10-QPeriod: Q2 FY2009

SYNOPSYS INC Quarterly Report for Q2 Ended Apr 30, 2009

Filed June 10, 2009For Securities:SNPS

Summary

Synopsys, Inc. (SNPS) reported its quarterly results for the period ending April 30, 2009. The company demonstrated resilience in a challenging economic environment, with total revenue increasing by 4% year-over-year to $336.8 million. This growth was primarily driven by time-based license revenue and the inclusion of Synplicity sales from a prior acquisition, partially offset by a decrease in professional services due to the economic downturn. Net income saw a significant increase of 23% to $48.3 million, reflecting revenue growth and effective cost control measures. Despite the ongoing global economic uncertainty and weakness in the semiconductor industry, Synopsys maintained a strong financial position. The company's business model, with a substantial majority of revenue being recurring (over 90% from time-based licenses and maintenance/services), provided a buffer against short-term economic fluctuations. However, management acknowledged potential impacts from customer payment delays, contract renegotiations, and industry consolidation. The company ended the quarter with a healthy cash and short-term investments balance of $876.8 million and no outstanding borrowings under its credit facility.

Key Highlights

  • 1Total revenue increased 4% year-over-year to $336.8 million, demonstrating resilience in a weak economy.
  • 2Net income rose 23% to $48.3 million, driven by revenue growth and cost management.
  • 3Time-based license revenue, a key indicator of recurring business, grew 2% to $284.0 million.
  • 4The company maintained a strong liquidity position with $876.8 million in cash and short-term investments, and no debt outstanding on its credit facility.
  • 5Goodwill increased to $917.3 million, reflecting ongoing acquisition strategy, though amortization expenses decreased due to prior acquisitions.
  • 6The company continues to generate a substantial majority of its revenue from recurring sources (over 90% from time-based licenses and maintenance/services).

Frequently Asked Questions

Synopsys reported a 4% increase in total revenue to $336.8 million for the quarter ended April 30, 2009, compared to the same period in the prior year. This growth was primarily attributed to revenue recognized from term licenses booked in prior periods (time-based licenses) and the impact of sales from the acquired Synplicity business. However, professional services revenue saw a decrease of 17% due to the economic downturn.

The company maintained a strong financial position, with $876.8 million in cash and cash equivalents and short-term investments as of April 30, 2009. Synopsys had no outstanding borrowings under its $300 million senior unsecured revolving credit facility and was in compliance with all covenants. This liquidity provides Synopsys with ample resources to meet its business requirements for at least the next twelve months.

While Synopsys' business model, which relies heavily on recurring revenue (over 90% from time-based licenses and maintenance/services), has provided some protection against short-term economic fluctuations, the company acknowledged that sustained downturns are not immune. Management noted that some customers have postponed decision-making, decreased spending, and delayed payments. The company also experienced a slight decrease in committed average annual revenue from contract renewals and anticipated this trend to continue, potentially impacting year-over-year revenue growth and backlog.

Net income increased by a significant 23% to $48.3 million. This improvement was driven by a combination of modest revenue increases and effective cost control measures across various operational expenses, including research and development and sales and marketing, which were managed effectively despite increased investments in R&D.