Hello. Good morning. Good afternoon. Welcome to the 28th Annual Needham Growth Conference. With me here right now is Shelagh Glaser, Chief Financial Officer of Synopsys. Shelagh, thank you for being with us today. Charles, great to be here with you. Before we start, allow me to read the safe harbor statement from Synopsys. Today's discussion may contain forward-looking statements related to Synopsys' current outlook, expectations, and beliefs, which are subject to certain risks and uncertainties that could cause actual results to differ. Please refer to Synopsys' most recent SEC filings for discussion of risk factors that may materially affect those statements. All right, now let's get started. Shelagh, I would like to address this question off the top of investors' minds immediately. So last year, you guys closed the Ansys acquisition. I think it's an achievement, maybe still a little bit underappreciated given the very tough geopolitical backdrop. But also last year, you guys had to cut outlook around the fiscal Q3 quite meaningfully. And we all knew that there was also a little bit of miscommunication issues around that particular print around Ansys, et cetera. I'm wondering if you can take the opportunity today and maybe recap from a fresh perspective today what exactly happened to last year's business that has led to that outlook cut as we look at this year and beyond. Great. Thanks for the question, Charles. Really what happened in our fiscal Q3 is in the IP business, which is a significant business for us. We saw three headwinds that we were navigating through. The first headwind is really China. What happened in our fiscal Q3 in China was there had been restrictions on the EDA technology. You say, well, IP is not affected by that. But it really caused a significant customer disruption because it caused great uncertainty in the customer base. As they were thinking about their roadmaps, trying to understand and navigate an uncertain environment and navigate what could impact their business, the IP decisions got delayed or contracts got downsized because of that. Just because there was uncertainty about what environment they were operating in, they took a step back to rethink their roadmaps. IP is an upfront revenue for us. That's a headwind inside the quarter. That was a headwind in Q4. The second one is some challenges in a foundry customer. You can think about we support all foundry customers universally. You can think about our IP as being critical for those foundry customers to be able to gain customers into their foundry. One of our foundry customers actually had some headwinds in terms of their ability to get customers. That's an impact to us. We've got resources dedicated to that. We had expectations on that. That's a headwind for us in terms of revenue. Related to item number two, we had areas where on HPC titles in particular, we didn't have enough resources. And so what we've done is we shifted resources to where we see the demand, which is the HPC titles. But that doesn't happen instantaneously that then the HPC titles are available. So what we've done as a consequence of this is we put the forecast together for 2026 and how we thought about guiding 2026 is really ingesting all that and ensuring we're de-risking our 2026 guide. In light of that, we think the China headwinds persist. We do not anticipate a different business environment in China in 2026 than we had in 2025. So we think some of that customer disruption and uncertainty, that's the same environment. In terms of the foundry customer, we assume and the way we built our forecast, we don't assume that foundry customer is getting additional customers. Our forecast doesn't assume that. And then in terms of the re-application of resources, we've already done that. So that work's already completely ensued. But some of those titles won't be available until the second half of the year. So that informs how we put our guide together. In terms of Ansys, we got very clear feedback, which was very welcome to make sure that we are fully visible and fully transparent. So what we have done is as a consequence of that, we've given full visibility into Ansys even as a part of the guide. We gave full visibility into Ansys. So we took that feedback very seriously. And we've built that into how we're moving forward and how we're communicating moving forward. Thanks, Shelagh. That was a great recap and a great rundown of the assumptions baked into this year's outlook guidance. So I would like to explore business segments one by one. And let's start with Ansys. So yeah, as you just mentioned, right around your fiscal Q3 earnings last year, people were a little bit worried about Ansys because a little bit lack of visibility into how that segment was performing given the segmentation decisions you had at the time. But then you kind of corrected that in Q4, giving us the full visibility. And it does look like Ansys has been performing very well. And I would argue maybe, I mean, on a short-term basis, of course, this is performing better than your EDA and IP segments. And so what's driving the Ansys outperformance right now? What are the factors you think should hopefully sustain that strong performance into 2026? Yeah, so Ansys has been performing very strongly in 2025, and we anticipate 2026 is another strong growth year for Ansys as we've given the outlook. It's really Ansys, and it's the reason that drove us to do the acquisition of Ansys. They have the leading portfolio in simulation and analysis. Their product portfolio is really unmatched, and really what we're seeing is the broad applicability of their tools. You can think of really almost any R&D team can benefit from the simulation and analysis tools inside Ansys. They have leading thermal, mechanical, fluid dynamics, and you can think about almost any R&D project will benefit from the ability, instead of building a physical prototype, to do simulation and analysis where you can really understand whether what you're designing is actually going to be what you end up getting in manufacturing. So we're just seeing broad strength across that portfolio because, again, it's the leading tools in the industry. And we're seeing a lot, I mean, simulation and analysis still very lightly penetrated. If you think about the tools that we use on the digital design side, nobody would make a leading-edge semiconductor without our design tools. But you can think of sort of the rest of the R&D world. Simulation and analysis is still only a few% of those R&D dollars. So tremendous opportunity and the leading portfolio in the industry. Yeah. That's great insight. Yeah. That EDA, I would argue it's a good chunk, a double-digit of the R&D budget, right? And yeah, it's great to hear. That's a good amount of upside. So now, Shelagh, you have managed the Ansys portfolio as the CFO of Synopsys for roughly seven months, I guess. In terms of the post-close integration targets, like deleveraging, like cost synergies, and maybe revenue synergies a little bit down the road, where are you relative to the targets you set when Synopsys first announced the deal that was two years ago? And any upside surprises or downside, if you will? Yeah. So as you said, we closed the transaction in July of last year. So we're well underway with our integration. It's been very seamless. The teams are working super collaboratively together. So it's been actually a great joy to see those teams work together and see the excitement between the teams, be able to just work hand in hand. So in cost synergies, we're accelerating the cost synergies. So as we announced a significant operating margin improvement year-over-year, we announced a restructuring. So we're taking the opportunity to make sure that we are capturing those synergies as we're kind of now one joint team. And so we are well underway on those cost synergies. In terms of deleveraging, we've already made significant progress in the term loans. As I shared in the earnings, we expect in the first half of 2026 to really complete those term loans. We're very dedicated to the deleveraging. We're moving very rapidly for that. Obviously, the bonds don't start until 2027, but we're making significant progress on those metrics. And then, as you said, revenue synergies are really the $400 million run rate by year four. And frankly, that's just because we're building out that joint roadmap. We'll have their first solutions in 2026 of the joint roadmap. But that's an ongoing, we'll build that roadmap out. The teams are already working on cross-selling. We've cross-trained the various teams so they can sell the various products. So we're actively working on that. But those joint products, those will build over time. So that's why that synergy on the revenue side is a little bit longer arc. Great. So we'll be expecting some announcement around the joint products around the, it's not called the Synopsys Converge event. We'll certainly talk in more detail at our SNUG conference, which is our Synopsys user group conference. We'll certainly talk in more detail. Great. Looking forward to that. So let's talk about IP. This is the area, despite all the challenges last year, right, you just mentioned. This is the area where Synopsys is the industry leader, I mean, probably indisputable at all, right? You're the leader in IP, especially at least around everything around the processors, right? And the long-term strategy, right, of maybe moving to subsystems or some of the HPC titles you just mentioned about, there's a lot in there. And I wonder if you kind of walk us through what's the longer-term strategy, how you think about growing the IP, I mean, despite all the challenges you've faced the last year, and how to play to your strength a little bit even stronger in the coming years. Sure. And as you said, we are the leader in interface and essential IP and processor. Obviously, Arm is the leader in processor IP. And that is a critical area because all of those GPUs, CPUs, whatever the engine is, they need all that interface IP. They need to be able to talk to other parts of the chip, to other chips, to the outside world. And so the importance of it is significant. The pace at which basically the standards are moving is a pace we've not seen before. The pace at which kind of the AI cohort is driving the standards is very rapid because, of course, you need these IPs to keep pace with how fast the engines are moving because they can slow down the capability of the engine if they're not moving at that. So that's a great opportunity, basically these standards moving in a much more rapid pace. The other opportunity that we see there is in the data center AI cohort. We see that that group of customers not only are buying merchant silicon, they're also partnering with some of the ASIC capability companies who we also partner with to provide IP. And they're also building their own designs. So we have the opportunity, obviously, on the first one, we're already working with those merchant silicon companies, but on the second two, to actually service them through that. And on the third one, where they're building their own chips, we're seeing them actually want custom. So yes, it's a standard, but they want something tuned exactly for the workload. Because if it's tuned for the workload, then that helps them have a much more optimized solution that helps them have a much better product or capability, and so that's an opportunity, and with those customers that are in that subsegment, we're also having conversations with them on evolving the business model, and so how do we think about evolving the business model with them over time, so that's an opportunity, and then as we move further out in time, some of the opportunities that we have as more customers sort of move into that smart space, the customers that aren't the fast-moving IP customers, they're certainly going to want to inherit some of the learnings on that. We've talked about sort of the tale of two markets. We don't see automotive and industrial at this point moving at the same pace of AI, but we certainly see areas where they're going to want more capabilities, more IP capabilities as they build more sophisticated chips over time. And so we think there's tremendous demand, tremendous opportunity. And the pace at which everything is moving really means that the kind of constant fresh IP is a big opportunity for us. Great. Great. So maybe this is a very timely, I mean, discussion. It's the sale of the ARC processor IP you guys announced a couple of days ago. So what's the rationale behind that transaction, at least from Synopsys' perspective? As I believe you guys have owned that portfolio for since, I think, probably 2010. That's the date I found. So more than 15 years owning that, why selling it now? It's really about us prioritizing and really making sure we're focusing on the areas where our strategy is to lead, which is the interface IP and essential IP. And so when we looked at that and we looked at the opportunity, Charles, that you and I just talked about, that's a tremendous opportunity for us. So the processor IP, it was not the priority for us. It's obviously a great match with Global and what they're driving their strategy. So it's a great asset. So it's essentially a priority for them. For us, we really want to be the leader and really be very focused on interface IP and essential IP and be able to service our customers. And so for us, that's our top priority. And so as a part of that, moving that asset to a place where it's a better fit was a really good outcome. Great. I think you touched upon the monetization business model for IP. I mean, if I understand you guys correctly, it used to be, I mean, it has been mostly driven by development and the usage. That's how you charge for the IPs as of today. But royalty looks like you guys are looking at that as a third avenue, right, of IP monetization. But there were not many very successful royalty-based IP business model out there. Maybe ARM is one. But how realistic do you think Synopsys can maybe migrate to a royalty-based IP business model given what you see today? Yeah. Yeah. And just to put it in context, we're talking about the customers that are in the data center AI where they're pursuing their own roadmap. So again, they kind of have three models. They're doing merchant chips, they're doing ASIC chips, and then they're pursuing their own roadmap. So it's in that segment, that small segment of customers where the conversation is for IP. We have basically an NRE, and then we have a use fee. What we're talking with those customers who are asking us to dedicate resources because, again, this is a big unlock for their roadmap and the drumbeat that they want to drive their roadmap on to make sure that they've always got these IP blocks ready to go. We're talking about another element of monetization with them because that's obviously higher value for them to be able to have these capabilities at the ready for them to accelerate their roadmap. How do we think about adding additional value-for-value monetization model, and then we're having the conversation about a royalty base that obviously is a tail. The NRE and the use fee are upfront. A royalty is over time, and again, it's in that subsegment of customers that we're having that, and so those conversations are ensuing in those discussions, and so we'll obviously evolve that conversation and evolve how that flows into the business model, but it's not moving from the whole business model is not moving to a royalty business model. It's in those cases. I think if you think about the pace and change of the industry and the pace and change of those customers, the business model does need to evolve. Their business model has obviously evolved quite significantly. So us in support of them having that successful outcome, that needs to change. Makes sense. Makes sense. It sounds like it's going to be pretty selectively maybe start somewhere in those specific areas where this model may fit better. Sounds like that's the case. Correct. Yeah. So it's very focused. Yes. Got it. Got it. Okay. So Shelagh, let's talk about EDA. So I think last year was exactly at this conference. I think you and I had a similar fireside chat, and you basically talk about semiconductor market as a tale of two markets, right, between AI haves and AI have-nots. And you basically, I think you alluded to the EDA growth and maybe could be still a little bit muted. That was last year's comment, given that dynamic between AI and non-AI. And where we stand today, do you still see a tale of two markets? And what do you think could drive EDA growth kind of back to low double digit? That's still your long-term target, right, for EDA. But the last year, last couple of years, EDA growth, as we can see from your numbers, your peers' numbers, especially around the custom digital, it hasn't been in the double-digit range. So mind if you give us some thoughts? What needs to happen for that part of the portfolio to reaccelerate again? Yeah, and we do still see the tale of two markets. So that persists. So we see the pace at which the AI kind of HPC crowd is moving, cohort is moving, is much more rapid. And then we still do see that consumer index or industrial and even automotive is still moving at a different pace. So over time, that will change. And then the monetization opportunities inside EDA really are bringing this Ansys portfolio together. That's why one of the motivations for bringing those leading Ansys tools in, that we build these joint solutions. So that's certainly a part of it. And the other one is as we move portfolio from CPU to GPU, that's another opportunity for monetization. And the other one that we've talked about, which is much longer term, is how we move from the current environment. Sassine calls it re-engineering engineering into a more agentic environment and how we move from just having AI as a part of the tool into having an agent as a part of the capability that could design some part of the chip or could run the test or could do something more than just kind of speed things up, actually change the design flow, and allow customers to have a much more rapid ability to go from initial architecture all the way to chip. Great. Great. So agentic AI, that's one potential upside. The other one, maybe joint development. And the third, I heard you talk about accelerated compute for EDA, right, moving, migrating to GPU. Three opportunities, maybe you can better monetize the EDA products you currently have. It does resonate with us. We do think EDA is a little bit underappreciated, the value you guys provide to the whole industry. You're very enabling. But allow me to double-click on that joint product between the EDA and Ansys portfolio, how that contributes to better monetization. So we've heard about this argument for many years from you guys, from your peers, and that integrating the different EDA tools, putting that into one design flow, the full flow supposedly should drive better pricing. But maybe it's happening, hardly from an outsider perspective, we can see evidence that is helping with the pricing. So why this time is different? The joint product between the EDA portfolio and Ansys portfolio, why this time it can help with the pricing? Yeah. And certainly, we develop tools in such a way that customers can still continue to buy things independently. So one of the expectations in our industry is everybody has a different design environment. So customers want to tune the design environment. So the portfolio will still be able to be purchased. However, customers want to purchase. But if you want to bring those two design environments, so we bring the thermal mechanical environment together with the digital design environment, we're actually solving bigger problems for customers. So if you think about when a customer has a design, they've got the specs that they want the design to perform to, and then they've got the expectation on what yield and what outputs are. A lot of this is managed in two different environments from the design standpoint. So we understand what the chip performance should be, what the power performance area, PPA, typically is called, what the PPA is for the digital design. And then we understand from the thermal, mechanical, what do we want the yields on this chip to be? What do we want the performance? What do we want the yields? These are two different environments right now. If you want to bring those two environments together, and you could find out much earlier in the design cycle that there's a yield problem, or if you could configure the chips, again, in a multi-die design, you can configure the chips in a different order of operations of which chip is one, two, and three, and you're solving yield problems, which are really business problems for customers because if you have a yield problem, you have a cost problem, you have a margin problem, you have a ramp problem. We want to solve big, hard problems for customers, and we want to solve them much earlier in the design cycle. That lowers costs for customers, increases confidence, improves margin for customers over time, and saves their resources because their resources aren't working on instead of having a bad tape-out, now we got to go back, we got to make another tape-out, and we got to chew up six months of R&D, of precious R&D people. I'm in search of solving bigger problems for customers because those customers are trying to make design cycles in 12 months, so if you want to make a design cycle in 12 months, you have to find the problems early, solve them early in the R&D, so that's what I'm in search of, solving that much bigger problem for the customer, much higher value problem set, therefore much higher value for what we deliver, and again, people can still purchase things separately. If that's not a high-value problem that somebody has, they would still be welcome, but in these joint solutions, that's what we're after, solving those higher-value problems, and then it's up to us, to your point, to make sure that we're fully capturing a portion of that higher-value problem that we're solving. Great. Great. Well, definitely looking forward to the magic Synopsys is going to bring to the market by fusing the leading EDA and the leading simulation analysis portfolios together. So Shelagh, I mean, for the remainder of the time, I do want to touch upon China. At the beginning, you did mention about you are assuming it's the same kind of environment in China. Nothing really has changed to the upside or downside versus last year. But yes, I get it. You're not assuming it's going to be a tailwind, but it sounds like it won't be a headwind either. But what could happen? What needs to happen for the overall China business to get better this year? Yeah, so I think kind of our forecast doesn't depend on something better happening in China. To your question, certainly, there's been a lot of uncertainty in the customer base just because there's a lot of tension and therefore uncertainty in the customer base, and I think to the extent that there can be more clarity, that helps the customer base in decision-making, and when customers are uncertain, they hesitate, they do smaller deals, they maybe sometimes might take a chip off a roadmap because they're not sure, not that they can't design the chip, but they're not sure, will they be able to manufacture that chip? Will they be limited into their use case for the chip? And so to the extent that there could be more clarity, I think that helps customers, and then that helps them be able to make better decisions. We don't, again, anticipate that the environment will be different. We're certainly still investing in China. We've got a great team in China. We have great customer relationships. So we're not in any way stepping away from China, but we're just trying to be very balanced in how we think about that in our forecast. Great. Thanks. And maybe before we open up for Q&A, this is one last question, Shelagh, for you. And I'm sure you've been speaking to a lot of investors, probably especially after the fiscal Q3 earnings. And what do you think are some of your messages you feel like maybe still a little bit underappreciated by the investment community as of today? So I think I would come back to some of the conversation we had. We have the leading portfolio in digital design. We have the leading IP portfolio in terms of interface, in terms of essential IP. We're focusing even more on that, as we talked about. We're disinvesting even in assets so we can really focus on that. And with Ansys, we have the leading portfolio in simulation and analysis. So the strength of the Synopsys plus Ansys portfolio is really unmatched in the industry. And we're operating in a time where silicon is the heart of everything. So the customer that we're servicing is really moving. Everything's becoming smart. Everything in the industry is becoming smart. And then obviously, we're seeing AI and physical AI move at a pace that's quite unprecedented. And we're essential, essentially, for those designs to happen. Great. Thanks, Shelagh. Let's open up for Q&A. If you are logged into the Needham Conference portal, you will see a Q&A box on the user interface. And feel free to type your questions there. I'll ask on your behalf. Let's give it a minute. I see if there are any questions coming up yet. All right. How about let's just leave it there. Great, Charles. Thanks for the time. Really appreciate it. Yeah. Thank you very much, Shelagh, and the Synopsys team. Appreciate your being here, and I hope everyone enjoyed the rest of our Needham Conference. Thank you. Thank you.