Synopsys Inc Q1 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mitchell Toshiro Steves - RBC Capital Markets, Research Division - Analyst : So, obviously, a good quarter here. I just had a couple of questions. The first one is actually just on the guidance. I've got a model that goes back pretty far and I realize you guys haven't missed a quarter in something like a decade. But I guess, historically, when you guys beat the first quarter and guide up the second quarter, you usually take out the full year at lease by the magnitude of the beat. So I guess why is that not occurring this time? And then secondly, just in terms of the Software Integrity business, can you maybe provide us an update on kind of how you expect the margins to trend? I realize that last year is probably a difficult year in terms of getting new business, but how should that kind of trend through the year? So those are my 2 questions.

Question: Jackson Edmund Ader - JPMorgan Chase & Co, Research Division - Analyst : Aart, you mentioned that the kind of recent breaches, specifically with SolarWinds, has increased the awareness or the demand on consulting-led Software Integrity deals. But just curious, on the product side, either from Tinfoil or the Black Duck products, are these also seeing an increased demand? And is there anything that those products do specifically that might help this type of attack in the future? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 17, 2021 / 10:00PM, SNPS.OQ - Q1 2021 Synopsys Inc Earnings Call Aart J. de Geus - Synopsys, Inc. - Co-Founder, Chairman & Co-CEO Well, our business tends to be not so much in the diagnostic of issues and more in the prevention of them. Now some of the products that you mentioned are sort of on the boundary of that. And to be honest, I don't know if these had any bump-up. In general, I would say that these type of breaches initially go through almost like a panic phase where people just want to find out, have they been breached and so on. That is not the business that we are in. Then they go into the longer-term considerations, which is how do they make their environment much more solid. And that is precisely where our Software Integrity Group is focused on. And more often than not, this is why sophisticated consulting is a value because there are so many different product offerings in the world and plotting a strategy that over the long term makes the development of environments stronger actually requires some sophistication. And so that is why we're trying to staff up further in those areas because we do see that it has impact.

Question: Gal Munda - Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst : The first question is just around the EDA growth that you're seeing. Clearly, above what we used to say is kind of sustainable growth of the market, and you're referring to some significant market share wins that you're taking. I was wondering if you're able to kind of separate what you're seeing in terms of what the market is growing at recently, considering the fact that there's been an acceleration in the general market trends. And how much is the market share win as in addition to what you're growing at when you're growing close to the double digits? Aart J. de Geus - Synopsys, Inc. - Co-Founder, Chairman & Co-CEO Well, I think I'm always a little careful before commenting on competitors. And I do think that the overall market is actually strong, as my response to the previous question. And so I assume that all of us benefit from that. There's no question in my mind that in some of the advanced areas that we have focused on for the last few years and often communicated to you about, we are doing particularly well. And moreover, that we're building on top of that sort of next-generation capabilities that look very, very promising. So in that context, I assume that, over time, we may gain some share. But this is always in the landscape that overall is positive, and we should continue to invest in these areas because now it's a good time for that.