10-KPeriod: FY2018

SYNOPSYS INC Annual Report, Year Ended Oct 31, 2018

Filed December 17, 2018For Securities:SNPS

Summary

Synopsys Inc. (SNPS) reported robust revenue growth of 15% in fiscal year 2018, reaching $3.1 billion. 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%. 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.

Financial Highlights

55 data points
Beta

Revenue

$3.12B

76.4% Gross Margin

Net Income

$432.52M

13.9% Net Margin

EPS (Diluted)

$2.82

Total Assets

$6.15B

Cash & Equivalents

$725.00M

Free Cash Flow

$325.26M

Financial Statements
Beta
Revenue$3.12B
Cost of Revenue$735.90M
Gross Profit$2.39B
R&D Expenses$1.08B
Operating Expenses$2.02B
Operating Income$360.23M
Interest Expense$15.61M
Net Income$432.52M
EPS (Basic)$2.90
EPS (Diluted)$2.82
Shares Outstanding (Basic)149.04M
Shares Outstanding (Diluted)153.39M

Key Highlights

  • 1Revenue increased by 15% to $3.1 billion in fiscal year 2018, driven by TSL revenue, acquisitions, and professional services.
  • 2Operating income grew by 4% to $360.2 million, reflecting disciplined expense management alongside investment in growth areas.
  • 3The company repurchased $420 million of its common stock in fiscal year 2018, demonstrating a commitment to returning value to shareholders and managing dilution.
  • 4Investments in Research and Development increased by 19% to $1.08 billion, highlighting Synopsys' focus on innovation and maintaining technological leadership.
  • 5Synopsys acquired Black Duck Software for $565.1 million in fiscal 2018, strengthening its position in software security and quality solutions.
  • 6The company maintained compliance with its financial covenants under its credit facilities.
  • 7Backlog increased to approximately $4.0 billion, providing visibility for future revenue recognition.

Frequently Asked Questions

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.

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.

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.

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.