Synopsys(SNPS)2024-02-22 01:27Financial Data and Key Metrics - Revenue for Q1 2024 was $1.65 billion, up 21% year-over-year, at the upper end of the guidance range [3] - Non-GAAP operating margin was 38.7%, up approximately 3.5 points year-over-year [3] - Non-GAAP EPS was $3.56, up 36% year-over-year, surpassing the upper end of the guidance range [3][23] - Operating cash outflow was $88 million for the quarter, with cash and short-term investments ending at $1.27 billion [14] - Full-year 2024 revenue guidance is $6.57 billion to $6.63 billion, with non-GAAP EPS expected to grow 20% to 21% [15][56] Segment Performance Design Automation - Revenue was $985.3 million, up 11% year-over-year, with an adjusted operating margin of 37% [14] - Strong design win activity, including industry-first tape-outs for GAA-based mobile cores and server SoCs at advanced nodes [6] - VSO.ai saw strong demand, with a large North American HPC semiconductor company deploying it across four projects [7] - TSO.ai demonstrated a 20% reduction in total pattern count, and Silicon.da analytics saw significant engagement growth [8] Design IP - Revenue was $525.7 million, up 53% year-over-year, driven by broad-based strength, with an adjusted operating margin of 47.5% [14] - Closed multiyear, multinode, and multi-foundry agreements for next-generation automotive and IoT platforms [10] - PCIe 6.0 IP led the industry with over 50 lifetime wins, and PCIe 7.0 technology was showcased at DesignCon 2024 [10] - Launched the new ARC 5 RISC-V-based portfolio, attracting strong customer interest [11] Software Integrity - Revenue was $138.2 million, up 8% year-over-year, with an adjusted operating margin of 17.3% [14] - The company continues to evaluate strategic alternatives for this business [144] Market Trends and Strategic Direction - The semiconductor industry is scaling towards $1 trillion in revenue by the end of the decade, driven by AI, silicon proliferation, and software-defined systems [4] - Synopsys is positioned to capitalize on the shift towards a silicon-to-systems approach, with customers increasingly adopting system-level design methodologies [5] - The company announced its intent to acquire Ansys, which will expand its TAM by 1.5 times to $28 billion and enhance its silicon-to-systems strategy [25] - Multi-die packaging is a significant growth driver, with Synopsys securing four die-to-die IP engagements in the quarter [30] Management Commentary on Operating Environment and Future Outlook - The company is confident in its leadership position, robust customer design activity, and the resilience of its time-based business model [15] - Synopsys is entering an era of pervasive intelligence, with AI and smart technologies driving demand for more sophisticated silicon and system-level solutions [24] - The Ansys acquisition is expected to close in the first half of 2024, with customer feedback being overwhelmingly positive [25][92] Other Important Information - The company launched Synopsys.ai, focusing on optimization, XSO.ai analytics, and generative AI, including a copilot for chip design [26] - Synopsys.ai copilot, developed in collaboration with Microsoft, aims to accelerate chip design through generative AI capabilities [28] - The company demonstrated the industry's first silicon success for UCIeS IP in TSMC's N5 process, highlighting its leadership in multi-die packaging [30] Q&A Session Summary China Market and Revenue Trends - Q1 sales in China were modestly accretive to overall growth, but the company expects headwinds to continue for the remainder of the year [36][37] - The backlog stood at $8.2 billion, down from a record $8.6 billion in Q4, reflecting normal lumpiness in timing of big orders [38] IP Business Performance - The IP business saw 50% growth in Q1, driven by new standards, multi-die packaging, and increased demand for interface IP [42][65][66] - The company expects IP demand to remain strong due to the secular trend of silicon proliferation and more sophisticated chip designs [66] Ansys Acquisition and Customer Feedback - Customer feedback on the Ansys acquisition has been overwhelmingly positive, with customers looking forward to deeper integration and system-level solutions [92][119] - The acquisition is expected to bring cross-sell opportunities and synergies, with a projected run rate of $400 million in synergies by year four [100] Hardware Business and Inventory - Inventory grew by 17% quarter-on-quarter to support record hardware demand, with hardware becoming a critical part of customer design processes [86][113] - The company anticipates another record year for hardware, driven by the increasing complexity of chip designs [86] AI and Edge Computing Trends - AI is expanding beyond data centers into edge and endpoint devices, creating opportunities for Synopsys in automotive, smartphones, and IoT [90][91] - The company is engaged with customers developing AI capabilities for a wide range of applications, reinforcing its position in the era of pervasive intelligence [91]