Synopsys(SNPS) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - GAAP earnings per share was $1.76, while non-GAAP earnings per share was$2.54, exceeding the high end of the target range [26] - Revenue for the quarter reached $1.395 billion, above the high end of guidance, with non-GAAP operating margin at 33.3$703 million, with a backlog increase to $7.3 billion [26][66] - Full year revenue guidance raised to between$5.79 billion and $5.83 billion, with non-GAAP earnings per share growth expectation increased to 21$928 million, up 13%, driven by strength in EDA software and hardware, with an adjusted operating margin of 38.8% [42] - Design IP segment revenue was $335 million, down 4$132 million, up 17%, with an adjusted operating margin of 13.9% [90] Market Data and Key Metrics Changes - Demand for Smart Everything is driving significant long-term growth for semiconductors, with a focus on performance-per-watt and security becoming mandatory [29][40] - The market is experiencing weaker demand for semiconductors overall, particularly in consumer markets, but R&D investments in new chip designs remain a priority [50][67] - The adoption of AI in chip design is accelerating, with over 200 AI-driven commercial tapeouts reported [31][34] Company Strategy and Development Direction - The company is embedding AI across its product offerings, with significant advancements in design flow automation and a focus on multi-die systems [30][57] - Collaborations with TSMC and Ansys aim to deliver advanced EDA solutions, enhancing the company's position in the semiconductor design market [35][36] - The vision of Smart Everything is expected to create substantial opportunities for both the company and its customers [27][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business outlook, citing strong design activity and a healthy industry despite macroeconomic challenges [50][67] - The company anticipates a strong second half of the year, driven by increased renewals and IP consumption [73][96] - The management highlighted the importance of AI in enhancing design productivity and addressing the shortage of top designers [72][84] Other Important Information - The company has doubled its customer base every quarter this year, with the SaaS model accounting for 70% of users [34] - The Software Integrity segment is expected to grow by 15% to 20% in revenue with expanding margins [90] - The company is committed to maximizing its positive impact and driving change in the industry through its technology [62] Q&A Session All Questions and Answers Question: What is the outlook for renewals and growth into next year? - Management confirmed strong investment in chip design during downturns to prepare for future demand, emphasizing the importance of productivity enhancements through AI [71] Question: Are larger software renewals expected in the second half? - Management noted that while renewals vary across the industry, there is a healthy outlook for the coming decade, driven by software demand [75][76] Question: What is driving the expansion of operating margins this year? - The expansion is attributed to rigorous financial control and the ability to scale effectively in response to opportunities [146] Question: How is AI transforming the core EDA market? - AI is enhancing automation and efficiency in chip design, leading to significant productivity improvements and potentially encouraging more companies to pursue custom semiconductor designs [138][162]