01—Abstract
Summary
Summary of the 10-Q filed February 26, 2025. Cited figures are marked; the original filing is the authoritative source.
Synopsys, Inc. reported a decrease in revenue for the first quarter of fiscal year 2025 compared to the prior year, primarily influenced by the prior year's extra week of operations and shifts in customer spending for hardware and IP products.
Despite the revenue dip, the company's strategic focus on AI-driven chip design and its comprehensive silicon-to-systems solutions remain robust. The company is actively progressing with its significant acquisition of Ansys, Inc., which is valued at approximately $35 billiona and is anticipated to close in the first half of calendar year 2025.
This pending acquisition, along with the recent divestiture of its Software Integrity business, signals strategic realignments aimed at optimizing its market position and future growth. Synopsys maintains a strong liquidity position, which is expected to support its ongoing operations and the upcoming acquisition.
02—Key points
Key Highlights
- Total revenue for the first quarter of fiscal 2025 decreased by 4% to $1.455 billion, impacted by the prior year's 53-week period and shifts in customer spending for IP and hardware products.
- Net income attributed to Synopsys decreased to $295.7 million ($1.89 diluted EPS) from $449.1 million ($2.89 diluted EPS) in the prior year's comparable quarter, largely due to revenue changes and increased operating expenses.
- The company is advancing its acquisition of Ansys, Inc. with a target closing in the first half of calendar year 2025, a transaction valued at approximately $35 billion.
- Operating expenses increased by 4% to $1.2 billion, primarily driven by higher legal, consulting, and professional fees related to the Ansys Merger and increased employee costs.
- The Design Automation segment saw a revenue increase of 4% to $1.02 billion, while the Design IP segment experienced a revenue decrease of 17% to $435.1 million, reflecting varied segment performance.
- Synopsys reported $7.7 billion in contracted but unsatisfied performance obligations (backlog) as of January 31, 2025, with approximately 42% expected to be recognized within the next 12 months.
- The company's cash, cash equivalents, and short-term investments remained strong at $3.8 billion, providing substantial liquidity, though significant debt is anticipated with the Ansys acquisition.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Synopsys kept $0.20.
- Revenue$1.46B100.0%
- Cost of revenue−$270.0M18.6%
- Gross profit$1.19B81.4%
- Operating costs−$933.5M64.1%
- Operating income$251.8M17.3%
- Interest, other & tax$43.8M3.0%
- Net income$295.7M20.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed February 26, 2025Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $1.46B$1.51B | −3.7% |
| Cost of Revenue | $269.98M$279.19M | −3.3% |
| Gross Profit | $1.19B$1.23B | −3.8% |
| R&D Expenses | $553.22M$525.53M | +5.3% |
| Operating Expenses | $933.50M$879.17M | +6.2% |
| Operating Income | $251.84M$352.63M | −28.6% |
| Net Income | $295.68M$449.11M | −34.2% |
| EPS (Basic) | $1.91$2.95 | −35.3% |
| EPS (Diluted) | $1.89$2.89 | −34.6% |
| Shares Outstanding (Basic) | 154.41M152.31M | +1.4% |
| Shares Outstanding (Diluted) | 156.19M155.33M | +0.6% |
05—Questions
Frequently Asked Questions
What was the primary reason for the decrease in revenue compared to the prior year's quarter?
The decrease in revenue was primarily due to the impact of the prior fiscal year's first quarter having 14 weeks (a 53-week year) compared to the current quarter's 13 weeks, which added approximately $63.2 million in revenue last year. Additionally, there was a decrease in revenue from IP and hardware products, amounting to approximately $74.0 million, attributed to the timing of customer spending and strong IP revenue in the prior year's first quarter.
What is the status of the Ansys acquisition, and how will it be financed?
Synopsys entered into a merger agreement to acquire Ansys, Inc. for approximately $35 billion in a cash-and-stock transaction. The acquisition is anticipated to close in the first half of calendar year 2025 and is subject to customary closing conditions, including regulatory approvals. The company plans to fund the cash consideration through a combination of existing cash on hand and debt financing, with a committed debt facility of $10.6 billion under the Bridge Commitment and a $4.3 billion Term Loan Facility.
How did the company's two main segments, Design Automation and Design IP, perform in this quarter?
The Design Automation segment showed positive growth, with revenue increasing by 4% to $1.02 billion, reflecting strong performance in EDA solutions. Conversely, the Design IP segment experienced a revenue decrease of 17% to $435.1 million, largely due to the timing of customer spending and strong IP revenue in the prior year's quarter.
What is the company's liquidity position, and are there any significant changes in its capital resources?
Synopsys maintains a strong liquidity position, with $3.8 billion in cash, cash equivalents, and short-term investments as of January 31, 2025. The company expects the Ansys Merger to materially increase its debt and liquidity needs. While current liquidity is sufficient for near-term operations, significant debt financing is in place for the Ansys acquisition, which will impact its capital structure.
06—Continue