Synopsys Posts Financial Results for Second Quarter Fiscal Year 2024
Synopsys reported strong financial results for Q2 2024, with revenue reaching $1.455 billion, marking a 15% increase year-over-year and hitting the high-end of guidance. GAAP earnings per diluted share were $1.92, while non-GAAP earnings reached $3.00, up 26% from the previous year and exceeding guidance. Due to solid execution and ongoing business momentum, Synopsys has raised its full-year targets for revenue and non-GAAP EPS. The company also announced the sale of its Software Integrity business, with results now reported for continuing operations only.
Net income for Q2 2024 was $299.1 million on a GAAP basis, up from $275.6 million in Q2 2023. Non-GAAP net income was $466.9 million, compared to $368.3 million the previous year. The planned acquisition of Ansys, approved by Ansys shareholders, is expected to bolster Synopsys' mission to provide essential silicon to systems design solutions.
- Revenue increased by 15% year-over-year to $1.455 billion.
- GAAP earnings per diluted share of $1.92, up from $1.78 last year.
- Non-GAAP earnings per diluted share of $3.00, up 26% year-over-year and exceeding guidance.
- Raised full-year targets for revenue and non-GAAP EPS due to strong execution and business momentum.
- Net income increased to $299.1 million on a GAAP basis compared to $275.6 million the previous year.
- Non-GAAP net income rose to $466.9 million from $368.3 million a year ago.
- Positive impact expected from the planned acquisition of Ansys.
- Discontinuation of the Software Integrity business, which could represent a strategic shift or loss of future revenue from this segment.
- Potential risks associated with the planned acquisition of Ansys, including integration challenges and financial implications.
Insights
Synopsys' latest financial results for Q2 FY 2024 have shown significant growth across key metrics. The company reported quarterly revenue of
Non-GAAP earnings per diluted share also saw a notable rise, reaching
Furthermore, Synopsys has raised its full-year targets for both revenue and non-GAAP EPS. This is a bullish sign, indicating management's confidence in sustained growth and solid business momentum. For retail investors, these outcomes underscore Synopsys' strong financial health and its potential for continued growth, making it an appealing option for their portfolios.
Rating: 1
The mention of Synopsys' planned acquisition of Ansys is particularly noteworthy from a technology standpoint. Synopsys aims to enhance its capabilities by integrating Ansys' simulation tools, which are pivotal in electronics design and validation processes. This acquisition could create synergies that enable Synopsys to offer more comprehensive solutions to its customers, further solidifying its position as a leader in the silicon-to-systems design market.
The strategic move aligns with the growing trend towards more integrated and holistic design environments, catering to the increasing complexity of modern electronics. This acquisition, approved by Ansys shareholders, can potentially drive innovation and efficiency gains for Synopsys, offering long-term benefits to stakeholders.
Rating: 1
Evaluating the market implications, the strong Q2 results and raised financial targets indicate that Synopsys is performing well in its core markets. The decision to divest its Software Integrity business shows a strategic focus on its core competencies in design automation and design IP. This could lead to a more streamlined business model, concentrating resources and investments where they are likely to generate the most value.
Importantly, the resilient business model of Synopsys, marked by high demand for its mission-critical technology, positions it well against industry peers. For retail investors, this solidifies its attractiveness as a stable and growing entity in the tech sector.
Rating: 1
Results Summary1
- Quarterly revenue of
$1.45 5 billion15% year over year and at the high-end of guidance. - Quarterly GAAP earnings per diluted share of
$1.92 $3.00 26% year over year1 and exceeding guidance. - Raising full year targets for revenue and non-GAAP EPS, based on strong execution and continued business momentum.
"We continued our strong operational execution and business momentum in Q2. Customers continue investing in Synopsys solutions to maximize their R&D and power their future innovations for this era of pervasive intelligence," said Sassine Ghazi, president and CEO of Synopsys. "We expect our planned acquisition of Ansys, which was approved today by Ansys shareholders, to further our mission of empowering technology innovators everywhere with essential silicon to systems design solutions."
"Synopsys' strong Q2 results were driven by our team's relentless focus on execution, our leading technology that is mission-critical to customers, and our resilient business model," said Shelagh Glaser, Synopsys CFO. "We remain confident in our business, and as a result, we are again raising our full-year targets for revenue and non-GAAP EPS."
________________________ |
1 Synopsys' Software Integrity business has been presented as a discontinued operation in the consolidated financial statements for all periods presented herein and all financial results and targets are presented herein on a continuing operations basis unless otherwise noted. |
Continuing Operations
On May 5, 2024, Synopsys entered into an agreement to sell its Software Integrity business. Unless otherwise noted, Synopsys' Software Integrity business has been presented as a discontinued operation in the consolidated financial statements for all periods presented herein and all financial results and targets are presented herein on a continuing operations basis.
GAAP Results
On a
Non-GAAP Results
On a non-GAAP basis, net income for the second quarter of fiscal year 2024 was
For a reconciliation of net income, earnings per diluted share and other measures on a GAAP and non-GAAP basis, see "GAAP to Non-GAAP Reconciliation" in the accompanying tables below.
Business Segments
Synopsys reports revenue and operating income in two segments: (1) Design Automation, which includes our advanced silicon design, verification products and services, system integration products and services, digital, custom and field programmable gate array (FPGA) IC design software, verification software and hardware products, manufacturing software products and other and (2) Design IP, which includes our Design IP products.
Financial Targets
Synopsys also provided its consolidated financial targets for continuing operations for the third quarter and full fiscal year 2024. The fiscal year targets include the impact of an extra week in fiscal year 2024, which was included in the first quarter of fiscal year 2024. These financial targets assume no further changes to export control restrictions or the current
Third Quarter and Full Fiscal Year 2024 Financial Targets (1)(2) | |||||
(in millions except per share amounts) | |||||
Range for Three Months Ending | Range for Fiscal Year Ending | ||||
July 31, 2024 | October 31, 2024 | ||||
Low | High | Low | High | ||
Revenue | $ 1,505 | $ 1,535 | $ 6,090 | $ 6,150 | |
GAAP Expenses | $ 1,099 | $ 1,119 | $ 4,559 | $ 4,614 | |
Non-GAAP Expenses | $ 920 | $ 930 | $ 3,770 | $ 3,810 | |
Non-GAAP Interest and Other Income (Expense), net | $ 4 | $ 6 | $ 32 | $ 36 | |
Non-GAAP Tax Rate | 15 % | 15 % | |||
Outstanding Shares (fully diluted) | 155 | 157 | 155 | 157 | |
GAAP EPS | $ 2.22 | $ 2.35 | $ 9.14 | $ 9.36 | |
Non-GAAP EPS | $ 3.25 | $ 3.30 | $ 12.90 | $ 12.98 | |
Operating Cash Flow | ~ | ||||
Free Cash Flow(3) | ~ | ||||
Capital Expenditures | ~ | ||||
(1) Synopsys' third quarter of fiscal year 2024 and its fiscal year 2024 will end on August 3, 2024 and November 2, 2024, respectively. For | |||||
(2) Presented on a continuing operations basis. | |||||
(3) Free cash flow is calculated as cash provided from operating activities less capital expenditures and capitalization of software | |||||
For a reconciliation of Synopsys' third quarter and fiscal year 2024 targets, including expenses, earnings per diluted share and other measures on a GAAP and non-GAAP basis and a discussion of the financial targets that we are not able to reconcile without unreasonable efforts, see "GAAP to Non-GAAP Reconciliation" in the accompanying tables below.
Earnings Call Open to Investors
Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m. Pacific Time. A live webcast of the call will be available on Synopsys' corporate website at www.investor.synopsys.com. Synopsys uses its website as a tool to disclose important information about Synopsys and comply with its disclosure obligations under Regulation Fair Disclosure. A webcast replay will also be available on the corporate website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the third quarter of fiscal year 2024 in August 2024.
Effectiveness of Information
The targets included in this press release, the statements made during the earnings conference call, the information contained in the financial supplement and the corporate overview presentation, each of which are available on Synopsys' corporate website at www.synopsys.com (collectively, the "Earnings Materials"), represent Synopsys' expectations and beliefs as of May 22, 2024. Although these Earnings Materials will remain available on Synopsys' website through the date of the earnings call for the third quarter of fiscal year 2024, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys undertakes no duty and does not intend to update any forward-looking statement, whether as a result of new information or future events, or otherwise update, the targets given in this press release unless required by law.
Availability of Final Financial Statements
Synopsys will include final financial statements for the second quarter of fiscal year 2024 in its quarterly report on Form 10-Q to be filed on or before June 13, 2024.
About Synopsys
Catalyzing the era of pervasive intelligence, Synopsys, Inc. (Nasdaq: SNPS) delivers trusted and comprehensive silicon to systems design solutions, from electronic design automation to silicon IP and system verification and validation. We partner closely with semiconductor and systems customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow. Learn more at www.synopsys.com.
Reconciliation of Second Quarter Fiscal Year 2024 Results for Continuing Operations
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income, earnings per diluted share, and tax rate for the periods indicated below.
GAAP to Non-GAAP Reconciliation of Second Quarter Fiscal Year 2024 Results(1) | ||||
(unaudited and in thousands, except per share amounts) | ||||
Three Months Ended | Six Months Ended | |||
April 30, | April 30, | |||
2024 | 2023 | 2024 | 2023 | |
GAAP net income from continuing operations | $ 299,111 | $ 275,602 | $ 736,561 | $ 545,286 |
Adjustments: | ||||
Amortization of acquired intangible assets | 16,925 | 11,387 | 32,526 | 23,640 |
Stock-based compensation | 162,346 | 130,114 | 327,487 | 252,352 |
Acquisition/divestiture related items | 25,256 | 2,641 | 57,188 | 4,975 |
Restructuring charges | — | (5,578) | — | 32,560 |
Gain on sale of strategic investments | — | — | (55,077) | — |
Tax adjustments | (36,694) | (45,878) | (106,261) | (106,033) |
Non-GAAP net income from continuing operations | $ 466,944 | $ 368,288 | $ 992,424 | $ 752,780 |
Three Months Ended | Six Months Ended | |||
April 30, | April 30, | |||
2024 | 2023 | 2024 | 2023 | |
GAAP net income from continuing operations per diluted share | $ 1.92 | $ 1.78 | $ 4.73 | $ 3.52 |
Adjustments: | ||||
Amortization of acquired intangible assets | 0.11 | 0.07 | 0.21 | 0.15 |
Stock-based compensation | 1.04 | 0.84 | 2.10 | 1.63 |
Acquisition/divestiture related items | 0.16 | 0.02 | 0.37 | 0.03 |
Restructuring charges | — | (0.04) | — | 0.21 |
Gain on sale of strategic investments | — | — | (0.35) | — |
Tax adjustments | (0.23) | (0.29) | (0.68) | (0.68) |
Non-GAAP net income from continuing operations per diluted share | $ 3.00 | $ 2.38 | $ 6.38 | $ 4.86 |
Shares used in computing net income per diluted share amounts: | 155,770 | 154,730 | 155,610 | 155,044 |
(1) Synopsys' second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For | ||||
GAAP to Non-GAAP Tax Rate Reconciliation (1)(2) | ||
(unaudited) | ||
Three Months Ended | Six Months Ended | |
April 30, 2024 | April 30, 2024 | |
GAAP effective tax rate | 13.3 % | 8.6 % |
Income tax effect of above non-GAAP adjustments | 1.7 % | 6.4 % |
Non-GAAP effective tax rate | 15.0 % | 15.0 % |
(1) Synopsys' second quarter of fiscal year 2024 ended on May 4, 2024. For presentation purposes, we refer to the closest | ||
(2) Presented on a continuing operations basis. | ||
Reconciliation of 2024 Targets for Continuing Operations
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP targets for the periods indicated below.
GAAP to Non-GAAP Reconciliation of Third Quarter Fiscal Year 2024 Targets (1)(2) | ||||
(in thousands, except per share amounts) | ||||
Range for Three Months Ending | ||||
July 31, 2024 | ||||
Low | High | |||
Target GAAP expenses | $ 1,099,000 | $ 1,119,000 | ||
Adjustments: | ||||
Amortization of acquired intangible assets | (17,000) | (20,000) | ||
Stock-based compensation | (162,000) | (169,000) | ||
Target non-GAAP expenses | $ 920,000 | $ 930,000 | ||
Range for Three Months Ending | ||||
July 31, 2024 | ||||
Low | High | |||
Target GAAP earnings per diluted share attributed to Synopsys | $ 2.22 | $ 2.35 | ||
Adjustments: | ||||
Amortization of acquired intangible assets | 0.13 | 0.11 | ||
Stock-based compensation | 1.08 | 1.04 | ||
Acquisition/divestiture related items (3) | 0.10 | 0.07 | ||
Tax adjustments | (0.28) | (0.27) | ||
Target non-GAAP earnings per diluted share attributed to Synopsys | $ 3.25 | $ 3.30 | ||
Shares used in non-GAAP calculation (midpoint of target range) | 156,000 | 156,000 | ||
GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2024 Targets (1)(2) | ||||
(in thousands, except per share amounts) | ||||
Range for Fiscal Year Ending | ||||
October 31, 2024 | ||||
Low | High | |||
Target GAAP expenses | $ 4,559,099 | $ 4,614,099 | ||
Adjustments: | ||||
Amortization of acquired intangible assets | (67,000) | (72,000) | ||
Stock-based compensation | (672,000) | (682,000) | ||
Acquisition/divestiture related items(3) | (50,099) | (50,099) | ||
Target non-GAAP expenses | $ 3,770,000 | $ 3,810,000 | ||
Range for Fiscal Year Ending | ||||
October 31, 2024 | ||||
Low | High | |||
Target GAAP earnings per diluted share attributed to Synopsys | $ 9.14 | $ 9.36 | ||
Adjustments: | ||||
Amortization of acquired intangible assets | 0.46 | 0.43 | ||
Stock-based compensation | 4.37 | 4.31 | ||
Acquisition/divestiture related items(3) | 0.55 | 0.49 | ||
Gain on sale of strategic investments | (0.35) | (0.35) | ||
Tax adjustments | (1.27) | (1.26) | ||
Target non-GAAP earnings per diluted share attributed to Synopsys | $ 12.90 | $ 12.98 | ||
Shares used in non-GAAP calculation (midpoint of target range) | 156,000 | 156,000 | ||
(1) Synopsys' third quarter of fiscal year 2024 and its fiscal year 2024 will end on August 3, 2024 and November 2, 2024, | ||||
(2) Presented on a continuing operations basis. | ||||
(3) Adjustments reflect actual expenses incurred by Synopsys as of May 4, 2024 as well as certain contractually obligated | ||||
Forward-Looking Statements
This press release and the investor conference call contain forward-looking statements, including, but not limited to, statements regarding short-term and long-term financial targets, expectations and objectives, including, among others, the anticipated effects of our pending acquisition of ANSYS, Inc. (the Ansys Merger); strategies related to our products, technology and services; business and market outlook, opportunities, strategies and technological trends, such as artificial intelligence; the pending Ansys Merger, including, among other things, its anticipated benefits; planned dispositions and their expected impact, such as the previously announced divestiture of our Software Integrity business (the Software Integrity Divestiture); the potential impact of the uncertain macroeconomic and geopolitical environment on our financial results; the expected impact of
SYNOPSYS, INC. | |||||
Unaudited Condensed Consolidated Statements of Income (1) | |||||
(in thousands, except per share amounts) | |||||
Three Months Ended | Six Months Ended | ||||
April 30, | April 30, | ||||
2024 | 2023 | 2024 | 2023 | ||
Revenue: | |||||
Time-based products | $ 781,714 | $ 717,845 | $ 1,586,777 | $ 1,408,135 | |
Upfront products | 396,389 | 335,009 | 838,755 | 665,978 | |
Total products revenue | 1,178,103 | 1,052,854 | 2,425,532 | 2,074,113 | |
Maintenance and service | 276,609 | 209,890 | 540,169 | 422,128 | |
Total revenue | 1,454,712 | 1,262,744 | 2,965,701 | 2,496,241 | |
Cost of revenue: | |||||
Products | 198,719 | 169,062 | 374,217 | 325,686 | |
Maintenance and service | 88,178 | 68,687 | 178,718 | 136,855 | |
Amortization of acquired intangible assets | 13,500 | 10,492 | 26,655 | 21,689 | |
Total cost of revenue | 300,397 | 248,241 | 579,590 | 484,230 | |
Gross margin | 1,154,315 | 1,014,503 | 2,386,111 | 2,012,011 | |
Operating expenses: | |||||
Research and development | 493,136 | 460,463 | 1,018,670 | 899,650 | |
Sales and marketing | 209,783 | 180,658 | 428,626 | 352,212 | |
General and administrative | 114,763 | 84,685 | 246,027 | 174,656 | |
Amortization of acquired intangible assets | 4,561 | 1,900 | 8,090 | 3,935 | |
Restructuring charges | — | (5,578) | — | 32,560 | |
Total operating expenses | 822,243 | 722,128 | 1,701,413 | 1,463,013 | |
Operating income | 332,072 | 292,375 | 684,698 | 548,998 | |
Interest and other income (expense), net | 9,458 | 4,212 | 114,286 | 27,147 | |
Income before income taxes | 341,530 | 296,587 | 798,984 | 576,145 | |
Provision (benefit) for income taxes | 45,437 | 23,947 | 68,346 | 36,730 | |
Net income from continuing operations | 296,093 | 272,640 | 730,638 | 539,415 | |
Income (loss) from discontinued operations, net of income taxes | (7,004) | (2,692) | 4,658 | (840) | |
Net income | 289,089 | 269,948 | 735,296 | 538,575 | |
Less: Net income (loss) attributed to non-controlling interest and | (3,018) | (2,962) | (5,923) | (5,871) | |
Net income attributed to Synopsys | $ 292,107 | $ 272,910 | $ 741,219 | $ 544,446 | |
Net income (loss) attributed to Synopsys | |||||
Continuing operations | $ 299,111 | $ 275,602 | $ 736,561 | $ 545,286 | |
Discontinued operations | (7,004) | (2,692) | 4,658 | (840) | |
Net income | $ 292,107 | $ 272,910 | $ 741,219 | $ 544,446 | |
Net income (loss) per share attributed to Synopsys - basic: | |||||
Continuing operations | $ 1.96 | $ 1.81 | $ 4.83 | $ 3.58 | |
Discontinued operations | (0.05) | (0.02) | 0.03 | (0.01) | |
Basic net income per share | $ 1.91 | $ 1.79 | $ 4.86 | $ 3.57 | |
Net income (loss) per share attributed to Synopsys - diluted: | |||||
Continuing operations | $ 1.92 | $ 1.78 | $ 4.73 | $ 3.52 | |
Discontinued operations | (0.04) | (0.02) | 0.03 | (0.01) | |
Diluted net income per share | $ 1.88 | $ 1.76 | $ 4.76 | $ 3.51 | |
Shares used in computing per share amounts: | |||||
Basic | 152,971 | 152,187 | 152,629 | 152,294 | |
Diluted | 155,770 | 154,730 | 155,610 | 155,044 | |
(1) Synopsys' second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For | |||||
SYNOPSYS, INC. | |||
Unaudited Condensed Consolidated Balance Sheets (1) | |||
(in thousands, except par value amounts) | |||
April 30, 2024 | October 31, 2023 | ||
ASSETS: | |||
Current assets: | |||
Cash and cash equivalents | $ 1,502,920 | $ 1,433,966 | |
Short-term investments | 156,780 | 151,639 | |
Total cash, cash equivalents and short-term investments | 1,659,700 | 1,585,605 | |
Accounts receivable, net | 834,918 | 856,660 | |
Inventories | 377,875 | 325,590 | |
Prepaid and other current assets | 760,269 | 548,115 | |
Current assets held for sale | 1,020,358 | 114,654 | |
Total current assets | 4,653,120 | 3,430,624 | |
Property and equipment, net | 566,832 | 549,837 | |
Operating lease right-of-use assets, net | 528,011 | 559,923 | |
Goodwill | 3,427,424 | 3,346,065 | |
Intangible assets, net | 276,877 | 239,577 | |
Deferred income taxes | 1,004,660 | 853,526 | |
Other long-term assets | 554,913 | 444,820 | |
Long-term assets held for sale | — | 908,759 | |
Total assets | $ 11,011,837 | $ 10,333,131 | |
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND | |||
Current liabilities: | |||
Accounts payable and accrued liabilities | $ 635,916 | $ 1,059,914 | |
Operating lease liabilities | 84,550 | 79,832 | |
Deferred revenue | 1,457,282 | 1,559,461 | |
Current liabilities held for sale | 330,602 | 286,244 | |
Total current liabilities | 2,508,350 | 2,985,451 | |
Long-term operating lease liabilities | 543,207 | 579,686 | |
Long-term deferred revenue | 307,965 | 150,827 | |
Long-term debt | 16,960 | 18,078 | |
Other long-term liabilities | 446,514 | 381,531 | |
Long-term liabilities held for sale | — | 33,257 | |
Total liabilities | 3,822,996 | 4,148,830 | |
Redeemable non-controlling interest | 31,043 | 31,043 | |
Stockholders' equity: | |||
Preferred stock, | — | — | |
Common stock, | 1,532 | 1,521 | |
Capital in excess of par value | 1,182,829 | 1,276,152 | |
Retained earnings | 7,478,366 | 6,741,699 | |
Treasury stock, at cost: 4,056 and 5,207 shares, respectively | (1,321,554) | (1,675,650) | |
Accumulated other comprehensive income (loss) | (188,013) | (196,414) | |
Total Synopsys stockholders' equity | 7,153,160 | 6,147,308 | |
Non-controlling interest | 4,638 | 5,950 | |
Total stockholders' equity | 7,157,798 | 6,153,258 | |
Total liabilities, redeemable non-controlling interest and stockholders' equity | $ 11,011,837 | $ 10,333,131 | |
(1) Synopsys' second quarter of fiscal year 2024 ended on May 4, 2024 and its fiscal year 2023 ended on October 28, 2023, | |||
SYNOPSYS, INC. | ||
Unaudited Condensed Consolidated Statements of Cash Flows (1) | ||
(in thousands) | ||
Six Months Ended April 30, | ||
2024 | 2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 735,296 | $ 538,575 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization and depreciation | 123,886 | 116,922 |
Reduction of operating lease right-of-use assets | 48,179 | 48,073 |
Amortization of capitalized costs to obtain revenue contracts | 37,912 | 39,588 |
Stock-based compensation | 358,487 | 277,485 |
Allowance for credit losses | 9,987 | 6,134 |
Gain on sale of strategic investments | (55,077) | — |
Amortization of bridge financing costs | 7,085 | — |
Deferred income taxes | (170,854) | (125,090) |
Other non-cash | (2,607) | 4,972 |
Net changes in operating assets and liabilities, net of acquired assets and assumed liabilities: | ||
Accounts receivable | 20,889 | 9,289 |
Inventories | (60,518) | (48,648) |
Prepaid and other current assets | (191,595) | 49,437 |
Other long-term assets | (104,551) | (75,324) |
Accounts payable and accrued liabilities | (142,086) | (162,840) |
Operating lease liabilities | (48,709) | (31,634) |
Income taxes | (229,536) | 94,587 |
Deferred revenue | 52,612 | 76,165 |
Net cash provided by operating activities | 388,800 | 817,691 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Proceeds from sales and maturities of short-term investments | 63,159 | 67,717 |
Purchases of short-term investments | (65,861) | (68,738) |
Proceeds from sales of strategic investments | 55,696 | 7,248 |
Purchases of strategic investments | (860) | — |
Purchases of property and equipment | (78,763) | (91,368) |
Acquisitions, net of cash acquired | (139,557) | (41,324) |
Capitalization of software development costs | — | (1,247) |
Net cash used in investing activities | (166,186) | (127,712) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Repayment of debt | (1,303) | (1,294) |
Payment of bridge financing and term loan costs | (54,715) | — |
Issuances of common stock | 115,111 | 132,808 |
Payments for taxes related to net share settlement of equity awards | (212,577) | (116,838) |
Purchase of equity forward contract | — | (45,000) |
Purchases of treasury stock | — | (560,724) |
Other | (1,096) | (122) |
Net cash used in financing activities | (154,580) | (591,170) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 2,423 | 27,708 |
Net change in cash, cash equivalents and restricted cash | 70,457 | 126,517 |
Cash, cash equivalents and restricted cash, beginning of year, including cash from discontinued operations | 1,441,187 | 1,419,864 |
Cash, cash equivalents and restricted cash, end of period, including cash from discontinued operations | 1,511,644 | 1,546,381 |
Less: Cash, cash equivalents and restricted cash from discontinued operations | 6,445 | 4,140 |
Cash, cash equivalents and restricted cash from continuing operations | $ 1,505,199 | $ 1,542,241 |
(1) Synopsys' second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For | ||
Synopsys provides segment information, namely revenue, adjusted segment operating income and adjusted segment operating margin, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting. Synopsys' chief operating decision maker ("CODM") is our Chief Executive Officer. In evaluating our business segments, the CODM considers the income and expenses that the CODM believes are directly related to those segments. The CODM does not allocate certain operating expenses managed at a consolidated level to our business segments and, as a result, the reported operating income and operating margin do not include these unallocated expenses as shown in the table below. These unallocated expenses are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income from continuing operations:
SYNOPSYS, INC. | ||||
Business Segment Reporting (1)(2)(5) | ||||
(in millions) | ||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |
Revenue by segment | ||||
- Design Automation | $ 1,054.9 | $ 927.5 | $ 2,040.3 | $ 1,817.4 |
% of Total | 72.5 % | 73.5 % | 68.8 % | 72.8 % |
- Design IP | $ 399.8 | $ 335.2 | $ 925.4 | $ 678.8 |
% of Total | 27.5 % | 26.5 % | 31.2 % | 27.2 % |
Adjusted operating income by segment | ||||
- Design Automation | $ 418.2 | $ 353.4 | $ 777.7 | $ 692.8 |
- Design IP | $ 124.8 | $ 81.5 | $ 370.5 | $ 194.9 |
Adjusted operating margin by segment | ||||
- Design Automation | 39.6 % | 38.1 % | 38.1 % | 38.1 % |
- Design IP | 31.2 % | 24.3 % | 40.0 % | 28.7 % |
Total Adjusted Segment Operating Income Reconciliation (1)(2)(5) | ||||
(in millions) | ||||
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |
GAAP total operating income – as reported | $ 332.1 | $ 292.4 | $ 684.7 | $ 549.0 |
Other expenses managed at consolidated level | ||||
-Amortization of acquired intangible assets (3) | 18.1 | 12.4 | 34.7 | 25.6 |
-Stock-based compensation (3) | 162.7 | 130.4 | 328.2 | 253.0 |
-Non-qualified deferred compensation plan | 11.1 | 2.8 | 50.5 | 22.6 |
-Acquisition/divestiture related items (4) | 19.2 | 2.6 | 50.1 | 5.0 |
-Restructuring charges | — | (5.6) | — | 32.6 |
Total adjusted segment operating income | $ 543.0 | $ 435.0 | $ 1,148.2 | $ 887.7 |
(1) Synopsys manages the business on a long-term, annual basis, and considers quarterly fluctuations of revenue and profitability as normal elements of our | ||||
(2) Synopsys' second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For presentation purposes, we refer to the | ||||
(3) The adjustment includes non-GAAP expenses attributable to non-controlling interest and redeemable non-controlling interest. | ||||
(4) The adjustment excludes the amortization of bridge financing costs entered into in connection with the pending acquisition of Ansys, that was recorded in | ||||
(5) Presented on a continuing operations basis. | ||||
GAAP to Non-GAAP Reconciliation
Synopsys continues to provide all information required in accordance with GAAP but acknowledges evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, Synopsys presents non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Synopsys' operating results in a manner that focuses on what Synopsys believes to be its core business operations and what Synopsys uses to evaluate its business operations and for internal budgeting and resource allocation purposes. This press release includes non-GAAP earnings per diluted share, non-GAAP net income and non-GAAP tax rate for the periods presented. It also includes future estimated ranges for non-GAAP expenses, non-GAAP interest and other income (expense), non-GAAP tax rate, non-GAAP earnings per diluted share and free cash flow. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
When possible, Synopsys provides a reconciliation of non-GAAP financial measures to their most closely applicable GAAP financial measures. Synopsys is unable to provide a full reconciliation of certain third quarter and full fiscal year 2024 non-GAAP financial targets to the corresponding GAAP financial measures on a forward-looking basis because Synopsys believes that it would not be possible for it to have the required information necessary to quantitatively reconcile such measures with sufficient precision without unreasonable efforts due to, among other things, the potential variability and limited predictability of the excluded adjustment items necessary for a full reconciliation such as certain acquisition/divestiture related items, restructuring charges, tax deduction variability, changes in the fair value of non-qualified deferred compensation plan, and gains (losses) on the sale of strategic investments. For the same reasons, Synopsys is unable to address the probable significance of the unavailable information.
Synopsys' management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, as superior to, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, the corresponding GAAP financial measures. Synopsys' management believes presentation of non-GAAP financial measures, when shown in conjunction with the corresponding GAAP financial measures, provides useful information to investors allowing them to view financial and business trends relating to our financial condition and results of operations through the eyes of management. Synopsys' management evaluates and makes decisions about our business operations using both GAAP financial measures and non-GAAP financial measures to help facilitate internal comparisons to Synopsys' historical operating results and forecasted targets, planning and forecasting in subsequent periods and comparisons to competitors' operating results.
The following are descriptions of the adjustments made to reconcile non-GAAP financial measures (other than free cash flow) to the most directly comparable GAAP financial measures:
(i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets, which include, among other things, core/developed technology, customer relationships, contract rights, trademarks and trade names, and other intangibles related to acquisitions. We amortize the intangible assets over their estimated useful lives. We do not enter into acquisitions on a predictable cycle. The amount of an acquisition's purchase price allocated to intangible assets and their estimated useful lives can vary significantly and are unique to each acquisition. We believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods. We also exclude this item because such expenses are non-cash in nature and we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our core operational performance and liquidity, and ability to invest in research and development and fund future acquisitions and capital expenditures.
(ii) Stock-based compensation. Stock-based compensation expenses consist primarily of expenses related to restricted stock units, stock options, employee stock purchase rights and other stock awards, including such expenses associated with acquisitions. We exclude stock-based compensation expense from our non-GAAP financial measures primarily because it is not an expense that typically requires or will require cash settlement by us. Further, the expense for the fair value of the stock-based instruments we utilize may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards and, therefore, is not used by management to assess the core profitability of our business operations.
(iii) Acquisition/divestiture related items. In connection with certain of our business combinations and/or divestitures, we incur significant expenses that we would not have otherwise incurred as part of our business operations. These expenses include, among other things, compensation expenses, professional fees and other direct expenses, concurrent restructuring activities and divestiture activities, including employee severance and other exit costs, bridge financing costs, costs related to integration activities, changes to the fair value of contingent consideration related to the acquired company, and amortization of the fair value difference of below-market value assets arising from arrangements entered into or acquired in conjunction with an acquisition. We also recognize the gains and losses from the mark-up of equity or cost method investments to fair value upon obtaining control through acquisition. We exclude these items because they are related to acquisitions and have no direct correlation to the core operation of our business. Further, because we do not acquire businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, we believe it is useful to exclude such expenses when looking for a consistent basis for comparison across accounting periods.
(iv) Restructuring charges. We initiate restructuring activities to align our costs to our operating plans and business strategies based on then-current economic conditions, and such activities have a specific and defined term. Restructuring costs generally include severance and other termination benefits related to voluntary retirement programs, involuntary headcount reductions and facilities closures. Such restructuring costs include elimination of operational redundancy, permanent reductions in workforce and facilities closures and, therefore, are not considered by us to be a part of the core operation of our business and are not used by management when assessing the core profitability and performance of our business operations.
(v) Gains (losses) on the sale of strategic investments. We exclude gains and losses on the sale of equity investments in privately held companies because we do not believe they are reflective of our core business and operating results.
(vi) Deferred compensation. We exclude changes in the fair value of our non-qualified deferred compensation plan because we do not use these to assess the core profitability of our business operations.
(vii) Income tax effect of non-GAAP pre-tax adjustments. Excluding the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effect on net income. We utilize an annual non-GAAP tax rate in calculating non-GAAP financial measures to provide better consistency across interim reporting periods by eliminating the effects of certain non-recurring and other period-specific items, which can vary in size and frequency and do not necessarily reflect our normal operations, and to more closely align our tax rate with our expected geographic earnings mix. This annual non-GAAP tax rate is based on an evaluation of our historical and projected mix of
INVESTOR CONTACT:
Trey
Synopsys, Inc.
650-584-4289
Synopsys-ir@synopsys.com
EDITORIAL CONTACT:
Cara Walker
Synopsys, Inc.
650-584-5000
corp-pr@synopsys.com
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SOURCE Synopsys, Inc.
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