Q3 2022 Synopsys Inc Earnings Call

Okay.

Ladies and gentlemen, and welcome to the Synopsys earnings Conference call for third quarter of fiscal year 2022. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session if you'd like to ask you.

Question. Please press one then zero on your Touchtone phone may remove yourself from queue at any time by repeating the one zero command. If you should require assistance during the call. Please press Star then zero today's call will last one hour and as a reminder, today's call is being recorded at this time I would like to turn the conference over to visa Eubank waste.

I didn't have Investor Relations. Please go ahead.

Thank you Carrie and good afternoon, everyone.

The call today are art did she S chairman and CEO of Synopsys, and Trac Pham Chief Financial Officer.

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

While these statements represent our best current judgment about future results and performance as of today.

Our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect in.

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

In addition, we will refer to non-GAAP financial measures during the discussion.

Reconciliations to their most directly comparable GAAP financial measures and supplemental financial information can be found in the earnings press release financial supplement and 8-K that we released earlier today.

All of these items plus the most recent investor presentation are available on our web site at Synopsys Dot com.

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

With that I'll turn it over to art to Geos.

Good afternoon, we delivered another excellent quarter with enduring broad based strength.

Revenue for the quarter was $1 25 billion.

GAAP earnings per share were $1 43, with non-GAAP earnings at $2 10 with.

We generated $440 million of operating cash flow.

Notwithstanding the normal ebb and flow of the semiconductor market design activity remains robust.

<unk>, our business model sets us apart by adding a solid level of stability and resilience through the accelerated growth we're seeing.

Based on this strength and confidence in our business, we are raising guidance for the full year.

We expect to grow fiscal 'twenty, two revenue approximately 21% and passed the $5 billion milestone.

We continue to drive notable ops margin expansion and we intend to grow non-GAAP earnings per share by approximately 29%.

In the process, we expect to generate $1 6 billion to $1 65 billion in operating cash flow.

Mark will discuss the financials in more detail.

Over the last five or so decades semiconductor chips and software have transformed every aspect of our world from traditional computers to networks to mobile devices from entertainment systems to home security to medical wander machines.

Every vertical market is affected and expecting more.

As a result, not only does the world demand more chips.

But more chips are being designed by an expanded group of semiconductor and systems companies.

Those chips are much more complex they need to be designed faster due to time to market pressure that was increasingly constrained engineering talents resources.

For the last 35 years Synopsys has been privilege to grow as an essential catalyst of this transformation delivering 10 million X and productivity.

Today's synopsys is uniquely sits at the intersection of the dual system forces of semiconductors and software, enabling both with the bold ambition to capitalize another thousand X. This decade.

We partner and collaborate with the most advanced companies in the entire supply chain and while the technical challenges are huge so all of the opportunities.

On top of this security safety and reliability are now almost through markets, such as robotics automotive and aerospace.

Meanwhile, more and more systems companies from large hyperscale edge to AI startups, two verticals like automotive have decided to own their destiny and design their own chips and systems to accelerate their differentiation.

Today's synopsys has successfully bridging technologies from silicon to software to systems as we engage with all of these companies.

In the last few years, we have delivered a number of groundbreaking innovations that are making tremendous impact for.

For example in chip design, we're automating not only individual design steps, but entire sub flows.

Pre configured IP blocks, not only speed up chip design, but also lead architects rapidly explore new market specific chip and system configurations.

Our emulation and prototyping solutions are now essential to verify and optimize the interplay between hardware and software in the system.

And in addition, we continue to grow our solutions that enable high quality and more secure software as well as provide security IP blocks.

Leading the way is our award winning DSO Dot AI artificial intelligence design solution, which is revolutionizing chip design.

First to market over the three years ago with technology that is still unmatched today.

<unk> delivers outstanding productivity improvements that are already driving substantial increases in customer commitments.

The technical results are truly groundbreaking.

Customers are seeing tremendous benefits from DSO dot AI ability to learn from prior designs for.

Two of the largest most advanced semiconductor companies in the world achieved a 25% reduction in turnaround time and compute resources.

Dsos of AI is also driving very significant low power improvements exemplified by a large automotive chipmaker, achieving a 30% power reduction.

These compelling outcomes are driving a high pace of adoption for production tape outs across verticals and a broad set of process nodes.

Examples this quarter include long term business commitments at a marquee U S Hyperscale and stop cards consumer Chip company.

Our entire market, leading digital design solutions, both empowers and benefits from DSO did AI.

This highly differentiated combination led to a competitive displacement at a large automotive chip company in Q3.

Our fusion compiler product continues to drive accelerated growth and competitive wins across market verticals and a broad swath of technology nodes.

This quarter, we expect to pass the thousands tape out milestone with successes in many different customer categories.

Fusion compiler is generated notable runtime and PPA performance power area.

<unk> at top graphics processors companies and.

And we have gained majority positions at one of the largest mobile Soc providers and has multiple leading hyperscale.

Excellent progress and strong demand also for our modern custom design solutions.

This area of growth is fueled by the key segments that include Hyperscale is high performance compute and AI and machine learning.

And custom design long dominated by older products, we've already surpassed last year's new logos with 36 additional year to date, including high profile semiconductor and Hyperscale customers.

Companies driving smart everything continue to innovate at breathtaking speeds and an all embracing migration to multi di system designs for next generation systems.

Our multi di system solution that includes our <unk> IC compiler platform and die to die IP portfolio is seeing strong demand.

Not surprisingly the key markets of high performance compute data center and mobile.

While we continue to expand deployment is a marquee U S. IDM. We also experienced increased traction of prominent high performance compute and hyperscale customers for complex <unk> multi die and chip led designs.

In mobile we achieved plan of record of leading semiconductor companies for their next generation multi die processors.

In high performance compute multi di systems incorporate a new interconnect IP standard.

UCI E, which stands for universal triplet interconnect express.

As the term express captures it is all about speed and Synopsys is seeing great traction in this area with a healthy pipeline and multiple wins at three nanometer.

More broadly IP blocks are a must have to meet intense time to market pressures.

Our unique breadth of scale and scale of our high quality IP portfolio with early availability at advanced processes continue to drive strong momentum.

Demand is particularly high in markets such as high performance compute AI and machine learning automotive and mobile where systems are fueled by smart everything high speed and secure connectivity and advanced process geometries.

In this context, our arc vision processor IP was named best automotive AI solution by the edge AI envision alliance.

Meanwhile, our industry, leading <unk> and PX and Vps processor cores that accelerate neural networks continued to see strong adoption and augmented and virtual reality automotive and consumer applications with multiple wins in the quarter.

In automotive, we closed significant transactions with large traditional and new Oems tier ones and semiconductor vendors.

Security remains front and center across all market segments, we're gaining strong adoption of our security solutions for interfaces, such as PCI Express CSL and DDR.

With more than 30 design wins across all market segments.

Now moving to the crucial intersection of hardware and software in other words verifying that the chips and system will do what was intended.

Our market, leading emulation and prototyping hardware products, our unique strengths and clear differentiator for Synopsys.

Where's the fastest engines highest capacity.

And lowest cost of ownership, we're doing very well.

Our products not only verify hardware software correctness, but also help find ways to reduce power consumption one of the most vital metrics of any system.

High demand continues for our zebu emulation, and perhaps 100 prototyping systems.

Growing with many of the largest semiconductor and hyperscale customers in the world.

We are on pace for yet another record year of hardware revenue.

With smart everything entering every vertical market.