business, On your IP

Trac Pham

of being is because would that than and good is more about portion time ratable I'm on time I consulting completion a than a base of that rather consulting say recognized business basis. two-thirds there's or based percentage of specific

Brent Thielman

can color geography? doing the And side from Pacific during give different is Asia sequentially only the and are to the there particular actually any declined are that rest that us the quarter, you in Okay. any as Integrity in China Thank of then perhaps trends the Software reason emerging you. how then business was

Trac Pham

look hard is quarter-by-quarter while if business we I that and highest would look at you actually to of ourselves a far our away at at You find is minimum for one and you and China the insight that that. giving Everything not did trailing think looking the in positive always way of you at XX-month is for some Asia drivers the may know, Synopsis. basis Pacific, best it's drivers, in growing region the general be

specific So, those at in quarter I extremely anything well all. doing would not we're Fundamentally, read into areas. a

Brent Thielman

then you. last M&A. thank Great, Okay. And regarding one question

past year those a acquiring those current given the your and Over IT how trailing are then being this few are time? companies and at under integrated in portfolio and a half How opportunistically software.

Trac Pham

already at during to Well, trying the rule something that the what close and from what but the adjacency adjacency. leverage try of find businesses channel is into we we is adjacency and follow call because doing the integration the which we acquisition falls of you have that look risks or fundamentally know we to we process what adjacency adjacency, are the customer technical different have, enough to minimize

two functions speed, is And with and some perspective, I new try process and business sense when all this that doing making us any team joins same a in Olympic guess customers and infrastructure sales analogy losing the sure a without deal same makes that like quickly the the goes so, there people all the of it of the the trains from it that to merging it we to same somewhere. movements at the here it's is typically when time that integrate functions, minute

have Duck one a and it an an all that And outstanding also but that so, say Software has what well and that is as to there. while story Duck the same what is is has market and the Integrity we done were closed. we've of IP these Group We now, not relationship already that group think to that as in I ago to do position, in with had ongoing brand. the very fits well a so good with very number customers because in impact essentially largest take correct we acquisitions right we the outstanding it and it's on to quite can example we positive a our that's did highlight Black the Black you areas And try well extremely those different it of long complimentary and already

Brent Thielman

right guess Thank what if have you follow amount with you up quick could. last acquire looking one the if now the and right the then next you of hand, I pieces are months? of I, in that great. over technology All several one one I cash are to

Trac Pham

Well really as we this one through mumble want our don't our where is of questions we those indicate always what to way it, next steps are.

Let the that interested it, and invest and And know to in looks our on shy as me never sometimes the us have may this vast the we're that enter that would actually investments small acquired and never and be also over a allow but one generalize majority period to shy harvested just gets to domains but not you things only of acquire one is do materialized long leading too is between do take over to so opportunities of percentage possible long years own. around on to percentage such to continually been acquisitions ourselves a keep if try time. ultimately we us at the edge also balance to that the R&D we relatively

names the on yet. won't lookout the necessarily but so, And you next we're give we

Brent Thielman

lot. a Thanks Alright.

Trac Pham

You're welcome.

Operator

from comes Credit of the question The next Suisse. Farhan Ahmad with line

please Your line go is ahead. open

Farhan Ahmad

the regarding my reform. taking question tax and for first the Thanks result. question on is congrats My

access tax versus generation ongoing you flow what's We reform all without of as passed and cash free recently have that your have onshore to now worrying the offshore. part about

any offshore the So, submission? of the how structure in how onshore change thinking view is there the and versus tax you reform are in capital cash business the you given about company the

Trac Pham

this is Farhan, Hi Trac.

reform to we've on does between flexibility and if look business however, in the investing to-date, So, history the at right. would we job expect us doing years more over been that The pretty so acquisitions. our balancing of I successful while That's path. buybacks on you a continue that fairly tax you're provide done

Farhan Ahmad

fiscal with of X% just really growth. you quarter and for the about more it guidance versus on conservatism now year? year-on-year in of the the been growth basically second on just something like yields How pretty much from the second And for is question much year, six the half are linearity I full Got then like going at you implied flat revenue in you half one look it. XX% the quarters business, for the and it like guidance, XX% of have than seems the has brought the suddenly are hardware going the to because seems

Aart de Geus

would to the we've growth. guidance range point our first to I X% full year the from X% year for raised where you revenue the for

What think seeing second with shift wouldn't that's I hardware, wrong of or in the growth. just are as very conservative I the healthy you software the is in half anything just it time the characterize business. being

by region. our said businesses by I or As in seeing of whether all you're talking we're our initial products remarks across very good execution

it's in quarter. profiling of course the function of just a So,

Farhan Ahmad

gridlock and to profitable. given Got XX% revenues you it. your report business? It's one your it's starting yet obviously Have thought And of just almost becoming to Security like any not Software question.

it how investors that the So, are terms are at of it's kind of credit I any getting looking not business. for we in would argue

So, from expediting sense a to you least reporting any segment just view? business the given have thought in or the point at of

Trac Pham

will Yes, executing think we are evaluate that business we in fact excited of this We're out that. space and year as how critical about fall on year we to mass Black hitting that very plan. manage are reporting throughout much and that I the that focused best this integrating the Duck

we later to on that. the in more more as have year clarity we'll So, describe have

Farhan Ahmad

I Thank all you. That's have.

Trac Pham

you. Thank

Operator

Thank you. The next question comes from the line of JP Morgan. Sterling Auty with

please go open, is line Your ahead.

Sterling Auty

guys. Hi, thanks. Yes,

the the revenue to in as in was parts the just other ZeBu, upfront revenue hardware quarter want the with sure strength start you strength to make want in was there and Just component well? or upside upfront the talk the main in

Trac Pham

the board. when, across at looking I there will hardware the upfront up. if As show specifically portion said that's where strength were But previously, you're

Sterling Auty

Okay. other how think you line. hardware do or But expectations in you revenue strength relative to much your characterize How items? was would see versus the you that

Trac Pham

Marginally.

across all strength the of of very most good think upside the I businesses. was across

Sterling Auty

you weighed Okay. of tax flow And cash flow and in kind items the may contribution. in talk the flow from strength? have about revenue But the what some can the deferred obviously cash took of a given that other, maybe quarter cash the and transition the good quarter the then just what were away things down

Trac Pham

Yes.

in last that's keep from year. mind we specifically, payout QX comp when variable our For

QX So is referring are weighs that that you what results. to? really the on mostly Sterling

Sterling Auty

even was seasonally have adjusted on would Yes. it basis, I at than looking But it expected. a more

other maybe cash was there So, I know items the flow actually with quarter. would repatriation in that if have tax don't cash payment weighed or timing on first

Trac Pham

biggest the No, that. negative do other related component of the is comp. but largest that and we see QX that be to puts takes, some typically a in variable are There outflow would part

Sterling Auty

And last flow. again, question cash just then Okay. around

You year read that? but the Is into full the be you're leaving by range cash raising from $XX operations million, revenue unchanged. there are to anything

Trac Pham

it's unusual we've highlighted had items, million full unusual last one, benefit this frankly you one-time few us $XX early items Keep at tech year then year for mind top hardest really a a hardest before. couple there's and we look metric when to the got that that the we've in the No, of a a a that flow year from in is cash typically year for project. and

to to off early point flow. on So, but a pretty it at we're cash this start good a call is make

Sterling Auty

thank you. Okay,

Trac Pham

welcome. You're

Operator

go Jay the ahead. open. from Thank is Securities Griffin Please of your you. line next The line from question Vleeschhouwer comes

Jay Vleeschhouwer

and Good question last category then the if years other there's a Aart to the in for particular software some good to three Rich let decades and history. been you question things that's implementation the me momentum good two lasted We've to And or last and a longer for is product category for was begin earlier. more historically EDA that categories. momentum, about the when couple helps seen asked over this the the two at you evening. years now go back specifically cool two Thanks. or least a average which core regarding one to back EDA, come momentum synthesis rough of

might momentum good one going now two categories might so, suggest regard the specific keep is to of have with different is, just something perhaps there to And categories? that already had question trends that that historical contrary or certain years

Aart de Geus

products have even on as long such providing the defacto as our Well, multi-year an our in look quarters ourselves determining ways basis companies intersect much and moved complete or the agreements. like of with beyond more what we many individual customers solutions years

is most tends human big the also important of customer. both is the lead of so, to comments curves and directions customers both of one the large smoothest supported advanced is those that fact which to that for employees the with both And see interaction because on projects fact by under support very on the numbers is thing, same also being the some equal very makes virtue of them very the stable the stability relationship by not of fundamentally and more its in almost and terms

and in a verification drives are so, are new need And waves. certainly well certain certain area super and of I also objective, that's for faster before. highlight one and trying though, big on AI seen products to hardware when to driving years combination you that an an whole more needs the hardware, prototype once the interest is get fully software you run because technology software the hardware more continue have the I think want you have multiple debugged related or think problem can that the of high that of have rate you optimized. that you is is software growing that And of to for at and we substantial relates and I in be area that systems grow new of than the the now high software the necessarily look example all don't before truly to renewal hardware the will can don't wait or run growth hardware a is problem to have in to a to of If processors

But coming that just good right it's overall, and simulation would think of growth became but our hardware. a seen essentially rate software be new a it's in out I so, And are of continual board the before gradual of now. of across we category we've about run even sort it there technology the grew times

Jay Vleeschhouwer

my questions you. together both so for ask remaining I'll two

interesting the two that's the last Japan. So, that one, to geo-perspective we've in the one over from seen number recovery is really the of years things one

that's had draught on market. Japan of certainly year-over-year a if in and long very sequentially EDA broadly that the better looking for trailing are industry basis in numbers opposite true and been Your the what XX it a and for

you provide question a the SIG become over services so, for you And is more the long-term but being that of at thinking with year necessary got intense keeps time? as a going? have or are the services of business? least what's nucleus and changed that over ago Cigital think services bought how intense services a that for you over You lastly, time the year do think or SIG and about there ago intensity time step And then might services perhaps acquisition, you to just becomes just

Aart de Geus

you consolidation became the very really absolutely times decade the and like in lost or companies lost two itself of be morale really think Japan workforce went it beatings to Well, stop bit the many and the tough little a correct used Japan, renewal will Starting decade recombination different I a are called and it that improves. questions. hi-tech the with cuts added to which when that of many and had

is, of modern, more the improved, news that I the think fresh, growing number I good they in sort are organized morale the businesses. western companies' has at more looking think managements the is of

our at still numbers over Japan region look it's trailing the at in in world area. months so, growing And better it least if I slowest still the feels XX

rebound that say. Japan, there more industry of is literally possible think would hi-tech but took I a redo I in the it

many half we much new the of a XXXX and can is it that think that now don't also for continue degree do by one companies not rapidly of does problem mean because of over but with only by the are be sophistication replaced do services is group the while a aligned customer a business. customers better is not And the think our managed evolving with focused modify think to it apt and companies only ourselves like within secondly, quality have how services necessarily to not the it's to the well and from security deliver I and vulnerabilities the I that Cigital, will which quite seventies or very is but and tools align statement crowd. learn the therefore what the a with educations of what I you of service on the with demands physically ability rest Regarding educations it's our that constant eighties security very

Operator

of comes from the line question next Monika Garg KeyBanc services. The from

Your line please open, is go ahead.

Monika Garg

Hi, question. taking thanks my for

you've Why model First almost guidance somewhere more side, the track on you've X%. leverage down be But what X.X%, if seeing not the basis we margin operating midpoint we year-over-year. margins guided revenue XXX, raised your in operating XXX as would points your X.X% are the to margins?

Trac Pham

absorb margins can have right margins you we go is we've then Monika, gone through managing with model Black up way to keep would organic excluding But commented to with know the last details. in that relatively Duck as of more impact You the now, flat previously the And specific we're dilution. year.

Monika Garg

when I be could look and If at done this of Duck, them add all Cigital breakeven it this all whole do And those acquisitions business ones. then, have Okay. I think you software company, all security the together together, Black previous profitable? if

Aart de Geus

that And the these of point we the these I is clearly same recipe opportunity opportunity on haircut sort able desire with first of position, strong accounting XX acquisitions to there's with profitable have the investments with we're growth assemble a; to turn typically long-term is invest because view algorithm each the in the and same of track time, have I well great with value been on about or long-term same the objective Well, all in to those. either we this needing potential integration same positive and for within would has at substantial the and the business really which of always essentially deal a acquisition, are four company. is followed acquisitions being cost each years bodes really the say b, business from And a months. we come to having profitability executing and return not a great to of XX think the which

Monika Garg

talked share? Thank to solutions vision processing, talk about then talk develop And Aart cases looking about some to about the and then the learning any could deploy looking last how wins develop you. autonomous driving can talk who are IP same solutions you detail Synopsis if can design you AI new is you and with your one in here, machine customers in had you

Aart de Geus

participant Well of and in gel let the AI advancement and and ways both are supporter of a ourselves a the AI. the Sure. take of we topic user course me of many and development

AI has same look learning projects the also see of investment. and won't these host I of promising. faster diagnose have tools curve objective at we the apply a that user, we but make own And a things here projects algorithms there's one time, there's tools the projects to to can As that more a actually into think of which see our of or go with run which an a or number better one I highest the to smoothly return on

the [ph] the brain times have to degree that processor human in a of developing times have of time. can the have he a was unbelievably the processors touch that CTOs I XXXX processors. what's not therefore to of that's of that are it general order today pace rapid of are starters, fundamentally it in promising anywhere do AI to you which period a here a advanced faster of really very for long weeks to the continue long saying to AI most the going and algorithms mentioned is going one of they in computations close at two for computation faster. and I XXX what than And can a long now I because on earlier now be very graphics do enhancements that to and processors talking we cores before was lot opened computations think many need rapid want we As do billion how certainly our category door we rival a sure about feel possible they companies probably the world for was specialized to except to one I supporter, a And that progression and some successful another is the aspects seen ago just aims what we to to term that

So, on they our possible all launch tools, the and those market they by largest to for advanced silicon hurry chips perfect our way design are these people the and in in support. wanted that they're customers a for IT, context the for and our can quickly very to navigate therefore yesterday most

check ups order to of this run way secured in that, by out, software be software to addition too. thing the and has mock In to to prototypes the on they want

we it is see everything But learning it's and in somehow this So, sort we to of certainly soup is trying as stir fast as to can. rapid interesting field. we're of in the touch the evolution how very

Monika Garg

you so Thank much.

Trac Pham

Thank you.

Operator

Steves comes The next with Markets. from of RBC the Mitch line question Capital

Your open, go please line ahead. is

Mitch Steves

for on Hi thanks the guys, had kind of my first Integrity taking question. I side. two, Software

just a clarity of close we kind a terms seasonality the on billion getting so a full have revenues. of except guys get you there of So, in lot seasonality and of dollars assets be combined the for now kind the sort of of of that are year? aware you to there any $X.XX to Is entity

Trac Pham

by that Hi Mitch, Integrity business based really seasonality. you It's will effect won't mostly driven margin. business on the so, variations Software time the see and

Mitch Steves

does well? include in as write-off that the deferred all that Yes,

Trac Pham

Yes.

Mitch Steves

the terms overall of of then the just one second And markets. Okay. kind was in

the Aart this addressable be you Software portfolio what total is entire hits what saying share the Integrity and was rough on would then it at based like you have critical think so industry of sounds the So, is kind the market guys entire time? market what mass,

Trac Pham

for how know, later world out I'm is, be to and looking at and to really software for Even software ago for the going can network of everything TAM a in ties checked is concluded entry this vulnerabilities. many over indirectly minutes sales companies virtually in connecting everything connected of a everything much the innocuous sure software world an simultaneously billion impossible. the somewhere where was or it and just again. entry necessity that or their the And itself. That actually in determining honest myself to coffee right put few the some so, that else therefore is run point. from a not vulnerabilities sooner know We and continue pretty maker knows but You software notion into over it's have you how potential is or be are just can it god that I this is matter no security broaden Electronics encompasses to the to to about at $X number I a what now I in electronics. therefore, point And once to quality think what will

that the of for build most that growth, And said is grow Difficulty]. of implies good from able a we and long-term. M&A importantly infinitely a customer. is market but against trusted to course needs growth the having the organic that term think being Now execute position the I for doesn't strong are position of to we fast and found in [Technical combination well because have this long to try

Operator

your is disconnected. this is turn like Susan, to Hi, at five-minute It the mark, host. I to the apologize over conference back the I'd got so I operator.

Aart de Geus

what me beeping this it event. the down, no end but I have let was probably of apologize this the you we idea happened, and the Well, just I is came heard Okay. guess for beeping what same of

available outlook. this ending, participation. corner your usual, feel Apologize will that hopefully year's the we appreciate thank I again comments And So, about and you be good and in you we the let heard me for for abrupt individual participating but executed as the the QX for aftermath. well

Operator

Ladies our you conclude today teleconference. your conference. your participation AT&T does for and patience and executive for using thank and We for this gentlemen also

now disconnect. may You

Synopsys (SNPS) 21 Feb 182018 Q1 Earnings call transcript