Q4 2022 Synopsys Inc Earnings Call
We 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 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 reckon.
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 website at Synopsys Dot com.
In addition, the prepared remarks will be posted on our website at the conclusion of the call.
With that I'll turn the call over to art to Geos.
Good afternoon.
Happy to report that Synopsys completed an outstanding year with sustained forward momentum.
Since about four years ago, we communicated our dual objectives of accelerating growth and expanding margin.
<unk> has delivered on and in fact exceeded those expectations.
This is visible through over 60% revenue growth since that point 11 percentage points higher non-GAAP operating margin and more than doubled EPS.
This quarter, we also crossed the $5 billion annual revenue milestone.
Simultaneously, we substantially evolve our product offering expanded customer relationships and increase competitive differentiation.
Building on this we delivered another record year in fiscal 'twenty two.
Revenue grew 21% to $5 8 billion with double digit growth in all product groups and across geographies.
We further expanded non-GAAP operating margin to 33% grew earnings by 30% and generated record cash flow of $1 7 billion.
While semiconductor industry revenue growth has moderated design activity remains robust.
In addition, our time based business model with $7 1 billion of noncancelable backlog and a diversified customer base, all provide stability resilience and forward momentum.
While fully mindful of the macro dynamics around us, including the most recent U S government export restrictions Synopsys is poised for strong results in fiscal 'twenty three.
We intend to grow revenue, 14% to 15% continue to drive notable ops margin expansion and aim for approximately 16% non-GAAP earnings per share growth.
Nick will discuss the financials in more detail.
Looking at the landscape around us some of you have asked US why customers design activity remained solid throughout waves of the business cycle.
Two reasons.
First the macro quest for smart everything devices and with it AI and big data infrastructure is unrelenting and expect it to drive a decade of strong semiconductor growth.
Second semiconductor and systems companies be it traditional or new entrants prioritize design engineering throughout economic cycles precisely to be ready to field competitive new products when the market turns upward again.
We've seen this dynamic consistently and pass up and down markets and expected to continue.
Today Synopsys aims to be a key engineering catalyst towards this smart everything world as our mission is to enable innovation at the critical interplay between semiconductors and software.
Our customers are racing to differentiate along three axes.
First still higher complexity chips with massive compute capability.
Super tightly integrated systems of chips optimized for the software it will run on them.
And third increasing focus on security and safety across both software and hardware in virtually all vertical segments.
Synopsys is uniquely positioned to address these challenges as we provide the most advanced and complete design and verification solutions available today, the leading portfolio of highly valuable semiconductor IP blocks and the broadest set of software security testing solutions.
In the past few years, we've introduced some truly groundbreaking innovations that radically advance how design is done.
Let me begin the highlights with our DSO at AI artificial intelligence design solution.
With already well over 100 commercial production design it.
It continues to deliver amazing results.
Applied simultaneously to multiple steps of the design flow DSO dot AI reduces efforts four months two nine weeks.
While also delivering superior performance and reduce power.
Results reported by customers include 25% reduction in turnaround time, and compute resources and up to 30% power reduction.
With customers, such as Samsung Renaissance, Intel Mediatek, Sony and many others reporting impressive achievements.
Customer adoptions have accelerated across a wide range of process nodes and market verticals.
In FY 'twenty, two the number of customers more than doubled and we've already seen significant repeat orders and broadening proliferation.
Seven of the top 10 semiconductor companies have adopted DSO dot AI for production design.
And while we're also extending machine learning capabilities across across other EDA workloads from verification to test to custom design.
These next phase solutions already in customers' hands, showing excellent impacted and promise.
Central to the impact of DSO that AI are the powerful digital design solution engines underpinning it.
Specifically, our fusion compiler product.
It drove numerous competitive wins with accelerated proliferation for wide variety of customers.
Key adoptions range from the largest processor firms to influential systems companies to major hyperscale.
Fusion compiler is used in over 90% of advanced nodes down to three in two nanometer with a majority exclusively using synopsys.
In Q4 cumulative customer tape outs surpassed 1000 more than doubling the combined total of FY 2020 one.
Our customer solutions also saw strong market momentum this year, continuing the drumbeat of competitive displacements.
Was it options ranging from large semiconductor companies at advanced nodes to automotive to memory vendors as we added more than 45, new logos. This year nearly one per week with double digit revenue growth.
To address the highly advanced chip mentioned earlier multi day system design, sometimes also called triplet based design is opening a whole new era of silicon complexity.
Having forecasted this a number of years ago. So and obviously now provides a differentiated multi di solution that enables architecture analysis design and signed off all integrated in one place.
This includes our <unk> IC compiler solution and our industry, leading portfolio of state of the art die to die interface IP.
Today, we're already tracking more than 100, multi die designs for a range of applications, including high performance compute data centers and automotive being strong adoption of our broad solution.
A notable example is achieving plan of record for multiple <unk> stack designs at a very large high performance computing company as well as expanded deployment at a leading mobile customer.
Meanwhile, the recently introduced UCI E protocol short for Universal Chip, let interconnect express has become the interconnect of choice for multi di systems.
Both our UC Ie interface, IP and HBM three memory IP.
At the forefront of enabling multi die design with multiple wins at tier one customers.
More broadly third party IP is a must have for designs across the board.
Our market, leading IP portfolio by far the broadest in the industry continues to drive significant adoption and growth.
In fiscal 'twenty, two our IP business delivered another record year with more than 20% growth.
We continue to see particularly strong demand in key markets such as high performance compute automotive and mobile where the systems are driven by smart everything high speed secure connectivity and advanced process geometries.
While maintaining technical leadership in IP for advanced process technologies, we delivered multiple IP product in the most advanced 3% and four nanometer process nodes to our customers and high end mobile and <unk> applications.
Very strong adoption also of our automotive grade IP solutions as cars are being re architected towards both electrification and autonomous driving.
The acceleration of car electrification driven by urgent climate considerations, notably derives a slew of new sensor actuator and control chip designs.
Our automotive solutions had outstanding growth.
Today, we have engaged with hundreds of designs for more than 30, leading semiconductor providers more than 10 Oems and three of the top four tier one suppliers.
At the core of these systems is the intersection of hardware and software.
To optimize the system, our customers must verify both the software in the context of the hardware and the hardware in context of the software.
While verification is fundamentally an unbounded problem our state of the art simulation emulation and prototyping products tackled these tough verification challenges at Unparallel speed with the fastest engine highest capacity and lowest cost of ownership.
Specifically, our hardware based products delivered a record year with competitive momentum, adding more than 30, new logos in over 200 repeat orders.
Moving now to software security the critical nature of which continues to grow as management teams and boards are keenly focused on ways to protect their companies and their customers from destructive cyber attacks.
Our software integrity solution enables organizations to manage the security and quality of software across a wide range of industry verticals from semiconductor and systems to financial services automotive industrial health and more.
Industry groups, such as Gartner and Forrester recognized Synopsys leadership.
Gartner positions us at the top and harvest right of its magic quadrant.
<unk> is highly for technology depth breadth consulting capabilities and vision.
While this is the one area, where we did see some impact from the macro environment in the quarter revenue growth for the year accelerated over FY 'twenty one.
Notably we saw good progress with the go to market and product initiatives introduced last year.
Our indirect channel partner business for example continues to ramp well by expanding our reach into customer groups and geographies that we haven't connected with in the past.
We are building momentum with the goal of another significant increase in indirect sales in FY 'twenty three.
On the product side, we expanded our offerings by launching two new SaaS services for static analysis and open source analysis integrated into our Polaris platform.
We expect these SaaS capabilities to accelerate adoption and consumption of our solutions as they are particularly well suited to growth in the mid market.
Early customer reception has been quite positive.
Our continually evolving a strengthening platform also provides more and more valuable insights to help companies drive increasingly robust top down software risk management.
In summary.
Synopsys exceeded beginning of year targets and delivered a record fiscal 'twenty two across all metrics was the additional spark of passing the 5 billion milestone.
We enter FY 'twenty, three with excellent momentum and a resilient business model that provides stability and wherewithal to navigate market cycles.
Notwithstanding some economic uncertainty our customers are continuing to prioritize their chips system and software development investments to be ready with differentiated products of the next upturn.
On our side, many game changing innovations across our portfolio position us well to capitalize a decade of semiconductor importance and impact.
Finally, our execution, our operational management continue to drive growth and margin expansion, and we're particularly thankful to our employees around the world for their vitality and diligence throughout the year.
One more comment.
As you may have seen yesterday, we announced the appointment of Sheila laser to become our new CFO on December 2nd.
She is here with us today listening in as we prepare to pass the torch from track in a few days.
Before I pass the microphone to track for his review of fiscal 'twenty two.
It's wonderful to say a heartfelt thank you.
For his contributions that helped build the company we are today.
With 16 years on our team eight of Synopsys CFO track.
<unk> is a cornerstone architect and execution leader of the strong results of the past year.
During his tenure he has strengthened our fiscal discipline and acumen engineered trusting and effective relationships with the other parts of the company and most importantly assembled and grew a great team that we will continue to build on.
So it is all the more meaningful to voice our gratitude to track at the very moment that we passed this unique revenue milestone.
Thank you Jack.
And now one more time.
Please give us your perspective on the state of Synopsys.
Thank you for those kind of words.
It has been a privilege to serve as the CFO of Synopsys.
I am immensely grateful to be part of this team and I'm proud of what we've accomplished.
Well I'll Miss the rich interactions with the Synopsys team and the investment community I'll be here through the end of December to ensure a smooth transition.
Synopsys is in a great position as reflected in strong results and outlook.
FY 'twenty two was an excellent year and featured record results in all key metrics, including revenue non-GAAP earnings and operating cash flow.
We continue to execute well and are confident in our business heading into FY 'twenty three driven by our strong technology portfolio that is expanding customer commitments.
Robust chip and system design activity, despite moderating semiconductor industry revenue growth.
And a resilient and stable time based business model with $7 1 billion in noncancelable backlog.
As a result, while the macro environment is stress, we expect to grow revenue, 14% to 15% and expand operating margin more than 100 basis points driving non-GAAP EPS growth of approximately 16% in 2023.
Let me provide some highlights of our full year 2022 results.
We generated total revenue of 5.08 billion up 21% over the prior year.
With double digit growth across all products in key geographies.
Total GAAP costs and expenses were $3 9 billion and total non-GAAP costs and expenses were $3 4 billion, resulting in a non-GAAP operating margin of 33%.
GAAP earnings per share were $6 in 2009.
And non-GAAP earnings per share were $8 90.
Up 30% over the prior year.
Semiconductor <unk> system design segment revenue was $4 6 billion driven by broad based strength across all product groups and geographies.
Adjusted operating margin was 35, 3%.
Software integrity segment revenue was $466 million up 18% with adjusted operating margin up slightly to 10, 1%.
For 2023, even in light of some of the marginal macro related impact in Q4 orders, we expect revenue growth to be within our 15% to 20% objective with increased adjusted operating margin.
Turning to cash operating cash flow for the year was a record $1 7 billion, reflecting our strong results robust collections and approximately $100 million and early collections.
We ended the year with cash and short term investments of $1 $5 7 billion and total debt of $21 million.
During the year, we completed buybacks of $1 1 billion or 69% of free cash flow.
Now to our targets, which reflects the impact from the recently announced export control regulations and assumes no further changes for the year.
Based on our current assessment, we expect quarterly revenue and non-GAAP EPS to steadily increase through the year.
For fiscal year 2023, the full year targets are.
Revenue of $5 775 to $5 85 billion.
Total GAAP costs and expenses between $4 49, a $4 five $3 7 billion.
Total non-GAAP costs and expenses between $3 81, and $3 84 billion, resulting in a non-GAAP operating margin improvement of more than 100 basis points.
non-GAAP tax rate of 18%.
GAAP earnings of $7 68 to $7 86 per share.
non-GAAP earnings of $10 28 to $10 35 per share.
Cash flow from operations of approximately $1 7 billion.
Now to the targets for the first quarter.
Revenue between $1 34, and $1 37 billion.
Total GAAP costs and expenses between 1.033, and 1.0 $5 3 billion.
Total non-GAAP costs and expenses between 875 and $885 million.
GAAP earnings of $1 89 to $2 per share and non-GAAP earnings of $2 48 to $2 53 per share.
Our press release and financial supplement includes additional targets and GAAP to non-GAAP reconciliations.
Finally, we are reiterating our long term financial objectives of annual double digit revenue growth.
non-GAAP operating margin expansion of more than 100 basis points per year and.
And non-GAAP EPS growth in the mid teens range.
In conclusion, we entered 2023 with excellent momentum and confidence, reflecting our innovative technology portfolio.
Ongoing design activity by our customers, who continue to invest to semiconductor.
Through semiconductor cycles.
And the stability and resilience of our time based business model.
With that I'll turn it over to the operator for questions.
Okay.
Thank you.
Begin the Q&A session I would like to ask everyone to please limit yourself to one question and one brief follow up to allow us to accommodate all participants if you have additional questions. Please reenter the queue and we'll take as many as time permits.
We'll take our first question from Joe <unk> with Baird.
Okay.
Great Hi, everyone and let me just start attract.
It's been a pleasure working with you.
Maybe I'll just start it seems youre customers are heading towards a demand environment that maybe.
<unk> most akin to what we last saw in 2019, and if I just think about Synopsys in 2019, I think you grew your recurring revenue at a low double digit pay as Jared nonrecurring revenue was down at a high single digit pace.
Hi.
<unk>, both are probably trending better.
2022, then the last kind of down experience for the industry can you just compare and contrast similarities differences.
Maybe a little bit more detail on how those two revenue components might track next year.
Well first actually I think your comparison is pretty good because 19 was really just sort of waving around the medium for the growth of the semiconductor industry.
And so in that sense I don't see a long term change in the trajectory, which essentially forecast that's what this decade semiconductors I'm, making two trillion and we see all the reason why we will get there. The fact that some years are higher than others on slightly lower is just a given.
In a context like that Synopsys has the good fortune to have a business model that is very stable and self sustainable but also a set of customers that have no interest in going up and down in their R&D for us because it's a continual investment over typically products that take two to three years to develop.
And so I think we provide a good solidity in pretty much all of the France.
General Joe I'd also add that we're seeing just better momentum today than we did a few years back when you're looking at.
Where our products are in with regards to the strength of the portfolio. How we are executing the changes that we're making and just the overall strength of the business I think where we're heading into an environment that may be stress.
Upside, but we're well positioned to.
To grow there.
Okay, Great and then I will.
Maybe just reconcile some of that year over year changes with your cash flow outlook.
Yes, <unk> bin.
Yes, if I adjust for the $100 million and early collections I think cash from operations is growing a bit more slowly than your core EBIT and earnings.
It looks like a big step up in Capex, maybe just what's behind that.
So let me start with the <unk>.
Cash from ops. The second thing in addition to the $100 million of early collections the Z.
Our cash flow projections reflect the change in the tax rules that now requires us to capitalized R&D expense.
So as a result of that cash taxes are going up.
In 2003, so that.
Affects a number with regards to the Capex.
A little higher than than it's been over the last couple of years, primarily because of our efforts to consolidate space and our facilities in the U S, mostly to drive better productivity and the employee base going forward.
Okay. Thank you very much.
Youre welcome Jeremy.
Yeah.
We will take our next question from Goldman <unk> with Wolfe Research.
Hey, Thank you for taking my questions and congratulations.
Relations with Neulasta.
It was a nickel as well I hope you enjoy your retirement.
Well first of all just.
I wanted to focus a little bit on the DSO you mentioned.
But you have doubled the amount of customers in 'twenty to my question.
How early are you in that potential to penetrate the customer base, especially the ones that move the needle on that matter and within the ones that have already adopted.
Do you feel it's just the beginning from them in terms of being productive, but do you think theres still a law.
A lot of room to sell deeper into those accounts.
I think theres a lot of room as a matter of fact, I think thats the whole AI driven design wave is easily the next decade.
Cause it fundamentally changes so many things at the very moment that the customers.
One way or another are going to grow complexity dramatically because they see so many opportunities in this notion of smart everything and so in order to do that you don't want to just have tools that use AI and be better and faster and so on you want actually to impact the very design flaw and to me the big breakthrough in DSL about AI felt very similar.
As a matter of fact of some 30 years plus ago synthesize it changed how things that are happening now in that sense. The adoption will on one hand take time on the other hand, I think he is very fast and literally just a couple of days ago. Among the team we were discussing how do we manage the number of people that are interested because they all want support they all want.
To be the first ones in.
It's a good problem to have.
That's very interesting. Thank you and then just as a follow up you mentioned automotive solutions from the Oems as well coming in.
Both semi companies and the Oems kind of increasing demand.
Driving part of the growth.
I guess, if I zoom out and I think about your growth today and thinking maybe specifically about next year. When you look at your pipeline.
How does the.
Reliance on the core semi leading edge companies compared to the systems companies in terms of the growth.
Bearing the higher proportion of growth in terms of risk with the ability to kind of deliver those targets that are pretty impressive. Thank you.
Well.
Im glad you bring up automotive because.
Looking at the numbers I was surprised myself, how well we have done this year at the same time I think there is some good explanations for it for starters. The very fact that there was a supply shortage in automotive suddenly everybody gets full attention of automotive and then simultaneously. The world is now recognized that the.
The cost of a climate change is upon us and I expect that the rate of change electrification is absolutely going to accelerate and so investments that started probably seven eight years ago, and we always sell a whole automotive is so slow zaslow.
Now suddenly are moving forward very fast and it's along the entire supply chain that is reconfiguring itself around new architectures. So I think there's a lot of opportunities a lot of challenges there as well, but I think we're in a great position for it.
Thank you so much.
Youre welcome.
Okay.
We will take our next question from Jason <unk> with Keybanc.
Hey, Thanks for fitting me in fact on an absolute pleasure bandwidth goodbye.
The later.
Thanks, Jason.
<unk>.
14% growth guidance.
Yes, very impressive, especially in a year that you are coming up.
I am curious, though with the upfront.
Having a tough comp you did 40% growth there this year.
How much of upfront hardware I'm using those terms kind of interchangeably are you kind of baking into the guidance for 'twenty three.
Okay.
I wouldn't naturally attach hardware to upfront of course, it will show up and online, but keep in mind that we do have IP that is reflected in.
In that category as well and keep remember in our statement, we our IP business grew over 20% in 'twenty two so.
Heading in 'twenty, three really the 14% to 15% guide for revenue growth is coming across all product areas.
And that's where we are.
All product areas and all key geographies.
And so that's where the.
Our confidence and the comfort is in terms of our ability to execute against that plan.
Okay excellent.
And then.
Alright.
DSO to AI.
That means you are getting a lot of traction there and you mentioned in some other areas, where youre looking to add AI capabilities like my gratification SaaS and Paas.
Can you kind of talk about this roadmap and where we are.
Okay.
Climate and how customers are using it for some of these other applications.
Sure I'll be careful with giving too much of the roadmap.
I wanted to make sure that you understand that in all of these areas. We have worked on those not for already quite a while and we have a number of very positive results directly with customers and at the end of the day, it's like the old the VC you have to do the dogs eat the dog food.
I want to compare customers to dogs of course, but the fact is.
It's in the field that you realize what are the issues that may not have contemplated and the feedback is very positive because they are too.
The tools have long been optimized with variety of machine learning and AI capabilities changing the very workflow is how you get a more profound impact and so.
We have a long opportunity space to grow into but the engagement already signifies that.
We have results that customers want to keep and turn into production.
Okay perfect. Thank you.
Thank you.
Yes.
We will take our next question from Harlan sur with Jpmorgan.
Good afternoon, and congratulations on the solid results and outlook.
Best of luck and thanks for all the support.
Thank you guys pointed out chip design activity in leading edge digital is very strong right.
Accelerated compute processors, nextgen networking switching and routing chips, new ASIC programs.
Very strong, but also significantly increasing design complexity and more importantly, chip design cycle times.
I'm wondering is the complexity and cycle time dynamic.
Requiring our customers to use hardware emulation and prototyping as an integral part of the verification and software development process versus it being somewhat discretionary 510 years ago and is this what is helping to sustain the hardware growth into next year.
The answer is yes, and another yes, yes. It does require much more attention to the intersection of hardware and software and in order to do that you need simulation that is blindingly fast and Thats why I use hardware accelerators.
We call them emulators prototyping and to be able to do that.
<unk>. Your question there was another comment which is really to comment that.
Is it true that that complexity still is increasing massively and the answer is very true, but it's going to be in a new forum, meaning it's not one chip it's multiple chips as close as possible and it is architecture is dedicated to whatever the end markets are and so the race is absolutely on in all of these.
The dimensions, but it brings a challenge for the for our customers that buy now after after many many decades have certainly learned how to optimize for performance and power. They now have to optimize for making it all work multiple chips hardware and software thermal issues and that complexity.
<unk> is going to drive all kinds of new products on our side, but also necessitates to look to have.
Focus on the entire flow and that's why I'm very encouraged by being at the dawn of.
So really multiple new decades of new technology.
Well, thanks for that and then on your IP business, you've got Intel and AMD. They are now starting to roll out their new processor chips, right, putting nextgen memory and storage interfaces.
Alright strong area for you guys by DDR five from memory Pcie Gen. Five CSL for storage. These processors are starting to rollout now. Additionally, you have more of your customers, bringing on additional foundries as a product diversification and reassuring efforts.
This should drive higher adoption of your foundational IP as well so what are the other dynamics that are going to drive the IP business next year. In this segment continue its strong double digit year over year growth in fiscal 'twenty three.
Well, we will take one year at a time, but theres no doubt that there is an opportunity to continue to grow very well and.
Great respect for you mentioning all the keywords off things that we sell I would add.
One other category that we alluded to which is the category that actually looks at the new types of interfaces and in these multi die.
<unk> because.
Those integrations are predicated mostly on one thing how short and how fast can you make to wires between the chips and therefore, it's another form of miniaturization was enormous connectivity between between chips and so these connectors are extremely sensitive to the speed the voltage and all these things.
And so they.
There too.
Leading.
In providing the IP that makes this possible and I think thats an area that will grow on top of what you mentioned.
Okay.
Thank you.
Youre welcome.
Okay.
We will take our next question from Charles <unk> with Needham <unk> Company.
Hi, good afternoon. Thank you for taking my questions.
I think the first question I wanted to ask is about China.
As being or maybe had been a major <unk>.
Stock at least over the last three or four months.
Especially after the very unprecedented that roundup.
Striction that the USA include bad debt since the beginning of October .
I understand you did.
Qualified that impacted non material, but.
It seems to me that investors may still be a little bit skeptical and.
Maybe can you just give us some sense of your perspective.
Why.
Why what you see as in reality being non material versus what the.
Perception among the investment community is being.
China restriction being a major major bad case for you is there any way that you can provide us some perspective why that has been the case and what do you think that should help our investors to really.
Change or have a more ground it'd be about this issue. Thank you.
Yes, so very good question and I understand why it's difficult because a lot of these things are at in terms of hard to understand technology and so of course whenever there is a change we look solidly at all the changes are thirsty impacts and actually I think we explicitly communicated that our assessment showed that it was not material in the <unk>.
Financial terms.
Highlights that we have factored in to divest of our ability exactly what the situation is today in our forecast and Moreover, we have put a lot of emphasis on making sure that we are 100% compliant with all the rules. So thats we.
We act in a clean fashion I would add only one more thing, which as you know China is a very broad market and so there are many technologies that are not anywhere close to being touched by the advanced restrictions. So.
We see continued great opportunity, but we understand with you that its an area to keep watching and to make sure that we grow in other parts of the world as well.
Okay.
Thank you art might be the second question.
Maybe this is for you.
You track first off congratulations on the retirement.
Ask you I think one year ago. When you gave the guidance about physical quantity to you kind of guided fiscal 'twenty two maybe like first half.
Slightly first half loaded over second half, but your fiscal 'twenty three guidance.
Hear you correctly, youre guiding second half likely to be higher than first half.
A number of seems to imply that every quarter needs could be somewhere 4% to 5% higher than the preceding quarters throughout the entire 2003, I wonder what exactly.
The assumptions there for steady growth into the year and that you have assumption like maybe the semi conductor industry needs to have a rebound of recovery out of the downtown to the second half of your fiscal year.
And if possible can you give us some color.
Exactly driving a second half rebound.
The growth into the second half.
Which one will be the primary driver EDA and IP is a hardware or is it the best product.
Part of our business. Thank you.
Sure Charles Let me, let me zoom out a little bit because over the last couple of years, we've had some unusual.
Profiles coming into the year right. So 20.
2020 was very backend 'twenty, one was backend loaded heading into 'twenty. Two we said it would be very front end loaded when we look at the profile. This year keep in mind that it's based on backlog that we have scheduled out for our software business.
IP at hardware, so there's good visibility into how it lays out throughout the year.
And when you look at the profile Youre right its slightly.
To the back half, but just marginally so and if you look at the first half comparison first half second half comparison for 'twenty three.
And you go back in time, it just actually in line with what we have historically seen which is kind of unusual but nice to get back to that profile.
And it does imply that there is.
Incremental increases in the business as we progress throughout the year.
The the.
The basis for the forecast as I said is grounded very much on disability in the backlog, but also.
What we expect to book in the year and we are playing.
Playing the year based on what we can execute similar to what we have said in the past. So it's not a stretch to assume that it's dependent on major market forces or anything out of our control we want to give guidance in terms of the outlook for the business, both topline and Bottomline that really is heavily dependent dependent on.
Our ability to execute and at this point given our visibility.
The portfolio that we have.
Our confidence in our execution, we feel really good about the 14% to 15% growth and driving 16% EPS growth.
Thank you track.
Youre welcome.
We'll take our next question from Jay Felicia <unk> with JMP Securities.
Thank you good evening art for you first a product question since the term roadmap came up a couple of times.
I'm wondering if there are some potential developmental catalysts that.
You might be able to bring to market.
For example.
Would it make any sense or would it be feasible for you to increasingly connect.
Cig with hardware based prototyping.
Along the lines of an earlier question.
You haven't mentioned silicon lifecycle management, or SLM, but would it make some sense there to connected increasingly to your your sign off business and so forth and other kinds of intercompany integrations that could be.
Differentiators or new catalysts for for product growth.
And then my final question for Trac.
With regard to Cig could you comment on the results that <unk> been seeing.
For your investments in international expansion for Sig over the last several years.
<unk> in particular your investments in security consulting outside of the U S.
So let me zoom out a little bit on your on your question because generically I think youre pushing absolutely on the right buttons, which is that.
While many of the things we've done in the past have been sort of point efforts point tools and so on for the last decade, we have started to integrate many tools more forcefully together because thats the only way of solving.
Problems of complexity, where power and speed and thermal and locations and reliability strongly intersect.
Then if you move to the next slide level up we have already mentioned the fact that.
They are strong interconnectivity between software and hardware because the hardware is one mission make the software faster and the.
The software is one mission make the work the hardware work harder for it and so these optimizations.
Are already going hand in hand.
<unk> adds an additional angle to that which is the angle of security and quality.
<unk>.
We have by the way sort of the equivalent of a cig inside of <unk>.
The EDA side as well in the IP side because in the IP, we have a variety of security capability is being built in.
I think it will take a little bit of time before you can see sort of a strong connectivity between those but it has not taken that much time to see at a number of customers that they start to recognize that our vision moves up into the domain of software and moves down into the hardware at the very moment that they are learning about this.
The earlier mentioned automotive, but it could also be industrial and a few other segments are precisely now arriving at this junction or figuring out that they have to make it all work at the same time.
So.
While many of the specific things that we're working on we'll talk about as we release them.
The general direction of your question I think is very much the way, we think about systemic complexity now being the hallmark of the next decade.
Hey, Jay this is Chuck so to your question regarding Cig and international expansion you are right that wasn't really.
Intentional focus for us.
A couple of years ago in terms of.
Improving the go to market function, both internationally, but both both internationally and with channel partners and I would say that when you look at the results over the last couple of years I think we've made really good progress with regards to how we are executing internationally.
<unk>.
The additions and the execution with new channel partners.
Optimistic not only because of the results have been good but it's we're in the early stages of actually.
Seeing in seeing strong results from that so I think theres a lot of progress ahead of us and a lot of opportunities ahead of us in both those areas. Okay.
Thank you Mark Thank you track.
Thank you Jamie.
We will take our last question from Ruben Roy with Stifel Nicholas.
Hi, Thank you and track Congrats from me as well thanks for all the support over the years.
Guess track or art, one thing I wanted to just touch base on again is on the Cig business Art you mentioned that you did see some impact from the macro and during the quarter. The numbers look pretty good I've got you down for 16% year over year growth. So maybe if you could just expand on that was that towards the latter end of the quarter and looking ahead or are any other detail you can give us. Please.
Sure well first I do think that the results were quite good what we did see it probably started a little earlier than this quarter that some of the the negotiations turned out to be a bit longer maybe some more layers of approval and actually that is very very common when you see.
Economy looking at well is it going to be a recession or not how people are little bit worried well. They just start putting some breaks on the decision, making first and foremost but at the same time, we were encouraged by the fact that growth continues to improve over the previous year and there's no doubt in our mind that this is a very good part of spinoff.
And there's lots of opportunity so we will keep pushing.
Okay, great. Thanks for that detail and then.
Quick follow up on the DSO Dot AI, you mentioned art.
<unk>.
You're starting to gain traction across a wide range of process nodes, which is <unk>.
<unk> to me can you maybe talk a little bit about the value prop across those nodes proposition across those nodes as it <unk>.
<unk> reduction for some reduction in turnaround time for others or how does that work.
Well first of all it is turnaround time reduction for everybody.
That in itself is interesting because if you remember my other comments about moving into a whole different league of complexity.
While people will continue to push on performance and power right now they are pushing on making sure that they can finish the job and in that in that context, improving the turnaround time is extremely valuable but.
The other thing is that in.
In many areas at.
It opens the doors that they didn't have before because if you can work in multiple nodes. The question is can you also start to translate from one node into another and we have in the last 12 months, specifically seen more and more really outstanding experiments and showcases where we helped.
We'll move from one node and design in let's say the next node or even some of those that are quite different from the ones, where they started with the benefit of learning from the original note and I think that opens a fertile space because in reality most designers redesign you try to always use what you.
In the past and the question is how easy is that when the past becomes more and more complex and that's where AI I think is a lot of potential going forward.
Sometimes you called that re targeting a remastering and I think it's going to be a lot of need for that.
Very good thank you thank.
Thank you.
And that concludes the question and answer session I would like to turn the call over to art <unk> for closing comments.
Well first and foremost thank you for all the support and the good questions over the last year I think we concluded a very strong year of course against the very strong markets, but I think we also demonstrated that there's momentum going forward and so that said that 23, even without track it will be a good year for us and we.
Thank her track one more time, we've also thank you for your support and for your continuing.
Our support of the higher stock.
With that have a great rest of the year and we will talk to you soon.
Thank you and that does conclude todays presentation. Thank you for your participation and you may now disconnect.
Okay.
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Okay.
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