01—Abstract
Summary
Summary of the 10-K filed December 12, 2016. Cited figures are marked; the original filing is the authoritative source.
Synopsys Inc. (SNPS) reported strong financial performance in fiscal year 2016, with revenues reaching $2.42 billiona, an increase of 8% year-over-year, driven primarily by growth in Technology Subscription Licenses (TSLs) and hardware sales.
The company continues to solidify its position as a leader in Electronic Design Automation (EDA) software and intellectual property (IP) for the semiconductor industry, while also expanding its presence in software quality and security solutions. A significant portion of revenue, approximately 90%b, is derived from recurring time-based revenue, providing a stable revenue stream. Financially, Synopsys demonstrated robust operational execution with improved operating income and a healthy cash position.
The company maintained a strong focus on returning value to shareholders through its stock repurchase program. Despite operating in a competitive and dynamic market, Synopsys' strategy of innovation, customer relationships, and strategic acquisitions positions it well for continued growth and leadership in the technology sector.
02—Key points
Key Highlights
- Revenue increased by 8% to $2.42 billion in fiscal year 2016, driven by TSLs and hardware sales.
- Approximately 90% of revenue is derived from time-based revenue, indicating a stable and recurring business model.
- Operating income grew by 19% to $317.4 million, reflecting strong operational performance.
- The company reported healthy cash flow from operations, ending the year with $1.12 billion in cash, cash equivalents, and short-term investments.
- Synopsys actively repurchased its own stock, repurchasing $420 million worth of shares during fiscal year 2016.
- The company is a leader in EDA software and IP, serving the complex needs of the semiconductor industry.
- Synopsys is also expanding its Software Integrity segment, offering tools for software quality and security.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Synopsys kept $0.11.
- Revenue$2.42B100.0%
- Cost of revenue−$543.0M22.4%
- Gross profit$1.88B77.6%
- Operating costs−$1.56B64.5%
- Operating income$317.4M13.1%
- Interest, other & tax−$50.6M2.1%
- Net income$266.8M11.0%
Where FY2016 revenue went
$2.42B- R&D: $856.7M, 35% of revenue
- Other operating costs: $705.5M, 29% of revenue
- Cost of revenue: $543.0M, 22% of revenue
- Net income: $266.8M, 11% of revenue
- Interest, other & tax: $50.6M, 2.1% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed December 12, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.42B$2.24B | +8.0% |
| Cost of Revenue | $542.96M$518.92M | +4.6% |
| Gross Profit | $1.88B$1.72B | +9.1% |
| R&D Expenses | $856.71M$776.23M | +10.4% |
| Operating Expenses | $1.56B$1.46B | +7.2% |
| Operating Income | $317.39M$266.47M | +19.1% |
| Interest Expense | $3.77M$2.81M | +34.0% |
| Net Income | $266.83M$225.93M | +18.1% |
| EPS (Basic) | $1.76$1.46 | +20.5% |
| EPS (Diluted) | $1.73$1.43 | +21.0% |
| Shares Outstanding (Basic) | 152.02M154.96M | −1.9% |
| Shares Outstanding (Diluted) | 154.72M158.06M | −2.1% |
05—Questions
Frequently Asked Questions
What is Synopsys' primary business and how does it generate revenue?
Synopsys provides Electronic Design Automation (EDA) software, intellectual property (IP), and services for designing semiconductors and ensuring software quality and security. The majority of its revenue (around 90%) comes from time-based revenue models, primarily Technology Subscription Licenses (TSLs), which are recognized over the contract term. This model provides a predictable and recurring revenue stream.
How did Synopsys perform financially in fiscal year 2016?
In fiscal year 2016, Synopsys achieved revenue of $2.42 billion, an 8% increase from the previous year. This growth was mainly attributed to strong performance in TSL revenues and hardware sales. The company also saw a 19% increase in operating income, reaching $317.4 million, and maintained a strong cash position with $1.12 billion in cash, cash equivalents, and short-term investments.
What is Synopsys' strategy for growth and how does it manage its capital?
Synopsys' growth strategy focuses on building leadership in EDA products, expanding its IP offerings, and driving growth in the software quality and security market. The company also utilizes acquisitions to augment its research and development. Synopsys actively manages its capital by repurchasing its own stock to offset dilution and as a good use of cash, demonstrating a commitment to shareholder value. They also have a revolving credit facility to support liquidity needs.
What are the key risks facing Synopsys?
Key risks include dependence on the semiconductor and electronics industries, which can be cyclical. Competition is intense, with rivals like Cadence Design Systems and Mentor Graphics. Other risks involve potential impacts from global economic uncertainty, difficulties in integrating acquisitions, product errors, cybersecurity threats, and the need to protect proprietary technology in a global market.
06—Continue