10-QPeriod: Q3 FY2014

SYNOPSYS INC Quarterly Report for Q3 Ended Jul 31, 2014

Filed August 26, 2014For Securities:SNPS

Summary

Synopsys Inc. reported solid financial results for the nine months ended July 31, 2014, with total revenue increasing by 4% to $1.52 billion compared to the same period last year. This growth was driven by a strong performance in time-based license revenue, which constituted approximately 83% of total revenue. The company also demonstrated robust operational cash flow, generating $378.0 million for the nine-month period, a 24% increase year-over-year. However, investing activities saw a significant outflow of $430.1 million, largely due to the acquisition of Coverity, Inc. for $375.5 million, which expanded Synopsys's market reach into software quality, testing, and security tools. Despite increased investment, the company maintained a healthy cash position and managed its debt effectively.

Financial Highlights

54 data points
Beta

Revenue

$521.81M

77.9% Gross Margin

Net Income

$65.66M

12.6% Net Margin

EPS (Diluted)

$0.42

Total Assets

$4.54B

Cash & Equivalents

$903.05M

Free Cash Flow

$311.95M

Financial Statements
Beta
Revenue$521.81M
Cost of Revenue$115.53M
Gross Profit$406.28M
R&D Expenses$182.81M
Operating Expenses$339.06M
Operating Income$67.23M
Interest Expense$715K
Net Income$65.66M
EPS (Basic)$0.42
EPS (Diluted)$0.42
Shares Outstanding (Basic)155.19M
Shares Outstanding (Diluted)157.62M

Key Highlights

  • 1Total revenue for the nine months ended July 31, 2014, increased by 4% to $1.52 billion.
  • 2Time-based license revenue, representing 83% of total revenue, showed strong growth.
  • 3Operating cash flow increased by 24% to $378.0 million for the nine-month period.
  • 4The acquisition of Coverity, Inc. for $375.5 million expanded Synopsys's product portfolio and market reach.
  • 5Goodwill increased by $284.9 million to $2.26 billion, primarily due to acquisitions.
  • 6Diluted earnings per share for the nine months was $1.25, an increase from $1.22 in the prior year.
  • 7The company maintained a strong liquidity position with $903.0 million in cash and cash equivalents as of July 31, 2014.

Frequently Asked Questions

Synopsys reported a 4% increase in total revenue to $1.52 billion for the nine months ended July 31, 2014, compared to $1.46 billion in the same period of the prior year. This growth was primarily driven by an 11% increase in time-based license revenue.

Synopsys acquired Coverity, Inc. for $375.5 million on March 24, 2014. This acquisition expanded Synopsys's offerings into software quality, testing, and security tools, contributing to revenue growth and expanding the total addressable market. The acquisition resulted in significant goodwill of $266.4 million.

The company generated strong operating cash flow, increasing by 24% to $378.0 million for the nine months ended July 31, 2014, primarily due to higher cash collections. However, investing activities used $430.1 million, largely for the Coverity acquisition. Financing activities also saw a net outflow of $62.7 million.

Synopsys primarily operates on a time-based revenue model, where a substantial majority of customers pay for licenses over time, with revenue typically recognized over the life of the contract (averaging about three years). This model leads to a significant portion of revenue being recognized from sales efforts in prior periods, making revenue less immediately sensitive to current-period customer spending fluctuations.