01—Abstract
Summary
Summary of the 8-K filed August 21, 2024. Cited figures are marked; the original filing is the authoritative source.
Synopsys (SNPS) reported third fiscal quarter 2024 results (quarter ended July 31, 2024, reported August 21, 2024) with record quarterly revenue of $1.526 billiona, up about 13% year over year from $1.354 billion.
GAAP diluted EPS was $2.73b (vs. $2.17), and non-GAAP diluted EPS was $3.43 (vs. $2.70), up roughly 27% and above company guidance. Results are presented on a continuing operations basis, with the Software Integrity business treated as discontinued following the May 2024 agreement to sell it. Design Automation revenue grew about 6% to $1.063 billion, while Design IP grew about 32% to $463 million, with Design IP adjusted operating margin expanding sharply to 36.7% from 23.6%.
Management raised its outlook for the full fiscal year 2024, now expecting record revenue growth of approximately 15%, non-GAAP EPS growth of approximately 24%, and a two-point expansion in non-GAAP operating margin. Fiscal Q4 revenue guidance is $1.614 billion to $1.644 billionc, with non-GAAP EPS of $3.27 to $3.32. Full-year revenue guidance is $6.105 billion to $6.135 billion, and full-year non-GAAP EPS guidance is $13.07 to $13.12.
The fiscal year includes an extra week that fell in Q1, and guidance assumes no further changes to export controls or Entity List restrictions. The filing also highlights the pending acquisition of ANSYS, Inc. (the Ansys Merger), which is referenced as a key forward-looking risk alongside the Software Integrity divestiture. Amortization of bridge financing costs tied to the Ansys deal is excluded from non-GAAP results.
Cash and short-term investments rose to about $1.99 billiond, while the balance sheet shows current assets held for sale of about $1.03 billion. Management stated that final Q3 financial statements will be included in the Form 10-Q due by September 12, 2024.
02—Key points
Key Highlights
- Record quarterly revenue of $1.526 billion, up approximately 13% year over year
- GAAP diluted EPS of $2.73 versus $2.17 a year earlier; non-GAAP diluted EPS of $3.43, up about 27% and above guidance
- Design IP revenue rose about 32% to $463.1 million, with adjusted operating margin expanding to 36.7% from 23.6%
- Full-year FY2024 outlook raised to approximately 15% revenue growth, about 24% non-GAAP EPS growth, and two points of non-GAAP operating margin expansion
- Q4 FY2024 guidance: revenue of $1.614–$1.644 billion and non-GAAP EPS of $3.27–$3.32
- Software Integrity business reported as discontinued operations, reflecting the pending divestiture agreed on May 5, 2024
- Pending ANSYS merger and Software Integrity divestiture remain key forward-looking risks; Q3 discontinued operations net loss of $17.8 million
03—Questions
Frequently Asked Questions
How did Synopsys perform in its third quarter of fiscal 2024?
Synopsys reported record quarterly revenue of $1.526 billion, up about 13% from $1.354 billion a year earlier. GAAP net income from continuing operations attributable to Synopsys was $425.9 million, or $2.73 per diluted share, and non-GAAP EPS was $3.43, up about 27% and above guidance.
What is the updated full-year 2024 outlook?
Management expects record full-year revenue growth of approximately 15%, non-GAAP EPS growth of about 24%, and a two-point expansion in non-GAAP operating margin. Full-year revenue guidance is $6.105–$6.135 billion, and non-GAAP EPS guidance is $13.07–$13.12, with the fiscal year including an extra week in Q1.
Why are the Software Integrity business results shown as discontinued operations?
Synopsys agreed on May 5, 2024 to sell its Software Integrity business, so the company presents it as a discontinued operation for all periods. Discontinued operations produced a net loss of $17.8 million in Q3 FY2024, and all reported results and targets are on a continuing operations basis.
What are the main risks flagged in the filing?
The filing cites macroeconomic and geopolitical uncertainty, export controls and Entity List restrictions, customer concentration, and competition. It also flags risks tied to completing the pending ANSYS merger, obtaining regulatory approvals, realizing expected merger benefits, and completing or achieving the intended benefits of the Software Integrity divestiture.
How does the company's non-GAAP reporting differ from GAAP results?
Non-GAAP results exclude items such as stock-based compensation ($164.0 million in Q3), amortization of acquired intangibles, acquisition and divestiture related items ($53.0 million in Q3), and tax adjustments. Non-GAAP EPS uses a 15% non-GAAP tax rate for fiscal 2024. Management notes these measures supplement, and should not replace, GAAP results.
04—Continue