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Synopsys(SNPS) - 2024 Q4 - Earnings Call Transcript
SNPSSynopsys(SNPS)2024-12-05 01:15
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Financial Data and Key Metrics - Revenue for FY 2024 grew 15% year-over-year, reaching 6.13billion,markingasignificantmilestoneasthecompanycrossedthe6.13 billion, marking a significant milestone as the company crossed the 6 billion mark just three years after reaching 4billion[7][36]−Non−GAAPEPSgrewata244 billion [7][36] - Non-GAAP EPS grew at a 24% CAGR over the last five years, with FY 2024 non-GAAP EPS reaching 13.20, up 25% year-over-year [7][36] - Non-GAAP operating margin for FY 2024 was 38.5%, with Design Automation and Design IP segments achieving adjusted operating margins of 38.7% and 38.3%, respectively [36][37] - Operating cash flow for the year was 1.4billion,andfreecashflowwas1.4 billion, and free cash flow was 1.28 billion, with the company ending the year with 4.05billionincashandshort−terminvestments[38]BusinessSegmentPerformance−∗∗DesignAutomation∗∗:RevenueforQ4grew174.05 billion in cash and short-term investments [38] Business Segment Performance - **Design Automation**: Revenue for Q4 grew 17% year-over-year, with full-year revenue up 12% to 4.22 billion, driven by strength in EDA software and hardware [14][37] - Design IP: Revenue for the full year grew 24% to 1.91billion,withrobustdesignactivityinhigh−performancecomputingandautomotivesectors[25][37]−∗∗HardwareBusiness∗∗:Recordyearforhardware,withstrongmomentuminHAPSandZeBuproductlines,includingover50repeatHAPScustomersand10newcustomersinQ4[24]MarketandGeographicPerformance−Thecompanyexperienceddouble−digitgrowthacrossallproductsandgeographies,withparticularstrengthinAI−drivenmarketsandhigh−performancecomputing[36]−China′sgrowthdeceleratedduetoeconomicslowdownsandexpandingrestrictions,withrevenueexpectedtoalignwiththecorporateaverageinFY2025[130][156]StrategicDirectionandIndustryCompetition−Thecompanyisfocusingonits"silicontosystems"strategy,withthependingacquisitionofAnsysexpectedtoenhanceitscapabilitiesinAI−powereddesignsolutions[8][11]−AI−driveninnovationisakeygrowthdriver,withSynopsys.aisolutionsdeliveringsignificantcustomerresults,includingoptimizingover700tape−outsandimprovinghardwareutilizationbyupto4times[15][16]−ThecompanyisalsoadvancinginMulti−Diedesigns,partneringwithTSMCtoimprovepredictabilityandyield,with901.91 billion, with robust design activity in high-performance computing and automotive sectors [25][37] - **Hardware Business**: Record year for hardware, with strong momentum in HAPS and ZeBu product lines, including over 50 repeat HAPS customers and 10 new customers in Q4 [24] Market and Geographic Performance - The company experienced double-digit growth across all products and geographies, with particular strength in AI-driven markets and high-performance computing [36] - China's growth decelerated due to economic slowdowns and expanding restrictions, with revenue expected to align with the corporate average in FY 2025 [130][156] Strategic Direction and Industry Competition - The company is focusing on its "silicon to systems" strategy, with the pending acquisition of Ansys expected to enhance its capabilities in AI-powered design solutions [8][11] - AI-driven innovation is a key growth driver, with Synopsys.ai solutions delivering significant customer results, including optimizing over 700 tape-outs and improving hardware utilization by up to 4 times [15][16] - The company is also advancing in Multi-Die designs, partnering with TSMC to improve predictability and yield, with 90% of HPC AI designs expected to be Multi-Die by 2027 [20][21] Management Commentary on Operating Environment and Future Outlook - Management expects double-digit revenue growth and a 40% operating margin in FY 2025, despite macro uncertainties and the impact of the Ansys acquisition [13][35] - The company is preparing for the largest acquisition in its history, with the Ansys deal expected to close in the first half of 2025 [12][50] - AI is seen as a transformative force, evolving from a discrete capability to an essential part of the company's operations and customer workflows [18][19] Other Important Information - The company changed its fiscal year to end on October 31st, resulting in 10 fewer days in the first half of FY 2025, impacting revenue by approximately 100 million [34][39] - The backlog at the end of FY 2024 was $8.1 billion, reflecting strong visibility into future revenue [33][54] Q&A Session Summary Question: Underlying growth assumptions for FY 2025 - The company provided a balanced view for FY 2025, considering market dynamics, macro uncertainties, and the Ansys acquisition, guiding for 11.5% to 12.5% growth [45][50] Question: Impact of U.S. semiconductor export restrictions - The latest U.S. export restrictions on EDA software are incorporated into the FY 2025 guidance, with some customers added to the entity list [66][68] Question: Growth profile of Design Automation and IP businesses - The company expects strong growth in Design Automation and IP, driven by increased investment in AI infrastructure and Multi-Die designs [71][73] Question: Design starts and customer-specific AI use cases - Design starts, particularly in AI, have been accelerating, with hyperscalers and semiconductor companies increasing their investments in custom silicon [77][79] - The company is exploring customer-specific AI use cases, leveraging generative AI and domain-specific design to enhance workflows [105][111] Question: China's impact on FY 2025 outlook - China's growth is expected to align with the corporate average, with deceleration due to economic slowdowns and expanding restrictions [129][156] Question: Operating margin improvement and pricing strategy - The company is focused on driving operating margin improvement through efficiency gains and modernization, with a 150 basis point improvement expected in FY 2025 [89][159]