SNPS - Earnings call transcript Q1 2020

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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 of Fiscal Year 2020. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instruction 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. go this Please time, Investor ahead. Lisa Ewbank, Vice

Lisa Ewbank

Good of Synopsys Trac are Laurie. Thank call Financial and Hosting Chairman Co-CEO Geus, Pham, today you, and Aart afternoon. Officer. de Chief the

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

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

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

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

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

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

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

Aart de Geus

cash $XXX target communicated non-GAAP operating margin expansion, QX our earnings or share with afternoon. mid-teens GAAP non-GAAP per more growth in year flow. exceeded an earnings targets. per and high-single the was was met range Good fiscal ops above million $XXX excellent of all million at substantial we In growth, guidance digit $X.XX. as to start Revenue of our December, share we $X.XX than revenue guidance, our earnings 'XX and

Trac for in We the the will reaffirming financials are guidance discuss our detail. more year.

recent have coronavirus at overall items the around the tension landscape, ongoing generated world. uncertainty outbreak the and Looking geopolitical

priority employees, customers the health and has the our safety Regarding been and partners. outbreak, first virus of our

continue they teams execution. and to monitor support the as We our situation continue drive to China business

startups persist companies and by designing degree proliferation Smart hyperscalers and with will be expansion. complex IoT and central urgency, AI cloud Everything evermore from the churn driven by high come. to traditional electronics devices those The semiconductor learning, challenges, XG, in driver and of automotive, a On market the of and ranging is new years systems and companies for machine to chips

As a XXXX. continued has for demand solutions our result, robust in

technologies and Our the products spectrum software, silicon central built. systems innovation spanning from to absolutely to the being and ambitious

the product share starting me with EDA. quarter, from some Let highlights

An production new in fabs With important differentiator into of our tools in design highly the partners, go not lay development. most well new our to for the structure simulation but before the for Synopsys design. advanced enabling position for continues ready to manufacturing leading sophisticated process technologies, be transistors, and these we manufacturing assist technologies groundwork be only our and also tuned we world, needed

is ago. of called in last A lower the different top new product, a this several has our literally resulting and years, over Synopsys far a that, power from algorithms Fusion showcase example Fusion about On that tools faster Compiler introduced chips time. fuses less of year in pioneered approach

area very roll just its our usage superior production of a to as of a results head-to-head winning life design on applications. benchmarks many well, revealed to performance, plan Within a few exploring ahead far initial a progressing are tool product. Results thus It set the with from customer out. engagements revolutionary with blocks few introduction, broad Fusion power months Compiler of is itself consistently and across

multiple cloud system competitive In to influential upon several QX, we built houses. firms ranging the impact hyperscalers and largest from wins, global processors graphics breakthroughs communications, to high

flow for next generation its processes. Compiler Fusion digital chose AMD design of example, its For full implementation

below. X-nanometer. and displacement X-and a next-gen a designs generation ARM We're competition company mobile large is spending Compiler next significant CPU electronics the deployments ARM leading at the win large of on Fusion at XG graphics for X-nanometer hyperscaler achieved at critical and for at core. We multinational displacing design a core-based consumer company

semiconductor new large deploying run a all graphics the in Fusion U.S. advantage core on of design. designs of for new leader We better expanded is taking company leading wireless semiconductor with at we proliferation designs, quality win results. company semiconductor competition ARM Compiler time A automotive leading a displaced at and a and U.S.

represent continues While still we Fusion a gain, approach event. relatively for Stay results product our The March our exciting cycle, revenue Synopsys our great will which flow as powerful share at significant across momentum tuned Silicon early new usage rapid some pace. wins product these getting Valley and group and overtime. innovation as concept in is multi-year important into very announcements is user

advanced growing turn a the that and highly me now XX displacements design, and a to push seen product progress flow over last full a underwent nodes, Let to continue not excellent we number for innovation custom area see engagements. has only are now multiyear competitive of we months,

expansion Our driven innovations designer maximizing on productivity. fresh by is focused

saw this benefit excellent our revenue custom quarter. experiencing from growth compiler and we in are Customers this product again

global a flow expanded competitive its full impact example, significant a systems usage displacement. proliferating after company For in high QX,

and image Additional a compiler wins a silicon custom sensor include CMOS leading developer photonics company.

one our where growing gained large board, across market driven global across a software, in Continuum demand move designs. in hardware-based to maintain capacity driven Platform complexity verification for position. share our platform. high by we needs our share Meanwhile, at QX growth In the for verification verification now me is number hyperscaler Let continued we Verification their new

software particularly well of capacity our is bring up The involved. speed are whenever suited and solutions

we last to X unique including for their strong both visibility. our over high and gained QX, repeat hardware and continue system solutions a momentum and for performance debug time tough with logos fast profile systems incumbents semiconductor very bring new we very up comparison, example, chose superior for compute ZeBu due XX NEC our companies. the customers. and high existing year-over-year In makes While gain new QX year orders a emulation to performance,

QX, we half the also the acquisition announced base of which FPGA portfolio. further DINI prototyping expands Group, In our

memory, number provider portfolio we automotive, of AI, markets, strong all one interface, IP IoT industry's continues foundry-specific covering key broadest as the to results, and Now embedded analog provide cloud, which XG to and the IP, mobile. deliver

Our in Express in is evidenced achieved We've design several applications areas. PCI high-performance more computing cloud demonstrated X.X. in already strength than XX wins

traction. Our and continues XXX XX die-to-die new gig market to gain SerDes

micro We also have for a applications. major a China company significant IP win with portfolio e-commerce server

Tier automotive leadership by a top USB automotive in leadership leading of used Our the seeing semiconductor XX industry. being also multiple X adopting and companies to process. IP IP meter momentum is semiconductor generation our suppliers led unmatched and USB X.X We're XX in processors newest position to grade where that our XXX

and selected One notable embedded Qualcomm, including example which their Ride test is automotive and for Snapdragon interface, solutions repair Platform for or ARM IP processors new portfolio autonomous our driving.

latter IP with to acquisition INVECAS, these across Finally, of our to eSilicon IP further high demand the enable customer week. we with Along to from continue our just valuable meet technology, development scale portfolio technologies and closing last expand growing acquisitions also us markets.

code period agreements, the more in a We progress Now continued Integrity, delivered the issues. than several with to dollar software last levels Software year multiyear, beginning driving that verticals. the XX% quality up security, vulnerabilities and same solid over multimillion for We booking business the year. across tools saw test multiple

accomplish business; XXX entered revenue channel refining leverage in market to scaling Polaris into software and the our two, on four fully to better four, we're three, and To management expanding DevOps X market; complexity the key platform new our one, a a enterprise million larger regional to our customers, cloud-base team size scaling key Integrity and strategy, December, of in we've of evolving As differentiator to business. Phase serve large Software product billion engagements for integrations; verticals X space. I the focused this, areas; mentioned additional consulting our

We're moving fast of all on these.

composition desktop. first code bringing code, and analysis announced of fix last Just to developers to proprietary Polaris in security enables find testing solution platform, known vulnerabilities that of the development developers open environment. week, in we within extension desktop and static directly kind all and This its the weaknesses seamlessly the source software

scanning Tinfoil broadening Dynamic products Security the our and offerings team API added product or We Testing from adding capability. also Application DAST, and Security, for

and ramped activity the also the efforts as in Our scaling about organization. hiring sales in energy well we've progressing the fields excited are up

example the one combination is of the consulting products world. power the the of good and of in of largest A pharmaceutical companies

small with to both product service initial respond help security bridge, proliferate additional solutions. engagement Our them help a a began to grown relationships them services add to to purchases that our include has and

scale leadership the to to management our and moving also teams fast next We're level.

to have a million for an launched new your $X into level. lead external We billion general $XXX search the to manager innovation

to positioned platform a and their consulting new will into and revenue enable positive in the efforts a time, improve high space this the to flow products, with There's value we're by these quality we're combination and great well services. a While encouraged tremendous opportunity of companies of software enabling security side. over

In QX reaffirming sophisticated system a markets, immense global chip was strong companies year. XXXX. to and to designs for very good as well invest in the our We caution of outlook around start results with delivered critical Even electronics financial some amounts software. closing, fiscal as continue and

prolific introducing capabilities. differentiating is and engine of a exciting quarter, we be will this and new innovation products Our number

mid-and margin and our are targets. committed and We on growth expansion towards track long-term

delivering results. and our hard their for strong thank customers dedication their business our me let and Finally, employees in for work continued

the now will financial Trac highlight perspective.

Trac Pham

start end the strong the year, target revenue plan. on for for Thanks, or our the we Aart. above pace the the year We of execution, range non-GAAP four afternoon our earnings remained delivered and our for share meeting targets well to high and guidance on are relentlessly per Good focused everyone. at exceeding generating quarter quarter, range. We

typically quarter to quarter another million payouts, an repurchase. and due cash launched a $XXX to which produced that is positive flow we in strong We a a share compensation outflow contribute variable collections,

great our diverse demand our for in revenue position well as of with recurring increasingly peers high nearly of us portfolio combined success Our XX% strong uncertainty. base as those customer model product

coronavirus Multiple market factors volatility. Based guidance added on uncertainty entity we as the and are abilities trade broader manage current and our have of and reiterating our strength year. including business, confident to through in well we the as for the situation the export restrictions tensions our this are view our to list,

$XXX & year. IP million, quarter was stated. revenue comparison over otherwise are generated now results. QX hardware of Design the review our last segment tough year-over-year unless growth All comparisons first strong Semiconductor and We with I'll in $XXX strong a of revenue million. System total

within and restrictions, remain EDA of impact list, digits. of range trade software the hardware Excluding results our long-term target entity single mid-to-high

and Integrity more of life the revenue associated the than segment levels the XX%. business of revenue model, total, of recognized time-based for contracts. our Because was over million, Software the largely XX% quarter be $XX increased would

costs. restructuring to non-GAAP $XXX million, in Total in expenses. million Moving includes on and operating XXX XX.X%. Total expenses X were expenses non-GAAP approximately resulting costs a margin GAAP costs and of which million were

Our increases QX as of this timing in salary profile QX. the margin well in now reflects as year revenue change the general

approximately XXX margin on integrity to XX.X% the X.X%. was basis We're points a for Design margin track of operating generate System Semiconductor softer & Adjusted expansion year. was up for

were Finally, GAAP share earnings share $X.XX. were non-GAAP per earnings $X.XX and per

we with our approximately stock since million ASR, million. a $XXX operating to of ended over XX free balance We returned to QX Turning Including our X.X period. XXX generated of the in we've XXXX that at flow. debt or quarter this of million of XXX cash, repurchased XX% total cash a cash flow shareholders cash million billion

to we I delivered on targets, A reiterating noted, year I've comments and year the of we guidance. full before couple start to move a are strong our our as

uncertainty first We which general unfolding of reflects hardware coronavirus the split as are around half, XX%, and prudence IP well second half of deliveries roughly forecast as XX%, our situation. the revenue timing the given maintaining

million, and For X.X billion. fiscal revenue between GAAP X.X $X.XX XXX growth are we of of expect and of XXXX. billion resulting million in and XXXX, approximately non GAAP XXX we billion capital to margin expenses approximately a in costs XX%. Cash of decline expenditures X.XX from operations $X.XX billion earnings to of capital to expenditures non X.XX to X.XX Total share. Non-GAAP share. $X.XX per and billion, and XXX GAAP operating costs million Total between to $X.XX billion. per GAAP targeting expenses X earnings X of

the million share revenue Now cost between XXX million, earnings GAAP to to share. and GAAP million of total and million, $X.XX total, to million per non-GAAP expenses non XXX per XXX the XXX between GAAP of between XXX expenses the quarter, cost second and million $X.XX $X.XX earnings and targets XXX and $X.XX for and

provided QX, conclusion, In we're very targets. reaffirming full deliver execution focused in in us or again guidance our meeting strong year the enabled December. exceeding to With start results, good a our

$X as are in at XXXX range operating term, twenties our goals milestone of revenue. we We also tracking our well XX% profitability next move longer towards of by to high and margin billion

business We capital continuing on remain we capital sustainable committed value. consisting for investing shareholders, strategy gross while allocation of focus as long-term the to in balance driving shareholder return to

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

Operator

question first our Valera with Needham Please And Instructions] the from go of [Operator line and ahead. Company. Rich

Rich Valera

question Software on Our Integrity.

So and sharply said but XX% business looked had you you've in in decelerated good like you levels, business pretty the mentioned it business. level very revenue increase

So just wanted revenue refer to levels understand, reaccelerate? that if and to the drive why in and what business to might bookings deceleration

Aart de Geus

been business So, may you to XXXX referred correct levels terms quarter that weak recall of and you're reported last bookings. had bookings that, relatively in

the of saw you whatever is the what result transacted that plus so, quarter. was And during

actively to high build will now to pursue is and level obviously that. objective our so, we back And a

Rich Valera

reaccelerate commentary or double routines? the of digits when thoughts sort might business into Any that on

Aart de Geus

what the Well, so that's objective, easier areas doing that space. the some a the are a keep done fast obviously was opportunity it's they of the just that, the to move think term I the and quarter, integration strong thought said the of on Polaris is I to mean, more of new to the specifically platform that, channel finished invest cornerstones share of can And Those than we some long deployment balanced in of be capabilities. for just right, we've but of business. success sort we

Trac Pham

highlighted for should faster. in business in or we market XX% to at we December, and keep multi-year also that this Just December, growth are least for in to Rich, we that able And mind is to XX%. long-term and -- committed highlighted period with the that the we grow be

Rich Valera

to that. A quick follow-up

the the realignment relative Where force terms and personnel in. about both do like in is of talked and sales think You've that you some force you being be? much want to Is it like to of sounds feel brought personnel structure sales where got you you headcount it and more you've forward? business need you the pretty there sort need to the drive to bring the new

Aart de Geus

in now active we're Well, hiring.

We it the It's of opportunities meaning putting holes see plenty as combination there have filling right organization people. and of the hired a of opportunities. in the simultaneously both we tuning, number and are

of that generally in quite far but a they appear better So, some on no, the to 'XX sales start of feels good the that bit energy have year we a and we're shot have force from done, actually we than that have made a changes these of the front this last year.

Trac Pham

hiring that margins on business. as the our did additional relatively of I'd business that as also in part to reiterate us plan, and December, we maintaining we're it track said scales; continue we in contemplate that which still flat as We'll highs -- year-over-year. invest for

Aart de Geus

is the the we're consistent managing all described that So, commentary with we business. how

Operator

And line our the Vruwink Joe Baird. next question from with of

is line Your open.

Aart de Geus

no That's we one have sounds connection, questions. operator. of the like easier It

Operator

Let Vruwink me open. line check, if is Joe your

go to momentarily. into RBC Markets. he will I Capital may our Mitch here Steves with the next back queue pop Okay, person

is line open. Your

Mitch Steves

wanted kind to Trac. to The first point I one of

coronavirus raised guys nicely first concerns, would do your macro year in this question So encapsulated the there you you full you that in XX that full year quarter, the beat my a the change? believe no assuming macro was pretty Since have given guide? Or is. study,

Trac Pham

days, very a it's business year, our did full feel about say the that year impact we after for the guidance. a I of so year. good on strong affecting get We It's the of not outlook a basis. would meaningful very start the XX

year, of the a us good start left business quarter, one describe, there's we lot it As to typically gives good progress it's and the after still book. but do a

Aart de Geus

and actually stability high products. add multi-year is mostly that, not the are actually they ship fairly to impacted have of we our customers clear this. it so degree the of a may time, business our events or is like customers in able towards same to may business some At I If because be the customers' that

problems. be the of to makes to quite mostly or us, but so, way insulated, seen, should And its type I all remains isolated say of are if it these we that for way all

Mitch Steves

one, EDA on the my And just then second core for business.

at have looks guys if it a to digit mid-to-high X talked about last quarters, single the You X%. growth. this, look like X it's been now I But about below about

a be guess, revenue EDA the growing just that single? based mid-to-high And if Is to I is that half? year-over-year, software why to in So, accelerate if still just would why time flat I'm so, is going the understand case? trying back

Trac Pham

parts. separate to would question that two I Mitch, Yes,

first mind EDA The in emulation is, in up that line. keep does any part show the

be multiyear grow its affect perspective, to So from but on comparison. product nicely quarter-to-quarter, hardware in and group the that very continued tends lumpy continued to will a that we've basis growth

connect to The is the the trying line time-based. is, affected you're versus that, second mix last see to revenue part, transition by we that And Remember type of to in which did up transition. XXX. the to you're this year, that license going time-based front

described, we've colored as numbers but in this and list was year still mid-to-high line, to feel EDA of by digits. as comfortable the a the the hardware that drive for the model long-term the our is and and well we both EDA timing very comparisons the As it IP single entity about affecting

Operator

Joe to with Please ahead Vruwink's go line, Joe. Go back he's Baird.

Joe Vruwink

the EDA wouldn't trend? revisit I come activity is there a R&D I go. does your wanted through, view but business to If on any would XXXX last more Okay, their reason market customers XXXX. think, argue regarding that participate seemed uncertainty, EDA is why just and to in the that question acceleration I in appreciate performance there we your optimistic and have in obviously

Aart de Geus

to in mentioned no what the I quite -- not there's reason we that somewhat preamble, we'd because in designing. customer see aggressive No, as be think they're participate

in EDA is are and we where it good fundamentally, that participation absolutely we part should a IP therefore in in or a do well. so of be market And

I impact. have where there many some are so in because that changes we the cautious think market been just have had global

out encompassed numbers, we'd be the no we change the to that As gave the fact list. we entity thought that we

are technology that think actually, I with massive and high like leaving very alone GDP that. are a those The anything of fluctuation that or market things good that's the for fundamentally, we're for us so, the are dealing And But year. types in encouraging. we needs long-term

Joe Vruwink

what just were And up a snap on that Software orders then comments reconcile XX% quarter to maybe Integrity, to follow back if can trying really actions ago to this outlined softer ago call like started quarter you that I Are that Is there the a a you seems to things those beginning the about? or fruit other number. and are the some going on? talking out already bear

Aart de Geus

is answer we want a invested of the the definitely suddenly XXXX. fruit same partially, to the have Well, latter of bear made At because changes, I in quite and time, don't an the number a that not set norm over quarter. from where is expectation we good but an point overall guiding fact XX% the That's quarter every this view. of towards, is for was very part

And itself will over so that in manifest time. revenue

think evolve you then management. to the of lot X.X of mark league of we business of and a be billion have the sort opportunities to So capable above rising a I in different

And so all really level. we're are making the you skill at, scaling know that to that the of next investments many of aimed

Operator

of Jackson ahead. Please JP And the our next question line Ader Morgan. go from with

Jackson Ader

first was The on one hardware.

those update XXXX? out What if now are in we for last the and delivery hardware mentioned the sure, an coming not slipped year, So expectations on. timing of that of and deals heard I’m you large

Aart de Geus

the direction. in bottom be is half strong one delivery don't typically But we continues somewhat that is reasons lumpy strong have hardware a try true a that the of give specific timing understand is customer we people which that overall shipments to of and is will the demand whom. because think of Well, what It also some first second is, the we is actually the a line year the that and did half, itself that, in visible year. to

Jackson Ader

Okay.

give were on wins whether then or to customers the they wins, Can you the -- Synopsys a competitor. Fusion displacing these you breadcrumbs us a past? were sense you can were the I away where follow identify up or just and you the competitive specifically that just re in new a just follow mix back, think I were shifted maybe mentioned wins, the where either a winning brand of had or some winning the whether there customer

Aart de Geus

ways. and because rare the industry stable number was -- we'd has consolidating. categories. a partially The In yes, of answer been past, That chip hyperscalers interestingly they two strongly the Meaning and fall relatively new One yes, relatively interested that all is customers design. actually yes. be they has changed brand doing is in that, that becoming used in some are in substantially

to on doing secondly, able of tools are those an plethora be And there's a extremely is advanced utilization aggressive to And timescale. of extremely for companies just that design IP the succeed. our imperative

now all So, on and bottom very strong. push we have is technology, have line opportunities continue very, to we the in to hard it's right farms the but

Operator

We'll go Securities. America to Adam Gonzalez Please with Bank ahead. go of

Adam Gonzalez

ask that the First you China I product changes changes the then, And can see excluding you whether to foreign proposed see there rule? minimis to that from how direct Huawei de and and market, impact any forward? regulatory the the if rule the potential or discuss you to moving just outlook about market wanted trends just

Aart de Geus

would technologies, that as continues you pace, and China take moving the then is meaning our strong. list entity active new adopting say, I forward to Sure. away business change, Well, a no if rapid very be

future. we radical entity near and predicted the in assumed be had Regarding change somewhat no the would list, that there

changes out that do on the that to all in we is line our are evolve. We major entity rules true, turned not because far tensions how in would has So be chipping. but unexpected the expect bottom list, can depending impact any of the as between we on business things the to part not happen specific know, have ways countries

all nothing already an situation sort type is that or today. cause So of

Adam Gonzalez

QX? this a outlook. had detail such expectations to SIG you up prior goal? on outlined split half the ramp revenue the the then And and year would just stay about Trac, little the wanted on And QX what relatively still more second maybe think it for you Is for that follow expect a you are you I up between Can your margins that year. throughout spending flat that business, to the call give

Trac Pham

still goal. the that's Yes,

expect largest and me quarter with SIG, consistent first revenues We this and guidance. the Let half, first to year. we direction QX do to continue half. that's the be question, hiring basis EPS, throughout for reflected the to start second little our with point that's the the With of generally get regards do a expect improvement. year quarter-to-quarter, a can noisy, XXX but and you ramp But the in last flattish with

Operator

John to next Credit go with We'll Suisse. pitzer

open. Your is line

John pitzer

that, a the they're My change where you be position CPU doing maybe first the going using takes to IPs the question, kind they've the for opportunities large are the within pretty or guy from create good and you seems to to of a more away couple what might North or of own off-the-shelf everything, their some over their been block philosophy EDA historically buying that IP puts and to next move I'm curious, space? American going kind where had fundamental design.

Aart de Geus

understood we apologies, section word. sort my but John, every of

and the to try are sort and to to it you they'll interested word that. just three try trend, of that to Is response possible And or fabricate words think, IP a four so, sort we out made of most of the apologize. I summarize the to, words

John pitzer

sound this better? Does

Aart de Geus

Yes. There's sort were sound as of this underwater. you wobbling if

John Pitzer

a Is on or this I'm any not? apologize. cellphone. Yes, better I

Aart de Geus

Marginally correctly? the so, word IP get did I

John Pitzer

you what moving is methodology, as kind that kind kind they're design for going to space? CPU is North large IP where EDA blocks. their Yes. of means design internal guy using the to of American curious off-the-shelf a philosophy of or of be that I'm own to the less question The or different

Aart de Geus

I design understand to bit, which American changing Well, a little think more are I'll reusable the they question. essentially CPU use IP? try methodology guys, a of that question to the it slightly not their reask I North North because answering answer broaden me fashion I that CPU for it's to want recognizes for appropriate guys, the there in customers. and to American many not are the is

but design, some I learning-oriented. design for can that way is views more that the what tend and continue that use old there's say optimize majority, much last in that question certainly machine people AI, there's specialized the methodology and that are definitely But for a data CPU include no is definitely gigahertz, in to general more GPU be toward a that to I'll massively applications the all for evolving. a There's the drift so around

with that focused And data off and architectures that comes on much are chip. very in getting

that and that in than now close methodologies substantially has for these we counting all use in the advanced potentially yes, And the our IP, collaboration today natural so customers have the of I a more of nodes possible is think that design And quality itself increase with the made it the they're brings advanced meaning IP. of reasonable about IP that they IP did available the nature, past.

We work Company. and is takes with IP will a distinguishing also more very because we continue complex to capability smaller them the lot nodes, of become make to that to a well. of effort it really expect expect continue, that the the But now absolutely it

to express us the to is is continue for demanding it business more be and these will will we therefore, I'm to pieces business you in. but So it acquire is difficult, be and relationships area to essentially, good great more continue a where they because in with for grow. long-term us. to trying It from IP customers be what have a And to us

John Pitzer

helpful. That's

the full was And Integrity Is embedding cushion and year to we do that extent going of business? significant for Software expansion this to that on op what is no how year, the the a from understandable. in a that coronavirus expect said that As you not during that's there be in part you levels quarter you're my follow-up, impact any there op would guidance? into at fiscal Trac, the of kind leverage XXXX? margin inflection the business margin And there think about current

Trac Pham

our been So it's regards investments. going full coronavirus the This to and year. business question margins and XXXX, scale to we've best improving margins, consistent more outlook we and the comment up planning is QX. SIG is is and with think should that's the that to growing is with combination be With on the how with of My I be related FY not consistent pretty year, and that QX a numbers to the it's us year for to first productive be question the the in the meaningful. continuing

Operator

And question from go Griffin Securities. our Vleeschhouwer of the line with ahead. Jay next Please

Jay Vleeschhouwer

design revenue to For the a revenues on tough was to IT the XXXX, would you subs evolving vis-a-vis for evolve XXX on million mechanics regarding this the themselves design distinguish methodologies processes, although comp applications primordial to just and talk but decades flows, context has revenue? in employment standard are $XXX in are ago. perhaps you the of question you impact core or terms of the upfront the XXXX days your of for IT. revenue have differentiating with your terms in upfront just that IT first. to wonderful role of versus positive the of way customers a need from Trac, of to with IT thinking process total answer Could from do since customers Aart, methodologies, are you tools? IT over three or and IT. evolution when easier adoption in about, according How multiple to EDA In comp been aside of the those you of And themselves you, XX-K, to what you how speak a increased now fiscal there sure about somewhat regard the it EDA largely continue $XXX the at look you also case In think in you regard IP? core to by and million. design EDA needs I'm put that incorporation

Aart de Geus

Okay.

me Let start.

tools for ones all our into nonstop comes be and all physical deep of speed demand the nodes. design that certainly with physics with Of your lead to X.X course, a there's which that will do. of first nodes, with advanced is adoption continuation the to not a these thing reaching the the to start of can But extremely up and question dissertation, still to all tools, I hour

the less and there's defined version. is version that months, And months, another new way, within node another then that their three time, and comes by in out, of another clearly node a three development meaning

there's as out max. so really people squeezing adaptation are And the constant

nodes that more all parallel out is to value out need in more advanced the but to to the worthwhile capabilities. use products that, and of Now not out tools, relevant the put was also as most the nodes those people figure still are note maybe older being can some less that squeeze of they new

the trends on per is of Having notion continue value density. lot you tools, capabilities, can on that to with the of one more notion our need order the transistors that, tools Still is what for Moore's of are increased that said down do. sure slowed that In well interact not other. chip do we a two this increase, one adds highlight advanced and there could has if tools to that to the each make to the factor or that, really for capacity the three I Law, because needs

that because notion team play, essentially so will attempts of really our somewhat the every of the already to in other tools improvements capabilities absolutely speak. tools. do understand have profound top we of now between we'll the AI anchored are is is impacted AI and comes What increasingly, better to the and in have our have so business. one deeply tool see capabilities Fusion tools every that And application on what that is by And through of it

multiple a space, I'll combinations early The being as high and is here I'm at importance make speed, diagnosed of in of to processors sensors, maybe strengthening other chips, both and memories had the assembled chips each that talking XD verification and the such of are chips we the the in hardware which looking and of able software. trend where on fashion is last and comment with at that things continues the a the verify to the

to is continues the market. slowest determine something goes to quality same At worst will of time because in grow whichever the when or the

is in. where advanced And area emulation, stimulation the so techniques, prototyping play that

can is So will yet week, by demand keep sight. sort because going next of something do. that to what And I the no there there in bet those deceleration we are govern forces be for that another

Trac Pham

introduce we XXX our the marketplace seeing a said, growth in the positive we're good on our But and for described, guidance for basis. growth a quarterly the everything business. IP, is me this and as numbers as question saying in year about full your year. on reflect a us This that more does a low regarding business the by bookings reflected let full transition basis is we're continue the to business. multiyear that start Jay, That variability IP on a So double-digit to on a very very basis, outlook. And

Jay Vleeschhouwer

on you us your could Also backlog Trac, number? update

Trac Pham

shortly, you're the then see book know And run positive. business the was I billion $X.X that's to and up the pretty out we we that that, going at last directionally read rate and our very steady backlog Q coming Well, within versus quarter. is actually you'll that it's that

Operator

Capital next Markets. of go with ahead. question line Please our the And Celino Jason from KeyBanc

Jason Celino

hole fills Hi, guys. holes the maybe offering for in came my a your question. taking side how Can acquisition about has? SIG acquisition Thanks for talk And about? small current your other you Tinfoil The nice testing portfolio. any that of dynamic

Aart de Geus

a acquisition. is nice everybody. everybody new knows these It in markets, very And

solution? and the And many that are that timely, are we is are a decades. both then in experience we business for integrate economically this have always, question in where of rapidly acquisitions reasonable some broader can really had And course, there so EDA

is fits that that. the particularly Tinfoil platform. intriguing Polaris in so in And similarity there's what was nicely And so some

more platform too of it, the of to type versatile they the do not and adopt designed course, that we'd capabilities makes to as Of possible it to is more type have useful, integrations integration. there and make this for our customers But we these was love costly. the it exactly because have

So if makes with high-quality fact and ability that, at easier truly the that some way, in remarkable, company it is of their future. Tinfoil the by locals the I integrate. terms to add individuals that to We to look the stunning

promising. it looks far, really So

Jason Celino

over of Okay. acquisition how in far of in months, IP? last complementary the the IP opportunity the those similar then or as to the growth opportunity assets margin few as kind And the topic, expansion should about IP we think

Aart de Geus

question. Very good

is the is much technology. does statement some in the the the for depth small often just new components: a actually, drive versions very that our IP a say tuning customer, as is both would of And But work. other of breadth on variations They continually two but one exactly to the So needs etc. IP so technologies IP. require IP technology, what we really business depths be or do delivering some are would works new of fits part that quite specific a of maybe the bit I of

of just it And continuing grow scale a continuing overall. so workforce to part this to do that can is

combination And but needs both well that of eSilicon and so and the very was the a cases also of suited have. importantly, a we in was most technologies, that workforce type for INVECAS of some

see we as way of to just continuing So it business. essentially and broaden grow our another

Operator

Sankar We'll Instructions] go Cowen [Operator to with next & Company. Krish

line open. is Your

Krish Sankar

question. Thanks them. had Hi. I Yes. for taking the of two

one at had the for how from change I'm the that, the just now all? First has at edge? and centralized computing high-performance being you at a if distributed last like I it, and curious, on years then this change if Did Trac. edge. swung follow-up EDA Aart, requirements of look EDA for curious it's cloud toward landscape, for several Kind Aart. over more the does

Aart de Geus

car high-performance Well, you centralized. is lot call number edge an the computing the going edge, of it of most a application, computation that's if of there's reasonably a is into But a super true that. that

type would of say you need have in power, two things is marked unless difference battery-operated not that And changed: the low that for i.e., I one is design things. general, so the

you XXXXs. But a of now, the when It so. without really mobility problem. so be computational performance to a how started devices potentially robot in up can a the came lethal. in, edge time. is applications a the you that challenge machines up but early squeeze used no not can number be battery And new have the can so other much there, out lethal in definitely And in be never-ending come these that draining thing of car And could or actually is that's

chips itself of as of of and that design the that repair having duplication the the capabilities. in so example, And in having, a itself for at least for itself to diagnose and cases, diagnose one comes serve to temporarily to with other some as set a whole some faulty, by such rules capability have chip

rules old. all are Now it on many of while because us took a those to those rules up catch very

really we in I maybe is script and They come from automotive. well top think the automotive highlighted the of on on this. industry. Synopsys But now,

and the much of in are that pioneered. developed where so next And we now the so rules premiums being set participate

more it's So never enough. they're it's the never It's years, But those are to for while low-power differences. That for sort enough, enough. it's negative like never And our good A of words, the music these sound fast us. continues. lot like opportunity rest,

Krish Sankar

there a emulation? variable. XXXX that's curious, guide That's in but any hardware that Kind very that understand because unexpected and looks given virus. for your then thought impact fiscal revenue of Trac. you follow-up the I helpful, Aart, the is little seeing would not like are business, Got your would it. of been largely the have more stream, I a innovation stability revenue quick have of some impact hardware or on It of

Trac Pham

information demand the best we right customers to our reflects very the from now, be guidance strong. our Well, and continues have

think to I it going timing part the variability mostly of be to of guidance. it, the going contemplated be on is that's is it's in but that the

and about growth we As a in at is had year, which we what goes, and far record as that are we we've got the where year, we that year place. every mind very But of be grow say the we going XXXX. in to hard feel keep in to look pipeline good it's off

Operator

the a have Tilton with Berenberg Markets. Capital from We Josh question of line

Your line is open.

Josh Tilton

Yes, for hi, thanks my taking questions.

to the are Polaris integrated? rollout? Integrity, be once expect on in Software many remains a we platform left is the should out? total how rolled And just on months fully margins key functionality What First, step-up

Aart de Geus

long thing time, for years. strange are that will many Polaris the of a meaning, hopefully, as capabilities it's rollout being to Maybe answer, a that platform but there. The continue, basic reason is long,

deal handles way it have precisely the etc. applications we easier because well much how of that instead in with makes is, multiple And a power question different representations, may of having applications? products is for life multiple data different that the user platform the Now integrate to interfaces, do a

capabilities be already next. So multiple now Tinfoil And slated what acquisition is integrated that there. that, may encouraging we to realize is you on is have I mentioned that the

do so a And Hopefully, way can it. about many to that's good we things. think more

new between Now us, life the the and this XX platforms to area, have years. platform to of cycle all it's continue will which typically to do at They is but what's somewhere EDA, look our for lasted to XX platform sort still me hard itself a say evolve. for you in if

Trac Pham

margin it's helped growth, up a the variety time but And the platform, across of revenue getting the on benefit going expansion to we come from efficiencies both platform. drive ramp of as over operating then and things,

Josh Tilton

there? Has was following up helpful have full the up it Compiler. just been And That head-to-head Cadence's specifically how and digital on been Fusion so, against win if rates then going flow?

Aart de Geus

a it's have very competitor. competitor area really in one we mostly Well, that and worthy

all against compete yes, So Cadence. time we the

me now, leave at that, capability. Let very a we have it strong just very, the think fact right I

Operator

our over I'll turn to back speakers. it

Aart de Geus

support. questions, thank for quarter. your had thank again, and strong a you with We that, you the Well, for all

of a call. as quarter. forward you whole and year for of talking available know, that go, in after some the rest you, look the also to we on to have Be to you we later again are We the aware

Operator

ladies for using for now thank today. conclude for your participation disconnect. And We our gentlemen, and And you. you you Thank will AT&T and service. this teleconference conferencing may

Synopsys (SNPS) 19 Feb 202020 Q1 Earnings call transcript