SNPS - Earnings call transcript Q2 2019

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Operator

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

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

Lisa Ewbank

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

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

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

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

financial refer In found X-K Reconciliations directly their most today. discussion. addition, in financial financial we is year earlier supplement operating this financial can the our ASC financial supplemental will Also information results. to that measures supplement Press during Release, to segment around transition the the financial and detailed we long-term earnings information and included XXX GAAP to comparable non-GAAP measures in objective, and the be released

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

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

Aart de Geus

segments. & Design, was moderated hardware quarter million, a a strength a somewhat $XXX comparison growth I am with Semiconductor particularly second results. excellent XXXX. happy System operating Revenue both by afternoon. quarter to was revenue record strong, tough second Good report versus software across record In

$XXX to million. to Software profitable repurchased the Integrity this $X.XX, year bringing so for Non-GAAP be expected growth plan is $XXX and tracked EPS we of the greater-than-XX% total million our far was revenue year. with and stock, to right

color the U.S. an tension in environment of the reflect week raising export will the do have geopolitical our architectures. and The impact creating substantial is the engaging our IP, big a earnings profound Virtually advanced While announced growing design business. market top driving the this with to strength the guidance revenue are things, to were overall has of the potential is is of and the are Whereas be The and tools, trillions financials some last we non-GAAP impact, security topic end us restrictions that opportunity. XG, our discuss escalated, more and in investments dollars. on is quite hunger all detail. new and customer machine-learning provide and strong, for for vertical internet solid. technology, Trac additional range data compute AI robust impact of solutions markets economic of in it AI, forecasts in

Silicon-to-Software these long-time competitively, issues large highly-interconnected the very push vendors, are is to entire and In product opportunities AI with system companies addition associated challenges. very to semiconductor growing The us. portfolio. world, benefits opening positioned providers further for along Synopsys complex ideally security a for with our solve solutions, cloud investing

Our brand-new creating in front solutions EDA verification engines. and design and AI-optimized are center

broadly silicon ever most is in technologies built. IP used the Our advanced

One, complexity, to software that virtually let two, integrated security smaller, technology three, nodes with in quarter, established EDA massive make moving EDA. part and recently, tests from nodes as Synopsys low chip three Our such is prototyping also and provide growth the denser to nanometer; on and vectors: our processes software of and silicon In solutions context, threats. vulnerability software their speed advanced well of tools most as to seven, support. customers along unmatched the driver also all collaboration underlying beginning The five is system overall challenges is design quality before design run subsystems minimize available; below key and and our chip three some power; In rely and together. sure work me highlights essential reduction, and on becoming new the to the long but designs XXnm and And design. of are tools, The that and cost for reasons more software for state-of-the-art optimizing content designs. are

platforms process. continued design for TSMC This The chip-stacking its Gate-All-Around XX by technology, significantly & certified first highlight test doing for both about Design XD Compiler such is well higher Design level Renesas One potential and logos, eight customer of single shorter predictability solution production from to for completed main solution, route, better its and TSMC, device adding into for of is Compiler Samsung and living capabilities design and pillars solutions develop who to data Platform power design, signoff of rapidly impressive. really set is November. brand-new which across technical nodes, is different performance on design, impact. Platform FinFET area broaden consistently and is to customers place is by cited now our technology excellent high-value of and process. Synopsys: trajectory Fusion Fusion delivering or designs, custom Renesas new our and fusion up Adopted the certified foundry-enablement across long-standing Fusion A with reporting we quarter its also growing the designs. and launched used rapidly the promise, its productivity our Compiler superior innovative power, or our a revolutionary different design success we continuously portfolio. Fusion results, of both digital digital process includes In in true integration. of times, automotive results. XXX the chip active a perspectives. model. SoIC business Fusion its deployed growing versatility timing, its who the of including Xnm a full-flow for on used for their which product, complete a combination a It’s cornerstones System-on-Integrated-Chip design our synthesis, very which single are new of all

launched a This fully deliver next-generation automotive safety. quarter we tests enhancements XX as example for and for Test flow over functional months. capabilities containing further the Stay integrated tuned we next

from have chip design by systems to our verification Synopsys solutions, customer are Verification the by can’t to Verification Customers we and high demand driven continue and for results a difficult see design more great day. time-consuming outstanding influential system software the verify products. Platform. turning strong are is tell QX’s huge verification, technology the we was how many software where reinventing is us of getting hardware strength bottleneck and who to excellent that accelerating years Now is and outlook their complexity market get verification, as design. Thanks the advances for more Continuum and and year. enough a they fastest for fortunate part to companies and is to leader. next-generation in demand in support,

need impact. together Our our high software franchise an of development The world early indicator in semiconductor of for ability companies XX primary chips with also increasingly top as solution. verification our decade-long is the broad-based. Demand validate the XX leadership for verification their are hardware-based our VCS is software important the and and the paramount. simulator to use

our prototyping that very X with which well, new FPGA-based of quarter. expectations robust and ZeBu Adoption in outpacing targets of solutions. Our is early launched development demand year, software HAPS early previous emulator doing late was exceeding solution the again last

As a result of in market our are prototyping. and leader the differentiation, we both emulation

an poised very had Now quarter to which for growth. is strong another excellent and of double-digit IP, year

wins interface, in for computing complex Process, the the to The milestones AI, in market automotive, quarter requirements broad of embedded a foundry-specific industry’s on As and we we more the nodes. today’s most of two of internet number number and than cloud achieved leader IP, We more. vendor XXX things, announced set building of analog, blocks TSMC’s and the FinFET Xnm range memory a broadest have featured across design world, advanced applications. provide that at address important IP

to one complete hyperscale Xnm markets the for of XXnm IoT, our connected we the And develop for next Further devices. addition, we in our taped FDX AI multi-year announced collaboration SerDes, global for a a cloud expand. In signed data automotive-grade process. IP on for building industry's with computing hottest a announced and enabling customer around Meanwhile, to strength wave out including Foundries solution Global applications, we portfolio connection titles IP first agreement narrow for band IP. with their continues XXXG of ultra-high-speed We the a marquee the key automotive, two and centers.

Synopsys revenue With Group, to now Synopsys electronic today’s and and need delivering low-risk scaling our has is IP, critical a complexity inherent sophisticated, Integrity time-to-market XX% in and the reached the fills of rising which growing which brings me challenges for Software nicely. milestone systems,

testing years only for both a beyond. issues over increase in but not business severity, security building to striking. continue past medical, financial necessity. and The automotive, becomes software during process this is the has in As services, and our develops true This progress development who industrial made is number team software anyone in for electronics, the five

While makes added In software services quality building our a Platform. Polaris scalability into brings Software deep that and and towards organic together security and cloud-based we compelling knowledge integrated, we substantial acquired March easier. and an Integrity announced platform. compelling we solution technology user-friendly, It investments, new our focused products also deployment

to XX great to months, to deliver XX initial showing continue already release will the next the over promise. the we While is enhancements platform

for and these and the Composition of strong preferred fact, the software. multiple for Quadrant also reaction power are and recognition solution in the positive. is EPS Important industry, insurance quarter, multi-million-dollar another partners. rankings placed are Leader third year. grow. for high-value substantiate are security order a our companies our delivered highest guidance We all named regions Wave in were very Industry for month, summarize: engaged investing of on application and Gartner’s top of the To Polaris. Coverity were leadership contracts a portfolio, who revenue the and Fortune for been testing; Last the for again such The at GAAP in placed in year end as Synopsys Analysis Forrester customers This to continues significantly very company raising we the open-source was adopting as their for a customers We number has We the leader delivered in also our broadest who included growing with evident choosing in row, across a of Software recognized XXX multi-year, early a level. products. Magic non-

progress step-by-step in our making ops We’re margin. expanding

and revenues and products growth. the portfolio our well, Demand year new rapid software profitability of Our multi-year adoption cycle And in scaling of are to deliver experiencing adoption. to security substantial for high, reaching of and EDA a and the is double-digit full XX% quality another total reach expected we expect about year. for our is early IP stages low business

want important customers Synopsys to always the and work thank helping commitment continued meet hard to its say and I urgent their objective. Finally, you global team our for to

call the turn now over to me Trac. Let

Trac Pham

Thanks Aart. Good afternoon everyone.

non-GAAP one double-digit and to outlook year, with with margin are trade top week’s growth. support. continue and we revenue are an well, business, XX%. the or non-GAAP and EPS on-track on improvement, basis, operating another Last government does Operationally, deliver customers for of software provide We to unable outstanding restrict reflects apples-to-apples to currently its ship of margin impact have execute ASC and products, bottom-line substantial an on affiliates good growth delivering operating our growth as updates action we an that high-single-digit XXX

business are we contracted result, new of and As not is able hold. revenue recognition to book on a currently

to half, still details revenue guidance we’re our I’ll of non-GAAP and able in top our provide to raise EPS due range. the more our of moment. end However, first a strength the

comparisons All year-over-year under all and stated, otherwise are numbers. Topic QX our to reported ASC results unless are Now XXX.

hardware, of For or of consolidated metrics X% or broad-based to $XXX as System results, generated record X% equivalent quarter XXX, million these well across last million, strength please a growth, Semiconductor revenue our Financial had as which $XXX segments. excluding a under up Design year. ASC Supplement. both financial high-single-digits We and & refer second saw summary was total revenue

the at a expenses as $XX expenses XX%. consolidated segment million, and XX.X%, Design delivered operating At level, other of share margin XX.X%, gain our this Note and at underlying managed million. million, the strength of adjusted such revenue to were allocated was the operating market Integrity statement, non-GAAP with $XXX that in compensation, operating an to dynamics System of that and been revenue that total are Semiconductor GAAP both an For & expenses. certain quarterly intangibles, capitalize on consolidated expenses income variability as Software increase level, have resulting Total segments. approximately $XXX Software were of Continuing market. stock-based costs Integrity, reflecting expenses business amortization and not and XX% of margin continues costs and non-GAAP down high-growth in

for of with We continue earnings corporate over to profitable share consolidated be reaching per the of Software per full margin share $X.XX. non-GAAP year, operating least and drove expect These $X.XX, GAAP at turn of Integrity long-term. the to our the results goal earnings in

operating driven of strong ended collections quarter. quarter Turning by cash the $XXX cash was with to We $XXX balance million, total cash, the million. and debt $XXX of million, flow a in

Before let week’s around color government moving additional impact me last to guidance, provide some action. of the

to impacts. Because duration revenue, we be for to array either contracts able our believe with recognize timing business to the the an contract on we I or depending not As its lifted. on and that account are until the resolution this revenue ban action. restriction hold ranges recognition new for mentioned, affiliates, of of and the book expires ultimate is customer We will unclear, the the eventually current we’ve potential of the the is government of expanded able is

$X.XXX which a rate Our to expenses $X.XX non-GAAP $X.XXX in costs XXX and shares $X.XX of non-GAAP share, our of $X.XXX of and the Other additional restrictions, million, operations billion; to margin of billion; of ASC $X.XX GAAP non-GAAP non-GAAP per $X XXXX of between we million midpoint some for prior growth; an expenses $X.XXX income future between million. XXX resulting $XXX resources minus Cash XX%; earnings to increase normalized the costs expenditures restructuring flow are: for $X.XX costs the $XXX $X.XX and total due earnings million; trade and million; at and million of to approximately XX%; midpoint on capital $X.XX targets, expenses fiscal GAAP share; XXX per the $XXX from Revenue operating just billion, at based guidance; to over and reflects between reallocate year and uncertainty total of million and $XX a between outstanding minus tax as $X.XX and over

CapEx We XXXX. by roughly expect continue to drop in to half

million; single targets and XX%; long-term the non-GAAP non-GAAP per total I’ll $X.XX reiterating $XXX per between to share. $X.XX share; $X.XX growth high-XXs of $XXX the expenses and growth XXX costs million and shares Revenue EDA, high-single-digits, expenses million; between by income normalized between and $X double-digit minus our driven GAAP earnings million non-GAAP margin of to longer-term. the range, and million; total XXX $X.XX between and costs for by Software XX% the range quarter: the non-GAAP XXXX, our growth, to Integrity low-double-digits the reflecting operating objectives. for for third XX% digits in between revenue million; million; $XXX tax and $XXX rate Annual financial earnings mid-to-high is conclude by in $X $XXX in expansion Now to IP, and $XXX and of and earnings other and and outstanding minus expenses million GAAP

that near-term longer-term Our half put to the first our reflects driving operating to a us execution will achieving objectives. path results on commitment our in

strategy meet these over value to enables I’ll And substantial allocation the balance shareholders. questions. internal a investments We and operator while objectives, capital for growth a external us maintain that, it Our for turn and dual to robust share-repurchase with to program. of returning

Operator

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

Rich Valera

has ago? afternoon. relative say some any a there you, specific the demand your change implications, in the Aart to Thank the beside from or other ban is you good from outlook quarter which would customers

Aart de Geus

months There don't Actually change. some think ago there’s I have material about seem settled. say that I that to would three no, was worry other

companies remains itself better end among I doing but the others, the the strong as who is market as think is think than just was re-adjusting I demand just it before.

Rich Valera

rev Got just rec clarification on then the Huawei. a it guidance the Trac and with for that

is of correct? we that can assumed that that no the your range Huawei assume revenue is of the rec the balance end So year, low there's for rev for it

Trac Pham

the That’s the the some the first of possibilities possibly which to then execution in of restrictions which of capture amount been gets the very effect the that listed to higher then correct has of strong Rich. and remaining the range time. in end We range reflects half try and widen reasonable

Rich Valera

it to that up been had with not going is to you change low so fair Right, have Huawei? had this would the end say respect

Trac Pham

correct. That's

Rich Valera

and respective all then kind year. Got had of comp tough QX, business to with it, the which hardware obviously but think comp in generally a for a next a of I tough has

year that this that year? but into a thinking sort on business, thoughts about my came flattish? thinking just that were know when the you flattish. in quarters gave hardware sense don't you now we're you you think that were guidance of if that the I was would know change being specific I into couple you of Any be that

Aart de Geus

predicted use think words think fundamentally we from away are and that No, are. while those where reasonably I we the well it I didn’t have we not far words, all

And so so do excellent. see that is demand broader and demand, we good

think that is was in far will actually So year so term particularly long overall at this in back. I and good just sit Last the the strong year general. just

I think it you characterized correctly.

Rich Valera

Got very gentlemen. it, thanks much

Aart de Geus

welcome. You're

Operator

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

Tom Diffely

Yes, that removed Huawei. up had I point? at near good question this on following location been on Where there was Rich's on us afternoon. applications

Aart de Geus

or our right helping customers engineers constantly now getting not rules we include I specific you Well follow all the know we want know support. to individual they just by exactly with intricacies we don't all and and set applications, actions, the essentially into have but them think go the the you government of

Tom Diffely

significant as well IT Okay and traditional it was tool question combination that, one a have the other. I a was on as more that just than EDA both then, of

Aart de Geus

in Large our wouldn't we it pieces. participants of our individual companies typically all well portfolio. break Yeah, into

the IP. include and would certainly that tools So

Tom Diffely

of to there some strong in of customers some you growth Chinese see space. was said as IP from comes actually a lot are new at Okay, you you the this the fairly point

do see do, the I the other tariffs on cloud? there delivering on, from business and versus your EDA so between difference moving you guess over impacts is you Okay, if trade war, the traditionally

Aart de Geus

of No, companies. few even changes speculate would some changes. see think been we any Obviously will say, really suppliers it's I don’t early act. about any period. have it's to and last talking there different think market, semiconductor see readjustment I the in be the changes But to early I'm too too days there much I how

Tom Diffely

at and obviously when any full that the got but created Okay, that or one particular I there other takes of you’ve look year and view spread then effect your Huawei, Trac was puts dampening the event? was really it just and

Trac Pham

isolated top fairly first you improving year guidance and constructive. line you last seeing well the half in good QX issue, very very that at because was can see growth is It look against in you are when results very for margin our

guidance range the so week. And really widening that trade reflects the went the into of last effect restrictions

Tom Diffely

Great.

you. thank Okay,

Aart de Geus

welcome. You're

Operator

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

Mitch Steves

you Can me? hear

Aart de Geus

we Yes, can.

Mitch Steves

road, I I Okay, two have questions, pretty only but on one am the level. apologies first is so high the I

it to higher have any end invest potential Maybe to China guess try with make outside Do here. US it vendors higher higher thoughts sense now, thinking they banned, push tax. wouldn’t about for there in So would and who the the the to, much, on a kind essentially to I’m Chinese of want got I into go do to the that? of obviously is Huawei tensions this but that you try get chance node too the also now

Aart de Geus

that very or get being try on. the companies developed think most think outlook one demand of provide forward are customers economic strong, Well, different technology. strong given to any ways, in nodes think goes investments overall that the end reasons signature is we our high why and our definitely under applications technologies, but that there in advanced so solid don't companies on will because part is the race the is the different and of away I business that are scenario in with this so and requires that you the I are continually products to sophisticated arena racing know all

Mitch Steves

over on pretty guess substantial is business, in that Q the Got help terms it, Q margins when and look Can to to the that’s high. you pretty take going I on basis. That seems you going because for limelight of one. already. this understand a think growth then the second track ramp, one, I Integrity XX% perspective had us Well, I Software the sequential how at XX% margin

So how next would model couple that forward in going the you of years?

Trac Pham

with this. start let Yes, me

focus quarter-to-quarter, of it's Let’s after in trend for a showing and five really know software direction on investment going We're in OM year. profitability you integrity that roughly heading or just the The quarter-to-quarter. that’s business, on to this area. years Keep growing right good this that the a business and market mind it’s we’ll profile in still very area. revenue growth, that’s be it's vary strong nascent invest to of the from but noisy continue the that and in will from

So see you'll growth us and investment. talking about revenue

QX terms For for average certainly but too lease QX. it results the profitability the in year term But the on and about as business, to OM. would dynamics nature be to do of of we this will we for the profitable. quickly definitely cautious be heading I at track we be the Longer that expect given corporate business, though, just extrapolating are

Mitch Steves

thank you. Okay,

Aart de Geus

welcome. You’re

Operator

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

Sterling Auty

I two round the or the China didn't I I apologize, situation. know following don’t guys. Hi the thanks. Yeah, quite if static it’s questions catch

else The potentially on quarters? all anything coming over could I with revenue to first that's Is it the up. currently is, one that one revenue follow hold? products all got the come there related is put that on customer And line

Trac Pham

all one So revenue to products revenues for all the customer. related that includes guidance

Sterling Auty

perfect. And cash what collections Okay, – and is, so revenue In statement, payments. catch the the I at for coming and then customer of didn't cash about there that one no flow? is other alright income all in terms

Trac Pham

fact for collections to additional new $XXX delayed. will our a cash outlook them, $XXX of to and able of we that be the for provide the does items. it’s reflection collections million guidance a assume just is of prudent couple One tax so that support the is impact probably of that to so aren’t million reflect Yes, flow an customer

is a restructuring took restriction we that that took we minor other the The QX. in part in QX,

Sterling Auty

I very in outlook? the FX last top and quarter bottom fair, think the that’s that on impact element. line and

Trac Pham

our that at in the Yen Keep beginning is one hedged the immaterial and denominated overall the is Generally, results. to the that's USD currency of mind, not year. in

the So pretty line FX. top bottom and is by much dampened

Sterling Auty

Sounds you so good, thank much.

Aart de Geus

welcome. You’re

Operator

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

Gary Mobley

Hi question. operating follow-up everyone. my Thanks for the question on the for Integrity Software A margin taking business.

You mentioned the long What term target to of know being at has high be achieved presumably to corporate to level target? average, get XX%. that you revenue

Aart de Geus

described we and and out go-to-market roughly the to model back-office that. the we also where infrastructure, organization and that but path there Software the portfolio have Integrity time plus last have processes building is our in product the infrastructure, will The the invested only the scale that over systems in the we for there the spent XX% is few growth not continue or we on years about if then be growth

that improvements continue to in growth as through will revenue of scales. operating operating you margins that XX% So and leverage see in a business range combination

Gary Mobley

Okay, quarter, charge you've restructuring mention was least years. the the I you in at the a minor had a Trac second highest but charge in few think

groups So headcount and what what the know light restructuring impacted? perhaps product you and could on some be the shed you might was

Trac Pham

our across in top and hitting just – top important tweak business, high fine by an the a XXXX. the it really, growth to was focus to committed XXs it’s to is and Yeah, know. invest continue we’ll the of part, a and is that’s function it’s you all business We’ll areas combination tuning. best focus tune line very margin driving making try We've QX sure of expansion, the expansion that areas and on going emphasizing margin Gary and we we're – as that line much to operating so that deliver with

Gary Mobley

integrated Okay, captiviely I'll a the and hopefully have quick and circuits? But OEMs last and System between ask it’s merchant answer. ship the question. mix handy quickly, do developed vendor you it

Aart de Geus

that follow don't question. I Sorry,

Gary Mobley

Well, what’s system between companies integrated your immersion and sales OEMs. mix circuit

Aart de Geus

of You was becoming because know that’s changed do design are the in houses. never fairness that’s all to for large as world invest And the those same think very for past of that we at are chip other that fuzzier are definitions companies mentioned to more design some very know much you the providers because big in all system sort XX%-ish I of are in example time companies more It didn't much. in sure in system the the of the chip the being and have some that challenging. dedicated any the But number money it's a those cloud started chip. some of now people always spending

for fundamentally away not us but the picture evolving is is numbers. changing, So from those

Gary Mobley

Thank helpful. that's alright Okay, you.

Aart de Geus

You're welcome.

Operator

with And Griffin [Operator our go question next Jay from Vleeschhouwer Securities. Instructions]. comes Please ahead.

Jay Vleeschhouwer

evening. clarification. good you, Thank Trac just a quick

and most news it processes openings looks for restructuring, Analyst Aart in ask into anyway that You couple could a the provide this is had operational the quick you're But and we in fair that you Second related other in profitability now to meeting and into to that efficiencies, like much just Trac you you the did that New as a ongoing and with of the meant not mention Once York in did to are QX, in of to? efficiencies questions restructuring months respect pullback you your the prepared remarks back year And job internal what an looks that? but are to you at your out a as updated changing couple check to going backlog in also, processes a in those what U.S. afternoon. half to ways referred openings Investor if in that here. detail spot fact current came referred and ties go improving improve lowest of your you and really cost ago, still of an alluded as structure didn't have and company's in you're you the meetings openings and September the your in again at to a you China. number number doing, a

processes, maybe those together just structure, So hiring? in of about talk terms Thanks. issues of all cost

Trac Pham

and me Jay. the the been with rate Aart comments again. but can I’ll start it was outlook, consistent pretty was fine-tuning let QX board. business a actually around healthy across first really $X.X has at as up the the backlog Overall few was your the color, and run on provide question of where some pretty see ranges of you can QX. end it business, The billion, our business growth in So with the more make in

into a upgraded prepared For but of to they example, year would next the you terms really in from of in today year Integrity the and are the the the things they platform lifts at to are do Over terms certainly of where volume, we as processes what evolution It’s around then Software supports which spend see IT looking business can lower are for that than system improvements our us as Having know we of examples looking at in portfolios. and our that to supporting processes creating half. different traditionally the that in then and to us XXX we in ways are the implementation. are dollar CRM and into looking ago this seeing, years heavy is scale profitability last business absolute systems the go ERP and big are transition at that you get that level to couple relative the some allowed Those time of allowing it much the continue $X billion goes very business want system are of well from systems some business the infrastructure appropriate But you sort the business of first benefit are and business, scaling to that at, EDA in business. different that used in higher we infrastructure, ambition. but you things terms to. that our the the two

Aart de Geus

tool we comment going you a to maybe side I a of it's and creating I we little three had Yeah, acquisitions, bit pushes two push of in communicated on or Software forget investments quarters portfolio. back essentially if to, but when our the exactly executed so also that can broadening with a a ago IP Integrity multiyear number the Group, on number specifically

automotive need an may so good on as emphasis all So communicated higher right are invested as in but slightly there the can you putting At all we and processes in verticals improving with world and the reduced, additional margin after could infrastructure this well were looking are same the at Ops direction we round looking that I all to and we of but we example investments through because that emphasis be or which what investment, we the areas which on or only not consider. are going we every quite Trac the think and continuing things tasks are these even looking products there. of time, mentioned, additional and for business side, customers potential, in we've at, very literally have the areas be done interest others the

tuning fine fine of And list so but does the a is tuning, actually long of it a an have impact. lot

a I openings, because the business how and to are units change time. have to that to needs have has very function filled, point move openings a they geography geography from They bit number the where do which also position from time looking for of this what do as these are, a evolved, situation. we time little been also revisits of large in at the we As think

anything I result you the have get pushing that heading abnormal there at that, you but So organized say in an in the are quarters ops keep watched and we're if I least inkling well think direction. last on wouldn’t should we is the very right to few margin serious the in and

Jay Vleeschhouwer

Thank you.

Aart de Geus

welcome. You're

Operator

next ahead. question Please Celino Crest. go from with Pacific KeyBanc comes Our Jason

Jason Celino

guys me? Hi, you hear can

Aart de Geus

Yes.

Jason Celino

even segment, bips topic, know we your margins operating systems you the core appreciate How of the and your I semi how should variability we margins. think XX on by you margins increased but the quarter-over-quarter. those at know comments on linearity of Staying should the margins? look about other

Trac Pham

progression high steady we want from multiyear to year is You were XXs. last you see where a to look on know, as in you basis XXXX, which be we the where a should

of a particularly the that that basis see a it contracts trend that give the we You On mix up, very highly are progression quarter you that. will in towards steady can that overall but or variable, very an shipped on trajectory. the see lumpy business play quarter-to-quarter quarter, be upward

Jason Celino

said can new some are provide some you ZeBu good Okay, from product, more getting you that? X relative customers, feedback you and then around the maybe color

Aart de Geus

of can know capacity of by one capacity larger key your scale the Sure, the can capabilities the of you (NYSE:B) fact is required the it really and do that it as that is the ZeBu (NYSE:A) customer. you needs X faster that much and

to but other to a your in the actually can the also you on Lastly words, so such very that yet. you hairy challenging some be hardware attractive and solution them is found designs, that to problem, It’s software you In don't equipped for. can that both a implement virtualize has that on one well problems that have an silicon we you and out actually per before the are makes one lowest solution. really emulator cost turning you can running have as start computation market solve, is

So where else, we are this. nothing the seen that we've or is very of have we to the also in are that intrigued started use few quarters are that encouraged and if broadening customers number last actually this going

Jason Celino

Great, thanks!

Operator

Gal from Berenberg next our And go ahead. Please Munda comes from Markets. Capital question

Francois Yoshida-Are

well are that as you as a of for was necessarily verification China long driving and or is then how for would are hold, the Gal. mentioned system companies how this their customers purchasing just is you on these the revisit follow-up just Hi, hardware software said designs? not complexity Francois be actually wanted We you that hold. were I contracts do that think wondering on to on

Trac Pham

on focused ’XX. guidance Our is FY

are the you So and of In in our restrictions guidance. that would the the end then lower in that year. of revenue does the the range effect end the on higher earnings in it the the for particular reflects change be possibility rest event to the expect

Aart de Geus

all the how prototyping, first use they your people that the it invariably also hardware in me customers not differently, on use let meaning that, Regarding both, to question really say the use most know typically us if software, got place. because that's

have to problems and start far inadequate that faster the the For can as people using once by as evaluations software get and to we on woefully smaller you speed where along multiple get and go much grown, hardware theme on complexity has is the way. the the try that's results you and

would diagnose powerful that's and It's work very, have the extremely software the fast of make simulator debugging actually So, important comment that the and and set other we is happens now I do simulations. very what thing our a both so very, when another wrong is something debugging that its where one with with very goes thing to to capabilities software emulators.

Francois Yoshida-Are

of of what's those kinds great. Okay, And the contracts? length

Trac Pham

typically Our three duration three around runs general is it in years. years,

Francois Yoshida-Are

one Is Okay, left think for more built platform. benefit I if and just the completely integrated margins? roadmap on platform we is for completion and to not that had Polaris the that how then what's your and should and about be in to your what

Aart de Geus

detect tools develop and Okay, let can code. back a multiplicity of platform let security step and all platform is use the the one about. really is to me as a of about, that you Well developers take say the what quality all issues variety software

and more the bringing was little version the you at have purchased early out to-date and all so also. actually platform What of a the tools including is set spring by is to the it this have acquired turned it's ago pieces year of that the some aims services first there. through the of that set already that way together customers have with was that we some we tools platform was of on Coverity so Polaris our first platform have the the products objective and bit realize year And in to it the product bigger of one first a that than our that for year, of this

difficult would broader first together” works “the stuff of place. one and early have trusted do, that's and XX of you is that will or the become a and XX particularly issues that in rather if remedial this of the is more as we to a so constantly progress indicate our some and development ITs, that around The a And have the available. different the as the long that this for easily head diagnose better and development for [ph] excited EDA Polaris seesaws know so so the or we were we partner is heads these course companies, in of of each As more company we And and well. you said that, a while And comment seesaws things lessons in through about these the to XX participate applying cure space. we are about because large why have learned are how know challenge to that tools to are larger many now why we we of to the have on security. for making relevant of really so situations, the Integrity last because challenges of months, do from can Software not this environment next you is you do are companies years together what miracle and provide lessons there platform, all best course intend lot is now IT XX work of ITs

Francois Yoshida-Are

very much. great. you Thank Okay,

Operator

back I’ll at time. no closing host And any there for remarks. further are queue over this questions turn it in the to

Aart de Geus

on good terms QX and appreciate situation. are been this the that, across if trajectory noise and us. while two the me in of first on has all we afternoon! we general, earnings to on static, hear the we good of control you've a clear hope understand had those start quarters nothing can our a that messaging there's market that so no Sure, the that and I the all looking Is else, year. of in have for bit release. we a over But our you per and things apologizing continuing at by loud most any in the been and of interest let came so Have in we don't that quite there's that business least strong

Operator

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

Synopsys (SNPS) 22 May 192019 Q2 Earnings call transcript