10-QPeriod: Q1 FY2010

SYNOPSYS INC Quarterly Report for Q1 Ended Jan 31, 2010

Filed March 9, 2010For Securities:SNPS

Summary

Synopsys Inc. (SNPS) reported its unaudited financial results for the quarter ended January 31, 2010. The company experienced a slight decrease in total revenue, down 3% year-over-year to $330.2 million, primarily driven by a 5% decline in time-based license revenue. However, upfront license revenue saw a significant increase of 30%. Despite the revenue dip, net income surged by 153% to $132.8 million, largely attributable to a substantial one-time tax benefit resulting from a final settlement with the IRS concerning fiscal years 2002-2004. The company maintained a strong liquidity position, with cash, cash equivalents, and short-term investments totaling $1.09 billion. Operating activities used $45.4 million in cash, while investing activities used $13.2 million. Financing activities showed a net use of $17.9 million, primarily due to stock repurchases totaling $25.3 million during the quarter. Synopsys continues to manage its capital effectively, with $474.7 million remaining available under its stock repurchase program.

Financial Highlights

29 data points
Beta

Revenue

$330.17M

80.1% Gross Margin

Net Income

$132.79M

40.2% Net Margin

EPS (Diluted)

$0.88

Cash & Equivalents

$626.49M

Free Cash Flow

-$53.45M

Financial Statements
Beta
Revenue$330.17M
Cost of Revenue$65.58M
Gross Profit$264.59M
R&D Expenses$101.23M
Operating Expenses$209.49M
Operating Income$55.09M
Net Income$132.79M
EPS (Basic)$0.90
EPS (Diluted)$0.88
Shares Outstanding (Basic)146.83M
Shares Outstanding (Diluted)150.79M

Key Highlights

  • 1Total revenue for the quarter was $330.2 million, a 3% decrease compared to the prior year's period.
  • 2Net income significantly increased by 153% to $132.8 million, primarily due to a large tax benefit from an IRS settlement.
  • 3Time-based license revenue decreased by 5% to $272.5 million, while upfront license revenue increased by 30% to $20.4 million.
  • 4The company maintained a robust liquidity position with $1.09 billion in cash, cash equivalents, and short-term investments.
  • 5Operating cash flow was negative ($45.4 million), influenced by the timing of billings, collections, and bonus payments.
  • 6Synopsys repurchased approximately $25.3 million of its common stock during the quarter.
  • 7The company reported $934.2 million in goodwill and $89.5 million in net intangible assets.

Frequently Asked Questions

The substantial increase in net income (153%) was primarily driven by a one-time tax benefit of approximately $91.6 million resulting from a final settlement with the IRS for fiscal years 2002-2004. This settlement included the release of previously established tax liabilities and a valuation allowance for foreign tax credits.

Total revenue decreased by 3% to $330.2 million. This was mainly due to a 5% decline in time-based license revenue, where revenue is recognized over the term of the contract or as customer installments become due. This was partially offset by a 30% increase in upfront license revenue, driven by higher sales of perpetual licenses.

Synopsys maintained a strong liquidity position with $1.09 billion in cash, cash equivalents, and short-term investments. The company used $45.4 million in operating activities, partly due to bonus payments and the timing of cash collections. Investing activities used $13.2 million, and financing activities used $17.9 million, largely for stock repurchases. The company believes its current cash reserves and operational cash flow will meet its needs for the next 12 months.

The IRS settlement provided a significant tax benefit, reducing the company's tax expense for the quarter. It also resulted in a decrease in unrecognized tax benefits and an increase in net deferred tax assets. The company expects the settlement to provide future tax benefits over the next seven years.