10-QPeriod: Q3 FY2011

SYNOPSYS INC Quarterly Report for Q3 Ended Jul 31, 2011

Filed September 2, 2011For Securities:SNPS

Summary

Synopsys, Inc. (SNPS) reported a solid performance for the third quarter of fiscal year 2011, ending July 30, 2011. Total revenue increased by 15% year-over-year to $386.8 million, driven by growth in time-based license revenue, upfront license revenue, and professional services, reflecting contributions from recent acquisitions and strong customer contract renewals. Net income saw a significant increase of 33% to $52.1 million, bolstered by robust revenue growth and a more favorable effective tax rate. The company maintained strong operating cash flow, with $367.3 million generated in the first nine months of the fiscal year, underscoring its recurring revenue business model and effective cash management. Synopsys ended the quarter with a healthy cash position and ample liquidity, with no outstanding debt under its credit facility.

Financial Highlights

53 data points
Beta

Revenue

$386.80M

78.1% Gross Margin

Net Income

$52.08M

13.5% Net Margin

EPS (Diluted)

$0.35

Total Assets

$3.37B

Cash & Equivalents

$889.89M

Free Cash Flow

$288.20M

Financial Statements
Beta
Revenue$386.80M
Cost of Revenue$84.73M
Gross Profit$302.06M
R&D Expenses$122.55M
Operating Expenses$243.88M
Operating Income$58.18M
Net Income$52.08M
EPS (Basic)$0.36
EPS (Diluted)$0.35
Shares Outstanding (Basic)144.96M
Shares Outstanding (Diluted)148.04M

Key Highlights

  • 1Total revenue grew 15% year-over-year to $386.8 million for the third quarter.
  • 2Net income increased by 33% to $52.1 million, driven by revenue growth and a lower effective tax rate.
  • 3Time-based license revenue, the largest component, increased by 12% to $322.1 million.
  • 4Professional services revenue showed substantial growth of 70% due to acquisitions.
  • 5Operating cash flow for the nine months ended July 31, 2011, was strong at $367.3 million, a 50% increase from the prior year.
  • 6The company ended the quarter with a robust cash and cash equivalents balance of $889.9 million, an increase of 15% year-over-year.
  • 7Synopsys repurchased $100 million of its common stock during the quarter, demonstrating a commitment to returning value to shareholders and managing dilution.

Frequently Asked Questions

The primary revenue driver was 'Time-based license' revenue, which accounted for 83% of total revenue, reaching $322.1 million, a 12% increase year-over-year. This reflects the company's recurring revenue business model.

Recent acquisitions positively impacted Synopsys' financial performance, contributing to increased time-based license revenue, upfront license revenue, and professional services revenue. The increased headcount from these acquisitions also led to higher cost of revenue and operating expenses.

Synopsys maintained a strong financial position, with cash and cash equivalents totaling $889.9 million as of July 31, 2011. The company also had $148.4 million in short-term investments, resulting in total liquid assets of over $1 billion. With strong operating cash flow and no outstanding borrowings under its credit facility, Synopsys has ample liquidity for its future needs.

The company noted that while the semiconductor industry experienced moderate growth in 2011, customers remained cautious due to cyclicality, increasing complexity, and macroeconomic factors. Synopsys expects its positive business outlook to be supported by industry growth forecasts, its acquisition strategy enhancing its product portfolio, and its strong financial position. However, it acknowledges that a challenging global economic environment could impact customer R&D spending.