01—Abstract
Summary
Summary of the 10-K filed December 17, 2018. Cited figures are marked; the original filing is the authoritative source.
Synopsys Inc. (SNPS) reported robust revenue growth of 15% in fiscal year 2018, reaching $3.1 billiona.
This growth was primarily driven by strong performance in Technology Subscription Licenses (TSLs), contributions from strategic acquisitions, and an increase in professional services. The company's core business in Electronic Design Automation (EDA) software and semiconductor intellectual property (IP) remains strong, supporting the design of increasingly complex chips. Synopsys also continues to expand its Software Integrity solutions, focusing on code security and quality.
Financially, the company demonstrated solid operational execution, although operating income saw a modest increase of 4%b. Significant investments were made in research and development, reflecting a commitment to innovation. The company also actively managed its capital structure through share repurchases.
Key risks for investors to consider include dependence on the cyclical semiconductor industry, intense competition, and potential impacts from global economic conditions and trade relations. Overall, Synopsys presented a strong financial performance for FY2018, with a clear strategy for continued growth in its core and adjacent markets.
02—Key points
Key Highlights
- Revenue increased by 15% to $3.1 billion in fiscal year 2018, driven by TSL revenue, acquisitions, and professional services.
- Operating income grew by 4% to $360.2 million, reflecting disciplined expense management alongside investment in growth areas.
- The company repurchased $420 million of its common stock in fiscal year 2018, demonstrating a commitment to returning value to shareholders and managing dilution.
- Investments in Research and Development increased by 19% to $1.08 billion, highlighting Synopsys' focus on innovation and maintaining technological leadership.
- Synopsys acquired Black Duck Software for $565.1 million in fiscal 2018, strengthening its position in software security and quality solutions.
- The company maintained compliance with its financial covenants under its credit facilities.
- Backlog increased to approximately $4.0 billion, providing visibility for future revenue recognition.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Synopsys kept $0.14.
- Revenue$3.12B100.0%
- Cost of revenue−$735.9M23.6%
- Gross profit$2.39B76.4%
- Operating costs−$2.02B64.9%
- Operating income$360.2M11.5%
- Interest, other & tax$72.3M2.3%
- Net income$432.5M13.9%
Where FY2018 revenue went
$3.12B- R&D: $1.08B, 35% of revenue
- Other operating costs: $940.1M, 30% of revenue
- Cost of revenue: $735.9M, 24% of revenue
- Operating income: $360.2M, 12% of revenue
Kept 12% as operating incomeOperating income $360.2M · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed December 17, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $3.12B$2.72B | +14.5% |
| Cost of Revenue | $735.90M$654.18M | +12.5% |
| Gross Profit | $2.39B$2.07B | +15.2% |
| R&D Expenses | $1.08B$908.84M | +19.4% |
| Operating Expenses | $2.02B$1.72B | +17.5% |
| Operating Income | $360.23M$347.56M | +3.6% |
| Interest Expense | $15.61M$7.30M | +113.7% |
| Net Income | $432.52M$136.56M | +216.7% |
| EPS (Basic) | $2.90$0.91 | +218.7% |
| EPS (Diluted) | $2.82$0.88 | +220.5% |
| Shares Outstanding (Basic) | 149.04M150.46M | −0.9% |
| Shares Outstanding (Diluted) | 153.39M154.87M | −1.0% |
05—Questions
Frequently Asked Questions
What is Synopsys' primary business and how is it segmented?
Synopsys provides products and services across the 'silicon to software' spectrum. Its core business includes Electronic Design Automation (EDA) software for chip design and testing, and semiconductor Intellectual Property (IP) products. Additionally, Synopsys offers software tools and services for improving software security and quality, known as Software Integrity solutions. The company reports revenue across four categories: Core EDA, IP/Systems/Software Integrity, Manufacturing Solutions, and Professional Services and Other.
How did Synopsys perform financially in fiscal year 2018?
In fiscal year 2018, Synopsys reported a total revenue of $3.1 billion, a 15% increase compared to the prior year. Operating income was $360.2 million, a 4% increase. The company maintained a strong balance sheet and generated significant cash flow from operations, though cash and cash equivalents decreased primarily due to acquisitions and stock repurchases.
What are the key risks for Synopsys, as highlighted in the filing?
Key risks include dependence on the semiconductor and electronics industries, which can be cyclical. The company faces intense competition from EDA vendors and internal design capabilities of its customers. Other risks involve economic uncertainties, potential impacts from global trade relationships, the need for continuous innovation to avoid product obsolescence, and the successful integration of acquired businesses.
What is Synopsys' strategy for growth?
Synopsys' growth strategy focuses on building on its leadership in EDA products, expanding its IP offerings, and driving growth in the software security and quality market. This includes investing in research and development and pursuing strategic acquisitions to enhance its product portfolio and expand its total addressable market.
06—Continue