10-QPeriod: Q1 FY2012

SYNOPSYS INC Quarterly Report for Q1 Ended Jan 31, 2012

Filed March 6, 2012For Securities:SNPS

Summary

Synopsys Inc. reported solid financial results for the quarter ended January 31, 2012, demonstrating robust revenue growth and increased profitability. Total revenue grew by 17% year-over-year to $425.5 million, primarily driven by a 20% increase in time-based license revenue, which constitutes the majority of their business. This growth was supported by the recurring revenue model, where over 90% of revenue is committed in advance, providing stability. Net income also saw a healthy increase of 18% to $56.7 million. The company successfully managed its cost of revenue and operating expenses, which increased by 12% year-over-year. Despite these increases, the company maintained strong gross margins. Significant strategic developments include the completion of the acquisition of Magma Design Automation, Inc. for approximately $523.1 million, which is expected to drive future revenue growth and enhance its product portfolio. Financially, Synopsys maintained a strong liquidity position with $943.5 million in cash, cash equivalents, and short-term investments. The company also continued its share repurchase program, demonstrating a commitment to returning value to shareholders while also managing share count dilution. The company provided forward-looking statements indicating a positive business outlook, supported by its recurring revenue model, strong financials, and strategic acquisition strategy.

Financial Highlights

54 data points
Beta

Revenue

$425.50M

78.9% Gross Margin

Net Income

$56.69M

13.3% Net Margin

EPS (Diluted)

$0.39

Total Assets

$3.30B

Cash & Equivalents

$811.34M

Free Cash Flow

-$50.33M

Financial Statements
Beta
Revenue$425.50M
Cost of Revenue$89.85M
Gross Profit$335.64M
R&D Expenses$132.88M
Operating Expenses$265.64M
Operating Income$70.00M
Interest Expense$17K
Net Income$56.69M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)143.88M
Shares Outstanding (Diluted)147.11M

Key Highlights

  • 1Total revenue increased by 17% to $425.5 million for the three months ended January 31, 2012, compared to $364.6 million in the prior year period.
  • 2Net income rose by 18% to $56.7 million, or $0.39 per diluted share, compared to $48.2 million, or $0.31 per diluted share, in the prior year period.
  • 3Time-based license revenue, the company's largest segment, grew by 20% to $355.9 million, indicating strong demand for their core offerings.
  • 4The company completed the acquisition of Magma Design Automation, Inc. for approximately $523.1 million, funded by existing cash and a new credit facility.
  • 5Total assets decreased slightly to $3.30 billion from $3.37 billion, primarily due to a reduction in cash and investments.
  • 6Total liabilities decreased by approximately 11% to $1.13 billion from $1.27 billion, largely driven by a reduction in accounts payable and accrued liabilities.
  • 7The company maintained a strong cash position, with $943.5 million in cash, cash equivalents, and short-term investments as of January 31, 2012.

Frequently Asked Questions

Synopsys is a leader in Electronic Design Automation (EDA) software, providing tools for designing, prototyping, and testing integrated circuits (chips). They also offer software and hardware for systems incorporating chips and the software that runs on them. Their revenue is primarily generated from time-based licenses (TSLs), which are recognized ratably over the license term, and to a lesser extent, upfront licenses (term and perpetual), maintenance, and service fees. The company emphasizes its recurring revenue model, with over 90% of revenue typically committed in advance.

For the quarter ended January 31, 2012, Synopsys reported a 17% increase in total revenue to $425.5 million and an 18% increase in net income to $56.7 million. Diluted earnings per share were $0.39, up from $0.31 in the prior year. Time-based license revenue showed significant growth at 20%, highlighting the strength of their core business.

The most significant strategic development is the completion of the acquisition of Magma Design Automation, Inc. for approximately $523.1 million. This acquisition is expected to accelerate the delivery of technology to customers and drive revenue growth by enhancing Synopsys' product portfolio. The company also entered into an amended and restated credit agreement that includes a new $150 million term loan facility to help finance the Magma acquisition.

Synopsys maintains a strong liquidity position, with $943.5 million in cash, cash equivalents, and short-term investments as of January 31, 2012. They also have access to a $350 million revolving credit facility and a $150 million term loan facility. The company actively manages its cash and capital expenditures and continues its stock repurchase program. They stated that their current cash, cash equivalents, short-term investments, cash generated from operations, and available credit are expected to satisfy routine business requirements for at least the next twelve months.