Synopsys, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the synopsis earnings conference call for fourth quarter of fiscal year 2021. At this time, all participants are in a listen only mode and later we will conduct a question and answer session and instructions will be given at that time. If you should require assistance during the call, please press star followed by the zero. Today's call will last one hour. Five minutes prior to the end of the call, we will announce the amount of time remaining in the conference. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Lisa Eubank, Vice President of Investor Relations. Please go ahead.

Thank you, Kerry. Good afternoon, everyone. With us today are Art DeGias, Chairman and Co-CEO of Synopsys, and Trach Pham, Chief Financial Officer. Before we begin, I'd like to remind everyone that during the course of this call, Synopsys will discuss forecasts, targets, and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during the call, important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release. In addition, we will refer to non-GAAP financial measures during the discussion. Reconciliations to their most directly comparable GAAP financial measures and supplemental financial information can be found in the earnings press release, financial supplement, and 8 that we released earlier today. All of these items, plus the most recent investor presentation, are available on our website at Synopsys.com. In addition, the prepared remarks will be posted on the site at the conclusion of the call. And with that, I'll turn the call over to RGGS.

Good afternoon. I'm happy to report that Synopsys delivered another record year, substantially exceeding our original goals. We grew revenue 14% to $4.2 billion with double-digit growth in all product groups and geographies. We substantially expanded our non-GAAP operating margin, with more than 20% earnings growth and generated record cash flow of 1.49 billion. In addition, disruptive innovation and collaborations accelerated our momentum as a number of large customers significantly expanded their commitments with Synopsys as visible in an outstanding order here. As a result, we enter fiscal 2022 with momentum. Looking forward, We are raising our long-term financial objectives to strong double-digit revenue growth anchored in a step-up in EDA and IP targets, ongoing non-GAAP operating margin expansion, and non-GAAP earnings per share growth in the mid-teens range, all of which driving very strong cash flow. Chuck will discuss the financials in more detail. Underlying our elevated outlook is not only a vigorous market, but just as importantly, a long-term growing demand for smart everything in every vertical segment. The inherent technical challenges powering this new era are well aligned with Synopsys' strength. Specifically, the smart everything era brings together massive amounts of data with the new wonders of machine learning software. Combined with the metaverse outlook of human-machine interaction, the role of chip-centric electronic systems has enormous potential. This requires highly complex semiconductor chips with massive compute capability, evolving semiconductors from system on a chip to tightly integrated systems off chips, and increased need for security and safety across software and hardware, that is, across the entire system. From an economic perspective, new entrants are already designing their own specialized chips. Traditional vertical market leaders are taking on a more active role in influencing chip and system architecture and design. At all levels, investments and urgency are increasing. To deliver on this promise, our customers are transforming the way they approach design. Whether it's processor or mobile teams combining multiple compute, storage, and connectivity chips together in CDIC structures, or hyperscalers investing in their own chip architectures to increase their cloud differentiations, or automotive OEMs dictating specific safety protocols, or financial services companies inserting security testing into their development processes. All are driven by the urgency of the economic opportunity and the need for strong partners to master the complexity of the task. Synopsys connects with all of these and is uniquely equipped to help catalyze this new era. The center of gravity of the technical challenges is the intersection of hardware and software. A chip is only as good as its interaction with the software and vice versa. In other words, the system. The system focus has been at the core of Synopsys innovation for many years and is now fueling mounting customer and business momentum. Nowhere is systemic complexity more visible than in our IP business. The sophistication of our IP blocks requires reaching deep down into the understanding of the advanced silicon nodes and also high up to the system architecture and software. IP is thus a bellwether of systems leadership as new architectures are increasingly jump-started by selecting the most important IP building blocks and their configuration. Benefiting from this, we achieved another record year in IP with revenue surpassing $1 billion and growing approximately 20%. This momentum is maintained for two reasons. First, continued strong demand to outsource IP as customers need their most skilled resources to focus on the differentiating aspect of their chips. Second, an increasing number of new entrants in segments such as automotive, high-performance compute, and AI accelerate their schedule by, whenever possible, selecting complex IP building blocks that are commercially available from a company they trust. As the number one provider of interface, foundation, and physical IP, Synopsys is in a unique position to provide complete solutions across multiple key segments. For example, we have the broadest IP portfolio for the fast-growing, high-performance compute and data center market, including PCI Express, HBM3, 400, 800-gig Ethernet, and many memory interfaces. We also see continued strength in automotive, fueled by the electrification of cars, the push to autonomous driving, and the explicit demand for higher safety, security, and reliability. Our IP has been selected by approximately 50 automotive companies with nearly 500 IP wins to date. In addition, Synopsys has always driven the leading edge, providing IP and, of course, EDA on the most advanced process nodes. With the mobile and compute companies who are deeply engaged, at 3 nanometer and had over 250 design wins at 5 nanometer this year. Let me talk a bit about system verification. Under our Synopsys logo, our tagline states, silicon to software. Our unique strength is to sit at the intersection of validating hardware and software, or simply put, verifying that the chips and the system do what was intended. Building on our market-leading VCS chip simulation solution, we were at the forefront of delivering software and hardware-based prototyping more than a decade ago. Since then, our offering has rapidly gained technical and market leadership. 2021 was a record hardware year with strength in both emulation and prototyping. Our solutions sit at the sweet spot of hardware-software co-verification, and our emulators are the fastest machines with the highest capacity and the lowest cost of ownership. This year, we increased our differentiation. We introduced application-specific emulation products, Zibu Empower and Zibu EP1, that are significantly faster in higher capacity than any competitive solution in the market. Meanwhile, our new HAPS 100 prototyping system now delivers 2x faster performance and 4x better debug, driving accelerated growth. During the year, we achieved multiple competitive wins and significantly broadened our customer base, as we added more than 50 new logos and 200 repeat orders. Obviously, at the center of enabling the smart everything era sits the promise of AI, which begs the question, what about applying AI to chip design? Today, machine learning enables significant capabilities and runtime advances in all of our key products. About two years ago, we delivered a fundamental disruptive technology at a very different magnitude. using AI to automate not just tools, but entire design flows. The outcome is remarkable. Our award-winning DSO.AI solution is getting great results on production designs with a rapidly growing number of customer partners. DSO.AI, which stands for Design Space Optimization Using AI, does exactly what the name says. It explores many, many design options, learns from them using design and tool data, and finds design configurations that a human is unlikely to ever find. Moreover, since design variables, such as performance, power, size, yield, reliability, and so on, all trade off against each other, DSO.ai can optimize well beyond what a design team can easily fathom. Through this year, results got better and better. Run by our customers on real production design, DSO.AI has reduced design times from months to weeks with superior performance and power results. One notable example is Samsung, which relied on DSO.AI for multiple complex projects, the most recent being an advanced production design for a new mobile product. Applied at every stage of design implementation, DSO.AI delivered performance well beyond their speed target and substantially reduced power consumption, all while saving weeks of manual effort. Central to DSO.AI's results are the powerful engines underneath it, our Fusion design platform. The platform is centered around our Fusion compiler product, the only solution today to seamlessly integrate market-leading synthesis and place and route, cross-checked and optimized by timing, power, and physical sign-off, all in a single tool. Fusion compiler's full flow proliferation and competitive wins increase through the year, including major expansions and competitive displacement. Revenue more than doubled this year. Seminal to our sustainable differentiation is native integration of our golden sign of products. As recognized by multiple awards from our foundry partners, our deep collaborations ensure that our mutual customers have well-honed and trusted design flows at the most advanced technologies. In addition to a continued push for smaller geometries, The smart everything hunger for much more compute, storage, and data management is so high that the economics of physically abutting and stacking multiple chips or chiplets is driving a push towards so-called 3D IC design. This brings about many challenges, including architecting how to partition into multiple chiplets, making the connections between the chiplets blindingly fast, and predicting and dissipating the heat of so much computation. Synopsys is at the forefront of this emerging wave. In 2020, we introduced 3D IC compiler, which offers a modern, differentiated approach to this complex design challenge. Our solution is being deployed in production and cutting-edge 3D IC designs in the industry. Another new era showing great promise is our silicon lifecycle management platform. which monitors, analyzes, and optimizes chips throughout their lifespan. The adoption of key sensor IP accelerated during this year with 25 new logos. And we recently added AI-powered real-time system optimization for in-field applications with the acquisition of ConcertIO. With the increase in systemic complexity to deliver smart everything, security and safety is a rapidly growing theme from chips to application software. About seven years ago, we invested in software integrity to provide security and quality testing for the massive amounts of software in today's world. Synopsys has since built the broadest portfolio of products and consulting services in the market. This year, we were recognized for the fifth year in a row as a leader in the Gartner Magic Quadrant for application security testing. Benefiting from the operational enhancements we've made, Our software integrity business achieved 10% growth for the full year, with particularly strong orders flow exceeding our original expectations. We expect to return to our 15% to 20% revenue growth objective in 2022. During the year, our focus has been to scale our go-to-market strategy and execution. We launched a new partner program this year, adding dozens of channel partners and systems integrators. They're already expanding our reach into customer groups and geographies that we hadn't reached in the past. We successfully refined our sales structure and tuned our market priorities. One proof point is the substantial growth of multi-year, multi-million dollar agreements. This notably includes our largest ever software integrity order with the U.S. hyperscaler, as well as significant renewals in the networking, airline, and enterprise software segments. We also made considerable progress with our Polaris software integrity platform. We delivered intelligent orchestration, which automates security testing within a company's specific protocol. This makes it easier and more efficient to integrate directly into their development pipeline. We enhanced our BlackDock software composition analysis solution, which positions us very well for software supply chain risk cases. Finally, the addition of risk management products that automate and accelerate discovery and remediation of software vulnerabilities through CodeDX rounds out our solution well beyond what competitors provide. In summary, we delivered excellent results in 2021, substantially greater than our original plan, with strength in all product groups and all geographies. We're entering 2022 with strong technical and market momentum, We are seeing significantly expanded customer commitments and collaborations as our wave of innovations will be crucial to help capitalize the era of smart everything. And as a result, we are raising our long-term financial objectives. Let me say thank you to our entire Synopsys staff for another great year. I'm looking forward to an exciting journey into our next phase of growth. Finally, I'm sure you all saw our other news earlier today, that our CFO, Trak Pham, has decided to retire in fiscal 2022. Trak has been a wonderful partner and excellent leader, and while we understand and support his desire to prioritize time with his family, we will miss him. Of course, remain a good friend to the company and to all of us personally. TRAC will stay with Synopsys until a successor is in place to ensure a seamless transition. TRAC, to you and your family, we wish the very best. And with that, I'll turn it over to TRAC.