Synopsys, Inc. (SNPS) Earnings Call Transcript & Summary

Okay. I believe we're live now. So the next fireside we're hosting today as part of our design software conference is the company, Synopsys, and we're extremely happy to learn a lot more about their IP business. And to do that, we're hosting John Koeter, who is the Senior VP of Product Marketing in the IP business, if I got that completely correct. John, thank you so much for joining us today. And thank you for your time.

Gal, it's a real pleasure. Thank you for having us here.

Of course. So for investors who perhaps are less familiar with Synopsys story. Interestingly, IP business has been such an important part of the overall business. And I guess, in the past, a lot more familiarity, more emphasis was being put on the core EDA side. But for the last few years, we also talked about the forays into kind of Software Integrity business, but IP is something that's been there for a number of years now that's representing a very, very material portion of revenue. It's also part of the business that has outgrown the core EDA market as well. So to understand the IP market itself and where you guys have played because there are many vendors in this space between the ARM, yourself, Imagination and Cadence, how would you segment the market at a high level to help our investors kind of just understand what you guys are all focused on? Do you compete with ARM? Do you partner with them? Do you provide a similar IP and how do you decide to specialize in some of those areas that potentially do not overlap today around -- maybe to start with?

Yes. Thank you, Gal. Yes, semiconductor IP is a really exciting market. And I've been in it for, let's see now, 14 or 15 years now, so quite some time here. And it is composed of a couple of major subsegments. So the first -- the biggest part of the semiconductor IP market. And by the way, I think I should probably start by just what is semiconductor IP, if your audience isn't familiar with it. Semiconductor IP is actual blocks of designs that get integrated into our chips by our customers. So they are like a physical block that gets integrated into a chip. For example, a USB interface is a good example here. Yes. So the semiconductor IP market has several big subcategories. The first is called the processor. These are the brains of the chips these days. These are central processing units, digital signal processors or DSP, GPUs, graphical processing units. And combining those areas, this processor space, is about 50% of the semiconductor IP market. And ARM is by far the largest player in that market, and this is also where Imagination plays as well. Cadence also does have a presence here with their Tensilica product lines, as do we, with our Arc processor family, which has had some reasonably good success in areas such as automotive and storage and IoT. And the second biggest segment of the semiconductor IP market is called interface IP. These are things that you use each and every day, USB, HDMI, Ethernet, PCI Express various memory interfaces. Here, Synopsys is, by far, the market leader. We're probably maybe 3x nearest competitor, and this is a very good business for us here. The third largest segment of the semiconductor IP market is what's called Foundation IP. Foundation IP are things like embedded memories. So every chip has an embedded memory unit to do data storage. It has things like standard cells, and it has things like general purpose IO for connecting to low-speed peripherals around the chip. So those are like the 3 big market segments. And by the way, we're also #1 in foundation IP, took over that spot a number of years ago. Another important and up and growing portion of the semiconductor IP market is security. Everything needs to be secured these days. And this is something we made an acquisition a number of years ago of a specialty security firm, and that's going very, very well for us. And we see a lot of potential growth into that market segment as well. So overall semiconductor IP growing nicely. Processors, the biggest block, interface is the second biggest block, foundation IP and then other areas such as security IP.

It's really interesting, and thank you. I think that really sets the tone and the scene right for everyone to understand better. And it's very clear, I think, as well. Would you say that 3 years that have been involved in the IP, there's been a lot of kind of change in focus between the different companies? So do you think that everyone kind of continues to stay in their own lane, so to speak, in terms of what they're investing and where they are prioritizing their R&D dollars?

Well, if you look at like important companies like ARM and Imagination, they've primarily been in the processor space and continue to be, although ARM does also play in what's called the foundation IP space as well. We, at Synopsys, have been steadily growing our portfolio over time. And we actually got into this business about 20 years ago and have been building our portfolio slowly, steadily and methodically over that period of time, just adding piece by piece by piece until we're by far the largest provider of IP from a portfolio breadth standpoint.

And then when I look at the -- I mentioned initially that IP has actually been outpacing the core EDA market. And in terms of revenue, it's become a more important part of Synopsys, not just through investments and acquisitions, but also just organically, it's been growing faster than the core EDA market. Why do you think that's the case? Why do you think that IP is able to outgrow the EDA tools that traditionally your customers used to design some of these chips?

Yes, that's a great question. And I'll start off by saying, first of all, IP is roughly about 25% of the company here and as you've noticed, has been growing very nicely. Our long-term goal is to grow this business and expectation to grow this business at mid-teens. And so what are some of the dynamics behind the market that is enabling that kind of success and growth rate? Well, I mean, I think there is multiple different dynamics. The first is there is a make-versus-buy dynamic in our industry here. And slowly and steadily, over many, many years, companies have been evaluating what is their core context versus what are the -- what's core differentiation for them versus something that is in the context? And clearly, things like USB blocks, they have to work. But when's the last time you bought a cell phone because it had the world's best USB block, right? You don't, right? You buy your cell phone for many other different reasons. But that block is very complicated, and it has to work. And so companies are more and more looking at, well, how do we make a decision between what is our core versus our context? And that's been a huge benefit to us and others in the semiconductor IP marketplace because more and more, they're saying, well, let's go to a trusted IP supplier like Synopsys, and let's get these blocks because we're under a lot of pressure. We're under a lot of pressure to accelerate our time to market. Let's go with a high-quality provider that provides great support. And so that's one thing. Another area where we've had a lot of success because we've had a lot of successes, we're very much partnered with a number of different market makers. And we're also the leading manufacturing process partner. And by that, I mean, there's a category of IP that's specific to the manufacturing process. It's called physical IP or hard IP, and we're the market leaders in that space. So we're very tightly partnered with some of the manufacturing partners in this area, the TSMCs and the Samsungs and so forth of the world. And lastly, we've just been slowly and deliberately expanding our portfolio, picking our market segments, whether it's high-performance compute or mobile or automotive and building out a very, very broad portfolio in those areas.

Yes, that's helped. And it's interesting you said it's not just the chip designers, it's also the companies, the foundries starting to look at it. And you have a host of different customers, right? So has the number of customers been expanding as well, not just in terms of kind of penetration of the workloads, I guess, within the existing customers, but you're saying that you have more customers than you had just organically as you kind of move towards different parts of the process, I guess?

Yes, that's correct.

I guess when I'm thinking about opportunity, right, let's assume that, I don't know, 20 years ago, most of these things were done in-house. And like you said, people had dedicated resources and now they're figuring out the fact that not everything makes sense to reinvent the wheel every time, right? So they will be buying building blocks. And that doesn't mean that the system will be commoditized, not at all. That just means that they can refocus limited resources that they have on things that can add value for them, right? It sounds like a trend. It sounds like a secular trend, but also sounds like a trend that has kind of a normal level of adoption that will hit. And when you look -- when you talk to your customers, do you have an idea or do you get an impression that there's still a lot of duplication of work between different customers that could be standardized and there's an opportunity to kind of standardize and focus them really on the higher problems and help them that efficiency, which then would suggest that the penetration is still fairly low in the IP market overall?

As best as we can tell, the IP market is roughly about 75% outsourced, and it continues to get more and more outsourced over time, for exactly the reasons that you're just saying, companies are looking out for what is their core versus context. And then they're looking at, well, okay, we want to outsource this. But what's most important is we want to outsource this to a company that has the best quality, the best support, the best program management and the best IP so that we can get our chips out the door faster. So that's definitely a trend that we see.

Awesome. As an analyst, we always kind of try to predict these things. And sometimes, what we've learned over the years that demand for IP can be somewhat seasonal at times. You have sometimes significant orders that come in and then those titles kind of get consumed over whatever the schedule of the customer is. But we find that a lot harder to model or predict in something like an EDA tool. So when you look internally for the -- through your kind of indicators that you track in terms of kind of to assess the health of the IP market from your standpoint, not any given quarter, but just kind of overall, what are some of those that you track, obviously, in addition to kind of being very close to your customers and kind of having your feet on the ground at all times, understanding that? Is there any external factors that you kind of track as well?

There are, absolutely. So number one is trends in the manufacturing process. When is the next manufacturing process is going to come in line? And then we work very proactively with our manufacturing partners as well as our lead customers to make sure that we have the IP available at the right time. But there are also other things. There are -- in many parts of our business are standards bodies, and we're like really plugged into the standards bodies. In fact, in many cases, we're leading the standards bodies in active participation. So that gives us a look inside to see what is going on and where the evolution of these standards might be over the next 6 or 9 months. So that gives us a head start. We're definitely partnered, as you said, with market-making customers, and really like -- in many -- in some cases, we're actually co-developing the specification with these market-making companies so that we can make sure that we have exactly the right feature sets. One of our sustainable advantages in IP, I think, though, is the breadth of our portfolio. At any given time, Gal, we're looking at thousands of opportunities that we're tracking across many, many, many different market segments. And in fact, I have a dedicated team that that's all they do is they look at market segmentation, what's going on. And so when you combine this with being close to our customers, combine this with the knowledge of the manufacturing partnerships, combine that with industry participation through these standards bodies, we think we have a very good handle on what's going to happen. And again, given our size and our breadth of our IP portfolio, we can see market trends that I think might not be obvious to others because we are involved in just so many chips across the board.

And that probably what gives you then that confidence into kind of projecting what do you think the midterm growth can be and what the contribution can be in the future as well, right?

Yes, absolutely.

How is the go-to-market approach in the IP business? Obviously, for someone like you, you sit kind of in the middle between the product and the technical teams and then on the other side, with the customers often understanding them and their needs. How do you engage with those customers? Do you get involved very early on? Or do they reach out when they kind of hit a wall and say, please help me. And if you compare those sales cycles to some of your colleagues maybe in the core EDA tool space, how would those kind of compare to what you're seeing on the IP side?

Okay. Yes, that's a great question. So let me maybe take a step back and give you some insight into what our business model is, and this will help us in determining on how we go to market. So we have a number of different business models. The primary one, though, is something that we call an IP FSA or a flexible spending account. And for that, a customer will sign up, it's -- I liken it to like a gift card that you might buy at your favorite department store, right? So you get a gift card, it has a balance on there, and then you have negotiated access to certain of our product portfolios, depending on whatever the contract says. And then as our customers do chips, they pull down from that gift card. And of course, when the gift card, it runs out of funds, then they go ahead and replenish it, so that is our overall model that we have, our primary business model. Again, we have other business models, but that's the primary business model that we have. And I highlight this in the context of your question because that business model gives us really good insight into what the customers are doing. We're always engaging with them in terms of what is their next generation of chip design. What do you need? How do we develop that in time? Because they've made a commitment to us and therefore, we've made a commitment to them to continue to engage and to have -- meet their needs in the future here. So that's our primary business model. And that business model gives us a lot of visibility into what the customers are interested in. We don't design our IP kind of just in time. We don't sit around waiting and say, oh, a customer comes to us and says, oh, we need the IP and then all of a sudden, we're like in a mad scramble to develop it. Now we're proactively, like I said, we look at all these different elements and there's many, many different elements. We look at the manufacturing processes. We look at the markets. We look at the customers. We look at the next projects. We look at industry trends. We look at all those things, and we combine them together into formulating our IP road map. So that's generally how I go. And one of the other things that I wanted to highlight is, I think as a sustainable advantage for Synopsys is our scale. Our scale is definitely a sustainable advantage for us. We have a large army of engineers here who are all over the world. They're very closely in touch with our customer base. And for those reasons, we really are closely monitoring the trends not just at the major customers, but also regionally manufacturing and so forth.

Got it. That makes sense. And in terms of kind of then going to market, what you say is it's a very integrated effort together. So you almost know what's coming before the order is going to come because you've been worked together already. So it sounds a lot more predictable from your side of the fence than it is. right?

Yes. And the business model, that IP FSA that I mentioned, also definitely gives us a visibility because it's -- while we need to compete and win on a chip-by-chip basis, the customers have come to us, and they are very motivated to have us continue to work with them very closely and give us some of that visibility, right, so that we can make sure that we're continuously meeting their needs. It's a win-win for both of us.

Yes, it sounds like that. That's very helpful. And I like the segmentation you mentioned at the beginning, where you have different type of efforts and almost different type of customers or end markets driving some of the different parts of IP, right? If you think about the USB, sure, it might be a customer, right? Apple someone wants to move to kind of a new standard, and they push the envelope. But then at the same time, there are industry regulatory bodies that can ensure that these things are standardized. When you think about the process or IP and something like that, it's probably a lot less driven by a standard, but a lot more driven by a specific number of group of customers or whatever the switch might be. How do you internally think about the development, right, when you talk to your kind of product teams in order to allocate some of these resources to address the opportunity in an effective way to make sure that the investment that you make is kind of balanced between all these different lanes, as we called them earlier?

Yes. So it's one of the -- thank you for the question, Gal, and it's a very interesting question. And as you were saying it, I was thinking in my mind, okay, there are many different angles to how we can address that question. So one of the things that I think really defines us as an organization here in IP is, yes, we're in all these standard bodies. Yes, we're looking at the market-making customers. Yes, we're looking at the manufacturing partners and having that complete range of insight into how do we develop our product road maps. And we do. We do have strategic product road maps that we are absolutely making sure that we're funding. And that's really critical because the pace that change, by the way, in many aspects of our business continues to go up as customers continue to iterate faster. Moore's Law continues to be well alive. For example, standards bodies like USB and PCI Express continue to rev the specs. So having all that strategic insight into the market is really important for us to come up with our strategic road maps. But I think one of the things that really defines us as a company is that we're very nimble in IP, too. We are always engaged with our customers all over the world. And if they need something that's not on a road map -- and again, this is actually, I think, a very significant advantages or scale with having so many thousands of engineers working for us. We always have the resources that we can flex. We can stay tuned on our strategic road map, and that's critically important to us for our long-term growth. But we also have the ability and the scale to react as specific opportunities that come up, and we do that on a very regular basis. And there's a very nice dynamic tension there between our strategic road map and our needs to service particular opportunities. And again, because of our scale, I think we can react very quickly to that and convert those -- capture and convert those opportunities into dollars.

If I expand on what you just said and then thinking about the IP opportunity, right, do you ever come across almost a trade-off where you're thinking about a new project and you're thinking about the potential market opportunity on one side versus a necessity of a customer that comes to you, and you've been working together with them? How do you ensure that IP and fact does not become, what people sometimes call, outsourced R&D in a way, right, where it becomes a bad project of someone else, which might be very important for them. But again, that's not a definition of IP, right? The definition of IP then is to be able to utilize that and find a number of customers that are interested in that kind of a building block. So you're not just kind of trying to solve a problem for someone that couldn't solve it themselves. Is that -- does that ever become the question? And because you have close relationship with some of these customers, especially on the EDA side, are they tempting you in kind of sometimes coming in and have to assess these opportunities and really look at it now, like which one is the genuine building block versus which one is more of a one-off project?

Yes, I was smiling a little bit as you were asking that question because that dynamic tension in that trade-off is actually my kind of core job, right? It's making kind of how do we make sure that we're overall maximizing our revenue and our growth here by looking at not only the strategic aspects but also the near-term aspects. But you're 100% correct when you -- with your comments about IP. IP is a business that's all about scale. It is a business that we pick titles as we call the products, we call them titles that will go many, many different chips, right? And sometimes, we personalize them to individual customers by doing some very high value-added consulting to tweak those functions to different market needs or different customer needs. And again, customers see a huge amount of value for that, and that's a chargeable activity for us. But in general, yes, we do not go off and do like one-offs because that is really more design services. That's not an IP business model. So will we occasionally customize the IP with -- for specific customers? Sure, we will. Absolutely. But overall, this is -- we're in a market where we build a product that will serve as many different customers' needs.

Got you. So that's really interesting, and I think it makes sense. And then when you think about the composition of your teams and then also specifically when you have your IP team that helps develop the block, let's call it, how much of a specific knowledge do these teams have? And how much does it help the fact that you do have the EDA tools, which potentially they can use them on another level, almost compared to someone else, which means that not only they are better equipped from a technical perspective, but also have better tools to do the job? Is that a big differentiator for you compared to someone who doesn't have the EDA to attach to it and are just kind of working with the standard tools in order to develop their IP?

I definitely think that, that's a significant advantage that Synopsys has. Now as we're developing the IP, we have this access to all of our world-class tools. And more importantly, we have access to their R&D. And so we're always closely collaborating between the different business units to adopt the latest and greatest features of the tools into our development flows to accelerate our time to market. And actually, a lot of times it goes the opposite way around, Gal. It's like we have thousands of designers out there, right? We are designing a lot of very, very complex blocks. So the path goes the other way. It's not only just to our advantage in IP, but it's also to our EDA presence advantage because they have a captive audience, so to speak, of thousands of engineers using the tool and giving them feedback. Of course, we get great feedback from our customers as well. But we also give them the internal feedback too, and that really helps develop some of the features of the tools on the priority. So it's mutually beneficial for us for sure. We absolutely have the leading edge of our EDA tools. And then we also provide our real-world experience in using those tools back into the EDA part. So...

Sounds like a good kind of synergy in terms of providing that real-time feedback. I'm sure you get that customer feedback, but usually also, mostly above the EDA side would probably get more of a negative feedback if something doesn't work, if something is in the right path of development or incremental things then that can probably benefit the R&D spend of the core business as well, right?

Yes, I thought so.

A few functionalities that have been introduced in the past are really interesting. And to me, one that is particularly interesting for development of IP potentially in theory and I might be completely off here...

Okay.

Like DSO.ai where we're kind of thinking about the potential of using machine learning techniques to accelerate the development and optimize the area and power and performance of a specific chip in terms of being able to do more with less engineers as well. All these things sound great for your customers when we talk about the core EDA. And then when I'm thinking about IP, I'm thinking, well, surely, your team should be the first one to utilize that and really kind of understand the benefits of it because of the fact that, that is so process changing and thesis changing? Is it something that you utilize today or ramping up? Like how does that compare to kind of the rest of the market picking up the adoption of those tools?

DSO.ai, as you point out, is really powerful technology. We've been seeing such amazing results from that on our customers, not only in terms of the quality results, the area, the power, whatever the performance or whatever, but also the time to result and the number of people that it takes to do that. So I mean, it's really -- I can't say enough good things about DSO.ai. I think it's really kind of market-changing tools. And to answer your specific questions, do we use that within our IP group? Absolutely, we have done that within our IP group. Because some of our IP is we can talk about it, maybe it's like blocks, but actually, they're very complex. There are millions of gates in many cases. And so this is a very complex design as well, and we can use this tool as well as our other tools to really move our IP faster. We also, by the way, talking about artificial intelligence and just doing a little quick aside. We do actually have an AI accelerator function that we sell as part of our processor family, too. We call it EV for embedded vision processors, and it's really important things like automotive applications. So not only are we using AI for productivity, but we're also developing AI engines for things like neural network and processing as well, and you were selling out of IP into edge devices.

Interesting. So the whole market, just in general, obviously, outside of the EDA moving to machine learning and using more high-speed processing and the power of effectively being able to put higher throughput data, which machine learning often depends on, right, is something that you can provide. And I guess, does that also then change a little bit what we've talked earlier about the composition of your customers? I would imagine that things like systems companies will then be more interested in things like that. From an IP perspective, right, they're dealing with the problems like machine learning, the customers are, but they need to enable that. And perhaps not every chip they want to develop themselves as well, so systems companies are, by definition, may be more open to use IP?

Yes. So there are several ways that I'm going to address that question. The first is you're absolutely right that the explosion of artificial intelligence is creating an unbelievable amount of opportunity for us in the IP space. And why is that? Well, the workloads that are required to process something as simple as a neural network, right, when you're speaking to natural -- it's called natural language processing, we speak that to one of our device assistants, and we don't really think much of asking about what is the weather or whatever, but the actual mathematical computations behind that are just absolutely staggering. They really are kind of mind-blowing call. And so that's driving a whole new wave of design starts now as all of these companies started getting into: how can I optimize my engines, how can I get that latency down, how can I get an answer with a higher degree of precision, how can I identify an object in the picture critical for automotive, for example. So across multiple, multiple industries, this whole trend to build AI tremendously beneficial from us from an IP perspective as well. It's really one of the catalysts that's driving our growth for sure. And so that is something -- and a lot of these companies have a great new idea, a great new algorithm, but this is the first time that they've ever done a chip. So from that perspective, it's an absolute no-brainer for them. They are not going to build the IP themselves, they're going to outsource it. And it's the same with these systems companies that are entering into chip design. And that's something that has definitely been another area that's been fueling our growth for sure. I see system companies move into chip design, whether it's in the high-performance compute data center world or in the automotive world, for example. As they move into doing chip design, again, it's like a no-brainer for them. It's like, why would we make IP when we can buy it from a reliable source? So those are several trends that are actually definitely propelling our growth.

The investment from things like automotive that doesn't affect the core EDA, it also affects you because of those trends of higher relative outsource -- well, buying building blocks rather than innovating the whole thing -- investment...

Exactly. And this is one of those things I'll just give you a quick aside about automotive. So about, I don't know, maybe 7 or 8 years ago, we decided that there was going to be a significant opportunity in automotive. And we started with like one product, and I would say, maybe not the best understanding of automotive way back then, right? But since then, we've engaged with a lot of the market makers, and we've really developed a very broad portfolio of what we call automotive-grade IP. And we've engaged with really the market leaders across the board on that. And that's been actually definitely another success story for us and definitely something where we have, I think, sustainable differentiation because to build their IP at a quality level and with all the features and functional safety aspects that customers are asking for is a significant endeavor. And like I said, we've been doing it for 8 years now. We have a very, very broad portfolio. And I think that actually is hard to duplicate.

John, we mentioned how the tools on one side and the skill set and the profile of people you hire, the thousands of people that you have in the IP segment are kind of unique on their own. Is there a combination? Is any of those, the competitive advantage that allows you to achieve that leadership position in so many areas of IP? Or is it the combination of them being able to use the tools themselves because that kind of locks out a lot of the market? Which one is more important when you kind of look -- when you hire?

When people are thinking about who they want to go work for, they really consider -- we have a very, very strong value proposition, so to speak, to attractive talent to our organization. Number one is they're leading, as you mentioned, they're engaged with the best-in-class tools, right, and they're using that to visualize their design. But they're also involved in very cutting-edge standards in terms of processes, manufacturing processes. They're involved in cutting-edge, leading-edge designs from a standards perspective. They're involved with market makers across the board. They can see direct line of sight from their work to the product going into an end customer's product. And so I think when we're competing in the marketplace, people are really generally excited to join Synopsys in the IP group because they can very clearly see, very clear line of sight from their effort to the end customer result.

And the whole success of the team, to a large extent, depends on the ability to hire the great talent that you have. And I guess on the hiring itself, we know that pretty much every industry vertical from construction to financial services to technology, everyone is kind of struggling to hire the talent right now because of the shortage of labor -- of skilled labor that people need. How have you found your ability to recruit? You said that the brand itself helps, but if you think about kind of the capacity you have and could you run faster if you had the ability to kind of unlock all the restrictions on the ability to hire as many people as you wanted to, today.

Yes. There is definitely a war for talent, without a doubt, right? So this is something which is a huge focus for us because by the nature of our business, we're a little bit more men -- labor-intensive than EDA. So yes, we're constantly competing for talent, and that is key to our growth. And that's where things like our company culture is so strong where we can entice people by leading -- being in a very, very leading edge of design with the best-in-class tools and so forth. So this is something where -- and we have development centers literally all over the world, so we can get the talent where it exists. So yes, there's definitely a war for talent going on, Gal, but I think that we're winning more than our fair share actually because of our culture, because of the kind of work we do because of engineers really get excited to work on this cutting-edge stuff.

Yes, that's helpful. Do you see the use of things, tools like DSO.ai, which actually increases productivity, does that decouple the one-to-one correlation with one engineer kind of being able to do one thing at a time? And like do you think your engineers ultimately can be more productive because of the fact they're utilizing the latest tools that potentially can widen some of these bottlenecks?

Yes, we're absolutely constantly looking at ways that we can leverage the tools in a parallel fashion to do more. I mean, this is a major, major focus area for us in the IP group. It's all about how do we improve our productivity, how do we get more products out the door. With the breadth of our portfolio, that's really something we have to take very, very seriously and we do.

Awesome. So the interesting valuable position of IP is the fact that, obviously, increases profitability of your customers because they don't have to spend resources on things that potentially don't add value for them. So clearly, there's a huge ROI that itself sells, right? So it's a kind of business that sells itself. Earlier, we did say that, obviously, there's a little bit of a tug of war or something or at least a trade-off at times where you're kind of thinking what is a real opportunity versus what might not kind of return the right profitability for you rather than the customer itself. Sure, it makes sense for a customer, but maybe it doesn't make sense. it's something -- are you being very strict when new projects come in, in order to make sure that profitability of those projects is at the kind of the required state i.e., would you have walked away from a deal, if it wasn't kind of at the right margin as you would expect it to come in? Or do you think penetration still low enough that we basically need to win this. And then the pricing is something we kind of consider as a secondary goal.

Yes, sure, we can and do walk away from business that if we don't like the business terms. Absolutely, right? But we also -- we have such a broad portfolio of IP that we manage our IP as a portfolio. So there are, like any portfolio, there are certain areas that are very high growth, certain areas that are very high profit, and we blend those together to make sure that we're continuously investing in the right areas to maximize that overall growth rate and to achieve our profitability targets as well. But your direct answer to your question? Sure, absolutely.

It's kind of both between having the right strategy, but an ability to execute and being disciplined as you do that, not grow at any part effectively. So the idea is, yes, you could have grown faster than the mid-teens, but then that would have hurt you because it wouldn't contribute enough to the bottom line as well, which is something the investors obviously are focused on. John, we're almost out of time. So maybe last question just to wrap up is when I look at the opportunity and regionally, sometimes any given year, any given quarter, there might be increased demand, which obviously the way IP is recognized, can skew the results a little bit. But what I'm thinking is just from a fundamental perspective and the way you see the adoption between, let's say, the Americas, the APAC region and the Europe, which of the regions has kind of been better at adopting or penetrating the opportunity and which ones are the ones that you think can kind of learn from the others as well, and we could maybe expect accelerated growth from them in the future?

Yes. Regionally, we're strong across the board. We are invested in many different areas, and there's really no significant regional differentiation from an IP perspective. Whether it's Asia Pac or Japan or Europe or Israel or North America, we have significant engagements across the board. So yes, that's not something that we look at as something being over underperforming at this point. I think the demand is strong across the board for all the reasons that we talked about.

Right, right. I mean it is a global industry, isn't it? It's one of the most industry has been seeing with the supply chain issues. Awesome. John, going to have to thank you here. The time went by quite quickly. And I am definitely smarter on the IP side than I was 45 minutes ago, and hopefully, investors feel the same as well. If there's any follow-ups, please reach out to us or the team at Synopsys to help you as well. And with that, we're going to wrap this one up. Thank you.

Thank you, Gal. Thank you.