10-QPeriod: Q2 FY2020

SYNOPSYS INC Quarterly Report for Q2 Ended Apr 30, 2020

Filed May 22, 2020For Securities:SNPS

Summary

Synopsys, Inc. (SNPS) reported a solid performance for the quarter ending April 30, 2020, with total revenue increasing by 3% year-over-year to $861.3 million. This growth was primarily driven by strong performance in its time-based products and the Software Integrity segment, indicating continued demand for its electronic design automation (EDA) and software security solutions. Despite the global economic uncertainties brought on by the COVID-19 pandemic, Synopsys demonstrated resilience. The company maintained healthy operating income, up 9% year-over-year, and healthy cash flow from operations. While some segments experienced minor disruptions, the company's diversified business model and its revenue recognition policy for software licenses over the arrangement period have helped to mitigate immediate impacts. Management expressed confidence in its ability to meet its liquidity needs and navigate the evolving economic landscape.

Financial Highlights

57 data points
Beta

Revenue

$861.33M

78.6% Gross Margin

Net Income

$109.92M

12.8% Net Margin

EPS (Diluted)

$0.71

Total Assets

$7.32B

Cash & Equivalents

$858.42M

Free Cash Flow

$353.86M

Financial Statements
Beta
Revenue$861.33M
Cost of Revenue$184.26M
Gross Profit$677.06M
R&D Expenses$302.57M
Operating Expenses$551.17M
Operating Income$125.89M
Interest Expense$1.85M
Net Income$109.92M
EPS (Basic)$0.73
EPS (Diluted)$0.71
Shares Outstanding (Basic)150.60M
Shares Outstanding (Diluted)154.38M

Key Highlights

  • 1Total revenue for the three months ended April 30, 2020, increased by 3% to $861.3 million compared to the prior year.
  • 2Operating income grew by 9% year-over-year to $125.9 million.
  • 3Time-based products revenue saw a 6% increase, highlighting consistent demand for core offerings.
  • 4The Software Integrity segment revenue grew by 6% for the quarter, demonstrating expansion in the software security and quality market.
  • 5Cash provided by operating activities for the six months ended April 30, 2020, significantly increased by $180.9 million to $389.7 million.
  • 6The company maintained a strong balance sheet with cash and cash equivalents increasing by 18% to $856.4 million.
  • 7Despite the COVID-19 pandemic, the company has not identified material impairments or adverse effects to date, though it acknowledges ongoing uncertainty.

Frequently Asked Questions

For the three months ended April 30, 2020, Synopsys reported total revenue of $861.3 million, an increase of 3% compared to the same period in fiscal 2019. This growth was primarily driven by continued organic growth in time-based products and, to a lesser extent, higher maintenance and service revenue. The Software Integrity segment also contributed positively to the revenue growth.

Synopsys stated that the COVID-19 pandemic had a limited impact on its operating results thus far. While there were minor disruptions to business operations, such as minor disruptions in the hardware supply chain and a slowdown in customer commitments within the Software Integrity segment, the company has not identified material impairments or other adverse effects to date. The company's revenue recognition policy for software licenses, which recognizes revenue over the arrangement period, has helped to delay potential impacts.

Synopsys maintained a strong liquidity position, with cash and cash equivalents increasing by 18% to $856.4 million as of April 30, 2020. Cash provided by operating activities for the first six months of fiscal 2020 significantly increased to $389.7 million. The company believes its current cash balances, along with cash generated from operations and available credit facilities, are sufficient to meet its working capital needs, capital asset purchases, share repurchases, and other liquidity requirements.

Synopsys operates under two main segments: Semiconductor & System Design and Software Integrity. The Semiconductor & System Design segment, which includes EDA tools and IP products, generated $773.0 million in revenue for the quarter, a 3% increase year-over-year. The Software Integrity segment, focused on software security and quality, generated $88.3 million, a 6% increase year-over-year. Both segments showed growth, demonstrating the company's diversified revenue streams.