Financial Data and Key Metrics Changes - The company achieved record annual revenue of $7.05 billion, up approximately 15% year-over-year, with Q4 revenue of $2.25 billion, at the high end of guidance [5][14]. - The total backlog increased to $11.4 billion, up from $10.1 billion in the previous quarter [13]. - Non-GAAP operating margin for FY25 was 37.3%, with Q4 non-GAAP operating margin at 36.5% [14][15]. - GAAP earnings per share for Q4 and FY25 were $2.39 and $8.07 respectively, while non-GAAP earnings per share were $2.90 and $12.91, exceeding guidance [14][15]. Business Line Data and Key Metrics Changes - The design automation segment revenue, including EDA and Ansys, was $5.3 billion, up 26%, while excluding Ansys, it grew approximately 8% [15]. - The design IP segment revenue was $1.75 billion, down 8% due to challenges in the second half of the year [15]. - The hardware-assisted verification (HAV) business saw a record year with 12 competitive wins in Q4 [8]. Market Data and Key Metrics Changes - China faced significant challenges, with revenue down 18% for FY25, and down 22% excluding Ansys [14]. - The company noted stronger semiconductor demand in mobile and automotive sectors, while industrial markets remained subdued [6]. Company Strategy and Development Direction - The integration of Ansys is a key focus, with the company aiming to deliver joint solutions in the first half of 2026 [11][62]. - The company is targeting double-digit growth for Ansys revenue in FY26, driven by increased R&D investments in various industries [60]. - A strategic partnership with NVIDIA is expected to enhance design and engineering capabilities with AI and accelerated computing [7]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential despite current challenges, particularly in the IP business [41][76]. - The company is adopting a pragmatic approach to forecasting, particularly regarding the ongoing challenges in China [76]. - Management emphasized the importance of AI in driving future demand for engineering solutions, indicating a shift in how engineering is approached [6][48]. Other Important Information - The company plans to prepay $2.55 billion of its term loans in the first half of 2026, which is expected to be accretive to EPS [16][19]. - The guidance for FY26 includes total revenue of $9.56-$9.66 billion, with Ansys contributing approximately $2.9 billion at the midpoint [17]. Q&A Session Summary Question: What is the embedded organic growth rate in the 2026 guide? - Management indicated it is around 8%, factoring in the divestitures and muted growth expectations for the IP business [22][23]. Question: What are the expectations for EDA and IP growth in the guidance? - Management acknowledged that EDA growth is impacted by the China environment and a muted roadmap for certain customers, while IP is expected to have a transitional year [31][32]. Question: Can the IP business achieve mid-teens growth in FY27? - Management expressed confidence in the IP portfolio and ongoing customer engagements, indicating that growth could return to mid-teens in the future [82]. Question: What is the rationale behind the NVIDIA investment? - The investment was made to accelerate computational capabilities and modernize engineering solutions, leveraging the strengths of both companies [44][45]. Question: How is the integration of Ansys progressing? - Integration efforts are underway, with R&D teams working together to deliver joint solutions, while maintaining separate go-to-market strategies for different customer segments [61][62].