10-QPeriod: Q1 FY2025

SYNOPSYS INC Quarterly Report for Q1 Ended Jan 31, 2025

Filed February 26, 2025For Securities:SNPS

Summary

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 billion 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.

Financial Highlights

55 data points
Beta

Revenue

$1.46B

81.4% Gross Margin

Net Income

$295.68M

20.3% Net Margin

EPS (Diluted)

$1.89

Total Assets

$13.04B

Cash & Equivalents

$3.66B

Free Cash Flow

-$108.17M

Financial Statements
Beta
Revenue$1.46B
Cost of Revenue$269.98M
Gross Profit$1.19B
R&D Expenses$553.22M
Operating Expenses$933.50M
Operating Income$251.84M
Net Income$295.68M
EPS (Basic)$1.91
EPS (Diluted)$1.89
Shares Outstanding (Basic)154.41M
Shares Outstanding (Diluted)156.19M

Key Highlights

  • 1Total 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.
  • 2Net 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.
  • 3The 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.
  • 4Operating 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.
  • 5The 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.
  • 6Synopsys 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.
  • 7The 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.

Frequently Asked Questions

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.

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.

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.

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.