10-QPeriod: Q2 FY2003

SYNOPSYS INC Quarterly Report for Q2 Ended Mar 1, 2003

Filed March 18, 2003For Securities:SNPS

Summary

Synopsys Inc. (SNPS) reported solid financial results for the quarter ended February 28, 2003, demonstrating strong top-line growth and improved profitability. Total revenue surged by 53% year-over-year to $268.1 million, driven by the successful integration of recent acquisitions, particularly Avant!, and the continued adoption of the company's Technology Subscription License (TSL) model. The company also saw a significant improvement in net income, which more than doubled to $34.4 million, translating to earnings per share of $0.45 on a diluted basis. Key financial highlights include a substantial increase in cash and cash equivalents, reaching $347.3 million, reflecting healthy operating cash flow. The company's strategic acquisitions, including Avant!, Co-Design, and inSilicon, have expanded its product portfolio and market reach, contributing significantly to revenue growth. Synopsys also announced a significant acquisition of Numerical Technologies, Inc. for approximately $240 million, which closed shortly after the quarter's end, further strengthening its position in the design-for-manufacturing space. Despite these positive developments, the company noted ongoing challenges within the semiconductor industry and reiterated a cautious outlook for the remainder of fiscal year 2003.

Key Highlights

  • 1Total revenue increased by 53% to $268.1 million for the three months ended January 31, 2003, compared to $175.5 million in the prior year period.
  • 2Net income more than doubled to $34.4 million, or $0.45 per diluted share, from $14.1 million, or $0.22 per diluted share, in the same period last year.
  • 3Cash and cash equivalents and short-term investments grew to $470.3 million, with cash flow from operations remaining positive.
  • 4Significant acquisitions in fiscal year 2002 (Avant!, Co-Design, inSilicon) contributed substantially to revenue growth.
  • 5The company announced the acquisition of Numerical Technologies, Inc. for approximately $240 million, effective March 1, 2003.
  • 6Goodwill and other intangible assets remain significant on the balance sheet, reflecting recent acquisitions. Notably, amortization of goodwill ceased in fiscal 2003 due to the adoption of SFAS 142.
  • 7The company maintained a cautious outlook for the semiconductor and electronics industries due to ongoing economic uncertainties.

Frequently Asked Questions

The primary driver for the 53% increase in revenue was the successful integration of acquisitions, most notably Avant!, which was completed in June 2002. Additionally, the continued adoption and revenue recognition from the company's Technology Subscription License (TSL) model also contributed to the growth.

Profitability improved significantly. Net income more than doubled to $34.4 million in the current quarter from $14.1 million in the same period last year. This translates to diluted earnings per share of $0.45, up from $0.22 in the prior year.

Synopsys expressed a cautious outlook. They noted continued weakness and a lack of visibility in the semiconductor and electronics industries, with expectations for only a very gradual recovery at best. The company stated it does not expect material growth in the EDA industry for the remainder of fiscal year 2003.

The acquisitions, particularly Avant!, Co-Design, and inSilicon, have significantly increased Goodwill and Intangible Assets on the balance sheet. As of January 31, 2003, Goodwill was $435.8 million. The company adopted SFAS 142, which means goodwill is no longer amortized, but will be tested annually for impairment. The amortization of other intangible assets continues.