SNPS - Earnings call transcript Q2 2020

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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 2020. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions] Today's call will last one hour. 5 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

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

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

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

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

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

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

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

new all this Finally, virtual awkward delays, technology dynamic. handoffs today, from glitches participating we navigate please are or as session in locations different forgive we any the Q&A

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

Aart de Geus

afternoon. Good

$X.XX. with all record our GAAP results million of second flow. outstanding with I'm non-GAAP Revenue exceeded quarter report operating earnings and revenue, non-GAAP share metrics. per was key share of happy cash of $X.XX earnings to orders, We earnings substantially guidance $XXX per and

and digital to internal primarily by we good on expansion goals. than plan, Orders progress were design greater margin our our continued substantially make driven software,

strength non-GAAP resilience revenue As the and a our guidance are we our margin of first of and reaffirming business, the for half our result year.

detail. discuss Trac our more financials cash flow the earnings in and While targets, non-GAAP will raising

let substantial me dominated highlights, landscape, quarterly its is, global providing of the the pressure market economy. recessionary which the comment Before and on by on pandemic course, COVID-XX

While from system around sector home, companies many continues in as and system unabated. world widespread semiconductor work to has a matter have stayed electronic of design adapted busy weeks, the the

for activity Driven the down. for or in work, compute downturns. need advanced sudden is slowing seen it bandwidth chip home, previous and this by schooling be design design continuous We've entertainment, not for

is to where XG, machine technologies, a new of and turns and be business or core AI be or continuous enablement. Synopsys Regardless company IoT, when is investment learning, industry ready the this again. way of its the they best at end markets, economy automotive cycle, cloud in the is up

environment. backlog our macro business uncertainties of withstand well-positioned of that recurring $X.X today's time-based billion, a is and of Combining a revenue the with high-level model, to non-cancelable Synopsys

the beginning With that context, highlights some let from EDA. with me quarter, provide

Our momentum technical push wins, Design and our benchmark unrelenting products. innovation throughout increased in Fusion Platform new is displacements driving breakthrough competitive

consumer well companies a designers. commitments QX, hallmark ranging product from and networking largest system world's by In automotive Fusion drove the doubling customers significant to number the our business as of tape-outs, of microprocessor as mobile, and Compiler

displacement XX-nanometer a included on GPU, computing semi multiple next-generation to edge mobile North world's company on X-nanometer. graphics prominent leading Key competitive ranging leading wins expanding design, advanced X-nanometer Asian chip a supplier and for American competitive designs the some from XG gaming of at

impact with very breakthrough concept, The the invention that resonates customers far and partners. Compiler even revolutionary beyond goes solution, with a our Fusion well Fusion

widely Broadcom, and deploying with This Design designs. who to delivery is expanded our our collaboration accelerate Platform X-nanometer Fusion X-nanometer of its we quarter, innovative

DSO.ai. productivity improvements exciting performance, of industry power impressive The optimized products, throughout and well with the further adjust in a partners, includes time as project automatically can engines In in pace. including we design area. And as chip result new several terms March, leading learning our is and it multi-year that innovation continues at of a result rapid the The announced optimizations flow. initiative

Using cloud-based of it computation, state-of-the-art tackle design handle a learning, to projects, and high larger teams creativity let tasks. parts well focus AI value-added burst on more as enables as project machine designers a and and leverage exclusively

on new IC enables IC product that Another Compiler brand seminal environment that a now die Compiler. is require Advanced approach. the and are of designs multiple massive XD is a they single complex a XD together chip. so combination new

an is performance for power, way supports opens such IC extend than capacity powerful conventional better a Electronics great package performance years come. to to and as very This and customers the industry new as chip far it and new and provides of architectures. parallelism also high-speed data multi-die density approaches XD benefits as a to for This disruptor. refer it Samsung the to engines AI computational of massive path who Moore's needs law,

that Meanwhile, being designs FinFET advanced ongoing is innovation and in flow the for Design, has Custom our resulted highly full competitive push displacements. used product a in competitive most driving multi-year

high-speed development Alphawave design Platform replaced custom legacy example, for Design For IP. with of connectivity Custom our its tools

than productivity underway. reward in Custom internal shorter a and Compiler aggressive expanded solution A notably Asia was XX our the targets timeframe. too deployment as major foundry its design Here meet projects helped have now in them more

memory, deployments also IP We for new and silicon designs. microprocessor secured

continues global expansions In to Verification platform leadership. companies is move our share and startups. technology significant Continuum the hyperscaler we're technology and our systems software, influential where semi at traditional innovation strong. verification cement companies, market seeing our now Across to me platform Let notable

On demand prototyping feed, cost of raw and products hardware uniquely high. emulators differentiated our and maintenance also design lower of overall, the our Competitively, are installation by and verification growth, easier reliability, a our systems solution caters high which is ownership. side to unrelenting for complexity

our we orders. this Just new hardware more quarter, customers purchased XX XX than repeat have and products,

systems seeing we're hyperscalers to momentum and and too, with semi very from ranging large Here good startups. customers companies

we continue the to gain year, a last deliveries the creates While and timing new hardware both of comparison first momentum with of with existing customers. tough half

lowering the as are interface momentum of solid portfolio the most complex we design time to in wins foundry risks. IP, specific are X-nanometer trust leadership computing their accelerating the foundry with market IP, specific requirements, growing than provide customers in more provider applications. one we memory, number for XXX our to high-performance addressing IP, embedded clearly libraries With and logic broadest placing Now and cloud where

semiconductor Most and recently, internet X.X, achieved networking including services for wins, a major our AI licensed company XE adopted customers. competitive who PCI Taiwanese multiple major who we and significant production-proven our subsystems company silicon-proven Express IP HBM a fabless and

high-performance X-nanometer availability continues. Our unrelenting enabling SoCs. announced We of IP process portfolio broadest computing focus for advanced designs of process the for on TSMC's

in our Our the and foundation HBI selected services leading power AI area differentiation. PCI our chose X.X, because of CXL technology cloud company giant and IP and performance, die-to-die multinational e-commerce our Express IP. And

high-end momentum ARC processors our ARC targeting processor is product today, as This control highest with applications Our storage, continued the also introduction for IP. automotive and performance processor such our of XX-bit embedded first infotainment.

area an mandates. that from to Now more Integrity. business impact companies delayed as adapt to of of our business This to shelter-in-place COVID Software one decisions felt is while working

longer orders see this range, While our returning revenue higher low-double-digit term. a sequentially, growth to revenue year that slowdown moderate will before growth the we growth to in improved did

ops to breadth serve DevTech The portfolio requirements. well of and uniquely suited roadmap today's our are

help great very software more interconnected for well-positioned providing products, companies strategic secure develop high-value a consulting a platform services, world. and While new high-quality to we are

product over grown breadth past Industry vision recognition have our of significantly several and the years.

weeks Just Security Application Quadrant updated a its ago, few Gartner Testing. Magic for

Synopsys We are is father's pleased the to quadrant. that the leader right at top note again position in

integration competitive achieved quarter during our several progress this multiple the We onto Integrity made in displacements and Software areas. the the Platform. of benefit portfolio Polaris We customers embraced as broad

We who a large expanded replaced of agreements adopt. the its saw electronics a company to broader customers of notable of expanded they our the incumbent and broadening products example One adoption global a as solutions. is set very number significantly

logos grow ranging hyperscalers customer leaders base consumer financial very industrial quarter, from electronics to to This to continued companies. well-known our services new and with

objective scale revenue time. million $XXX business next over reach is $X Our in to this billion to to

thank handling months and selfless let our several who you business. objectives dual to shown I'll also and I hand comment who to begin it agility past over many on want sincere the our to over incredible the commitment execute me safe. of COVID-XX caregivers I us thank employees the on Before with health pandemic. to the Tack, keep practical a have of

I our that believe been stellar. during execution this period has

took for global orders, In implement with addition shelter-in-place and we actions governments to to office. safe agencies continued to work the partner rapid our to ensure health the those returning to we peers, local a environment

job teams home. from and systems operations an infrastructure facilities support to Our have done quickly adopting and amazing IT, our work HR

continue teams chain and have R&D supply some worked well hardware effectively and very challenges. logical through execute Our to

our enable us worldwide team products and high The and rapidly development large foresight delivery excellent pipeline. product confidence strong advanced our to new give This had in to which also title. number demand results applies of benchmark IP of remote the

ship our on our and We customer orders our our support by are sales products quarter to [indiscernible] as engineering also Last, strongest team application stellar teams. record, the witnessed execution. demonstrated able from

sensitive is being. to of shift our coordination countries gradual and back very As to opening well a see with businesses a many employees authorities our states, now in planning we and local leadership in the gradual office

results flow. enduring. closing, strong Synopsys share outstanding In non-GAAP Design We executing with remains earnings well. orders, activity record second quarter cash and is delivered operating revenue, per and

benchmarking strongly. portfolio innovative new introduce We and continue to our products are throughout

growth, circumstances, substantial per extraordinary margin the we Notwithstanding to ops and expansion, share revenue mid-teens operating target growth, earnings high-single-digit strong world cash flow. non-GAAP continued

now financial perspective. highlight will the Trac

Trac Pham

afternoon, Good Aart. everyone. Thanks,

the especially Our by ourselves over customers the record noteworthy, past and challenges faced are our few months. of results considerable in light

forget goes delivering sometimes it's our these. execution, easy results like how history to work strong Given much of hard into

their So to our I'd for difficult my to thanks under dedication circumstances. add these like employees

increase This times gives business elements half operating periods nearly stress. to during the as a revenue excellent revenue. non-GAAP of XX% our well greatest high annual us leadership, very and us guidance, margin recurring reaffirm to base targets. is confidence earnings position and and the as the cash foundation, demand our our combination and in our execution These solid flow Complementing technology diverse non-GAAP rare well customer first for

QX. stated. All $XXX.X in year-over-year driven otherwise target unless our second in by Ending above from digital large our million to was strength moved results. Now billion. backlog revenue design. broad range, our by revenue generated particularly, some exceeded quarter part are total plan, substantially driven and of We Orders that EDA, $X.X comparisons

growth year. Design tough System segment $XXX was a strong by software QX million. of revenue hardware comparison strong This over EDA & in Semiconductor moderated last

high EDA target to range results our remain long-term of software hardware, Excluding mid single-digits. within

mandates, A presented HAPS-related through has shelter-in-place quick chain supply note them while due to managing we're well. on hardware, challenges, COVID-XX some minor

are partners Our and essential, gradually contract products they because top considered priorities. are are capacity increasing our manufacturing

Software Integrity of total. segment revenue XX% was $XX.X million,

program communicated and million Total previously cost These for to in million costs not growth. to Moving $XX resource GAAP were allocation expenses. optimize with long-term approximately expenses associated are $XXX on sustainable includes which COVID-related. restructuring our

Total were costs non-GAAP a expenses non-GAAP of and resulting in operating $XXX XX.X%. margin million,

generate of on approximately year. points expansion are margin to the non-GAAP operating for We percentage track X

margin Software for Semiconductor operating segment System Adjusted Integrity XX.X%, the the after segment, XX.X%. for & was Design

well per $X.XX, Finally, to range non-GAAP earnings share GAAP above and were operational were our per execution. target earnings share $X.XX excellent due

We million repurchased in buybacks $XXX ASR initiated in to flow. of record our cash XXXX, approximately million Turning flow. of now free generated million and year-to-date. our cash We've We billion $XXX $XXX cash. have $X stocks a since XX% operating completed

cash environment changed. global We'll remain continue allocation best the quarter macro will to use Our and not evolves. the we of has as capital evaluate prudent strategy each

$XXX quarter ended of with Our revolver. we $XXX and very paid of a total million $XX cash our debt million balance sheet the down balance is as of We million strong.

revenue Now and the for deliveries. scheduled in of to the rest due to Consistent of remain primarily the skewed the IP place assume year with year. to current later in restrictions List to which guidance, expectations, hardware the continues our timing Entity

GAAP $XXX non-GAAP resulting $X.XX GAAP million; million; $X.XX expenditures earnings flow $XXX cost billion, per from share; For of $X.XX share; $X.XX a of to share; between $X.XX $XXX and and are capital non-GAAP and $XXX $X.X margin non-GAAP million and of of expenses and $X.XX non-GAAP expenses earnings operating billion; $X.XX GAAP to billion total total to total per of $XXX and and our approximately GAAP targets billion year of to $X.XX revenue between per $X.XX total $X.XX between cost operations in million $XXX $XXX for XXXX, to $X.XX to the now and expenses approximately XX%; third $XXX million; per and $X.XX of to targets billion fiscal and of non-GAAP million; earnings billion; between million; and $XXX quarter, revenue expenses the earnings between cost $X.XX share. costs cash million million

strong business and conclusion, and reiterate execution, globe, strength customers resilient and faced and flow by a very our model In despite the non-GAAP to unprecedented portfolio focused or deliver enabled revenue raise and us our the challenges non-GAAP guidance employees targets. our full-year around margin cash earnings quarter,

sheet position balance approach us to to current capital strong well environment. thoughtful navigate Our and allocation, the

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

Operator

so much. you Thank

we I to like limit allow Before all everyone would the begin two Q&A please accommodate yourself questions to participants. ask to session, us to to

additional questions, take as have time re-enter queue, permits. please you the [Operator and we'll many Instructions] If as

our & question Company. Valera from comes Rich And first line Needham of Please ahead. the go with

open. is line Your

Rich Valera

congrats on very delivering in solid Thank the a team and challenging you, to results environment.

was color sort in you stronger core related, to the think net I in you you thought on saw you that demand, plan? of orders give on original what your primarily sort if any you that order EDA. commentary, it think if of was I timing wondering said expected maybe just a First, if relative was strength. a drove or And than could increase

Aart de Geus

working that last of there to just extremely introduced it. to that Well, a happened we I give attractive very all But this, a all announced time thing and think the we is multiple like Obviously, benchmark credit lot well. year, execution, pay we attention we things I hard think are and some so, time. are and products the number new other the of at are some in same recently that will just played at that a in

are during for products more of a the X-nanometer. continues to customers now seeing number the timeframe, same we're what because sophisticated advanced that hunger from is moving so X-nanometer the And

tools so they're the they of And that IP using the implications have both want. on that that strength and on

at I demand, we was the that so get find absolutely it it. way was there to a make And think for sure to and us

Rich Valera

revenue business, know the Thanks. And despite relatively more one, a there? the were on business pretty on any progress SIG growth. the bookings there? unit what head a could - just two, were unit say modest one quarter, getting you they business And I last good new

Aart de Geus

ramifications from completely home. were So we than people has Company. lower subpart a they communicate normally and surprise hustling of any were impacted that the interactions that in because don't some for COVID disclose going therefore very early expected for the lot did the by forward. essentially this not of a bookings time quarter on We the It's shelter

and expect six at months, On the recruiting, next that be fulfilled - will in we we and have the started we're a this so search now looking candidates.

Operator

Diffely Next, Davidson. we turn to Please the line of ahead. D.A. with Tom go

Tom Diffely

the assembly is bigger curious do your hardware a internal first issue do or do you suppliers a Maybe on completely test assembly Or your COVID in point, And question business. and for if At outsourced? was own do that final just house? in or still test? a for this you

Aart de Geus

excellent an It's question.

we of would we status the ourselves. the you you watch all who hardware, some cetera. assemble much So have what parts we of - as a the of of out as can. initially, you have it outsource disruption a assembly, do from, the little There on where depending markets the obviously, doing bit et is We possibly as that. expect, are global all when coming all is to And, of

is top the that quite team issues the by fact work us essential a HAPS related. on we us priority. that as looked And initially people this gave after benefited we at our And impressed that. assembly that, how high were the quickly of was with I'm equipment

the at And point so, time. this I mostly is think problem in resolved

Tom Diffely

third of fourth strong for model growth, guidance leverage look at pretty quarter, not growth. Trac, then Okay, a the hear. the midpoint And that guess, that's of for I when the lot revenue the off great implied revenue and to I

Is more curious Or conservatism? that, because is something going there centric? I'm is So it's hardware else it on?

Trac Pham

a hardware bit mix. of is little the It

in see And You ramping an as QX but you'll it got additional COGS is that from well. QX. margins improvement operating up that, in profile of expenses with some I expect does expenses have do to terms the hiring,

Operator

of go the with Vruwink Next line Baird. return Please Joe ahead. to

Joe Vruwink

just if little proposals current or recent this have new came I'm Synopsys just the up, events either impacted the customers couple export weeks wondering maybe close if spending around you and your joined some past decisions? quarter the cause the from, apologies, And been question. of maybe of since Or April out? of but any certain reconsider know, coming impacts bit anyway news to I a late, some that's restrictions

Aart de Geus

in able old, not Well, recent is, get the And two our what or very answer conclusion the we're weeks bottom fairly one is does and were good complicated, line of affect prohibited it already of sense The is no. the a us announcements to beyond while entity. it.

not had in worried we're any form. also have of We that customers follow-on any

fairly So I has been think, universal. that interpretation

Joe Vruwink

Integrity, qualitative great. Polaris, strikes the you're terms displacements Polaris And that Okay, I at competitive of positive. commentary, guess, getting and then just points, on to as some Software me of buy-in fact the that pretty the in for this

by So, question half traction thinking for have I give maybe you does it more platform in difficult surprise you is, a the your COVID? guess optimism bookings of And environment my created did about to that back year? and some

Aart de Geus

You they a actually, get know, because the by are with of different many from it overly the together. for trying work has we benefit complex an environment is benefit, well it, live optimism is whole buyer, the a is especially and many, larger tools way, of to example another for vendors. And companies, the point with to not good that that maintain tools multiple of platform this and

reason that have we that actually number structured in the gain that work the extremely of able that over the will precisely are Synopsys is fact actually together customers for more And direction encouraging. bought things counting because being to on. so And value time bring well together capabilities more fashion, and multiple precisely a is

Operator

Steves Please line Mitch we turn And of RBC Capital to with go next, ahead. Markets.

Mitch Steves

to a I Yes. here. margin the want bit here on focus operating

it kind So high the like get the exiting implied the you XXs the to of number, are going to looks guys year.

So I question. my really parts two have to

first Because imply of have high to you something from T&A exit that then 'XX one get correct, of just It's as is able And coverage a guys dynamic, should be The at going is target? XX%? much better work that you're kind that that, of software don't lot now, to kind XXs secondly, does we've your home actually companies, do. particularly heard that expense. than you

So guys points to the basis out of to going is extra are any line OpEx there be forward? able squeeze you way going

Aart de Geus

Let Mitch. me work backwards on question, your

be You're will this right, for of - keep And at in the mind the early XXs the revenue a expansion. we too largely we come driving we year, our long-term about it's are exiting We'll 'XX. year. FY ramp. the in to later remain committed that to in profile margin of But high goals talk that but on it's point,

certainly, we're for through COVID, diligent our that far more good flow us the on set time. which growth As where seeing executing savings the we about spending, and result But plan flow to to deliver a that's margin of largely some be the plan to year - element are by continue and out focus through going driven as year this to the - is over from benefits we're results. that driving know, that investing you

Mitch Steves

one one, there. ask could. just questions if And I small multiple I couldn't

above COVID push was of the any go in be revenue get impact of didn't guide? terms why revenue able about? out what was any terms of anything that because guide in the you the you So push had quantify hardware been to towards high-end, curious outs shipments full-year quarter? related guys do guess, So have you'd I a you could just think the or in sales any - I'm to if would there the sort there - lease How

Aart de Geus

results really, effect the No. really had the And small COVID or on financial a effect on immaterial results.

into numbers for the - we to but with overcome mandates the the we able had some supply were chain. As a challenges execute effect, went mentioned, we initial the shelter-in-place, that on and quarter. When

some this And revenues we were view it of point, QX. reflects but for QX, QX we're did providing see it of to and in best really move the its in from growing outlook QX. our in the At good a results hardware execution strong profile own,

we far, confident that's ability so why to guidance. reaffirming our in And that feel - we're execute to

Operator

line ahead. go to Ader turn we Please JPMorgan. of next, And Jackson with

Jackson Ader

Thanks my for taking questions, guys.

a on one of follow-up, trade restrictions. first some actually The is to Aart the

think I impact were case already that the that? and having I tighter Huawei, guess, out expect about addressed, List guess actions been end-use But April? from at control Do you what You end-user of restrictions, military end factored the the military put Entity in. any or I

Aart de Geus

we don't. No,

we the in So a solid at of fundamentally, given encompasses of have the half. over very this various you year the we feel last I in that interpretation have guidance point taken all been our that all And time. actions of that think interpretation and

Jackson Ader

all great. then you follow-up and Trac. Thank Okay, for right,

Aart de Geus

You're welcome.

Jackson Ader

Yes.

Just quickly cash on flow.

curious any saw customers Integrity is Software are to up, strength from? doubtful So I some flow accounts just there either in or customers maybe - that are payment but in flexibility? come are expected cash business, semiconductor the for the looking provisions in the where went for

Trac Pham

Yes.

the most haven't we meaningful back renegotiate coming impact or seen any that customers and in of terms. part, For

that's much of of so been - we seen very haven't for an And prepared that far, kind far impact. potential, We're prepared we're but positive. to so

as flow pretty reflection growth disbursements. both to. P&L for the what margin and the cash a year, disbursements well is It's to that's effective of are and outlook in eventually strength translate more in as the collections On we're strong to really lower the And cash improvement. as confidence good going solid guiding

Operator

turn Please next, Wells Mobley ahead. go Fargo And of the to Gary we Securities. line with

Gary Mobley

spiked is increase that significantly. in The average I license is X% the commendable. backlog reading And see lines, quite your between duration sequential

guess some overall more record there that I Or of there? one concentration And trends orders so bookings perhaps the with renewal? speak diverse customer to the does is

Aart de Geus

customer second. multiple if single the not It's customers. is all it's the It at

the contracts point about in people be this stress, it. general, shorter encouraging have not That in think worried be times variations I are of not it as economic contracts. there appears in often all. could is of to the become time, case that lengths at At in

we difference. If else products. are and And to as number have new opportunities said no design, accelerating hope nothing of as really from next good companies year to use that a approach in see they with there,

advances business I technology the directly. on track are think So reflects the and that

Gary Mobley

Okay.

Trac Pham

it's that back Gary, in a to the large grew an only in - have - was but I record run would But backlog the environment also in QX but this, we nice rate add the quarter. we very that absolute in in like good like general, environment it numbers, this. bookings not the particularly, also saw a growth

with I'm pleased So, combination. that

Gary Mobley

Okay. question. And as my follow-up

shelter-in-place, I explanation With a an still that largely and whatnot. there why the still access of IP labs and your to perhaps the affecting in the intact completion quarter in be Is back-end Is hindrance guess to deliverables? perhaps loaded? fourth Bay some Area, that may facilities to access

Aart de Geus

it. While of initially we how labs, questions manage a to were to that, number there of manage best access how can to get

positively that solutions able to we too, there quickly. practical to well can think deliver we we group we chips executing the surprised a find manufacturing, is as to very new continue cores. to continue send as were And I how actually pretty I'm - as IP

a anything And revenue else. of than distribution is the function the from the of uptake so think more customer I

Operator

ahead. with America. And line next, of we Please of turn Gonzalez Bank go Adam to

Adam Gonzalez

orders, low-double-digit then to alluded the what you be the in all the Thanks. versus at growth the sales you wondering on Integrity last delay on business grow prepared year? imply your And confidence were say your spending some shelter-in-place what target - efforts how elaborate have I'm just would then secondly, business, and if in you gives the the in And on decisions impacted first changed remarks? they by could quarter? plans that of this that And have Software business the

Aart de Geus

Yes.

go me Let backward on that.

working did on the somewhat. - our at many of acted home the it slow with customers, started interaction As become to

rates We one the in as are impact hire And quickly also that we to some then tend type our people of gets as things in. saw slowdown the those to had orders' that planned. ability

can the And circumstances, the we always the capabilities better at all-in-all, not have through have point types I so one diminished think still and they - could all. the that we of on do but that reception need

matter through the customers As work wave gone concern installations a of many our as home of they a question. security see of established many of were you fact, has from and somewhat how of in can those immediately

in. that touched ourselves we're is Now that field but that we not the barely

But the that what that harder do at again breaches. protect will from is people of future ramification to the to look security in secondary software

and what from the I think execution that The as focusing was as can think just I healthy So perspective, and our evolve circumstances it opportunity is before. will business improve, that's we're on.

Adam Gonzalez

Thanks. chain And a fab to my toward? industry then EDA to supply and more follow-up, see TSMC's SMEs across seem following build any the speaking, of in Arizona. read be decision just tech you do from generally broadly asking, duplication progressing on Just up

Aart de Geus

couldn't I the hear first. sorry, I'm

across, Do see what? sure was. the said something what I'm not but we You something

Adam Gonzalez

any chain industry and across Do EDA China? you broadly duplication the of read Thanks. efforts with supply see US the from

Aart de Geus

duplicate because the actually people interesting thing whenever an question, turn. to is in efficient, is which actually for a them become to That less efforts, starts supply bad not chain supplying they

we fairly enormous And semiconductors, manufacturing saw But of in yet. of effort clearly, think the I an that a to announcements other that for big way so are see you TSMC. all recent have high don't on of as sort countries, independence there wanting amount different macro to the countries of of degree discussions of

construct in year. the to to that to well, to those that is given in people our a business. fairly going I build so for evolution connected participate and see they're need we're whatever think and to for we're next very over us they going dynamic all of And And whatever a that good fashion suddenly intend

Operator

And turn ahead. of Please Securities. to with next, line go Jay Vleeschhouwer Griffin we the

Jay Vleeschhouwer

that same not in I'm this important was the mistaken, is will direction needless is quite record bookings question - yes. the for EDA momentum Aart, quarterly influence years last backlog. seven If and comments your orders question record about And say how about record The The to ago. significant up was that new leading capacity EDA. see kind by of of strength the instance, again AE or see a adoption, allocation when for EDA, of internal strength resources? indicator would we kind and of in for we driven coincidental or ramping Normally product demand in as

So slower on And you the for you investments can be differently in maybe you're thinking investment Trac incrementally of doing kind growth? you what more talk internal of as little And elaborately terms intend. might go of restructuring bit this through SIG comment perhaps conversely, could of a EDA. that period about

question second is my then And on back EDA.

two at conversations both design the You in the that was or you broadly of big EDA impact from the business having one couple general of comments. it next those about was there had, incrementally parse way chips in older spoke industry, Is different prototyping, I'm big last moving and how you a call a any or remember thing either as to versus of EDA is levels you of or we've to let's abstraction. older described say specific sure the trends speaking as year forms them, those directly methods. specialty on the driving

Aart de Geus

than Okay. try I an hour. to answer will in half less that

so entered the market, to the behavior large answers on were that we it that perspective. start an more that broader. was years seven the the from didn't and with This this making when And covered of at ago would single me customers time than on. Let customers an results were Nonetheless, there the order by crisis, became impact. clear frankly, much know to questions pandemic more we very what do good global I instantaneously

first secondly, as well sure also view all with was clear to customers, that we support instantaneously a point perspective of hands to however fund in relationships downturn it as the be well. to Synopsys business, able that us on deck long to order make for And to And maintain from the bring make strong they in maybe. to that of sure from the the do continuing

technologies, had the but executed well, as today, necessities of And new mentioned, of We that I the it partially new good increase questions with think time from because extremely early nodes, advanced products is design the on focus also such and clearly reuse, we I new IP of point because view, we think as a cetera. a well. one the et very

we also to way the in but And we've But next to ago, really the that of specialty key question, is is this what the towards generation and a DevOps many that And the optimize chips improvement has we done, to you because this ties machine to from which - the right called your behind continue chips, a view. so years rate, margin completely we this to trends helps work obviously, which are always what I technology call architectures. - have direction. also readdressed committed growth is the and will AI must would learning manage point whole now

computing these And speed, little it's when speed, very rates except speed, such data us often do what big matter big important to to want of extremely small as are no you computing machines because understand just and engines engines processors why is AI, relevant parallel bit a that for with bandwidth. large you a

thing specialty and own so that in truly company and so - doing be their that is differentiated, there trying to And chips. they are is every invested

what and is And many Compiler XD worrying are that multiple is after number why because a a Moore's an of little extremely alive interesting answer chips is people bit although law it such splitting particularly IC now are to be somewhat, think, about has I go into this down well and many, of can interesting these it's may that a slowed more years multiple connected. chips is product much than great down is slowing if

precisely that the architectures the are notion as specialty chips of so the chips, together. And more call driving them bringing you are

work because just risk actually that the that context, chips when complex are, was the specialty the the where hardware. the runs the Now, more that the have people before these chip in doesn't - and other more the is the run prototyping out in there is and product to doesn't a intended it That software And comes It they responsive is to be it. relevant on. - as wasn't more is is the sits software that half or software middle. their quite of in allows check to the complex software software prototyping the chip

I investing these And attention that and to areas. expect we growth and will strongly certainly, are so we continued see in this

few a next thing. ever that is, Obviously, bottom is have quarters. nobody we not the order will in see argue now strong the what So to good economy execute global does. line We'll the

good other speaking a semiconductors seen we in relatively that is a slowdown. spot, to have most think and actually markets I not

Trac Pham

And in addition restructuring. question to the regarding that - your to

we are remain and committed over up We on to a driving margins path time.

of In all really opportunities. the bets is and a can because that we're in, growth addition happier combination fine-tuning that we growth and reflection the areas to segments profitability. the get making best placing good The we the business, where restructuring investments we're of that, think we'll continue sure in the to invest we're seeing in of

Operator

And next, line go ahead. we with Celino turn Jason KeyBanc. to the of Please

Jason Celino

Trac, you some maybe pull go of from or side more the just revenues the forward And on comments EDA hardware into first the side? question, the QX, maybe on can

Trac Pham

EDA that's because saw time in relative saw profile on to there upfronts. shorter on just and might year, the we board. Mostly few the why there base see benefit you particularly, a significant QX the But the FSAs and strength is bit EDA, so growth side, in little contracts for and higher overall, the was what across we a the that

Jason Celino

was profile And since that while to margins probably SIG growth challenged? the increase maybe you've the of follow-up, breaking did more much hiring? my this segment look you out. the margins for a then the little points, And basis managing the highest How reported SIG segment this prioritize Great. slower from restructuring, XXX is then profitability would

Trac Pham

of bit all that It's little things those a described. you

to invest the and come committed margins were to to on going did that to XX%. that the margins invest in expenses. that depending further And quarter-to-quarter year ramp-up the around I business try mentioned right, to at will we beginning plan think from profile for the vary up we're You're from We the still growth. of in

into I wouldn't Company's sure to extrapolate continue balance business investing full-year a new growth. plant the will overall well, it the to the up that fits making as or

Operator

& turn you Please Sankar, And of Cowen ahead. Krish Mr. next, Sankar mute. phone go the on to Company. with line And we may have your put

Aart de Geus

we to to come back gentlemen. go the the Maybe and can next

Operator

the John And next, we of Suisse. turn with ahead. go Please Credit Pitzer to line

John Pitzer

the going just China's the from color quick system the software on and of military week all to last Huawei to of use. chessboard. you sort back ecosystem pawn I Aart, desire is out, important of the recent on kind gave the geopolitical China. and to you of a question, EDA kind guys just news But that build appreciate - critical semiconductor the licensing sort how curious become really given I'm just to a

up are you out I'm probably of Asia-Pacific break you kind just I of China, of but couldn't, soaked revenue, China guess supporting you that if look what And so customers you curious help can. percent specifically. break China don't that? of as and revenue, some for you would phones, out And ship us kind Can MediaTek ballpark inside else, into that can Huawei i.e. today in get reason Qualcomm demand the but somewhere maybe you

elsewhere? what And percent that that think to do customers them you're shipping doesn't not lot of of go a so you demand the Chinese or start-ups maybe if probably

Aart de Geus

number can play many to all companies hypothetical develop that difficult not people question could very market when time. jump speaking, expect a others it's because picked a have after where an I in facto is globally this so the there's And geopolitical one continue opportunity and and because of themselves. up or - you Well, at a quickly very very I tell way that there open another. far, same so and de is in forces

overall particularly, are that China. Actually, companies other growth of are in but many as continues And year, parts Entity as last without, not in jumping China learned came really both have well in how there felt and the and to List we since in was so world, about there - which obviously the well much the globe. have live change. May Growth continues really

John Pitzer

to to kind of maybe back new then the Or sure growth this. a making just drive channel I'm on function it get follow-up, And of inability to looking slowdown growth at will understand a - support there? of sort activity? bring view? that for question a SIG. actually the your here I is there? asking actual through COVID And customer I'm just headcount metrics What re-accelerate we you confidence Is this of to better I and why sense phenomenon, the get growth once that guess are just I'm trying

Aart de Geus

than sidetracked Sure. in Well, that, I a down have of type been at question. of most slower That that answer the combination saw same slowdown little execution. of slow investment, of own bit yes, and to a customers it's two, our think to our a did hiring or a the That in survival has ways, their number own and that the be as see was that is into that meaning we time, just objective challenges commenting you in this is planned. tends different

we good that. in is, line Synopsys part to to of this will bottom effort doing So put very need - continue exactly we're into bringing profile. put And a

what is Now and the is have that we better better. not and at getting gives solution confidence problem the all is shrinking that

that. well are electronic Now grow yeah, so work to we But they will it than systems have to continue you give more right, because doesn't in say, many money. before. intertwined much grow that for you itself, But, and continue were the you're problem to will

Therefore, will present that the a on that continue pieces more on will will the And be variety have needed but software, sub as is side. the certainly electronics hardware that to ways. is happen case also in side case pathway of in a there be That's security note, built in the massively assurances on. increasingly the it

led is business a track that nothing And good perhaps have the therefore is and is situation let's overall point. own of to growing opinion slower good a the us we now actually on underestimate, this there But execution being good combination a for to of than in has us this technically us. But this well not market wanted our So challenging, our market, it good particularly gave changed a - a Synopsys. is for It very this future. year. bit

Operator

we further queue. have in speakers, And questions no

Aart de Geus

let on are not case, you you, support that having we your more earnings sound. a family assumption basis hearing is take of that home, hope well. all in all also that, of your releases. do we your care through if Bye-bye. quarterly appreciate attend. yourself attend me safe and and thank My home from situations, be Please to and situations most Well, so voice these And of the you first

Operator

your you for today. gentlemen, Thank using conference and that and ladies And service. conclude participation conferencing for our for does AT&T

may You now disconnect.

Synopsys (SNPS) 20 May 202020 Q2 Earnings call transcript