Synopsys, Inc. (SNPS) 27th Annual Needham Growth Conference (Transcript)

Industry and Company Overview * Industry: Semiconductor and EDA (Electronic Design Automation) * Company: Synopsys, a leading provider of semiconductor and software solutions Key Points and Arguments * Record Revenue and Profitability: Synopsys achieved record revenue of $6.13 billion in FY24, up 15% year-over-year, with double-digit growth across all products and geographies. Non-GAAP operating margin reached 38.5%, and non-GAAP EPS grew 25% year-over-year. * Strategic Focus on Growth Segments: Synopsys sold its software integrity business and is acquiring Ansys, doubling down on its silicon to systems strategy and expanding into new adjacent areas. * Megatrends Driving Growth: Synopsys benefits from secular growth drivers such as AI, silicon proliferation, and software-defined systems. The company's success is tied to technology innovation cycles, particularly in AI and HPC chip design. * AI and EDA: Synopsys has been a pioneer in adding AI optimization engines to its products, with solutions like DSO.ai and VSO.ai delivering significant customer results. The company is also integrating generative AI into its platform, expanding the capabilities of Synopsys.ai. * Multi-Die Designs: Synopsys is actively involved in Multi-Die design, partnering with ecosystem leaders like TSMC to improve predictability and yield. The company's 3DIC Compiler and Synopsys.ai solutions are addressing thermal and power integrity challenges for CoWoS interposer packaging. * Strong Segment Performance: * Design Automation: Revenue grew 12% year-over-year, driven by strength in EDA software and hardware. The Fusion compiler and Synopsys.ai solutions contributed to this growth. * Design IP: Revenue grew 24% year-over-year, driven by broad-based strength. The company achieved significant design wins in PCIe 6, security integrity, and data encryption. * Hardware: Revenue grew 17% year-over-year, driven by exceptional momentum on both HAPS and ZeBu product lines. * Financial Guidance: Synopsys expects to grow revenue 10.1% to 11.1% in FY25, excluding the impact of the extra week and calendar year change. Non-GAAP operating margin is expected to expand by approximately 150 basis points, and non-GAAP EPS is expected to grow by approximately 13%. Other Important Points * Regulatory Review: The regulatory review process for the Ansys acquisition is proceeding as expected, with the HSR waiting period expiring and the FTC investigation ongoing. * Backlog: Synopsys ended the year with a non-cancelable backlog of $8.1 billion. * Macroeconomic Uncertainties: Synopsys is taking a balanced view of the macroeconomic environment, considering factors such as market dynamics, macro uncertainties, and the impact of the Ansys acquisition. * China: Synopsys is taking a cautious approach to China, considering the deceleration in revenue growth and the expansion of restrictions. The company expects China to grow in line with the corporate average in FY25.