Q1 2024 Synopsys Inc Earnings Call

Ladies and gentlemen, welcome to Synopsys earnings conference call for the first quarter of fiscal year 2024.

Operator: Ladies and gentlemen, welcome to the Synopsys Earnings Conference Call for the first quarter of fiscal year 2024. At this time, all participants are in listen-only mode.

At this time, all participants are in listen only mode.

I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Operator: I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. If you should require assistance during the call, please press star followed by zero. Today's call will last for one hour. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Trey Campbell, Senior Vice President of Investor Relations. Please go ahead.

If you should require assistance during the call. Please press star followed by zero.

Today's call will last one hour as a reminder, today's call is being recorded.

At this time I would like to turn the conference over to Trey Campbell Senior Vice President of Investor Relations. Please go ahead.

Trey Campbell: Thank you operator, good afternoon, everyone with us today are <unk>, president and CEO and Sheila Glaser CFO 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, including statements regarding our pending acquisition of Anzus. However.

Trey Campbell: Good afternoon, everyone. With us today are Sasin Ghazi, President and CEO, and Sheila Glaser, CFO. 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, including statements regarding our pending acquisition of ANSI. However, we will not be commenting on ANSI's financial results.

Trey Campbell: We will not be commenting on <unk> financial results. While these forward looking 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 this call important factor.

Trey Campbell: While these forward-looking 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 this call, important factors that may affect such statements are described in our most recent SEC reports and today's earnings press release. In addition, during the discussion, we will refer to certain non-GAAP financial measures.

Trey Campbell: Or is that may affect such statements are described in our most recent SEC reports and today's earnings press release. In addition, we will refer to certain 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.

Trey Campbell: Reconciliations to their most directly comparable GAAP financial measures and supplemental financial information can be found in the earnings press release, financial supplement, and 8K that we released earlier today. All of these items plus the most recent investor presentation are available on our website at www.synopsys.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 Saseen.

Trey Campbell: Hey that we released earlier today all of these items plus the most recent investor presentation are available on our website at www Dot Synopsys Dot com.

Trey Campbell: In addition, the prepared remarks will be posted on our website at the conclusion of the call with that I'll turn the call overseen.

Speaker Change: Good afternoon in.

Saseen Ghazi: In Q1, we continued our strong momentum with revenue in the upper end of our guidance range and Nungap EPS surpassing the upper end of our guidance range. Revenue was 1.65 billion dollars, up 21% year over year. Non-GAAP operating margin was 38.7%, up approximately 3.5 points year over year. Nungap EPS was $3.56, up 36% year over year, while maintaining our laser focus on meeting our quarterly financial commitment. We strategically drive the business for long-term financial success. Over the last three years, we have delivered a 17% revenue CAGR, a non-GAAP operating margin improvement of 7 points, and Nungap EPS growth at a 26% CAGR. Sheila will discuss the financials and guidance in more detail.

Speaker Change: In Q1, we continued our strong momentum with revenue in the upper end of our guidance range.

Speaker Change: And non-GAAP EPS, surpassing the upper end of our guidance range.

Speaker Change: Revenue was $1 $65 billion.

Speaker Change: Up 21% year over year.

Speaker Change: non-GAAP operating margin was 38, 7% up approximately three five points year over year.

Speaker Change: non-GAAP EPS was $3 $5 $6 up 36% year over year.

Speaker Change: While maintaining our laser focus on meeting our quarterly financial commitments.

The T J <unk> drive the business for long term financial success.

Speaker Change: Over the last three years, we have delivered a 17% revenue CAGR.

Speaker Change: non-GAAP operating margin improvement of seven points.

Speaker Change: And non-GAAP EPS growth at a 26% CAGR.

Speaker Change: Sheila will discuss the financials and guidance in more detail.

Sheila Glaser: Let's turn to market trends.

Saseen Ghazi: Let's turn to market trends. We have entered an era of pervasive intelligence. These trends demand more compute, new architectures, and new design methodologies, which are requiring us to address the significant challenges of complexity, cost, energy consumption, and security. Despite the mounting challenges, design starts continue to rise as the semiconductor industry scales to a trillion dollars in revenue or more by the end of the decade. As the leading silicon-to-systems design solution company, with best-in-class EDA tools and the broadest portfolio of semiconductor IP, Synopsys' growth opportunity is truly incredible and already underway. Across industries, a paradigm shift is underway as companies race to deliver on this era of pervasive intelligence, where AI and smart technologies are omnipresent and interconnected. To capitalize on this shift, the technology industry is converging on a silicon-to-systems approach to innovation, as the company at the heart of silicon and systems. Synopsys was made for this moment.

Sheila Glaser: We've entered an era of pervasive intelligence driven by the rise of artificial intelligence silicon proliferation and software defined systems.

Sheila Glaser: These trends demand more compute new architectures, and new design methodologies, while requiring us to address the significant challenges of complexity.

Sheila Glaser: Cost energy consumption and security.

Sheila Glaser: Despite the mounting challenges design starts continue to rise as the semiconductor industry scales to a trillion dollars in revenue or more by the end of the decade.

Sheila Glaser: As the leading silicon to systems design solution company with best in class EDA tools, and the broadest portfolio of semiconductor IP.

Sheila Glaser: Synopsys growth opportunity is truly incredible and already underway.

Sheila Glaser: Across industries.

Sheila Glaser: Dime shift is underway as companies race to deliver on this era of pervasive intelligence, where AI and smart technologies, our omni present, an interconnected.

Sheila Glaser: To capitalize on this shift.

Sheila Glaser: The technology industries overcoming it.

Sheila Glaser: Its converging on a silicon to systems approach to innovation.

Sheila Glaser: As the company at the heart of Silicon and systems.

Sheila Glaser: Synopsys was made for this moment.

Saseen Ghazi: There is no one more capable of helping companies innovate for this era of pervasive intelligence. Semiconductor companies are now designing with a system approach in mind, while system companies are unlocking additional value through purpose-built chips and software-defined systems. At the same time, customers see the fusion of electronics design and physics simulation as critical to delivering high-performance and high-yielding solutions for their business.

Sheila Glaser: No one more capable of helping companies innovate for this era of pervasive intelligence.

Sheila Glaser: Semiconductor companies are now designing with our system approach in mind.

Sheila Glaser: While system companies are unlocking additional value through purpose built chips and software defined systems.

Sheila Glaser: At the same time.

Sheila Glaser: Customers see the fusion of electronics design and physics simulation is critical to delivering high performing and high yielding solutions for their business.

Sheila Glaser: Building on our seven year partnership with <unk>, the industry leader in simulation and a deliberate multiyear strategy to reshape our business to support system level design last month, we announced our intent to acquire Anthos.

Saseen Ghazi: Building on our seven-year partnership with ENSYS, the industry leader in simulation, and a deliberate multi-year strategy to reshape our business to support system-level design, last month, we announced our intent to acquire ENSYS. This transaction will grow our revenue by 1.5x to $28 billion and further enhance our Silicon-to-Systems strategy, both across our core EDA segment and in highly attractive adjacent growth areas where Ansys has an established presence Customer feedback on the proposed transaction has been incredibly supportive, and we look forward to closing this transaction in the first half of 2025. Now I'll share some segment highlights, starting with design automation, where we saw strong design win activity across the business. We continue to enhance our leadership in digital EDA, as our capabilities become increasingly critical for the leading chips at advanced nodes. We are proud to have partnered with our customers to achieve a number of industry firsts in Q1. The world's first GAA-based next-generation arm, Cortex-X, mobile core tape out at the leading Asian mobile SOC provider.

Sheila Glaser: This transaction will grow our Tam by one five X $228 billion and further enhance our silicon to system strategy.

Sheila Glaser: Both across our core EDA segment.

Sheila Glaser: And in highly attractive adjacent growth areas, where <unk> has an established presence and successful go to market expertise.

Sheila Glaser: Customer feedback on the proposed transaction has been incredibly supportive and we look forward to closing this transaction in the first half of 2025.

Sheila Glaser: Now I'll share some segment highlights starting with design automation, where.

Sheila Glaser: Where we saw strong design win activity across the business.

Sheila Glaser: We continue to enhance our leadership in digital E D. A.

Sheila Glaser: As our capability has become increasingly critical for the leading chips at advanced nodes.

We are proud to have partnered with our customers to achieve a number of industry firsts in Q1.

Sheila Glaser: The world's first GAA based next generation arm cortex ex mobile core tape out at a leading Asian mobile <unk> provider.

Sheila Glaser: The first completed tape out for a server Src on 18 eight.

Saseen Ghazi: The first completed tape-out for a server SOC on 18A, and Asia's first N5 arm flagship automotive core tape out for a leading EV OEM. In addition... We had multiple competitive wins anchored by 2nm and 3nm projects at a leading Asian mobile semiconductor company. We are also gaining momentum with analog mixed-signal customers. We won several competitive full-flow displacements at analog mixed-signal companies, including networking OEMs in Europe and Japan.

Sheila Glaser: In Asia first and five arm flagship automotive core tape out for a leading EV OEM.

Sheila Glaser: In addition.

Sheila Glaser: We had multiple competitive wins anchored by two nanometer and three nanometer projects at a leading Asian mobile semiconductor company.

Sheila Glaser: We are also gaining momentum with analog mixed signal customers. We won several competitive full flow displacements.

Analog mixed signal companies, including networking Oems in Europe and Japan.

Sheila Glaser: A key differentiator in this competitive win was the bread and leadership of our <unk> platform from digital to analog and from architecture to sign off.

Saseen Ghazi: A key differentiator in these competitive wins was the breadth and leadership of our EDA platform, from digital to analog and from architecture to sign-on, all turbocharged with the industry's leading full-flow AI platform, Synopsys.ai. Synopsys.ai focuses on three distinct pillars of value for our customers: Optimization, xso.ai, Data Analytics, x.da, and Generative AI, including our co-pilot. Starting with our XSO.AI family, which includes design, verification, test, and analog space optimization.

All turbocharged with the industry's leading full flow AI platform synopsis that AI.

Sheila Glaser: Synopsys that AI focuses on three distinct pillars of value for our customers.

Sheila Glaser: Optimization ex <unk> AI.

Sheila Glaser: Data analytics ex Dr da and generative AI, including our co pilot.

Starting with our excess or Doc AI family, which includes design verification test and analog space optimization.

Saseen Ghazi: We continue to expand our footprint and drive SELUP in our core EDA tools. DSO.ai was key in several major wins and continues to drive a 20% plus uplift to Fusion Compiler revenue at multiple accounts. Increasing the share of usage of DSO.AI versus the competition was driven by superior PPA results on our platform versus alternatives. We saw a very strong pull for VSO.AI with multiple production deployments that are seeing excellent improvements in test coverage and turnaround time.

Sheila Glaser: We continue to expand our footprint and drive setup in our core EDA tools.

Sheila Glaser: DSO that AI whiskey in several major wins and continues to drive a 20% plus uplift to fusion compiler revenue at multiple accounts.

Sheila Glaser: Increasing share of usage of DSO that AI versus the competition was driven by superior PPA results on our platform versus alternatives.

Sheila Glaser: We saw very strong pull for <unk> or AI with multiple production deployments that are seeing excellent improvements in test coverage and turnaround time.

Sheila Glaser: A large north American HBC semiconductor company made a significant investment in VSO that AI technology with plans to immediately deploy on four projects and eventually deploy corporate wide.

Saseen Ghazi: A large North American HPC semiconductor company made a significant investment in VSO.AI technology with plans to immediately deploy it on four projects and eventually deploy it corporate-wise. Another large North American GPU company saw 2x faster turnaround time and a 20% improvement in coverage and is planning a large-scale deployment of the technology. Our analog AI tool, ASO.AI, now has multiple deployments moving to production with reference flows at TSMC, Samsung, and Intel for analog migration. We also broadened the capability of TSO.AI, adding a design for test feature to the proven ability for advanced pattern generation. At the International Test Conference this quarter, we demonstrated a 20% reduction in total pattern count using TSO.AI.

Sheila Glaser: Another large north American GPU company saw two X faster turnaround time, and a 20% improvement in coverage and is planning a large scale deployment of the technology.

Sheila Glaser: Our analog AI tool <unk> AI now has multiple deployments moving to production with reference flows at TSMC, Samsung and Intel for analog migration.

Sheila Glaser: We also broadened the capability of Ts or that AI, adding a design for test feature to the proven ability for advanced pattern generation.

At the International Test conference this quarter, we demonstrated a 20% reduction in total patent count using <unk> AI.

Sheila Glaser: Our data analytics AI products also saw significant logo engagement growth.

Saseen Ghazi: Our data analytics AI products also saw significant logo engagement growth. A great example is silicon.da, production analytics, which is part of the Silicon Lifecycle Management family and spans design through product manufacturing phases. Silicon.da automatically highlights silicon data outliers, enabling engineering teams to quickly identify and correct underlying issues in design and manufacturing and boost productivity. Last quarter, we had a groundbreaking generative AI announcement with Microsoft for accelerating chip design. Synopsys.ai Copilot. The integration of GenAI across Synopsys.ai provides chip designers with collaborative capabilities that offer expert tool guidance. Generative Capabilities to Enable RTL and Collateral Creation from Natural Languages

Sheila Glaser: A great example is silicon Doug D. A production analytics, which is part of the Silicon lifecycle management family and.

Sheila Glaser: And spans design through product manufacturing phases.

Silicon Dr D a.

Sheila Glaser: Mattikalli highlight silicon data outliers, enabling engineering teams to quickly identify and correct.

Sheila Glaser: The underlying issues and design and manufacturing and boost productivity.

Sheila Glaser: Last quarter, we had a groundbreaking generative AI announcement with Microsoft or accelerating chip design.

Sheila Glaser: Synopsys that AI co pilot.

Sheila Glaser: The integration of Gen AI across Synopsys duct AI provides chip designers with collaborative capabilities that offer expert tool guidance <unk>.

Sheila Glaser: <unk> generated capabilities to enable RTL and collateral creation from natural language.

Sheila Glaser: Following positive feedback from initial pilot participants.

Saseen Ghazi: Following positive feedback from initial pilot participants, AMD, Intel, and Microsoft, we'll be adding a number of other companies with our beta rollout. In Q1... We also won a significant multi-die package design. Our 3D-IC compiler platform gains substantial momentum in multi-die packaging.

Sheila Glaser: Intel and Microsoft will be adding a number of other companies with our beta rollout.

Sheila Glaser: In Q1, we.

Sheila Glaser: We also we also won significant multi die package designs.

Sheila Glaser: Our <unk> IC compiler platform gained substantial momentum in multi die packaging.

Sheila Glaser: Multi die implementations continue to increase and the HBC market with an expectation that by 2028.

Saseen Ghazi: Multidi implementations continue to increase in the HPC market, with an expectation that by 2028, 40% of HPC designs will be multi-die architectures. Like the transition to AI, this new design paradigm will create significant opportunities for both our EDA and IP business. Moving to our systems business, hardware-assisted verification had a strong quarter with excellent bookings on Zeebo and HAPS across multiple geographies with eight new hardware logos. We saw share expansion at a large Asian OEM on ZEBU 5 and grew our HAPS footprint at two top North American customers. In system software, Booking's momentum continued with key automotive OEMs and Tier 1. One example was the collaboration we announced with Continental, integrating our industry-leading virtual prototyping solution.

Sheila Glaser: 40% of HBC designs will be multi die architectures.

Sheila Glaser: Like the transition to AI. This new design paradigm will create significant opportunity for both our <unk> and IP businesses.

Sheila Glaser: Moving to our systems business.

Sheila Glaser: Hardware assisted verification had a strong quarter with excellent bookings on zebu and haps across multiple geos with eight new hardware logos.

Sheila Glaser: We saw share expansion at a large Asian OEM on zebu five.

Sheila Glaser: And grew our haps footprint at two top North American customers.

Sheila Glaser: And system software bookings momentum continued with key automotive Oems and tier ones.

Sheila Glaser: One example was the collaboration we announced with Continental.

Sheila Glaser: Integrating our industry, leading virtual prototyping solutions within continental automotive edge development framework.

Saseen Ghazi: Within Continental's Automotive Edge development framework, we're building the digital twin capabilities that allow automakers to accelerate their software development and improve their time-to-market. Now, moving to design IP, which continues to deliver industry-leading growth as the IP supplier of choice for leading HPC, AI, automotive, and mobile chips at advanced nodes. This quarter, we closed a multi-year, multi-node, and multi-foundry agreement to enable the next-generation automotive and IoT platforms in a landmark design win at a major North American semiconductor company. A keystone IP in HPC and AI is PCIe 6.0, where we lead the industry with more than 50 lifetime wins. We demonstrated our next wave of innovation by showcasing our PCIe 7.0 technology at DesignCon 20

We are building the digital twin capabilities that allow automakers to accelerate their software development and improve their time to market.

Sheila Glaser: Now moving to design IP.

Sheila Glaser: Which continues to deliver industry, leading growth as the IP supplier of choice for leading HBC.

Sheila Glaser: AI automotive and mobile chips at advanced nodes.

Sheila Glaser: This quarter, we closed a multiyear multi node and multi foundry agreement to enable the next generation automotive and Iot platforms and the landmark design win at a major North American semiconductor company.

Sheila Glaser: A keystone IP in HBC and AI is pcie six point or.

Sheila Glaser: Where we lead the industry with more than 50 lifetime wins.

Sheila Glaser: We demonstrated our next wave of innovation by showcasing our PCI E. Seven Oh technology at design Con 2024.

Sheila Glaser: Multi die packaging is a significant tailwind to IP as well as EBITDA.

Saseen Ghazi: Multi-die packaging is a significant tailwind for IP as well as EDA. We won four die-to-die IP engagements in the quarter, surpassing 45 lifetimes, enhancing our leadership in this emerging space. We proudly demonstrated the industry's first silicon success for UCIE-S, Phi-IP, in TSMC N3E and N5.

Sheila Glaser: We want four die to die IP engagements in the quarter, surpassing 45 lifetime enhancing our leadership in this emerging space.

Sheila Glaser: We proudly demonstrated the industry's first silicon success for UC I E S.

Sheila Glaser: In TSMC <unk> and five.

Saseen Ghazi: The tight integration with our flagship EDA tool, 3DIC compiler, is generating significant productivity gains with improved design margin. Finally, at the beginning of the quarter, we launched our new ARC-V RISC-V based portfolio with strong customer interest. The Arc5 processors are highly configurable and extensible to deliver optimal power performance efficiency for a broad range of applications such as automotive, storage, and IoT.

Sheila Glaser: The tight integration with our flagship <unk> <unk> tool <unk> IC compiler is generating significant productivity gains with improved design margins.

Sheila Glaser: Finally.

Sheila Glaser: At the beginning of the quarter, we launched our new arc five risk five based portfolio with strong customer interest.

Sheila Glaser: The arc five processors are highly configurable and extensible to deliver optimal power performance efficiency for a broad range of applications, such as automotive storage and Iot.

Sheila Glaser: Now to the software integrity segment, which delivered a record revenue despite the challenging macroeconomic backdrop for enterprise software.

Saseen Ghazi: Now to the software integrity segment, which delivered record revenue despite the challenging macroeconomic backdrop for enterprise software. We continue to evaluate strategic alternatives for this business, and we will provide an update when we complete this process. While the company engages in this process, the Software Integrity Group will continue to focus on investing in and innovating in our market-leading products and serving customers with our leading application security testing portfolio and a global go-to-market execution. In summary, we had an excellent start to the year, building on momentum underpinned by multiple secular growth drivers.

Sheila Glaser: We continue to evaluate strategic alternatives for this business and we will provide an update when we complete this process.

Sheila Glaser: While the company engages in this process the software integrity group will continue to focus on investing.

Sheila Glaser: And innovating in our market, leading products and serving customers with our leading application security testing portfolio and our global go to market execution.

Sheila Glaser: In summary.

Sheila Glaser: We had an excellent start to the year building on momentum underpinned by multiple secular growth drivers.

Saseen Ghazi: We have a resilient business model, and our customers continue to prioritize investments in silicon and systems that position them for future growth. We are aligning our portfolio investments with the greatest return potential to accelerate our growth. Thank you to our employees, partners, and customers for their passion and commitment. Finally, we look forward to providing you with more insight into our business, strategy, and growth opportunities at our upcoming Investor Day, which will be held in conjunction with our Synopsys Users Group event in Santa Clara on March 20th. I hope to see many of you there. Now, with that, I'll turn it over to Sheila. Thank you, Sistine.

Sheila Glaser: We have a resilient business model and our customers continue to prioritize investments in the silicon and systems that position them for future growth.

Sheila Glaser: We are aligning our portfolio investment with the greatest return potential to accelerate our growth.

Sheila Glaser: Thank you to our employees partners and customers for their passion and commitment.

Sheila Glaser: Finally, we look forward to providing you more insight into our into our business strategy and growth opportunities at our.

Sheila Glaser: Upcoming Investor day, which will be held in conjunction with our Synopsys users group event in Santa Clara on March 20th I Hope to see many of you there with that I'll turn it over to Sheila.

Sheila Glaser: Thank you <unk>, we delivered a solid start to the air with revenue and upper end of our guided range non-GAAP operating margin of 38, 7% and non-GAAP earnings above the high end of our guidance range our Q1.

Sheila Glaser: We delivered a solid start to the year with revenue in the upper end of our guided range, a non-gap operating margin of 38.7%, and non-gap earnings above the high end of our guidance. Our Q1 results are driven by our execution and leadership position across our segments, robust design activity across semiconductor and systems customers, and the stability and resilience of our time-based business. We remain confident in our business.

Sheila Glaser: Results are driven by our execution and leadership position across our segments.

Sheila Glaser: Bus design activity across semiconductor and systems customers and the stability and resilience of our time based business.

Sheila Glaser: We remain confident in our business as a result, we are reaffirming our full year 2024 targets for revenue and non-GAAP operating margin and raising our non-GAAP EPS guidance.

Sheila Glaser: And as a result, we are reaffirming our full year 2024 targets for revenue and non-GAAP operating margin and raising our non-GAAP EPS guidance. I'll now review our first quarter results. All comparisons are year-over-year unless otherwise stated. We generated total revenue of $1.65 billion. Total GAAP costs and expenses were $1.29 billion, and total non-GAAP costs and expenses were $1.01 billion, resulting in a non-GAAP operating margin of 38.7%. Gap earnings per share were $2.89, and non-gap earnings per share were $3.56.

Sheila Glaser: I will now review our first quarter results.

Sheila Glaser: All comparisons are year every year unless otherwise stated.

Sheila Glaser: We generated total revenue of $165 billion.

Sheila Glaser: Total GAAP costs and expenses for $129 billion.

Sheila Glaser: Total non-GAAP costs and expenses were $1.0 billion to $1 billion, resulting in non-GAAP operating margin of 38, 7%.

Sheila Glaser: GAAP earnings per share were $2 89.

Sheila Glaser: non-GAAP earnings per share were $3 and 36% Q.

Sheila Glaser: Q1 included an extra fiscal week, which contributed $70.5 million in revenue and 11 cents in non-GAAP EPS. Now on to our segment. Design automation segment revenue was $985.3 million, up 11%. Design Automation Adjusted Operating Margin was 37%. Design IP segment revenue was $525.7 million, up 53%, driven by broad-based strength. Design IP's adjusted operating margin was 47.5%. Software Integrity revenue was $138.2 million, up 8%, and Adjusted Operating Margin was 17.3%. Operating cash outflow was $88 million for the quarter, and we ended the quarter with cash and short-term investments of $1.27 billion.

Sheila Glaser: Q1 included an extra fiscal week, which contributed $75 million in revenue and 11.

Sheila Glaser: And non-GAAP EPS.

Sheila Glaser: Now onto our segment.

Sheila Glaser: Design automation segment revenue was $985 $3 million up 11%.

Sheila Glaser: Design animation adjusted operating margin was 37%.

Sheila Glaser: Design IP segment revenue was $525 7 million up 53% driven by broad based strength design.

Sheila Glaser: Design IP adjusted operating margin was 47, 5%.

Sheila Glaser: Software integrity revenue was $138 $2 million up 8% and adjusted operating margin was 17, 3%.

Sheila Glaser: Operating cash outflow was $88 million for the quarter and we ended the quarter with cash and short term investments of $1 billion to $7 billion.

Sheila Glaser: Now to guidance. For fiscal year 2024, the full-year targets are revenue of $6.57 to $6.63 billion. Total GAAP costs and expenses were between $5.02 and $5.08 billion. Total non-GAAP costs and expenses were between $4.14 and $4.18 billion. Resolving a non-GAAP operating margin improvement of roughly 2 percentage points, a non-GAAP tax rate of 15%, GAAP earnings of $9.56 to $9.74 per share, and non-GAAP earnings of $13.47 to $13.55 per share.

Speaker Change: Now to guidance.

Speaker Change: For fiscal year 2020 for the full year targets are revenue of $6 five seven to $6 $63 billion.

Speaker Change: Total GAAP costs and expenses between $5.0 billion to $5.08 billion.

Speaker Change: Total non-GAAP costs and expenses between 414 and $4 one 8 billion.

Speaker Change: Resulting in non-GAAP operating margin improvement of roughly two percentage points.

Speaker Change: non-GAAP tax rate of 15% GAAP earnings of $9 56.

Speaker Change: $9 74 per share.

Speaker Change: non-GAAP earnings of $13 47 to.

Speaker Change: The $13 55 per share cash.

Sheila Glaser: Cash flow from operations of approximately $1.4 billion. Now to targets for the second quarter. Revenue between $1.56 and $1.59 billion. Total gap costs and expenses between 1.21 and 1.23 billion dollars. Total non-GAAP costs and expenses between $1.01 and $1.02 billion, GAAP earnings of $2.05 to $2.16 per share, and non-GAAP earnings of $3.09 to $3.14 per share.

Speaker Change: Cash flow from operations of approximately $1 4 billion.

Speaker Change: Now to targets for the second quarter revenue between one five and $159 billion.

Speaker Change: Total GAAP costs and expenses between one to one and 123 billion.

Speaker Change: Total non-GAAP costs and expenses between 1.01 and $1.02 billion GAAP earnings of $2 <unk>.

Speaker Change: To $2 16 per share and non-GAAP earnings of $3 nine to $3 14 per share.

Operator: Our press release and financial supplement include additional targets and gap to non-gap reconciliation. In conclusion, we delivered a solid start to the year. We continue to execute, and for the full year, we expect 12.4 to 13.5% revenue growth, non-GAAP operating margin improvement of roughly 2 percentage points, and 20 to 21 percent non-GAAP EPS growth. Our confidence reflects our leadership position across our segment, robust design activity by our customers, and the stability and resiliency of our time-based business model. With that, I'll turn it over to the operator for questions. Before we begin, the Q&A session will begin momentarily. I would like to ask everyone to please limit themselves to one question and one brief follow-up to allow us to accommodate all participants.

Speaker Change: Our press release and financial supplement includes additional targets and GAAP to non-GAAP reconciliation.

Speaker Change: In conclusion, we delivered a solid start to the year, we continue to execute and for the full year expect.

Speaker Change: 12, four to 13, 5% revenue growth.

Speaker Change: non-GAAP operating margin improvement of roughly two percentage points and 20% to 21% non-GAAP EPS growth.

Speaker Change: Our confidence reflects our leadership position across our segments.

Speaker Change: Robust design activity by our customers and the stability and resiliency of our time based business model with that I'll turn it over to the operator for questions.

Speaker Change: Before we 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.

Gary Mobley: If you have additional questions, please re-enter the queue, and we'll take as many as time permits. We will pause for a moment to compile the Q&A. Our first question comes from the line of Gary with Wells Fargo Securities. Gary, the floor is yours.

Speaker Change: We have additional questions. Please reenter the queue and we will take as many years as time permits.

Speaker Change: We will pause for a moment to compile the Q&A roster.

Speaker Change: Our first question comes from the line of Gary with Wells Fargo Securities Gary the floor is yours.

Gary: Good afternoon, everybody. Thanks for taking my question.

Gary Mobley: Good afternoon, everybody. Thanks for taking my question. I think when you started, or you initially gave fiscal year 24 guidance, you were expecting China to be a drag on the overall revenue growth, but in the first quarter results, it looks like sales into China were modestly accretive to the overall growth.

Gary: I think when you started are you initially gave fiscal year 'twenty for guidance you were expecting.

Gary: China too.

Gary: I guess to be a drag on the overall revenue growth, but in the first quarter results. It looks like sales into China were modestly accretive to the overall growth.

Saseen Ghazi: So my question is, you know, do you still anticipate some headwinds specific to China and anything specific you wanted to call out there? The Bulletproof Executive 2013, Yeah, thank you, Gary, for the question. You are correct. When we guided FY24, we called out two possible headwinds. One, the continued enterprise software slowness, and the other one was around China, both the macro and the impact of export control.

Gary: And so my question is do you still anticipate some headwinds specific to China and anything specific you wanted to call out there with with respect to the dilution to the overall revenue trends.

Speaker Change: Yes, Thank you Gary for the question.

Speaker Change: You are correct.

Speaker Change: When we guided FY 'twenty four we called out two possible headwinds one the continued.

Speaker Change: Enterprise software slowness and the other one was around China, both the macro and the impact of the export control.

Speaker Change: That will continue.

Sheila Glaser: That will continue in terms of our balanced view as we look at the year. And, as we communicated as well, we believe that being pragmatic around Chinese growth as we look at FY24 was important. Now, as you saw in Q1, as you're calling out strong Q1, that is due to some timing of our pulldown of our business, be it in EDA or IP, that can vary quarter over quarter. But the remainder of the year is pretty much what we communicated when we guided the year. Just a follow-up housekeeping question. What was the RPO balance at the end of the quarter? And it looks like the other income is coming in stronger than the original projected.

Speaker Change: In terms of our balanced view as we're looking at the year and as we communicated as well we believe that been.

Speaker Change: Pragmatic around the China growth as we look at FY 'twenty four.

Speaker Change: Was important now as you saw in Q1 as Youre, calling out strong Q1.

Speaker Change: That is due to some timing of our pull down of our business be it in <unk> or IP that can vary quarter over quarter.

Speaker Change: But the remainder of the year is pretty much what we communicated when we guided the year.

Speaker Change: Okay.

Speaker Change: Followup husk.

Speaker Change: Housekeeping question.

Speaker Change: What was the <unk> balance at the end of the quarter and it looks like the other income is coming in stronger than the original projections, including some upside in the first quarter. Sheila if you could give some clarity on the source of that.

Sheila Glaser: Synopsys: Clarity on the source of that. Yeah, the backlog is 8.2 billion for the quarter. So we had obviously a record backlog in Q4 of 8.6, and that's sort of the natural lumpiness of timing of big orders. So that was a pretty normal expectation.

Sheila Glaser: Yeah, the backlog is $8 2 billion for the quarter. So.

Sheila Glaser: We had obviously a record backlog in Q4 of $8 six and that sort of the natural lumpiness of timing of Big order. So that was a pretty normal expectation and then some of the goodness we saw in some.

Sheila Glaser: And then some of the goodness we saw in some of our other businesses was some improvement in some forex. And so, you know, obviously that can ebb and flow, but that's what we saw in Q1. Thanks, Gary.

Sheila Glaser: Some of our other with some improvement in some forex and so on.

Sheila Glaser: Honestly that that can ebb and flow, but that's what we saw in Q1.

Speaker Change: Thank you.

Speaker Change: Thanks, Gary.

Speaker Change: Our next question comes from the line of Keybanc the floor is yours.

Jason Celino: Our next question comes from the line of KeyBank. The floor is yours. Oh, hey, thanks. This is Jason. Can you guys hear me?

Speaker Change: Oh, Hey, Thanks This is Jason.

Jason: You hear me.

Jason Celino: Yes, Jason. Perfect. Maybe building off of Gary's question, the backlog 8.2, really nice to see in the high teens year over year growth again. I get it, you know, lumpy coming off a record, but it was down a little more sequentially than what we've seen typically from Q4s to Q1s. Um, is there any way to think about the linearity through the year, first half, second half, or renewal timing? Just trying to understand the shape of it.

Jason: Yes, Jason.

Jason: Perfect maybe building off of Gary's question, the backlog any point to really nice to see in the high teens year over year growth again.

Jason: Again, it lumpy coming off a record, but it was down a little more sequentially than what we've seen typically from Q4 as Q1.

Speaker Change: Is there any way to think about the linearity through the year first half second half or are renewal timing just trying to understand the shape. Thanks, Yeah, I wouldn't say, there's anything unusual about it I mean year over year, we were up about 19%. So we kind of think about managing these things on a yearly increment because you think.

Sheila Glaser: Yeah, I wouldn't say there's anything unusual about it. I mean, year over year, we're up about 19%, so we kind of think about managing these things on a yearly basis because you think about, you know, timing of renewals and things like that, which we usually think about over the course of 12 months. So there's nothing really specific about Q4 to Q1, other than I would point out that Q4 was an all-time high. So in some senses, you know, that all-time high will go through sort of a natural pulldown and then replenishment of the backlog as we drive renewals and expansion. Okay, perfect.

Speaker Change: Timing of renewals and things like that which usually we think about over the course of 12 months. So there's nothing.

Speaker Change: Really specific about the Q4 to Q1 other than I would point out that Q4 was an all time high so in some senses.

Speaker Change: And you know that that all time high we'll go through sort of the national pulled out and then replenishment in the backlog as we drive renewals and expansion.

Speaker Change: Perfect and then on the IP side, again really strong quarter, 50% growth.

Saseen Ghazi: And then on the IP side, again, a really strong quarter, you know, 50% growth. I know you mentioned a lot of new IP titles that are coming out or have come out. I guess what was the main driver of the strengths in IP and then how should we think about that trend through the rest of the year?

Speaker Change: I know you mentioned a lot of new IP titles.

Speaker Change: We are coming out or come out I guess, what was the main driver of the strength in IP and then how should we think about.

Speaker Change: Pat.

Pat: And through the rest of the year.

Pat: Hum.

Pat: On the IP.

Saseen Ghazi: Yes, thanks, Jason. As far as IP goes, the beauty of what we have in our IP business, given it's an interface IP, more silicon proliferation, more chip starts; they need IP to connect the chip, inside the chip, the different blocks to each other, and connect the chip to the outside world. And this is where we lead with our IP business. Now, that being said, there are constant new standards that are being delivered in order to support the complexity and the performance requirements of be it an AI chip or any chip that goes into a data center, etc. Multi-die is another factor. The moment you start stacking dies together in a package, you need more and more interface IP to connect that multi-die package together.

Pat: Yes.

Speaker Change: Thanks, Jason.

Speaker Change: As far as IP goes.

Speaker Change: The beauty of what we have in our IP business given its an interface IP more silicon proliferation more chip starts they need IP to connect the chip inside the chip the different blocks to each other and connect the chip to the outside World and this is where we lead with our IP business.

Speaker Change: Now that being said there.

Speaker Change: There are constant new standards that are being delivered in order to support the.

Speaker Change: The complexity and the performance requirements for.

Speaker Change: <unk> AI chip or any chip that goes into data center.

Speaker Change: Et cetera.

Speaker Change: Multi die is another factor.

Speaker Change: The moment you start stacking.

Speaker Change: Dice together in a package you need more and more interface IP to connect that.

Speaker Change: The multi die package together.

Speaker Change: Together. So those were the factors that were driving the IP opportunity and we are very confident.

Sheila Glaser: So those were the factors that were driving the IP opportunity, and we are very confident that this secular trend with IP demand will continue as long as there is more demand for silicon and more sophisticated silicon. Yeah, and Jason, I would just add that the shape of the year is a bit opposite from last year. Last year, we were very back-end loaded, as you recall, and this year we're a little bit more towards the front of the year. And that's really driven as we've always talked about lumpy NIP because we're building those new standards that Sistine talked about every day, but then when the customers need them to ingest into their designs, that's when we get those big pulldowns. Okay, I appreciate that. Thank you both.

That this secular trend with IP demand will continue as long as there is more demand for silicon and more sophisticated silicon.

Speaker Change: Yeah, and Jason I would just add the shape of the year isn't a bad opposite from last year last year were very backend loaded as you recall and this year, we're a little bit more towards the front of the year.

Speaker Change: And that's really driven as we've we always talk about lumpy and IP because we're building those new standards. That's been talked about every day, but then when the customers need it to ingest into their design, that's when we get those big pull downs.

Speaker Change: Okay I appreciate that thank you both.

Jay Vleeschhouwer: Thank you, Jason. Our next question comes from the line of Jay with Griffith Security. Your floor is yours.

Speaker Change: Thank you Jason Jason.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of Jay with Griffin Securities.

Jay: The floor is yours.

Saseen Ghazi: Thank you. Good evening. So I see that with the ANSYS acquisition, you are, of course, pursuing the largest convergence event in the industry. But the question is, in the meantime, would you talk about the kind of internal resources or investments you are making anyway as you await the transaction in terms of new technologies, new methodologies to effectuate convergence even before the transaction closes, particularly for the target markets that are motivating the acquisition, such as aero, auto, and industrial? Yes, an excellent question, Jay. So I want to break it down into two areas of investment. One in the core of EDA, not only with multi-die 3DIC but even if you have a single die in a package, a homogeneous chip.

Jay: Thank you good evening.

Jay: So <unk> seen with the <unk> acquisition, you are of course pursuing the largest convergence event.

Jay: The industry, but the question is in the meantime could you talk about the kind of internal resources or investments you were making anyway.

Jay: You are right the transaction.

Jay: In terms of.

Jay: New technologies, new methodologies to effectuate conversions.

Jay: Even before the.

Jay: After the transaction closes, particularly for the target markets.

Jay: The better is motivating the acquisition such as Aero auto and industrial.

Speaker Change: Yes excellent question, Jay So I want to break it into two.

Speaker Change: Areas of investments one in the core ebay.

Speaker Change: Not only with multi die <unk> IC, but even if you have a single die in a package of homogeneous chip.

Saseen Ghazi: When we started the collaboration with ENSYS in 2017, the intention of that collaboration was to bring an industry leader's sign-off technology to our design implementation portfolio. But that did not mean we stopped investing in our own organic implementation portfolio, because you need to integrate some key engines in order to correlate with industry sign-off. As the complexity since 2017 grew, our investments organically expanded in order to have engines sitting inside our fusion design platform to correlate with the broadened touchpoints we created with Ansys from a simulation and sign-off standpoint. So that will continue in order to serve our customers deliver the solution that they are looking for in order to design and develop their product. So that's one bucket of investment.

Speaker Change: When we started the collaboration with emphasis in 2017.

Speaker Change: The intention of the collaboration was to bring an industry leader sign of technology to our design implementation portfolio.

Speaker Change: That does not mean, we did we stopped investing in our own organic.

Speaker Change: Implementation portfolio, because you need to integrate.

Speaker Change: Some key engines in order to correlate with the industry sign off as.

Speaker Change: As the complexity since 2017 grew.

Speaker Change: Our investments organically expanded in order to have engine sitting inside our fusion design platform.

Speaker Change: Two.

Speaker Change: Correlates with the broaden touch points, we created with <unk> from a simulation and sign off as standpoint, so that will continue in order to serve.

Speaker Change: Our customers are.

Speaker Change: Deliver to a solution that they are looking in order to design and develop their products. So that's one bucket of investment.

Saseen Ghazi: The second one, as we started expanding into new markets, such as automotive, driving our system's aspiration. The investment there was not only from the product side, but it was a go-to-market investment as well, in order to expand and call into new sets of customers, like the automotive OEMs and others. And this is where we called out a month or so ago, when we announced the Ansys acquisition, that Ansys would bring an acceleration of knowledge into the new market segments that they have experience and brands selling into those markets. So those are the investments, both on the R&D side and the go-to-market side, that we will continue to make until we close the agreement and start talking about integration at the time. Okay, thank you.

Speaker Change: The second one as.

Speaker Change: As we started expanding into new markets.

Speaker Change: Automotive driving our systems our aspiration.

Speaker Change: The investment there was not only from the product side was the go to market investments as well in order to expand and call into new set of customers.

Speaker Change: Motive Oems and other.

Speaker Change: And this is where we called out.

Speaker Change: A month or so ago, when we announced the <unk> acquisition that <unk> will bring in an acceleration of our.

Speaker Change: Knowledge into that to new market segments.

Speaker Change: That that they have an experience and brand.

Speaker Change: Selling into those markets. So those what those are the investments both on the R&D side and the go to market side that we will continue on making until.

Speaker Change: We we closed the agreement and we start talking integration at the time.

Speaker Change: Okay. Thank you for the follow up one of the things that distinguishes your current business is the customer concentration that is at least with one customer Shoeless former company.

Saseen Ghazi: For the follow up, one of the things that distinguishes your current business is the customer concentration, that is, at least with one customer, Sheila's former company. Over time, as you know, AI becomes increasingly pervasive, and all the other phenomena that you've talked about, and that Aart talked about this morning at the IFS event, take hold. How do you foresee your customer concentration perhaps evolving in core EDA, IP, and or hardware over the next number of years when you think about all the various trends and technological trends? You've been speaking after some time. Do you think the concentration will get higher, or do you think that you will have less customer concentration over time? And set aside the answers.

Speaker Change: Overtime as it becomes increasingly pervasive, but all the other phenomenon that you talked about and that are talked about this morning at the Iff's event.

Speaker Change: Cold how do you foresee.

Speaker Change: Our customer concentration perhaps evolving.

Speaker Change: <unk> T.

Speaker Change: <unk> hardware over the next number of years when you think about all the various trends and technology trends.

Speaker Change: <unk> been speaking about for some time do you think the concentration.

Speaker Change: Got it gets more or do you think that you will have less customer concentration.

Speaker Change: Overtime and set aside answers for the moment.

Speaker Change: Yes, so a J just a correction, both sheila ni or aluminized of Npls.

Speaker Change: I felt left out so I had to correct you here.

Saseen Ghazi: Yes. So, Jay, just a correction. Both Sheila and I were alumni of Intel. I felt left out, so I had to correct you there.

Speaker Change: So.

Speaker Change: I believe the market will go through phases of both vertical <unk> and horizontal horizontal nation and the reason for that is.

Saseen Ghazi: So, I believe the market will go through phases of both verticalization and horizontalization. And the reason for that is that when there's a new opportunity, you see, many customers either are trying to build a complete stack or a platform. And you hear many of our traditional semiconductor chip companies talking about building or delivering a system to their customers, delivering a platform to their customers. And then you see system companies trying to go deeper into silicon to drive their own differentiation for their specific workload, specific application, etc. Regardless of which direction it goes, for us, we benefit both ways.

Speaker Change: When there is a new opportunity.

Speaker Change: You see many customer either are trying to build a complete stack or platform.

Speaker Change: And you'll hear many of our traditional semiconductor chip companies talking about building, a or delivering a system to their customers delivering a platform to their customers and then youll see system companies are trying to go deeper into silicon to drive their own differentiation for their specific.

Speaker Change: Take workload specific application et cetera.

Speaker Change: Regardless, which direction it goes for us we benefit both ways because if the silicon customers are delivering more silicon and specialized silicon for these different market verticals, we sell them IP and EDA two to deliver to those products same thing with the system companies.

Saseen Ghazi: Because if the silicon customers are delivering more silicon and specialized silicon for these different market verticals, we sell them IP and EDA to deliver those products. Same thing with the system companies. You know our concentration, correct? That is focused on the chip, companies that are working on the most complex SOCs. Because those are the guys that spend, at the end, the most money to absorb the latest technology that we offer in order to deliver on these complicated chips. So I don't see it changing in the near term. Now, if you fast forward five plus years from now, and many system companies have a very solid, broad semiconductor arm inside them, there will be an expanded opportunity for us to serve. Very good. Thank you. Thank you, Jay. Our next question comes from the line of Lee Simpson with Morgan Stanley. Lee, the floor is yours. Great. Good evening, everyone.

Speaker Change: You know our concentration correct that is.

Speaker Change:

Speaker Change: Focus on the chip.

Speaker Change: Companies that are working on the most complex.

Speaker Change: <unk>.

Because those are the guys that they spend at the end.

Speaker Change: Most money to absorb the latest technology that we offer in order to deliver on these complicated.

Speaker Change: Chips, so I don't see it changing in the near term.

Speaker Change: If you fast forward five plus years from now and many system companies have a very solid broad.

Speaker Change: Semiconductor arm inside them.

Speaker Change: We will be.

Speaker Change:

Speaker Change: An expanded opportunity for us to serve.

Speaker Change: Okay very good thank you.

Speaker Change: Thank you Jay.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of Lee Simpson with Morgan Stanley Lee the floor is yours.

Lee Simpson: Great. Good evening, everyone. Thanks for fitting me in.

Lee Simpson: Thanks for fitting me in. Just really rolling back to a couple of things you mentioned in the product summary. I think you mentioned gate all around work with a mobile SoC player and then went on to talk about two nanometer products with leading semiconductor companies out of Asia. You know, great progress clearly there.

Lee Simpson: Just with the ruling back to a couple of things you mentioned on the <unk>.

Lee Simpson: Product summary.

Lee Simpson: You mentioned the gate all around and work with a mobile app to see player and then went on to talk about two nanometer products with bleeding Sammy.

Lee Simpson: Companies out of Asia.

Lee Simpson: Great progress clearly there.

Saseen Ghazi: And I guess I'm just trying to understand how this comes through as we get closer to things like, you know, 18a, 2 nanometers, or N2 more generally at TSMC, all of which seem to be standing up in the 2025 timeframe. So that feels to me as though that could and should be a pretty decent secular driver into the back half of the year. Is that the right way to be looking at this? Or does this come further into 25?

Speaker Change: I guess I'm just trying to understand.

Speaker Change: How does this come through as we get closer to things like <unk>, two nanometers or into more generally at TSMC, all of which seem to be standing up into 2025 timeframe.

Feels to me as though that could and should be a pretty decent secular driver into the back half of the year is that the right way to be looking at this or does this come farther into 'twenty five.

Speaker Change: So.

Saseen Ghazi: So, anytime there is a new technology, in this case, the GAA, the N2, the 18A, and maybe you heard Intel earlier today talking about 14A, that's a fantastic opportunity for two. In order for the customer to be able to explore that process technological innovation, even if they want to get a feel, do they want to move in that direction or not? Does it add value in terms of performance, power, etc.?

Speaker Change: Any time, there is a new technology in this case the GAA. The end 2018, a and maybe you heard Intel earlier today talking about 14 a.

Speaker Change: That's a fantastic opportunity for two reasons.

Speaker Change: In order for the customer to be able to explore that process technology innovation, even if they want to get a feel.

Speaker Change: Do they want to move in that direction or not does it add value in terms of performance power et cetera.

Saseen Ghazi: That technology, that process technology, needs to be enabled. In order to be enabled, it means Synopsys needs to design its IP on that process technology and make sure that our EDA products are comprehending that new technology in order to deliver to the target performance power area of this process technology. So our work starts at least two years before we start talking about the GAA tape-out that I mentioned in the script in order to deliver the IP, design the IPN, and make sure that our EDA product is available and ready. So you can think of it in that time frame as whenever you hear a new technology being introduced... process technology. There is an early, early effort to provide what is called the entitlement to that technology from a design point of view. And then you start seeing IP coming in, and designs start coming in around 24 months from the announcement of the technology from the leading foundry. Great, that's pretty clear, actually.

Speaker Change: That technology that process technology needs to be enabled in order to be enabled it means synopsys needs to design its IP on that process technology and make sure that our <unk> products.

Speaker Change: Comprehending that new technology in order to deliver to the target performance power area of these process technology.

Speaker Change: Our work starts at least two years before we start talking about the GAA tape out that I mentioned in the script in order to deliver the IP design to IP and making sure that our EBITDA products.

Speaker Change: Available and ready so you can think of it in that timeframe.

Speaker Change: Whenever you hear of new technology being introduced.

Speaker Change: Office technology, there is an early early effort too.

Speaker Change: It provide what is called the entitlement of that technology from a design point of view.

Speaker Change: And then you start seeing IP coming and design start coming in around 24 months.

Speaker Change: Announcement of technology from the leading foundries.

Speaker Change: Great that's pretty clear out here, maybe just a follow up when youre going back to your answers announcement that you made on some of the verticals that we play into.

Lee Simpson: Maybe just as a follow-up, going back to the Ansys announcement that you made and some of the verticals that they play into, clearly one of the main drivers that are happening around the automotive industry is this transition or migration to software-defined vehicles. And it does feel, as software and hardware decouples, that there's a scope here for someone to drive standards. Particularly in automotive testing, sorry, particularly in software, having that fully tested before sending it over the air. Could that be one of the ambitions for a deal like this? And does that behove scale to drive standards through? I'm just trying to get my head around what the opportunity might be there in new standards. Yeah, Lee. A good question.

Speaker Change: Clearly one of the main drivers that are happening around the automotive.

Speaker Change: Motive industries is this transition or migration to software defined vehicles.

Speaker Change: It does feel as software and hardware.

Speaker Change: Couples that there there is a scope here for someone to drive standards.

Particularly in automotive testing, particularly in software.

Speaker Change: Having not fully tested before sent over the air.

Speaker Change: Could that be one of the ambitions for a deal like this.

Speaker Change: It does not behoove scale to drive standards through I'm, just trying to get my head around what the opportunity might be there and new standards.

Speaker Change: Yes good.

Speaker Change: Good question, we are actually at if you think.

Saseen Ghazi: We're actually at, if you think, the software over-the-air update that is being pushed out to, say, a car. What is needed in order for that software to be implemented is for the hardware to be adaptable to the software changes that got pushed down. How do you know?

Speaker Change: The software.

Over the air updates that is being pushed out to say a car.

Speaker Change: What is needed in order for that software to be implemented as for the hardware to.

Speaker Change: Be adaptable to the software changes that got pushed down how do you know now let's assume you are in automotive OEM. How do you know the response or the reaction of that software update to the function.

Saseen Ghazi: Now, let's assume you're an automotive OEM. How do you know the response or the reaction of that software update to the function of that system, the car? This is where we come in; we can model every chip. We can test every chip. So as the software is adaptable and changing, the automotive OEM will get a feel and validation for every change they make without having to change, of course, the chips and the actual silicon that is in the car. So that's really where we come in, is that's what we call the electronics digital twin, where we have the ability to model every aspect of the electronics, the chips in the car. So those automotive OEMs can do exactly what you describe. That's excellent. Thanks so much.

Speaker Change: Of that system the cost and this is where we come in where you look at the entire electronic system of a car.

Speaker Change: We can model every chip.

Speaker Change: Test every chip so as the software.

Speaker Change: Adaptable and changing the automotive OEM will get a field and validation to every change they make.

Speaker Change: Without having to change of course, the chips and the actual silicon that is in the car. So that's really where we come in is that's what we're referring to electronics digital twins, where we have the ability to model every aspect of the electronics the chips and the card so those automotive <unk>.

Speaker Change: <unk> can do exactly what you described.

Speaker Change: That's excellent thanks, so much.

Speaker Change: Thank you.

Lee Simpson: Thank you. Our next question comes from the line of Joe LaBaird. Joe, the floor is yours.

Speaker Change: Our next question comes from the line of Joe with Baird, Joe the floor is yours.

Joseph D. Vruwink: Great. Thanks for taking my questions. I wanted to go back to IP performance. In your prepared remarks, you mentioned how AI is starting to lift growth around some of the core EDA software lines. I'm wondering if you can maybe do that, but for IP, and how AI development is maybe starting to lift growth in your IP portfolio. And then related to that, yeah, I would imagine these are a lot of advanced IP applications. Is this starting to show up in what could maybe be a favorable price mix? I think it's interesting that if you look at margins over the last four quarters now, they are actually higher than the design automation segment. So there seems to be something going on there. That's quite impressive.

Great. Thanks for taking my questions I wanted to go back to IP performance.

Joe: So I think in your prepared remarks, you mentioned, how AI is starting to lift growth around some of the core EDA software lines I am wondering if you can maybe do that but for IP and how AI development. In fact customers are maybe starting to lift growth in your IP portfolio.

Speaker Change: Palio.

Speaker Change: And related to that yes, I would imagine these are a lot of advanced IP applications is this starting to show up and.

Speaker Change: What could maybe be favorable price mix.

Speaker Change: It's interesting if you look at margins over the last four quarters now.

Speaker Change: Actually higher than the design automation segment, so there seems to be.

Speaker Change: Something going on there that's quite impressive.

Speaker Change: Yes so.

Speaker Change: Maybe first a comment because we did not get to that point, where we are in IP overnight. We have built that business 25 years ago actually if I'm not mistaken. This month is our 2005th year anniversary for that business.

Saseen Ghazi: Yes, so maybe first a comment because we did not get to that point where we are in IT overnight. We built that business 25 years ago. Actually, if I'm not mistaken, this month is our 25th year anniversary for that business, with a scale that is truly serving our customers in an amazing way. And the reason I'm emphasizing scale is the number of standards that are required in order to keep up with the complexity of a chip. Let's say you're talking about an AI chip. The bandwidth requirement, to connect the chip to the memory, to the networking part of it, to the compute aspect of it, is changing at a rapid, rapid pace. For us, that's a great opportunity.

Speaker Change: With a scale.

Speaker Change: That is truly.

Speaker Change: Serving our customers.

Speaker Change: Amazing way and the reason I'm emphasizing on scale.

Speaker Change: The number of the standards that are required in order to keep up with the complexity of chip, let's say when you were talking about an AI chip.

Speaker Change: The bandwidth requirements.

Speaker Change: To connect the chip to the memory to the networking part of it to the compute.

Speaker Change: Aspect of it is.

Speaker Change: Is changing at a rapid rapid pace for us that's a great opportunity because what it means anytime youre going to the next version of that interface IP, It's a new opportunity to monetize because it's a new IP with a an uplift in our pricing.

Saseen Ghazi: Because what it means, anytime you're going to the next version of that interface IP, it's a new opportunity to monetize. Because it's a new IP with an uplift in our pricing in order for our customers to get access to the latest and greatest. So that's from our ability to execute and deliver high-quality IP to the customer when the customer needs it. Now, the other part of your question is, please look at the trailing 12 months. The IP, by its nature, is pulled down where the customers consume the IP out of what we call an FSA, a committed multi-year agreement that we have with the customer so that they pull it down when they pull the IP down when they need it.

Speaker Change: In order for our customer to get access to the latest and greatest so that's from our ability to execute and deliver high quality IP to the customer when the customer needs. It now.

Speaker Change: Now the other part of your question.

Speaker Change: Is please look at the trailing 12 months.

Speaker Change: By its nature it is.

Speaker Change: <unk> pulled down with the customers consume the IP out of typically what we call an FSA a committed multiyear agreement that we have with the customer that they pull it down when they put the IP down when they need it so naturally youre going to see very very strong quarter from either an operating <unk>.

Saseen Ghazi: So naturally, you're going to see a very, very strong quarter from either an operating margin or revenue with a lumpiness where the next quarter may be significantly lower. But as you measure over the trailing 12 months, you will absolutely see it going up and to the right consistently. Okay, that's great. Thank you.

Speaker Change: Margin or revenue.

Speaker Change: The lumpiness, whether the next quarter may be significantly lower but as you measure over trailing 12 months, you will absolutely see it up and to the right consistently.

Speaker Change: Okay. That's great. Thank you.

Joseph D. Vruwink: And then second question, just looking at your inventory balances, a pretty nice jump there, which I imagine relates just to your expectations for the hardware business looking forward. Any changes in those expectations here at the start of the year? And then, related to this, how do you think about the concept of hardware cycles at this point? You know, in the past, there was an all new platform generation and then upgrading along the way. So you kind of get ebbs and flows, but we're now several years into a strong hardware environment. How do you see that progressing going forward? Sure. So, let me start, and then I'll have Saseem fill in.

Speaker Change: And then second question just looking at your inventory balances are pretty nice jump, there, which I imagine relates just your expectations on the <unk>.

Speaker Change: Hardware business looking forward any changes in those expectations here at the start of the year and then I guess related to the.

Speaker Change: How do you think about the concept of hardware cycles at this point in the past there was an.

An all new platform generation and then upgrading along the way. So you would kind of get ebbs and flows but we're now several years into a strong hardware environment.

Speaker Change: You see that progressing going forward.

Speaker Change: Sure. So let me start and then <unk>. So we did grow inventory about 17% quarter on quarter and Thats to align with we had a record hardware ear last year, we're anticipating another record hardware and hardware here and so we're building to ensure that we have proper supply to support our customers and the <unk>.

Sheila Glaser: So we did grow inventory by about 17% quarter-on-quarter, and that's to align with we had a record hardware year last year. We're anticipating another record hardware year, and so we're building to ensure that we have the proper supply to support our customers. And the reason that it's so important in our customer designs is that they're designing more and more complex chips. This allows them to help infuse into their design environment the ability to model the software before they actually have the chips, so they can find issues and improve their time to market.

Speaker Change: Isn't that at Sao important and our customer designed as they're designing more and more complex chips. This allows them to infuse into their design environment the ability to model the software before they actually have the chips that they think can find issues and improve there.

Centrally time to market. So it's an incredibly valuable capability for our customers we want to make sure that we have sufficient hardware available to be able to support this next record year and I wouldn't say that.

Sheila Glaser: So it's an incredibly valuable capability for our customers. We want to make sure that we have sufficient hardware available to be able to support this next record year. And I would say the capability that we're delivering to our customers through hardware is something they value greatly, which is why we've been able to have record year after record year. In terms of the cycles, maybe Saseem, do you want to comment on that?

Speaker Change: That capability that we're delivering to our customers through hardware as something they value greatly which is why we've been able to have record year. After a record year in terms of the cycles may be seen do you want to comment on that yes sure. Joe If you go back 810 years ago.

Saseen Ghazi: Yeah, sure. Joe, if you go back eight, ten years ago, selling hardware to customers, the customers viewed it at the time as an option. They could have gotten the job done without it, but they used it because it accelerated their effort.

Joe: Selling hardware to customers the customers' views viewed it at the time as an option.

Joe: They could have gotten the job done without it but they use it because it accelerated.

Joe: They are effort you fast forward to now.

Harlan Sur: You fast forward to now, and there is no way a chip can go to tape out, meaning to go to manufacturing, without having many, many cycles of emulation and prototyping to make sure that you cover as much as possible in terms of verifying the chip before you commit it to manufacturing. So there are no longer ebbs and flows of demands around hardware. There's a constant need by our customers to expand their investment and support the latest and greatest systems in order to take advantage of ensuring that the silicon they get back from manufacturing is going to be functioning and working. Great, thank you very much. Thank you, Jill, www.synopsys.com. Our next question comes from the line of Harlan with J.P. Morgan. Harlan, the floor is yours.

Joe: There is no way a chip.

Joe: <unk> can go to tape out meaning to manufacturing without having many many cycles of emulation and prototyping to make sure.

Joe: That you cover as much as possible.

Joe: In terms of verifying the chip.

Joe: Before you committed to manufacturing so it's no longer.

Joe: The ebbs and flows of demands around hardware there is a constant.

Joe: The need by our customers to expand their investment.

Joe: And support the latest and greatest systems in order to take advantage of.

Joe: Ensuring that the silicon they get back from manufacturing is going to be functioning and working.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you Joan.

Speaker Change: Our next question comes from the line of Harlan with Jpmorgan Harlan the floor is yours.

Harlan Sur: Hi, good afternoon. A great start to the fiscal year. On the AI front, you know, much of the focus has been on data centers, right? Data center, GPU, networking, custom ASIC, focus there continues to be strong. But now we're seeing sort of this broadening of AI moving into edges and endpoints, right?

Harlan: Hi, good afternoon, great start to the fiscal year on the AI counting on much of the focus has been on data Center data center GPU networking custom Asics.

Harlan: The continued strong but now we're seeing sort of the broadening of AI and moving into edges.

Harlan: And endpoints right. So not many of your semiconductor customers focused on smartphones automotive Pcs.

Saseen Ghazi: So now many of your semiconductor customers focused on smartphones, automotive PCs, Home Assistance Appliances, etc., are all scrambling to add AI capabilities to their future chip roadmaps. I think it's resulting in more complex ship designs, more demand for higher performance IP, and more system-level analysis. Is the team already seeing this in terms of design activity momentum, IP licensing engagements, maybe more potential opportunities for ANSYS? I mean, any color here would be helpful.

Harlan: Home assistance appliances, like we're all scrambling to add AI capabilities to their future chip roadmap.

Harlan: It is resulting in more <unk>.

Harlan: Complex ship designs more demand for higher performance IP more systems.

Harlan: System level analysis.

Harlan: As the team already seamless in terms of design activity momentum.

Speaker Change: Licensing engagements, maybe more potential opportunities for instance, I mean, any any color here would be helpful.

Harlan Sur: Thank you, Harlan, for the question. Actually, that's exactly what we refer to as pervasive intelligence, exactly what we when we talk about we're entering, and we are in the era of pervasive intelligence, where more and more devices are interconnected and smart devices. So that exactly means the reference you made, AI on the edge, et cetera, which requires more sophisticated silicon and a broader silicon proliferation of those advanced chips. And for our industry, for us, when you think about EDA and IP, that's a fantastic opportunity. And this is where, when we make commentary, that despite the ebbs and flows of the semiconductor market, the cyclical market, we don't see it because the design starts are tied to those R&D investments that customers are making for all these different applications. So absolutely, we're seeing it; we're engaged with those customers. And when we start describing our company as silicon to systems, in that era of pervasive intelligence, that's exactly the opportunity that we're talking about. Great insights there.

Speaker Change: Thank you Harlan for the question actually that's exactly what we refer to as pervasive intelligence exactly what we when we talk about we're entering and we are in the era of pervasive intelligence, it's more and more devices are interconnected and smart devices. So that.

Speaker Change: Exactly means.

Speaker Change: The reference you made AI on the edge et cetera, which requires more sophisticated silicon.

Speaker Change: And a broader silicon proliferation of those advanced chips.

Speaker Change: And for our industry for Us when you think about EBITDA and IP, that's a fantastic opportunity and this is where and when we make commentary.

Speaker Change: Despite the ebbs and flows of the semiconductor market the cyclical market, we don't see it because the design starts is tied to those R&D investments that the customers are expanding for all these different applications.

Speaker Change: Applications. So absolutely we're seeing it will engage with those customers and.

Speaker Change: When we start describing our company as silicon to systems.

Speaker Change: In that era of pervasive intelligence is exactly the opportunity that we're talking about here.

Speaker Change: Oh, great insights there.

Saseen Ghazi: And then on Ansys, looks like your, looks like the customer's feedback has been quite positive. You know, we cover 20 something odd semiconductor companies, and we've asked them about this, and they all also seem to be positively inclined to the deal as well. And maybe you can tell me as a further endorsement of the strategy. I mean, you did see this last week, right?

Speaker Change: And then on the NCS looks like your effective your customers feedback has been quite.

Speaker Change: Quite positive we cover.

Speaker Change: Something on semiconductor companies and we've asked them about this and they all see also seem to be positively inclined on the deal as well and maybe.

Speaker Change: You can tell me as a further endorsement on the strategy I mean, you did see.

Speaker Change: It was last week with Renaissance, which is a major semiconductor company they announce that theyre going to acquire ultimate unlicensed PCB design and analysis company for $6 billion right. It looks like the systems opportunity is so important that they decided to bring the design and analysis capabilities directly in house, but.

Saseen Ghazi: Renesas, which is a major semiconductor company, announced that they were going to acquire Altium, right? This PCB design and analysis company for six billion dollars, right? It's like the system's opportunity is so important that they decided to bring the design and analysis capability directly in-house. But maybe more importantly, just wanted to know what you're hearing from Ansys's large customers about the potential combination. So the customer feedback has been truly overwhelmingly positive around two points they make. One...

Speaker Change: Maybe more importantly, just wanted to know like what Youre hearing from absences large customers.

Speaker Change: About the potential combination.

Speaker Change: So the customer feedback has been truly overwhelmingly positive around two points they make one.

Saseen Ghazi: The challenges they're dealing with, they're looking for deeper collaboration in order to solve the problems they're running into today, and, as importantly, they're going to face in the future. So from a... Anticipated solution, the way customers are looking at their current product and future product, they are looking forward to this combination. Now the second feedback that is consistent is what you were touching on, which is the system level perspective, which is that if you look at the various market verticals... You can argue each one of them is going to go through an inflection point at various points in time. If you fast forward 7, 8, 10 years from now, and you pick an industry, let's say industrial, health, etc., they will go through that inflection point of transforming and digitizing their application, in order to be connected, in order to be smarter devices in their application, et cetera. And this again is where Ansys has a very strong presence. Because Synopsys, since its existence, we have served the chip and design customer base. And, of course, we extended into our system companies where, you know, today, about 45% of our business is with system companies.

Speaker Change: The challenge as they are dealing with they are looking for a deeper collaboration in order to solve the problems, they're running into today and as importantly, they are going to face.

Speaker Change: Into the future.

Speaker Change: So from a <unk>.

Speaker Change: Hum.

Speaker Change: Anticipated solution the way the customers are looking at.

Speaker Change: Current product and future product they are looking forward to this combination.

Speaker Change: Now the second feedback that is consistent is what you're touching on which is.

The system level perspective, which is.

Speaker Change: If you look at the various market verticals.

Speaker Change: <unk> argued each one of them is going to go through an inflection point at various points in time, if you fast forward seven 810 years from now.

Speaker Change: And you pick an industry, let's say.

Speaker Change: Industrial health.

Speaker Change: Et cetera.

Speaker Change: They will go through that inflection point of transforming and digitizing their applications in order to be connected in order to be smarter devices in their application et cetera, and this again, where <unk> has a very strong presence.

Speaker Change: Because synopsys for since its existence, we serve the chip design.

Speaker Change: The customer base and of course, we extended into our system companies, where today about 45% of our business is with system companies, but those are system companies around hyperscale and mobile primarily with many many opportunities to expand with other system companies and Thats, what <unk> will bring in.

Saseen Ghazi: But those are system companies around hyperscalers and mobile, primarily, with many, many opportunities to expand with other system companies. And that's where Ansys will bring in more than just the silicon aspect that is needed for 3DIC but that whole silicon-to-system modernization for the rest of the market. Great. Thanks for seeing me. Thanks, Harlan. Your next question comes from the line of Joshua Wolfe Breeson. Joshua DeFleur-Joy said, Hey guys, can you hear me?

Speaker Change: More than just the silicon aspect.

Speaker Change: Is needed for <unk>, but that whole silicon to system.

Speaker Change: Modernization.

Speaker Change: For the rest of the market verticals.

Great. Thanks Sophie.

Sophie: Thanks Harlan.

Sophie: Okay.

Sophie: Your next question comes from the line of Joshua <unk>.

Sophie: Search Joshua the floor is yours.

Joshua: Hey, guys can you hear me.

Joshua: Yes.

Joshua Wolfe Breeson: Yeah. Great. I actually, I really want to follow up on that last question about customer feedback on the Ansys acquisition. Is it positive feedback that you're hearing from customers that currently don't leverage the benefits of the existing Ansys and Synopsys partnership? Or are these existing customers of both Synopsys and Ansys? And they're both Synopsys and Ansys customers. Actually, I want to go back and give you the journey of customer feedback. In 2017, when we announced the partnership...

Joshua: Great.

Joshua: I really want to follow up on that last question about the customer feedback.

Speaker Change: On the answers acquisition.

Speaker Change: Is the positive feedback that you're hearing from customers that currently don't leverage the benefits of the existing Anthos announced a partnership or are these existing customers the boats in opposite the answers.

Speaker Change: Yeah.

Speaker Change: They are both Synopsys and <unk> customers.

Speaker Change: Actually I wanted to go back to give you the journey of the customer feedback in 2017, when we announced the partnership there.

Saseen Ghazi: There was a lot of customer excitement because the way we structured the platform is an open platform, meaning you can use the Ansys sign-off product that can plug into the Fusion design platform from Synopsys, and that same Ansys product can plug into other industry-available platforms. Then, as you move from 2017 to where we are today, that deeper, tighter integration is required, not only for one or two products that Ansys is offering, but for the broader portfolio. If you look at a multi-die package, the electronics aspect of it, to design that multi-die package, you have a solution today that you can use from Synopsys plus Ansys, and you're good. As it goes through manufacturing, what they're facing are mechanical stress issues. And those are issues where, as you squeeze those dyes inside a package, and you're running the software workload, it's overheating, some of these dyes are cracking, are warping, etc.

Speaker Change: There was a lot of customer excitement because of the way we structured the platform.

Speaker Change: <unk> is an open platform, meaning you can use the answer's sign off product that can plug into the fusion design platform from Synopsys and that same <unk> product can plug into other.

Speaker Change: The industry available platforms.

Speaker Change: And as you as you move from 2017 to where we are today that deeper tighter.

Speaker Change: The creation is required not only for one or two products that emphasis offering is for the broader portfolio.

If you look at.

Speaker Change: A multi die package.

Speaker Change: The electronics aspect of it to design the multi die package you have a solution today that you can use from Synopsys, plus <unk> and youre good.

Speaker Change: As it's going through manufacturing what they are facing is mechanical stress issues and those are issues, where as you squeeze in those dies inside a package and you're running the software workload. It's overheating. Some of these guys are cracking or warping et cetera. So is.

Saseen Ghazi: So it's a very mechanical, intense challenge where that deeper integration will be required and needed. And that's what the customer is excited about. And when I say deeper integration, this is where you need to move in actual algorithms and engines during the design phase, not only when you go into the later stage of the design for Synopsys. It makes total sense.

Speaker Change: Very mechanical intense.

Speaker Change: The challenge, we have that deeper integration.

Speaker Change: <unk> will be required and needed and that's what the customers excited about and when I say, but deeper integration. This is what you need to move in.

Speaker Change: The actual algorithms and engines during the design phase not only one U.

Speaker Change: Go into.

Speaker Change: The later stage of the design for sign off.

Joshua Wolfe Breeson: I guess my follow-up to that, Ben, is just are you seeing any signs from your existing Synopsys customers of excitement around customers who didn't leverage this partnership previously and are now, because of these integrations to come, reaching out to you, asking about the potential, the opportunities, and basically, are there any early signs that you're going to see additional Synopsys plus Ansys users and payers because of this partnership or this acquisition that Yeah, so Joshua, today, any advanced chip? And when I'm talking about advanced chip, I'm talking about 5 nanometer and below, AI chip, et cetera, are already using Synopsys and Antenna.

Speaker Change: Makes total sense I guess my follow up to that then is just are you seeing any signs from your existing synopsys customers of excitement around customers, who didn't leverage this partnership previously and now because of these integrations to come.

Speaker Change: Like reaching out to you are asking about the potential of the opportunities and basically is there any early signs youre going to see incremental synopsys. Both ends with users and payers because of this partnership for this acquisition that will close.

Speaker Change: Got it.

Speaker Change: Yes, so Josh what today.

Speaker Change: Any advanced chip.

Speaker Change: And what I'm talking about advanced chip I'm talking about five nanometer and below AI chip et cetera.

Speaker Change: Is already using Synopsys anzus I cannot think of customers that are designing most advanced <unk>.

Saseen Ghazi: I cannot think of customers that are designing the most advanced chips with the complexity I described that they are not leveraging Synopsys Fusion Platform and Synopsys. So they're already there, but given the complexity, it's gonna be further increasing that deeper integration and addressing the challenges beyond the electronics is gonna provide the opportunity where one plus one is more than two. That's from the core current chip semiconductor business perspective. Now, the other part of your question... Are there Ansys customers that aren't today a Synopsys customer? The answer is yes.

Speaker Change: With the complexity I described that they are not leveraging synopsys fusion platform anthos. So theyre already there, but given the complexity is going to be further increasing that deeper integration and addressing.

Speaker Change: The challenge is beyond the electronics is going to provide the opportunity where one plus one is more than two <unk>.

Speaker Change: That's from the core.

Speaker Change: Current chip semiconductor business perspective.

Speaker Change: Now the other part of your question.

Speaker Change: And some customers that today they are not a synopsis customer the answer is yes.

Saseen Ghazi: There are many, many Ansys customers that we don't see, by the way, becoming a Synopsys customer in the next one or two years. But there are going to be many others that will be a Synopsys customer, regardless of whether they're designing a chip or not. I'll give you an example.

Speaker Change: Many many <unk> customers that we don't see them by the way, becoming a synopsis customer in the next one or two years, but theyre going to be many other that they will be a synopsis customer regardless, if they are designing a chip or not.

Speaker Change: I'll give you an example.

Saseen Ghazi: If you are an industrial OEM, and today you are an ENSYS customer because you're using ENSYS to design the mechanical aspects, etc., of your products. And you want to move to the next level of product delivery, where you have more chip content in order to support connected robots, let's say, and a connected and smarter device, even if you're not developing the chip. You're gonna need an ability to model that chip, to verify that chip.

Speaker Change: If you are industrial.

Speaker Change: And today you are a <unk>.

Speaker Change: <unk> customer because youre using <unk> to design, the mechanical aspect et cetera of your product.

Speaker Change: And you want to move to the next level of product delivery, where you have more.

Speaker Change: Chip content in order to support connected robots lets say in a connected and smart device.

Speaker Change: Even if you're not developing the chip.

Speaker Change: Youre going to need the ability to model that chip to verify that chip back to the example of automotive and over the air software updates.

Saseen Ghazi: Back to the example of automotive and over-the-air software updates. Those industries are going to move in that direction, and this is where Ansys has a very broad presence. That presence, that market knowledge, that brand that they have will absolutely expand the synopsis market in the future, where it's an ANSYS customer but not a Synopsys customer. So just to be clear, the opportunity is more about making Ansys customers that aren't Synopsys customers, Ansys plus Synopsys customers, and less about making... Synopsys customers, Synopsys bookends. It's both.

Speaker Change: Most industries are going to move in that direction and this is where <unk> has a very broad presence that.

Speaker Change: That presence that market knowledge that brand that they have will absolutely expand the synopsys markets in the future.

Speaker Change: It's an <unk> customer, but not as synopsys customer.

Speaker Change: So just to be clear the opportunity is more about making answers customers that arent synopsys customers anthem lots and lots of customers and less about making.

Speaker Change: Synopsys customers Synopsys.

Speaker Change: It's both and there are synopsys customers that today, they're using part of the NCS portfolio. The more you integrate the <unk> portfolio into current Synopsys platform Youre going to expand that for example, the fluid dynamics inside a chip for a mechanical stress.

Saseen Ghazi: And there are Synopsys customers that today are using part of the Ansys portfolio. The more you integrate the Ansys portfolio into a current Synopsys platform, you're going to expand it. For example, fluid dynamics inside a chip or a mechanical stress challenge that you need to integrate deeper into a Synopsys platform that will expand the one plus one will be greater than

Speaker Change: Challenge that you need to deeper integrate into a synopsis platform that will expand the one plus one will be greater than two yes, Joshua we shared in the announced that by year. Four we will have run rate of $400 million in synergies. It was cross sell both ways is a big part of that and then.

Sheila Glaser: Yeah, and Joshua, when we shared in the announcement that by year four, we'll have a run rate of 400 million in Synergies, cross-sell both ways is a big part of that. And then, as Saseen's talking about that multi-die, that is further monetization inside an existing customer because that's a, you know, more integrated solution than they're currently able to. Bye from either one Thanks, Josh. I just want to thank everybody for coming on the call today and, again, remind you that we're less than a month from our investor meeting, and we look forward to seeing a bunch of you here in the Bay Area, or, if you can, at least join our webcast. So, we look forward to talking with you then. So, thanks for coming to the call, and we'll talk to you soon. Yeah. Thank you, everyone. Thank you. Ladies and gentlemen, that concludes today's conference. You may now disconnect.

Speaker Change: Assessing is talking about that multi die that is further monetization inside an existing customer because that's a more.

Speaker Change: Our integrated solution than they're currently in Boulder.

Speaker Change: For me that one of us individually.

Speaker Change: Thanks, Josh.

Speaker Change: I just want to thank everybody for coming on the call today and again <unk>.

Speaker Change: Remind you that were less.

Josh: Less than a month from our Investor meeting and we look forward to seeing a bunch of you here in the Bay area or if you can at least joined our webcast. So we look forward to talking with you then so thanks for coming to the call.

Speaker Change: We will talk to you soon thank you everyone. Thank you.

Speaker Change: Ladies and gentlemen that ends today's conference you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Yeah.

Yeah.

Speaker Change: Yeah.