10-QPeriod: Q1 FY2004

SYNOPSYS INC Quarterly Report for Q1 Ended Jan 31, 2004

Filed March 16, 2004For Securities:SNPS

Summary

Synopsys Inc. (SNPS) reported its first quarter results for fiscal year 2004, ending January 31, 2004. Total revenue increased by 6% year-over-year to $285.3 million, driven by a 21% rise in time-based license revenue and a 9% increase in upfront license revenue, the latter boosted by the reintroduction of term licenses. However, service revenue saw a significant 24% decline, primarily due to lower maintenance fees. Net income decreased slightly by 6% to $32.2 million, impacted by increased amortization of intangible assets and R&D investments. Operationally, the company announced multiple strategic acquisitions in February 2004, including a significant agreement to acquire Monolithic System Technology, Inc. (MoSys) for approximately $453 million, aimed at strengthening its intellectual property offerings. Cash reserves decreased due to substantial share repurchases totaling $160.9 million in the quarter, alongside continued capital expenditures. Despite the slight dip in net income and operational cash flow, the company maintains a strong liquidity position with over $617 million in cash, cash equivalents, and short-term investments.

Key Highlights

  • 1Total revenue grew 6% year-over-year to $285.3 million, primarily driven by time-based license revenue (+21%) and upfront license revenue (+9%).
  • 2Net income slightly decreased by 6% to $32.2 million, attributed to higher amortization costs and R&D investments.
  • 3The company repurchased approximately $160.9 million of its common stock during the quarter under its stock repurchase program.
  • 4Significant growth in upfront license revenue was supported by the successful reintroduction of term licenses.
  • 5Service revenue declined 24%, largely due to lower maintenance fees resulting from changes in licensing models and renewal rates.
  • 6Synopsys announced a definitive agreement to acquire Monolithic System Technology, Inc. (MoSys) for approximately $453 million, signaling a strategic focus on expanding its IP portfolio.
  • 7Cash, cash equivalents, and short-term investments stood at $617.8 million as of January 31, 2004, providing substantial liquidity.

Frequently Asked Questions

Synopsys reported a 6% increase in total revenue, reaching $285.3 million for the three months ended January 31, 2004, compared to $268.1 million in the same period of fiscal year 2003. This growth was primarily driven by a 21% increase in time-based license revenue and a 9% increase in upfront license revenue, partly offset by a 24% decrease in service revenue.

Synopsys repurchased approximately 4.6 million shares for $160.9 million during the quarter. This significant outlay contributed to a decrease in cash and cash equivalents and a use of cash from financing activities, although the company maintains a strong overall liquidity position with over $617 million in cash, cash equivalents, and short-term investments.

Synopsys announced a definitive agreement to acquire Monolithic System Technology, Inc. (MoSys) for approximately $453 million in a cash and stock transaction, expected to close by the end of May 2004. This acquisition aims to enhance the company's intellectual property offerings. Additionally, Synopsys completed the acquisitions of Accelerant Networks, Inc., assets of Analog Design Automation, Inc., and test-related assets of iRoC Technologies S.A. for an aggregate of approximately $40 million.

Synopsys recognizes upfront license revenue (perpetual licenses and upfront term licenses) in full upon shipment if payment terms require at least 75% of the fee within one year. Time-based license revenue, primarily from Technology Subscription Licenses (TSLs) and term licenses with extended payment terms, is recognized ratably over the license term or as installments become due. This difference in recognition impacts the timing of revenue and earnings recognition.