10-QPeriod: Q3 FY2020

SYNOPSYS INC Quarterly Report for Q3 Ended Jul 31, 2020

Filed August 21, 2020For Securities:SNPS

Summary

Synopsys Inc. reported strong financial results for the third quarter and the first nine months of fiscal year 2020, ending July 31, 2020. Revenue increased by 13% year-over-year for the quarter to $964.1 million, driven by growth in both its Semiconductor & System Design and Software Integrity segments. This robust top-line performance translated into significant operating income growth of 65% for the quarter, reaching $210.6 million. The company also demonstrated strong cash flow generation, with operating cash flow increasing by $209.9 million for the nine-month period compared to the prior year. The balance sheet showed a healthy increase in cash and cash equivalents, up 44% to over $1 billion. The company maintained a strong liquidity position, despite some investments in acquisitions and share repurchases. Management expressed confidence in their ability to meet ongoing liquidity needs. While the COVID-19 pandemic caused some minor disruptions, Synopsys has largely navigated the challenges effectively, with no material adverse impacts identified to date, though ongoing uncertainty remains.

Financial Highlights

57 data points
Beta

Revenue

$964.13M

80.0% Gross Margin

Net Income

$252.91M

26.2% Net Margin

EPS (Diluted)

$1.62

Total Assets

$7.66B

Cash & Equivalents

$1.05B

Free Cash Flow

$359.85M

Financial Statements
Beta
Revenue$964.13M
Cost of Revenue$193.01M
Gross Profit$771.13M
R&D Expenses$322.60M
Operating Expenses$560.53M
Operating Income$210.60M
Interest Expense$941K
Net Income$252.91M
EPS (Basic)$1.67
EPS (Diluted)$1.62
Shares Outstanding (Basic)151.35M
Shares Outstanding (Diluted)155.97M

Key Highlights

  • 1Revenue increased by 13% to $964.1 million in Q3 FY2020 compared to the prior year, driven by growth in both reporting segments.
  • 2Operating income surged by 65% to $210.6 million in Q3 FY2020.
  • 3Net income for Q3 FY2020 was $252.9 million, a significant increase from $99.9 million in Q3 FY2019.
  • 4Diluted earnings per share (EPS) rose to $1.62 in Q3 FY2020 from $0.65 in Q3 FY2019.
  • 5Cash and cash equivalents increased by 44% to $1,049.9 million as of July 31, 2020, compared to October 31, 2019.
  • 6Operating cash flow for the nine months ended July 31, 2020, was $789.2 million, a substantial increase from $579.3 million in the prior year.
  • 7The company completed several acquisitions during the nine months ended July 31, 2020, for an aggregate consideration of $238.3 million.

Frequently Asked Questions

Synopsys reported total revenue of $964.1 million for the three months ended July 31, 2020, representing a 13% increase compared to $853.0 million in the same period of fiscal year 2019. This growth was primarily driven by organic expansion within its Semiconductor & System Design and Software Integrity segments.

Profitability saw a significant improvement. Operating income increased by 65% to $210.6 million in the third quarter of fiscal year 2020, up from $127.6 million in the prior year's comparable quarter. Net income for the quarter more than doubled, reaching $252.9 million, or $1.62 per diluted share, compared to $99.9 million, or $0.65 per diluted share, in the prior year.

Synopsys maintained a strong liquidity position, with cash and cash equivalents growing by 44% to $1,049.9 million as of July 31, 2020. The company generated $789.2 million in cash from operating activities for the first nine months of fiscal year 2020, a significant increase from $579.3 million in the same period of the previous year, indicating robust operational cash generation.

Synopsys reported that the COVID-19 pandemic has caused only minor disruptions to its business operations and has had a limited impact on its operating results to date. The company has not identified any material adverse effects, but acknowledged ongoing uncertainty. While there were minor disruptions in the hardware supply chain and a slowdown in customer commitments within the Software Integrity segment, the company believes its current cash and cash equivalents are sufficient to meet its needs.