Synopsys at Bank of America Conference: Navigating Regulatory Challenges

On Wednesday, 04 June 2025, Synopsys Inc. (NASDAQ:SNPS) participated in the Bank of America Global Technology Conference. The company addressed both the challenges and opportunities it faces, including regulatory hurdles in China and the promising development of AI-driven products. Synopsys is navigating these complexities while maintaining a positive outlook on its strategic acquisitions and partnerships.

Key Takeaways

• Synopsys halted shipments to China due to unexpected regulatory restrictions from the BIS.
• The company is actively engaging with the government to clarify and potentially adjust these restrictions.
• Synopsys is optimistic about the ANSYS acquisition, expecting it to enhance operating margins.
• AI-driven products like AgenTic are in development, aiming to improve engineering efficiency.
• Synopsys is focused on narrowing the valuation gap with competitors like Cadence.

Financial Results

China Revenue Impact:

• Pre-restrictions, China was a significant growth area for Synopsys, with a 25% increase.
• Recent restrictions led to a 28% year-over-year decline in China revenue.
• The decline is due to technology restrictions affecting AI and HPC chip development.

Operating Margin:

• Synopsys has been increasing operating margins by 100-200 basis points annually.
• The ANSYS acquisition is expected to push operating margins to the mid-40s.
• Improving margins is a strategic focus to close the valuation gap with peers.

Operational Updates

China Sales Restrictions:

• Synopsys received a BIS notification to halt shipments of certain products to China.
• The company seeks clarification on these restrictions, particularly for multinational companies with Chinese employees.
• The restrictions include Gate all around products and impact bug fixes and updates.

ANSYS Acquisition:

• Synopsys has cleared regulatory hurdles in all but one geography.
• The company is optimistic about finalizing the acquisition, which has strong customer support in China.
• The FTC granted the final consent decree last week.

AI Initiatives:

• Synopsys is developing the AgenTic platform to address resource scarcity in design engineering.
• AgenTic will be launched in phases, beginning with lower-risk applications.

Future Outlook

China Market:

• Synopsys is working to define the scope of the sales restrictions in China.
• The company plans to resume allowable sales once the restrictions are clarified.

ANSYS Integration:

• Synopsys aims to finalize the ANSYS acquisition, enhancing its product portfolio and market position.
• The integration is expected to achieve mid-40s operating margins.

AI Product Development:

• Synopsys is investing in AI-driven products to drive future growth.
• The phased launch of AgenTic is expected to improve engineering productivity.

Q&A Highlights

China Restrictions:

• Analysts inquired about the scope and revenue impact of the China restrictions.
• Synopsys clarified that the restrictions apply to specific products and end users.

ANSYS Acquisition:

• Analysts questioned the timeline for the acquisition’s completion.
• Synopsys expressed confidence in obtaining final regulatory approval.

Intel Relationship:

• Analysts asked about the impact of Intel’s new CEO on their relationship.
• Synopsys confirmed a strong, long-term relationship with Intel.

In conclusion, Synopsys is navigating complex regulatory landscapes while pursuing strategic growth through acquisitions and AI innovations. For more details, refer to the full transcript below.

Full transcript - Bank of America Global Technology Conference:

Unidentified speaker, Moderator: Good afternoon. Welcome to this session. Really delighted to have the team from Synopsys join us. Trey Campbell, Head of Investor Relations. I’ll you know, typical fireside format, I’ll go through my questions, but please feel free to raise your hand.

And before we get into the fireside, just a quick statement from Synopsys. Today’s discussion may contain forward looking statements related to their current outlook, expectations, and beliefs subject to certain risks and uncertainties that could cause actual results to differ. Please refer to Synopsys’ most recent SEC filings for a discussion of risk factors that may materially affect these statements. So with that exciting thing out of the way, Trey, welcome.

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. Great to be here.

Unidentified speaker, Moderator: Yeah. Really appreciate you being here. I know a lot of, you know, macro crosscurrents, and I I really wanted to, you know, spend the bulk of the call on kind of the longer term drivers for, you know, what’s a very high quality industry and and business. But just at at the start, let’s get some of the recent headlines, right, out of the way. So Synopsys, you know, all of your peers received some notification from BIS.

Maybe, you know, give us a sense for, you know, what that letter says, right, to the extent you can, and then what it means for Synopsys.

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. So thanks everybody for joining. Great to be here. So we had we had our q two quarterly earnings last Wednesday. It was the first time I’ve gotten to do earnings and then update the guidance the next day.

But yeah. So we had we had heard some rumblings in the industry. We had not received a letter from commerce, but we heard that there were and we saw some of the chatter and x and those kinds of things. So we delivered our quarter and then the next morning, I guess maybe they were listening to our call. We hadn’t received a letter, we got one.

And so if you we eight k’d, basically, the paraphrase kind of comments of that letter. If you look at the cadence letter, it’s pretty much straightforward. The letter is pretty, you know, as as written in their eight k. But it was something where there were it’s a two and four letter, which typically is to stop doing something. There were a couple of broad codes in you know, through the period of regulatory restrictions.

In China, there are a number of there’s classification for software and hardware and chips and all manner of things put into different codes to check, you know, the effectiveness of those. We were informed to stop selling along this. So we basically worked through that day and have kinda stopped shipping to China. And, you know, one of the things it it was a surprise in seeing that letter. Typically, when we get we’d worked through quite a few restrictions, you know, in the Biden administration and even previous to that.

Typically, there’s a you know, anywhere from a four week to a twelve week comment period, which is valuable because you can imagine, you know, there are these are complicated technologies with a lot of interconnections, you know, things like, you know, software versus firmware versus, you know, all of these things that matter when we’re selling. And so we stopped shipping, but we’re we’ve been having conversations, and I assume peers have been doing the same thing to kind of after the fact try to create that comment period to understand what, you know, what was the intent of the regulation? How do we follow that intent? But are there elements of our business that can still be sold, you know, that that are not a part of the strategic intent of the regulation? So we’ve been working through that and what we’ve we pulled our guidance, which we thought was appropriate given this is, you know, could be a material impact.

And then we will, you know, we’ll put new guidance up there as we work through this with the government and understand, you know, what is off limits and what could be sold. And so that’s kind

Unidentified speaker, Moderator: of what we’re working through right now. Got it. Is there a timeline, Trey, to when we should, you know, we might hear of an update?

Trey Campbell, Head of Investor Relations, Synopsys: You know, there’s nothing nothing I can give you as a point. I mean, we’re working vigorously on it.

Unidentified speaker, Moderator: Is it a week’s thing? Is it a I don’t I don’t

Trey Campbell, Head of Investor Relations, Synopsys: I don’t think I mean, I don’t think it’s a long term thing, but it, you know, it’s gonna take it takes a little bit of time. I mean, it we have you think, oh, we only have a few products that we sell, but these are broken up into thousands of subpart numbers even in software of how things move together. So we have to be you know, we wanna be really solid in looking through that and making sure that we’ve really check through it with, you know, our legal teams, work through with the government. You know, interestingly, we compete vigorously with, you know, with our peers in this industry. But this is one space where we, you know, we do work together as legal teams and as, government relations teams because we don’t have the scale of Apple and Nvidia.

We want to be a combined force. So I know that the rest of the industry is also working through this. Got it.

Unidentified speaker, Moderator: Why would they single out the EDA industry versus the equipment industry, right? Which has almost like 30% exposure. Like what is the difference between the enablement that as an industry EDA is giving to China versus what the equipment companies are doing?

Trey Campbell, Head of Investor Relations, Synopsys: You know, I’d I’d be speculating, I mean, in terms of the intent. But, you know, I mean, usually, there are usually a couple of things that come up with administrations in terms of when you think about restricting. There are two significant choke points. One is always EDA. One is cap equipment, as you mentioned.

You know, there are it certainly can impact the ability to go get things done in, you know, in China, but they’re also well, you know, one of the reasons you have to look at how you do these, these are high collateral damage areas too in terms of, you know, the the restrictions that we’ve gotten historically have been targeted at AI. And so, you know, this all kinda started in 2019 when Huawei was banned, and then you had a number of other players in in space that were banned. And then you kind of went on to a technology restriction kind of schema where initially it was gate all around. So you basically were taking away the most advanced process nodes, which were, you know, highly used by AI and HPC chips. Then there was a restriction on the performance per square millimeter that you can drive.

So, hey, if you could manage to couple it together without two nanometer or three nanometer, you could go do you’d still have this restriction. And then the final leg of this was in November when high bandwidth memory was restricted. And so the combination of all of those technology restrictions have had an impact. And I just I mean, I’d point to, you know, pre restrictions. China geography was growing kinda 25% for Synopsys.

In the most recent quarter, you know, we were down 28% year over year, and that was about the same thing for the first half. A lot of the impact is those technology restrictions have meant that a lot of the AI and HPC chips that were getting developed may die on the vine before, you know, just say, hey. I I can’t have a performance solution relative to what AMD or an NVIDIA can offer from merchant. And so that means, hey. The IP doesn’t get used.

I don’t need the hardware to verify it even if we’re continuing to sell EDAs on recurring contracts. So less kind of flexibility in that. But, you know, that’s what we saw. And so we’ve been working through all those. As a company, we a % are gonna comply with everything that the government comes in with this.

Same thing with our peers. And so but this one, it was atypical because, you know, there wasn’t really a comment period and and now we’re working that comment period after the fact. Got it. Historically, what sort of been

Unidentified speaker, Moderator: the exposure across applications in China? Is it like half as high performance computing, quote unquote, the other half as mature node, washing machines, failing edge type stuff? Is it like half and half? Is it you know, tilted more one way or another? Yeah.

I don’t have I mean, I don’t

Trey Campbell, Head of Investor Relations, Synopsys: have that kind of rough proxy, but I can tell you the there are a lot of chips on lagging edge, but pro I mean, we get paid lot more advanced node. Right? Because these are the these are the chips that are going to have, you know, the high end EDA use more IP and newer IP. You know, those designs are the ones that require hardware verification where you may be able to kind of do it without on lagging edge. So our our kind of business was skewed definitely toward the advanced node in that space.

But what’s happened with the technology restrictions is we’ve as the AI and HPC TAM has compressed with the restrictions, we’ve moved more into automotive and IoT and industrial, and those have been really good markets. The challenges is this weren’t as big from a revenue TAM perspective as the AI market.

Unidentified speaker, Moderator: So if we were to just do a very, very high level breakout, is it like one third high end, two thirds trailing edge? Is it as

Trey Campbell, Head of Investor Relations, Synopsys: Well, really is whether you’re looking at design starts or the revenue TAM out there. I mean, there’s still a lot of design starts at lagging edge because, know, like 25, 30 percent of lagging edges in China. Right. And so there’s a significant amount of kind of sixteen, fourteen nanometer and above chips that are made. However, I our, you know, EDA IP intensity is much higher in advanced nodes.

Right.

Unidentified speaker, Moderator: The reason obviously, we are focused on that is because the investment community is trying to get some rough sizing of if there were to be right, some kind of additional scrutiny, right? Would it apply to a quarter or a half? Like what what is the right way to kind of

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. This is the one where right now we’re just, you know, really trying to work through a little bit of the clarity and to put more fine grain understanding on what we can and can’t sell. The other piece is it really gets down to duration. So and, you know, this is how long will these restrictions be in place? Will they be narrowed?

What’s the intent? How does this play? So and that it really a lot of the questions for us, we we don’t wanna make dramatic changes to our business if something is Right. Is very fluid. Right.

So I’m sure we’ll get it to the ANSYS question. But, you know, I mean, there’s lots of knock on implications of this. So if this is a short term thing, you know, a lot of the question I’ve gotten today in one on ones and and after the call, oh, well, maybe there’s a glass half full. Maybe you guys can close ANSYS this week. Right?

And that it gets back to a duration question of would you would you do something like that if this is a short duration thing where we don’t wanna lose out on a a market we really wanna participate in in China. I mean, to this was a twenty, twenty five percent growth market before you had the restrictions. If you reach a a trade negotiation or something that, you know, that has the right controls but restores our ability to sell, we certainly don’t want to walk out

Unidentified speaker, Moderator: of a growth market like Of course. Makes sense. And and what’s also interesting is that, you know, we are seeing all these headlines in the midst of just US and China trade negotiations. It’s it’s hard to know because, know, you also mentioned that historically the industry has always been given notice. There’s been a comment period, right, of several weeks, but this has just sort of come out of the blue, right in the midst of these trade negotiations.

Is there a chance that it is perhaps part of that bigger negotiation? It’s not like singling out?

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. I mean, I I think there’s a lot of conjecture, you know, on on one way what it is. I certainly hope that it’s a short duration kind of thing and that we can work our way through it. But it I’m I’m not on the right side of the of the government to answer that. Right.

Understood.

Unidentified speaker, Moderator: And then finally, in terms of, the spending that is associated with this revenue, if they were to say hypothetically x percent of this revenue goes away, then is there some OpEx profile associated with it that can also go away or you think that OpEx is fairly fixed?

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. I mean, there there are certainly some variable elements of OpEx. I mean, if if if you were in a situation and you said, hey, this this is this is written in stone and it’s permanent. Well, you you know, you’d you’d look at the revenue driving kind of Salesforce and those things. But, you know, if you look at our business and, you know, just software in general, it takes a certain amount of resources to go put out Fusion Compiler or in our key EDA tool or, you know, to develop IP blocks and these kinds of things.

So regardless of how many geographies I can scale my revenue, it’s a great thing for my p and l to be able to do that, but I still have to invest the right OpEx to go get these done. And so, you know, that’s why no. I mean, we’ll certainly look at all opportunities to be more efficient in OpEx and all those things, but it does take a certain amount of resources to go put this tool set out there.

Unidentified speaker, Moderator: Right. Got it. And then finally, you mentioned that oh, sorry. Yes, Nick. Please.

Nick, Analyst: Yeah. Just when you say you stop sending to China, does that mean you stop sending them software updates? Or can they continue to operate on the existing software they have? And if they are operating on the existing software, how long can they operate?

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. I’ll give you kind of the schema and the short answer is it depends a little bit. But I mean, the way we go to market, and this is I’ll just do kind of a broad generic size because I mean, it’s different for customer to customer. But typically, have two and a half to three and a half year EDA contracts. We basically chunk those con let’s say it’s a three year contract.

We basically chunk that up into yearly increments and we provide a key for that year. And then if you continued using us, you’d get the next year of keys around your renewal date. So on an EDA side, you know, customers are anywhere from, you know, the time last week that we got this note for the next three hundred and fifty five days, if assuming this was written

Nick, Analyst: in

Trey Campbell, Head of Investor Relations, Synopsys: stone, they’ll go dark at some point during that period. Right? It just depends on what their renewal dates were. We can no longer you know, we’re not maintaining or fixing bugs or, you know, doing updates in that, but they could continue to use the tool, which they’d have to kind of keep updated themselves. On IP, if, you know, if that was, you know, something, we would if they’ve downloaded the IP from our databases before that date, they could use it, but there won’t be new downloads until we create resolution here.

And then with hardware, they could keep using that, but it’d be the same thing. There wouldn’t be updates or software bug fixes, those kinds of things.

Unidentified speaker, Moderator: Yep. Peace.

Peace, Analyst: Yeah. No. Thank you so much. I was just wondering, like, in conversations with the government, is the intent really, like, a restriction on the final owner or on the geography of sale, especially since, like, software design services can be moved around? Like, how strict is the BIS, like, oversight in sales?

And the language sounds like sales direct to China outside of that military end user list where it’s anywhere versus just Chinese subsidiaries that would open into Singapore and Middle East and moving around some of those designs. What is the intent behind that? And how do you see, like, you know, reactions in talking to customers in China on how they’re trying to, like, maintain that access?

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. No. Yeah. It’s a great question. And it’s these are some of the questions we’re going back to commerce on, you know, to to really get clarification on some of these things because it’s it’s it’s a fairly generic and vague, you know, kind of in there.

You naturally will ask a lot of questions of would this apply to a US multinational company with Chinese national employees? Is it an export if they look at it? These are the kinds of things that we would refine and we are refining as we go through it, but we need a little more time to kinda go through some of these things. But these are exactly the kind of questions that we wanna get fine grained answers on so we can basically follow the intent. Right now, as I said, we’re we’ve stopped everything while we’re while we’re working through this.

But those are the kinds of questions we have to kinda get answers to so that we can make sure, hey, this these are sales that we can make, and these are allowable and supported, and these are things that we must keep off limits. So, yeah, it’s a good question, but some of the things we’re refining right now.

Unidentified speaker, Moderator: Any other questions? Is there a way, Trey, to ring fence, you know, your product just by the kind of application? Because the way I understand it, it’s it’s the same kind of basic tool, but it’s the libraries, right, that go along with it that somewhat determine what range of applications it can

Trey Campbell, Head of Investor Relations, Synopsys: get into. And we’ve done this. I mean, so the good example is the gate all around. Right? So, you know, we can we can sell fusion compiler, which is kind of a core design, you know, digital implementation tool, place and route tool that we have.

And in China, it just does not work on gate all around. So you you can do some you know, you can manage the you know, what’s okayed by the tool when it calls back to us. And so we can do those kinds of things, but there wasn’t at least in the initial note, there wasn’t that kind of clarification. Just a blanket. Okay.

Unidentified speaker, Moderator: Understood. Let’s get to kind of the core Cool. Business. The AI exposure for the company. So the industry was involved, I think, right from the get go.

Right? So the growth was above trend for a few years. Now it has kind of come back to the trend line. So where are you seeing the benefits of AI in your business? So first in terms of the features in the product itself, and then secondly, the ability to upsell versions of the product that have AI Copilot like enablement.

Yeah. No, it’s a

Trey Campbell, Head of Investor Relations, Synopsys: great question. I mean, there’s a, we kind of started, it was really Sassine, who’s our CEO, who started this journey when he ran our EDA group kind of, you know, 2018, that kind of time frame. We brought up the first optimization engine in 2020. Samsung, you know, this was around hot chips. Samsung wrote an article about it, we started to see, you know, this was we added it to a variety of our tools to have traditional reinforcement learning optimization engines, hugely valuable, you know, to our customers.

Also, we you know, this has kind of been a journey we’ve developed along with a lot of people in the industry, knowledge assistance or copilots that kind of get the first blushes of generative AI and get engineers into a prompting space. And we’ve seen huge benefit. I mean, we’ve run kind of sample cohorts at some of our big customers. And the nice thing is they broke it up into the the the maturity level of the engineers. And it’s not probably unexpected that really senior engineers don’t get a ton of bang from a copilot because they they’ve done it so much.

But junior engineers, mid level engineers get a ton of efficiency, like 40% because you instantly find things that may be in a 1,200 page manual. Right? And so huge learning curve benefit. Those things have been beneficial and are adding to the P and L, but they aren’t that kind of inflection in terms of the P and L and the cash flow. Where we see that really coming is with AgenTic.

And so for as you kind of look through AI, a lot of these early stages are table stakes to really get to AgenTic. Because as we get into you know, actually having agents that we sell to customers that can actually do design engineering workloads, they’re going to pull on those optimization engines. They’re going to use the Copilots, all those things. And we see a ton of interest from our customers. We’re already doing some beta work inside.

We want to get it out there as fast, but this is probably a few years away. The challenge in our space relative to maybe you know, someone in in in a lower risk environment, you know, like call center or things like that. Right. The the impacts of making an error are so huge. Right?

You’re if it’s a billion dollar tape out, you know, that’s not the place you wanna make the mistake. And so we need to operate in that kind of five to six nine space. So we’ll where we’ll bring this in is we’ll start to do things that are more risk tolerant, things like checking test benches, checking the work of engineers. But this is going to progress. And I encourage you if you didn’t get to go to our CR user group in March, Sassine spent a lot of time on this and he had a pretty good parallel analogy of the autonomous driving kind of level one through level five and how that would look in AgenTic.

Starts with early kind of work in the background, but it will progress to where you have agents working with other agents and orchestration level that’s AgenTic where and then it gets to kind of more autonomous mode. And so there’s a huge amount of promise in this, and it comes into a market where we have a significant resource scarcity issue. And so the the industry overall, our customers and ourselves, about 20% short the number of design engineers we need to go make all the products on the road map that people have for the next five years. This is one of those where you can say, hey. This is an, you know, an excellent way to kind of be a scale multiplier in terms of of how our engineers work.

And we have a lot you know, there’s a lot of work to do technically. There’s also a lot of work to do on business model because this is a pretty big change. We’ve been selling three year subscriptions. As you get into this, you certainly would have something, you know, more metered or consumption driven, kind of usage driven. And so there’s a lot of business model update.

But at a high level, kind of cocktail napkin math, this hunts. I mean, it’s we we our customers pay us about 15% of the r and d money for our IP and EDA. The other is really gone goes to their headcount. And it’s one of those arguments where you say, hey, would you pay 50% more on 15% to get a 30% reduction on 80%? Very ServiceNow like argument, but a lot of work to go do to get there, but it’s compelling.

Unidentified speaker, Moderator: Few quick things. So Ansys from what has been said, I think let’s set the BIS, right, implications I think you guys have kept this June closing date. Are you getting enough kind of warm and fuzzy from you know, the final jurisdiction that matters to maintain that level of confidence?

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. I mean, you know, I I started when I was talking to everybody today, was like, you know, I I’m not sure I could construct an argument with all of the things that are, you know, that you see in Bloomberg and the New York Times and everything to get everybody here to give me a high five on on on, you know, the conviction level. But what I can tell you is we’re having really good dialogues. And so

Unidentified speaker, Moderator: Is there any sticky points still you think that

Trey Campbell, Head of Investor Relations, Synopsys: They’re the same kind of good dialogues that are that happened, and we’ve gotten through the reg we you know, last week, we got the final consent decree from the FTC. So we’ve cleared all the other geographies regulatory. The discussions have been really good. You know, there there is significant interest in keeping Synopsys and ANSYS technologies in country, you know, and having those capabilities. ANSYS only has 5% of the revenue there, but it’s it’s important revenue that touches a lot of important infrastructure and other capabilities.

You know, we’re used prolifically in the country. And we’re the one thing I would say too, as we had in other geographies, we’re getting a ton of customer support. These are Chinese customers who want to see the combination and be able to use simulation and EDA together. And, yeah, there’s a there’s tons of noise and and issues at a top level working through trade issues. But there’s also a realization that, you know, there’s a long term.

Right? These are capabilities that the country and companies want. So good dialogues. We still are very optimistic and we want to get this through the typical approval. All right.

Unidentified speaker, Moderator: Next important topic is your largest customer, right? And they have a new CEO, right? Who comes from Cadence. So talk to us about what that means from a competitive landscape, your market share, is there an opportunity that maybe just to spend there expands and we are just worried about a fixed pie, whereas maybe the pie there can expand, right? How do you think about market share and their spending levels?

Trey Campbell, Head of Investor Relations, Synopsys: Yeah. I no. We we’ve Intel has been a has been a great customer. You know, we we we exist there with others, you know, and and certainly, you know, Lip has ties deep ties to Cadence from his past. But, you know, we’ve worked with Lipbu also and Sassine has a great relationship with them.

You know, in fact, you know, there are a number of companies in the Walden portfolio that just use Synopsys. Right? So before he even got to Intel, even there’s a lot of companies that were exposed through his investment portfolios. You know, we’re our goal is to make them as successful as possible. I mean, you know, it’s a critical company for the world, and we wanna do everything we can to make them successful.

I would say EDA is pretty sticky, you know, in terms of, you know, you have users that have used it for a long time. Certainly people move back and forth and they may use both tools. But, you know, that’s not one of our major concerns. We have a lot of other things that that we’re working on, but the main one is just to make them super successful.

Unidentified speaker, Moderator: Got it. Yeah. You think that there is a possibility that maybe just their spending, you know, because they have, I mean, you have direct experience there that, you know, their spending has not been at par with the percentage of R and D as you mentioned that, you know, that’s the industry norm. You there is a chance that maybe there is a larger addressable market? Well, I mean,

Trey Campbell, Head of Investor Relations, Synopsys: the it it a part of this gets back to and I know, you know, I I was in Intel for twenty two, twenty three years. And, you know, the the most important thing for any any company is leadership products. Right? I mean, in in EDA is a piece of that, but all the other aspects that come into that. I mean, and I think Libbu was here, he’d probably say, hey.

We’re focused on building leadership products, however you get that done. So, yeah, I I hope that is the opportunity that they, you know, they operate in a in a great way, and it creates more TAM for everybody.

Unidentified speaker, Moderator: But you haven’t seen any slippage of share or anything along? No.

Trey Campbell, Head of Investor Relations, Synopsys: I mean, have long term EDA contracts with them. We have another contract. Over the last couple of years, they used us. They had done a lot of internal IP and chose us as we kind of get into 18A and some of the more advanced nodes. And then they’ve been a great hardware customer too.

So, all three of those are separate. And so, no, we’ve continued to see good support. Got it. And finally, just from your

Unidentified speaker, Moderator: experience now at all these organizations, one question that always comes up, people will probably or wrongly contrast synopsis, right? And trading multiples with like cadence and trading multiples and say, well, how come there is such a wide gap, right, in the multiples? Historically, I think that existed because of the difference in profit margins. But I think Synopsys has done a good job, right, since Shellag has come there, right, to kind of help close some of that gap. Why do you think there is still this really large delta?

Yeah.

Trey Campbell, Head of Investor Relations, Synopsys: I mean, I’m I’m sitting with a group of experienced investment professionals, and I’m gonna tell them why I think the stock is trading. So take this with a grain of salt. So, yeah, I I used to

Unidentified speaker, Moderator: Rumors of my greatness are greatly exaggerated.

Trey Campbell, Head of Investor Relations, Synopsys: Well, know, it’s a I’ll a quick aside, but when I was at Intel and IR and and Stacy Smith was the CFO, You know? And every IR professional has this experience where it’s like, you know, what happened to the stock today? Right? And you I’m sure you all get this. And, you know, after talking to multiple trading desks and hearing seven different stories of why the, you know, why the stock moved, you know, I didn’t Stacy and I were gonna go, looks like more sellers than buyers.

Yeah. That’s what I’m discerning. But yeah. No. I think I think it’s a couple of things.

One, I think was what you hit. When I came in about two years ago, you know, Sheila’s had a tremendous focus on scaling the company at a at an improved operating margin. We’ve been doing about a 50, two hundred basis points a year of operating margin accretion, which is fantastic. It’s not over. We’re gonna keep doing that, but we’re still at a delta relative to cadence.

But as we did and we gave pro form a when we did the ANSYS acquisition, we expect the combined company to be mid forties, which would be market leading kind of operating margin. We need to continue to work on that front. I do think and we can all compare notes at the watering hole afterward. But, I mean, certainly the deal overhang, you know, has has meant that, you know, when I came in, I looked at the stock, a lot of investors own us and Cadence. Right?

So, I mean, you’re kind of playing the entire market for the sector, which is, know, very rich, a lot of high growth. But, you know, Cadence is a pure play that isn’t wrapped up in a thirty five billion dollar acquisition where a lot of ours is how’s how’s the deal closing? How are these things? So I think that’s created a little bit of a disconnect, but the margin one is real, and we and we intend to close it. Right.

Unidentified speaker, Moderator: Terrific. Thank you so much, Jake. Really appreciate your time. Joining. List.

Okay. All the best.

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