SNPS
#Well, the reason customers signed long-term deals is maybe financial, but in most cases it's really because one is looking at a collaborative partnership that has the potential to create additional differentiating value for the customer.
And over the years from time to time we have done very engaging ---+ built very engaging relationships that have demonstrated that working closely together cannot only impact the way our tools are used presently, but also hone it for the specific situation that the customer has.
And so, although of course when you do a multi-year deal, you always make sure that it is balanced for both parties, you also make sure that one creates something that is beyond what would be just a customer supplier relationship.
This is <UNK>.
I would stress that not only were the deals large, but they were quality deals.
We did see run rate grow in Q1.
Yes, the over achieve on EPS is really expense story.
We were light on expenses.
Typically we started the year behind in hiring and this year was probably more, more in common with that.
We'll be catching ---+ we'll try to catch up on our hiring for the rest of the year.
If you look at our head count, it was pretty flattish versus the end of the year.
That's where the upside came from.
Well, by definition, when you have consolidation, that means that some customers are becoming larger, assuming that you continue the business relationship, which we have.
And so I think that is not a new phenomenon and that will continue.
At the same time, I've always been a believer that in times of consolidation, you can't look at it as a maturation of a market, or you can look at it as the beginning of a next phase.
And the reason we're emphasizing and we're investing along the lines of working with both semiconductor systems and software developers is precisely because we see an evolution in the market that we will continue to emphasize this increased role of the intersection between software and hardware.
And so we are well positioned for that.
Obviously, on the hardware side, we go as deep as anybody down into the silicon.
On the software side, we have put down new gambits in the software sign-off, software integrity space.
And then in the middle, we have a large business that deals with the intersection of those two, be it in verification or even some in the IP side.
So I think we're well balanced, and I try to express that by saying we're trying to sort of follow the sweet spot of the industry, and in that context, of course, the players do change over time.
But I think we're ---+ we have solid roots down and I think good opportunities looking up.
Well, I think it\
So let me start with your automotive question.
The first reason why, of course, automotive is in so many discussions is because somewhat surprisingly so, almost overnight it has turned into the poster child of what digital intelligence can do.
And this, I say surprisingly so, because automotive in the past has been a relatively slow adopter of silicon technology for many good reasons, because safety was absolutely paramount.
And so it demanded a lot of very specific long-term design.
I think this is changing radically, meaning that suddenly automotive is now on the clock tick of Silicon Valley, so to speak, of software combined with most advanced silicon.
And therefore, many of the capabilities and tools and IP that we provide is front and center.
Now, to your specific question of our position in automotive, we have a remarkably complete set of capabilities that is well vested in a number of automotive-specific techniques, such as making sure that chips are designed with provable safety and verifiability in mind.
So in that context, we, I think, are very well positioned and very engaged at, by the way, all the levels that you mentioned.
So semiconductor companies, Tier 1s, even some automotive companies specifically.
I don't want to go overboard the enthusiasm here either.
It's an industry that doesn't ship as many cars as their cell phones.
So the numbers are somewhat moderated by that.
But it is an industry that suddenly has caught the bug of how do they differentiate themselves in this new space, and I think the race is very much on.
So <UNK>, this is <UNK>.
Your question regarding the geographic growth and the product growth, I wouldn't read into any correlation between other geographic growth and product growth.
We see both emulation and IP as growth areas for us long-term and that's pretty broad-based.
We wouldn't ---+ we're not expecting that necessarily comes from any one geography.
It would be broad-based growth.
Q4 to Q1---+ In emulation, that would be partly the case, whether it's quarter on quarter.
Yes.
<UNK>, we have said for a while that where we are heading is toward the mid-20s.
So these numbers are all in that space.
At the same time, one of the things that we decided to do a couple of years ago, is to invest specifically in a new emerging area.
And, and we did that with the belief and understanding that a lot of functionality would move into software, that the software was quickly going to reach the issue of complexity, and then security issues, that would become enormous, and we continued to invest in that.
Of course such an area initially is not particularly profitable.
But it has potential.
Secondly, we have seen that the investments that we've made recently, through some of the acquisitions, initially bring about a small hair cut and those are the small differences that would make up or explain what you were mentioning.
Be it as it may, our objective is very clear.
Our objective has always been how do we deliver shareholder value over the long-term, with a fairly consistent pattern so the intent is not to surprise anybody, but at the same time, to also not be hesitant to put our chips down if we see some opportunity.
And that is exactly what we are continuing to do.
You have noticed that in the last couple of years we have not been hesitant to also utilize our balance sheet towards buybacks, as we found them to be appropriate and have done so again this quarter.
So the balance of those things is how we're managing the company.
Well, you know, the emulation business is difficult to characterize because they are multiple players with multiple sort of cycles of product and there is some degree of ---+ I wouldn't say seasonality as just things go up and down from one quarter to another because it's somewhat lumpy.
Lumpy was the word I was looking for.
Having said that, the reason that we are bullish around emulation is actually a broader one.
Which is that we are strong advocates and we think we strongly deliver around a vision of a verification continuum that allows to use emulation in the context of many other tools as appropriate for the task at hand.
And without going too technically deep here, the reason this is important is because we are dealing with a space that goes all the way from verifying strictly some hardware to verifying some chips with embedded software all the way to people wanting to bring up entire operating systems and some application software on hardware that has not yet been built.
And so in that context, the collection of technologies assembled in a platform that we have is truly quite amazing compared to where we were just five or six years ago.
And we have seen that the take-up in system companies that are now hitting this intersection has been particularly positive and that was visible in some of the Q1 growth.
Well, as mentioned, the overachievement was mostly on light expenses and most of that's timing, still early in the year.
We are definitely focused on the full year, full year EPS targets.
At this point, we feel pretty good about the guidance.
Thank you.
Okay.
Well, <UNK>, you probably know that we never respond to specific M&A questions.
But in general terms, if you watch Synopsys, we have found a balance between using repurchase mechanisms and M&A as the two ways to leverage our balance sheet.
When we look at M&A, invariably it's driven by two things.
Either mechanism to increase the strength of our SAM, meaning purchase companies that have either technology or market position that we think we can do better with or that strengthens our position, or just as importantly, maybe even more important, is opportunities to create new TAM for us.
And so in that sense, the last 18 months have been interesting because we've done a number of acquisitions, starting with a company in the software quality space.
The reason that one is important is because that is the fundamental platform to analyze software.
And then just in the last I think eight or nine months or so, we've acquired four security companies that can all pretty swiftly be integrated into the overall software analysis platform.
And so these are all good examples of how we utilize our cash on an ongoing basis.
Now, are there waves of these.
Yes, there are.
Sometimes they are driven by the state of the market, but in general, I would tell you that many of these things are often on the radar scope for many years and the moment has to just be right to be able to acquire something both from a seller point of view and a buyer point of view.
And there's quite a bit of dating that goes around before marriage.
So in that sense, we're always busy.
Sure.
Well, in general, as <UNK> alluded to, at the end of the day, revenue growth is the single best recipe to grow margins, and in that sense, we are heading there.
And as mentioned, based on some of the past acquisitions and recent investments, we see that the haircuts will gradually fade away and our continued growth and diligent expense management will get us there.
So to me the issue is not can we get there or not.
Yes, we will.
And we have been committed to that for quite a while.
Well, in general, I would observe two things.
The most advanced nodes by definition are always the ones that get adopted by the people that have both the skills to use them, but most importantly, have the business opportunity to leverage differentiation of faster, much more dense, lower power chips.
Initially, that is invariably a small number, as the foundries themselves hone these processes to gradually grow the yields, meaning bring down the cost per chip.
The most advanced design companies spend most money because they have an economic return on that differentiation.
If you look back at only three or four years, the belief was that FinFET would be the reality for only three or four companies.
Well, that is most definitely not the case.
We are seeing actually a rapid increase now, as the proof points of solid FinFET technology are there by a broader set of companies, and interestingly enough, a set of companies that one would never have thought about in the past, the automotive companies, are suddenly interested here as well, as they want to introduce digital intelligence in their products.
So I think the push will continue, which is not to say that it gets easier or much cheaper, but the value of differentiation is quite high, and we will continue to work with those most advanced customers.
As said, we also work equally much with the system houses that integrate these chips and each would have an understanding of the insides of the chip and the software that runs on it.
So it's actually a fairly broad field of companies that we touch that are deeply involved with FinFET.
The services line.
It's right in the range, <UNK>, so when you look at the services line, it's relatively flat at 61 versus the last quarter, and the nature of that business, that's where a lot of our IP consulting business does flow through.
So it can move around quarter to quarter, depending on the revenue signature and the project schedules.
You're welcome.
Well, again, thank you very much for attending our earnings release.
I think the first quarter was particularly positive as a start to the year and I think many of the issues that were alluded to last year actually quite mitigated.
So we have a strong outlook going forward.
Thank you again for your time and we'll be available after the call for the analysts.
