Core Viewpoint - Synopsys, Inc. (NASDAQ: SNPS) has shown growth in the Electronic Design Automation (EDA) sector, but its stock valuation remains high, leading to significant underperformance compared to the S&P 500 Index since the previous "Sell" report in January 2024 [1] Company Summary - Synopsys, Inc. is experiencing growth in the EDA market, which is a positive indicator for its operational performance [1] - The stock price of Synopsys has notably underperformed relative to the S&P 500 Index, suggesting potential concerns regarding its valuation [1]

Key TakeawaysSynopsys stock has fallen more than any other S&P 500 component Thursday after the company reported fiscal fourth-quarter results.The chip design software maker's fiscal 2025 outlook was below the analyst consensus compiled by Visible Alpha.The company's shares are now about flat for the year. Synopsys (SNPS) shares tumbled after the chip design software maker posted a disappointing forecast for its coming fiscal year late Wednesday.  The company called for full-year revenue of $6.75 billion t ...

Financial Data and Key Metrics - Revenue for FY 2024 grew 15% year-over-year, reaching $6.13 billion, marking a significant milestone as the company crossed the $6 billion mark just three years after reaching $4 billion [7][36] - Non-GAAP EPS grew at a 24% CAGR over the last five years, with FY 2024 non-GAAP EPS reaching $13.20, up 25% year-over-year [7][36] - Non-GAAP operating margin for FY 2024 was 38.5%, with Design Automation and Design IP segments achieving adjusted operating margins of 38.7% and 38.3%, respectively [36][37] - Operating cash flow for the year was $1.4 billion, and free cash flow was $1.28 billion, with the company ending the year with $4.05 billion in cash and short-term investments [38] Business Segment Performance - **Design Automation**: Revenue for Q4 grew 17% year-over-year, with full-year revenue up 12% to $4.22 billion, driven by strength in EDA software and hardware [14][37] - **Design IP**: Revenue for the full year grew 24% to $1.91 billion, with robust design activity in high-performance computing and automotive sectors [25][37] - **Hardware Business**: Record year for hardware, with strong momentum in HAPS and ZeBu product lines, including over 50 repeat HAPS customers and 10 new customers in Q4 [24] Market and Geographic Performance - The company experienced double-digit growth across all products and geographies, with particular strength in AI-driven markets and high-performance computing [36] - China's growth decelerated due to economic slowdowns and expanding restrictions, with revenue expected to align with the corporate average in FY 2025 [130][156] Strategic Direction and Industry Competition - The company is focusing on its "silicon to systems" strategy, with the pending acquisition of Ansys expected to enhance its capabilities in AI-powered design solutions [8][11] - AI-driven innovation is a key growth driver, with Synopsys.ai solutions delivering significant customer results, including optimizing over 700 tape-outs and improving hardware utilization by up to 4 times [15][16] - The company is also advancing in Multi-Die designs, partnering with TSMC to improve predictability and yield, with 90% of HPC AI designs expected to be Multi-Die by 2027 [20][21] Management Commentary on Operating Environment and Future Outlook - Management expects double-digit revenue growth and a 40% operating margin in FY 2025, despite macro uncertainties and the impact of the Ansys acquisition [13][35] - The company is preparing for the largest acquisition in its history, with the Ansys deal expected to close in the first half of 2025 [12][50] - AI is seen as a transformative force, evolving from a discrete capability to an essential part of the company's operations and customer workflows [18][19] Other Important Information - The company changed its fiscal year to end on October 31st, resulting in 10 fewer days in the first half of FY 2025, impacting revenue by approximately $100 million [34][39] - The backlog at the end of FY 2024 was $8.1 billion, reflecting strong visibility into future revenue [33][54] Q&A Session Summary Question: Underlying growth assumptions for FY 2025 - The company provided a balanced view for FY 2025, considering market dynamics, macro uncertainties, and the Ansys acquisition, guiding for 11.5% to 12.5% growth [45][50] Question: Impact of U.S. semiconductor export restrictions - The latest U.S. export restrictions on EDA software are incorporated into the FY 2025 guidance, with some customers added to the entity list [66][68] Question: Growth profile of Design Automation and IP businesses - The company expects strong growth in Design Automation and IP, driven by increased investment in AI infrastructure and Multi-Die designs [71][73] Question: Design starts and customer-specific AI use cases - Design starts, particularly in AI, have been accelerating, with hyperscalers and semiconductor companies increasing their investments in custom silicon [77][79] - The company is exploring customer-specific AI use cases, leveraging generative AI and domain-specific design to enhance workflows [105][111] Question: China's impact on FY 2025 outlook - China's growth is expected to align with the corporate average, with deceleration due to economic slowdowns and expanding restrictions [129][156] Question: Operating margin improvement and pricing strategy - The company is focused on driving operating margin improvement through efficiency gains and modernization, with a 150 basis point improvement expected in FY 2025 [89][159]

SYNOPSYS® Corporate Overview for Investors December 2024 Forward-Looking Statements This presentation contains forward-looking statements, including, but not limited to, statements regarding Synopsys, Inc.'s (Synopsys, we or our) statements regarding short-term and long-term financial targets, expectations and objectives including, among others, our long-term financial objectives, which include the anticipated effects of our pending acquisition of ANSYS, Inc. (the Ansys Merger); business and market outlook, ...

Core Insights - Synopsys reported revenue of $1.64 billion for the quarter ended October 2024, reflecting a 2.3% increase year-over-year, with EPS at $3.40 compared to $3.17 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $1.63 billion, resulting in a surprise of +0.23%, while the EPS also surpassed expectations by +3.34% [1] Revenue Breakdown - Maintenance and service revenue was $280.67 million, exceeding the average estimate of $249.31 million, marking a year-over-year increase of +0.4% [3] - Total products revenue reached $1.36 billion, slightly below the estimated $1.38 billion, but still showing a +2.7% change from the previous year [3] - Design IP revenue was reported at $517.80 million, lower than the estimated $537.96 million, with a +0.8% year-over-year change [3] - Design Automation revenue was $1.12 billion, surpassing the estimate of $1.09 billion, reflecting a significant year-over-year increase of +17.3% [3] - Upfront products revenue was $520.94 million, exceeding the estimate of $475.29 million, with a year-over-year change of +16% [3] - Time-based products revenue was $834.38 million, falling short of the estimated $910.83 million, representing a decline of -4.1% year-over-year [3] Stock Performance - Synopsys shares have returned +9.2% over the past month, outperforming the Zacks S&P 500 composite's +5.8% change [4] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [4]

Synopsys (SNPS) came out with quarterly earnings of $3.40 per share, beating the Zacks Consensus Estimate of $3.29 per share. This compares to earnings of $3.17 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.34%. A quarter ago, it was expected that this maker of software used to test and develop chips would post earnings of $3.28 per share when it actually produced earnings of $3.43, delivering a surprise of 4.57%.Over the ...

Financial Performance - Record quarterly revenue of $1.636 billion, up approximately 11% year over year, exceeding the mid-point of guidance[4] - Quarterly non-GAAP EPS of $3.40, up approximately 13% year over year, exceeding guidance; full-year 2024 non-GAAP EPS growth of approximately 25%[5] - Full-year 2024 revenue reached $6.127 billion, an increase of approximately 15% from $5.318 billion in fiscal year 2023[6] - GAAP net income for Q4 2024 was $279.3 million, or $1.79 per diluted share, compared to $346.1 million, or $2.23 per diluted share, for Q4 2023[10] - Non-GAAP net income for Q4 2024 was $529.9 million, or $3.40 per diluted share, compared to $464.1 million, or $3.00 per diluted share, for Q4 2023[11] - For the fiscal year 2024, GAAP net income per diluted share was $9.25, compared to $7.91 in fiscal year 2023, with non-GAAP net income per diluted share rising to $13.20 from $10.54[27] - Net income for the twelve months ended 2024 was $2,235,810, compared to $1,218,125 for the same period in 2023, representing an increase of 83.4%[42] Future Outlook - Synopsys expects to deliver double-digit revenue growth in 2025, despite macro uncertainties[8] - Financial targets for Q1 2025 include revenue range of $1.435 billion to $1.465 billion and full fiscal year 2025 revenue range of $6.745 billion to $6.805 billion[16] - The company targets GAAP earnings per diluted share for Q1 2025 in the range of $1.81 to $1.95, with non-GAAP earnings per diluted share targeted between $2.77 and $2.82[31] - For the full fiscal year 2025, the company anticipates GAAP earnings per diluted share to be between $10.42 and $10.63, with non-GAAP earnings per diluted share expected to range from $14.88 to $14.96[33] Acquisitions and Divestitures - The acquisition of Ansys is expected to close in the first half of 2025, pending regulatory approvals[8] - The company completed the sale of its Software Integrity business on September 30, 2024, presenting it as a discontinued operation[7] - The company is in the process of acquiring ANSYS, Inc., which is expected to impact future financial results positively[34] Tax and Expenses - Non-GAAP tax rate for fiscal year 2025 is expected to be 16%[16] - The effective GAAP tax rate for the twelve months ended October 31, 2024, was 6.6%, while the non-GAAP effective tax rate was 15.0%[28] - Target GAAP expenses for Q1 2025 are projected to be between $1,142,000 and $1,162,000, while non-GAAP expenses are expected to be between $945,000 and $955,000[31] Revenue Breakdown - Total revenue for the three months ended October 31, 2024, was $1,635,986,000, an increase of 11.5% compared to $1,467,383,000 for the same period in 2023[37] - Revenue from the Design Automation segment for the three months ended October 31, 2024, was $1,118.2 million, up from $953.7 million in 2023, reflecting a growth of 17.3%[46] - The Design IP segment generated revenue of $517.8 million for the three months ended October 31, 2024, slightly up from $513.7 million in 2023, indicating a growth of 0.8%[46] - Total products revenue for the twelve months ended October 31, 2024, reached $5,026,521,000, up 13.9% from $4,416,381,000 in the previous year[37] Cash Flow and Assets - Cash and cash equivalents rose to $3,896,532,000 as of October 31, 2024, compared to $1,433,966,000 in the previous year, showcasing improved cash flow management[40] - Total current assets increased to $6,469,666,000 as of October 31, 2024, from $3,430,624,000 a year earlier, indicating robust liquidity[40] - Total assets increased to $13,073,561,000 as of October 31, 2024, from $10,333,131,000 in the previous year, indicating growth in the company's asset base[40] - The company ended the period with cash, cash equivalents, and restricted cash of $3,898,729, significantly up from $1,441,187 at the end of 2023[42] Operational Performance - Research and development expenses for the three months ended October 31, 2024, were $554,818,000, an increase of 18.9% from $465,815,000 in the prior year[37] - Gross margin for the three months ended October 31, 2024, was $1,260,963,000, compared to $1,181,202,000 for the same period in 2023, reflecting a strong operational performance[37] - Total adjusted segment operating income for the twelve months ended October 31, 2024, was $2,362.1 million, compared to $1,928.0 million in 2023, an increase of 22.5%[48] - The adjusted operating margin for the Design Automation segment improved to 38.7% for the twelve months ended October 31, 2024, compared to 37.5% in 2023[46] Risks and Challenges - The anticipated impact of macroeconomic conditions and geopolitical uncertainties on financial results was highlighted as a risk factor[35] - Stock-based compensation for the fiscal year 2024 was $4.21 per diluted share, up from $3.30 in the previous year[27] Non-GAAP Measures - Stock-based compensation expenses are excluded from non-GAAP financial measures as they do not require cash settlement and may not reflect actual value realized[56] - Acquisition-related expenses, including compensation, professional fees, and integration costs, are excluded from core operations for consistent comparison across periods[56] - Restructuring charges, including severance and facility closures, are not considered part of core operations and are excluded from profitability assessments[58] - Gains and losses from the sale of strategic investments in privately held companies are excluded as they do not reflect core business results[59] - Changes in the fair value of non-qualified deferred compensation plans are excluded from core profitability assessments[59] - The company adopts a non-GAAP tax rate of 16% for fiscal year 2025 to provide consistency across reporting periods[60]

Results Summary1  Record quarterly revenue of $1.636 billion, up approximately 11% year over year (YoY), exceeding the mid-point of guidance. Quarterly GAAP earnings per diluted share (EPS) of $1.79; non-GAAP EPS of $3.40, up approximately 13% YoY, exceeding guidance. Achieved record full-year 2024 revenue of $6.127 billion, up approximately 15% YoY, while improving non-GAAP operating margin and delivering approximately 25% non-GAAP EPS growth. Expecting to deliver double digit revenue growth in 2025 while ...

Synopsys (SNPS) is scheduled to report fourth-quarter fiscal 2024 results on Dec. 4, after market close.Synopsys expects non-GAAP earnings per share between $3.27 and $3.32. The Zacks Consensus Estimate for fiscal fourth-quarter earnings is pinned at $3.29 per share, which indicates a year-over-year increase of 3.8%.The company anticipates revenues between $1.614 billion and $1.644 billion for the fiscal fourth quarter. The Zacks Consensus Estimate is pegged at $1.63 billion, which suggests growth of 2.1% f ...

Wall Street analysts forecast that Synopsys (SNPS) will report quarterly earnings of $3.29 per share in its upcoming release, pointing to a year-over-year increase of 3.8%. It is anticipated that revenues will amount to $1.63 billion, exhibiting an increase of 2.1% compared to the year-ago quarter.The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This reflects how the analysts covering the stock have collectively reevaluated their initial estimates during this timefram ...