Core Insights - Synopsys reported revenue of $1.6 billion for the quarter ended April 2025, reflecting a year-over-year increase of 10.3% and an EPS of $3.67, up from $3.00 in the same quarter last year [1] - The reported revenue met the Zacks Consensus Estimate, with a slight surprise of +0.16%, while the EPS exceeded expectations by +8.26% [1] Revenue Breakdown - Maintenance and service revenue was $265.26 million, below the estimated $279.24 million, representing a year-over-year decline of -4.1% [4] - Total products revenue reached $1.34 billion, slightly above the $1.32 billion estimate, marking a year-over-year increase of +13.7% [4] - Design IP revenue was $482 million, surpassing the average estimate of $443.37 million, with a year-over-year growth of +20.6% [4] - Design Automation revenue was $1.12 billion, below the estimated $1.16 billion, showing a year-over-year increase of +6.4% [4] - Upfront products revenue was $510.68 million, exceeding the estimate of $415.15 million, with a significant year-over-year increase of +28.8% [4] - Time-based products revenue was $828.33 million, falling short of the $904.12 million estimate, but still reflecting a year-over-year growth of +6% [4] Stock Performance - Synopsys shares have returned +11.1% over the past month, outperforming the Zacks S&P 500 composite's +7.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Synopsys reported quarterly earnings of $3.67 per share, exceeding the Zacks Consensus Estimate of $3.39 per share, and showing an increase from $3 per share a year ago, indicating strong performance in the software industry for chip development and testing [1][2]. Financial Performance - The company achieved revenues of $1.6 billion for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 0.16% and up from $1.45 billion in the same quarter last year [2]. - Over the last four quarters, Synopsys has consistently exceeded consensus EPS estimates, demonstrating a strong track record in financial performance [2]. Stock Performance - Synopsys shares have increased approximately 5.5% since the beginning of the year, significantly outperforming the S&P 500, which gained only 0.7% during the same period [3]. - The current Zacks Rank for Synopsys is 3 (Hold), indicating that the stock is expected to perform in line with the market in the near future [6]. Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $3.90, with expected revenues of $1.77 billion, while the estimate for the current fiscal year is $14.88 on revenues of $6.77 billion [7]. - The trend of estimate revisions for Synopsys is currently mixed, which may change following the recent earnings report [6]. Industry Context - The Computer - Software industry, to which Synopsys belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook for companies within this sector [8]. - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, highlighting the importance of monitoring these revisions for investment decisions [5].

Financial Data and Key Metrics Changes - The company reported a strong second quarter with revenue of $1.6 billion, up 10% year over year, exceeding the midpoint of guidance [5][14] - Non-GAAP operating margin was 38%, and non-GAAP EPS was $3.67, reflecting strong execution and leadership position [14][16] - Backlog increased to $8.1 billion, up $400 million quarter on quarter [14][16] Business Line Data and Key Metrics Changes - Design Automation segment revenue was $1.12 billion, up 6% year over year, with an adjusted operating margin of 40.9% [17] - Design IP segment revenue increased by 21% year over year to $482 million, with an adjusted operating margin of 31.2% [17][10] Market Data and Key Metrics Changes - The company experienced strong demand in Europe and South Korea, which offset headwinds from China [16] - The AI and HPC sectors remained robust, while non-AI end market demand was subdued [6][16] Company Strategy and Development Direction - The company is focused on leveraging megatrends in AI, software-defined systems, and silicon proliferation to drive growth [6][13] - The pending acquisition of Ensys is aimed at enhancing AI-powered silicon design solutions [7][12] - The company is investing to maintain and extend its leadership position in AI for chip design [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a slowdown in China but reiterated confidence in full-year guidance due to strong execution in other regions [22][26] - The company is optimistic about the second half of the year, expecting to capitalize on secular megatrends driving the semiconductor industry [20][19] Other Important Information - Non-GAAP EPS targets were increased to reflect Q2 outperformance, partly offset by net interest expenses from a $10 billion bond issuance [19] - The company is experiencing a shift towards GPU-based compute for EDA tools, which is expected to enhance pricing power [90][92] Q&A Session Summary Question: Impact of China sales on overall revenue - Management confirmed that China sales now represent 10% of the mix, down from 12% in Q1, and acknowledged a year-over-year decline in China revenue [24][26] Question: Clarification on bond payment structure - Management clarified that the first bond payment would include a catch-up for the first half month due to the bond's settlement date [27][28] Question: Revenue mix in China - Management stated that they do not split revenue by region but indicated that the mix in China is similar to the rest of the world [33] Question: R&D spending by largest customer - Management noted that while there may be fluctuations in hardware spending, committed agreements with customers like Intel remain stable [40][41] Question: Status of the ANSYS acquisition - Management expressed confidence in closing the ANSYS deal in the first half of the year, citing positive negotiations with regulators [42][61] Question: Changes in design activity for non-AI customers - Management observed stabilization and renewed activity in industrial and automotive sectors, indicating a positive trend [46][47] Question: Recurring revenue development - Management acknowledged fluctuations in recurring revenue but emphasized strong performance in the IP business, which was up 21% [78] Question: Overall R&D landscape - Management indicated a pickup in R&D spending in automotive and industrial sectors, suggesting a return to stronger growth similar to previous years [85][87] Question: Pricing power and GPU-based compute - Management confirmed that the shift to GPU-based compute has allowed for better pricing models, enhancing overall value for customers [90][92]

Financial Data and Key Metrics Changes - The company reported a strong second quarter with revenue of $1.6 billion, up 10% year over year, exceeding the midpoint of guidance [5][14][16] - Non-GAAP operating margin was 38%, and non-GAAP EPS was $3.67, reflecting strong execution and a resilient business model [14][16] - Backlog increased to $8.1 billion, up $400 million quarter on quarter [14][16] Business Line Data and Key Metrics Changes - Design Automation segment revenue was $1.12 billion, up 6% year over year, with an adjusted operating margin of 40.9% [17] - Design IP segment revenue increased by 21% year over year to $482 million, with an adjusted operating margin of 31.2% [17][10] Market Data and Key Metrics Changes - The company observed strength in Europe and South Korea, which offset headwinds from China [16] - The AI and HPC sectors remained robust, while non-AI end market demand was subdued [6][16] Company Strategy and Development Direction - The company is focused on addressing challenges in design complexity and costs driven by megatrends in AI, software-defined systems, and silicon proliferation [6][12] - The pending acquisition of Ensys is aimed at enhancing AI-powered silicon to systems design solutions [7][12] - The company is investing to maintain and extend its leadership position in AI for chip design [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a slowdown in China but reiterated confidence in full-year guidance due to strong execution in other regions [22][28] - The company is optimistic about the second half of the year, supported by strong demand in AI and HPC sectors [20][19] Other Important Information - The company is actively negotiating with SAMR for regulatory clearance in China regarding the Ensys acquisition [7][45] - Non-GAAP EPS targets have been increased to reflect Q2 outperformance, partly offset by net interest expenses from bond issuance [19] Q&A Session Summary Question: What is the expected impact of declining sales in China? - Management confirmed that they are anticipating a decline in China year over year but reiterated full-year guidance based on strong performance in other regions [26][28] Question: Can you clarify the bond payment structure? - The CFO confirmed that the first payment will include a catch-up for the first half month due to the bond's settlement timing [29] Question: What is the revenue mix in China? - Management stated that they do not split revenue by region but indicated it is similar to the rest of the world [35] Question: How is the largest customer’s R&D spend affecting growth? - Management noted that while there may be fluctuations, committed agreements generally protect EDA software revenue [42] Question: What is the plan if the ANSYS deal does not close? - Management emphasized that they are focused on completing the transaction and are confident based on received approvals [45][66] Question: What is the outlook for design activity in non-AI markets? - Management indicated signs of stabilization and new energy in industrial and automotive markets, with increased design activity expected [50] Question: How is pricing power being affected? - Management stated that pricing is based on the value delivered to customers, and they see opportunities to improve pricing as challenges increase for chip design [81] Question: What is the confidence level for achieving double-digit revenue growth? - Management expressed confidence in achieving industry-leading double-digit revenue growth, even with potential challenges in China [107]

Financial Data and Key Metrics Changes - The company reported revenue of $1.6 billion, representing a 10% year-over-year increase, exceeding the midpoint of guidance [4][14][15] - Non-GAAP operating margin was 38%, and non-GAAP EPS was $3.67, which was above the guided range [14][15] - Backlog increased by $400 million quarter-over-quarter to $8.1 billion [14][15] Business Line Data and Key Metrics Changes - Design Automation segment revenue was $1.12 billion, up 6% year-over-year, with an adjusted operating margin of 40.9% [16] - Design IP segment revenue increased by 21% year-over-year to $482 million, with an adjusted operating margin of 31.2% [16][10] Market Data and Key Metrics Changes - Strong demand was noted in Europe and South Korea, which offset headwinds from China [15] - The company observed a slowdown in China, which is expected to decline year-over-year, while other regions showed resilience [5][15][27] Company Strategy and Development Direction - The company is focused on leveraging megatrends in AI, software-defined systems, and silicon proliferation to drive growth [5][14] - The pending acquisition of Ensys is aimed at enhancing AI-powered silicon design solutions [6][12] - The company is investing to maintain its leadership position in AI for chip design [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a "tale of two markets," with robust demand in AI and HPC sectors, while non-AI end market demand remains subdued [5][4] - The company reiterated its full-year guidance despite challenges in China, citing strong execution in other regions [27][78] Other Important Information - Free cash flow was approximately $220 million, with cash and short-term investments totaling $14.3 billion and debt of $10.1 billion [16][17] - The company is confident in achieving industry-leading double-digit revenue growth despite potential challenges in China [102] Q&A Session Summary Question: What is the expected impact of declining sales in China? - Management confirmed that they are anticipating a decline in China year-over-year but reiterated full-year guidance based on strong performance in other regions [27][78] Question: Can you clarify the bond payment structure? - Management indicated that the first bond payment would include a catch-up for the first half month, transitioning to a regular semiannual payment schedule [28][29] Question: How is the revenue mix in China divided among software, IP, and hardware? - The company does not disclose revenue by region but indicated that the mix is similar to that of other regions [32] Question: What is the outlook for R&D spending among major customers? - Management noted that while there may be fluctuations, committed agreements generally remain stable, and opportunities arise when customers push their roadmaps [40][60] Question: What is the status of the pending ANSYS acquisition? - Management expressed confidence in closing the acquisition in the first half of the year, citing positive negotiations with regulators [42][63] Question: How is the company addressing the need for more system design capabilities? - The company is focused on completing the ANSYS acquisition, which is seen as essential for enhancing system design capabilities [42] Question: What are the expectations for R&D investment in the semiconductor industry? - Management observed a pickup in R&D investment in automotive and industrial sectors, indicating a positive trend for future growth [88][89] Question: How does the company view pricing power in the current environment? - Management stated that pricing is based on the value delivered to customers, and there is an opportunity to improve pricing as challenges in chip design increase [79][80]

Core Viewpoint - Synopsys's stock experienced a significant decline of 10% following the announcement from the Trump administration to halt its services to China, impacting the company's revenue and market position [1][2]. Group 1: Company Impact - The Bureau of Industry and Security instructed Synopsys to cease its business with Chinese chipmakers, which is expected to negatively affect the company's financial performance [2]. - In 2024, 16% of Synopsys's total revenue, amounting to approximately $978 million (16% of $6.1 billion), was derived from China, indicating the importance of this market to the company's overall revenue [2]. - Synopsys has previously engaged with Huawei, a major Chinese chipmaker, which has drawn scrutiny from U.S. authorities [2][3]. Group 2: Industry Context - The ongoing U.S.-China trade tensions, particularly concerning semiconductors, highlight the fragility of trade relations despite recent de-escalation efforts [5]. - The Chinese Ministry of Commerce criticized the U.S. actions, claiming they undermine the preliminary trade agreement established last month and called for corrections from the White House [5].

Financial Performance - Revenue for Q2 fiscal 2025 was $1.604 billion, an increase of $149.6 million or 10% compared to Q2 fiscal 2024[157] - Operating income for Q2 fiscal 2025 was $376.4 million, an increase of $44.4 million or 13% year-over-year[163] - Total revenue for the six months ended April 30, 2025, was $3.059 billion, an increase of $93.9 million or 3% compared to the same period in fiscal 2024[163] - Total revenue for the three months ended April 30, 2025, was $1,604.3 million, representing a 10% increase from $1,454.7 million in the same period of 2024[195] - Design Automation segment revenue increased by 6% to $1,122.3 million for the three months ended April 30, 2025, compared to $1,054.9 million in the prior year[195] - Design IP segment revenue grew by 21% to $482.0 million for the three months ended April 30, 2025, up from $399.8 million in the same period of 2024[195] - Upfront products revenue for the three months ended April 30, 2025, was $510.7 million, a 29% increase from $396.4 million in the same period of 2024[201] - Time-based products revenue for the three months ended April 30, 2025, was $828.3 million, a 6% increase from $781.7 million in the same period of 2024[200] - Maintenance revenue for the three months ended April 30, 2025, increased to $117.8 million, up 6% from $110.9 million in 2024, while total maintenance and service revenue decreased by 4% to $265.2 million[203] - Adjusted operating income for the Design Automation Segment rose to $458.8 million for the three months ended April 30, 2025, reflecting a 10% increase from $418.2 million in 2024[223] - Adjusted operating income for the Design IP Segment increased to $150.5 million for the three months ended April 30, 2025, a 21% rise from $124.8 million in 2024[224] Costs and Expenses - Total cost of revenue and operating expenses for Q2 fiscal 2025 was $1.2 billion, an increase of $105.2 million or 9% primarily due to employee-related costs[163] - Total cost of revenue for the three months ended April 30, 2025, was $318.3 million, a 6% increase from $300.4 million in 2024[205] - Research and development expenses for the three months ended April 30, 2025, rose to $554.0 million, a 12% increase from $493.1 million in 2024[210] - Sales and marketing expenses for the three months ended April 30, 2025, were $215.0 million, a 2% increase from $209.8 million in 2024[212] - General and administrative expenses for the three months ended April 30, 2025, increased to $136.5 million, a 19% rise from $114.8 million in 2024[214] - The increase in cost of revenue was primarily due to $23.2 million in employee-related costs and $9.0 million in hardware-related costs[208] Net Income and Other Income - Net income from continuing operations attributed to Synopsys for Q2 fiscal 2025 was $299.1 million, compared to $644.9 million for the same period in fiscal 2024[158] - Total other income for the three months ended April 30, 2025, was $114.1 million, a 592% increase from $16.5 million in the same period of 2024[221] - Interest income increased to $89.9 million for the three months ended April 30, 2025, up 675% from $11.6 million in the same period of 2024[221] Acquisition and Financing - The pending acquisition of Ansys is valued at approximately $35.0 billion, based on Synopsys' stock price as of December 21, 2023[165] - The Ansys Merger is expected to close in the first half of calendar year 2025, pending regulatory approvals[168] - Synopsys plans to issue $10.1 billion in Senior Notes to fund a portion of the cash consideration for the Ansys Merger[171] - The pending Ansys Merger is expected to require a cash consideration payment of $19 billion, funded through a combination of cash on hand and debt financing[230] - The company issued $10 billion aggregate principal amount of Senior Notes in March 2025, with net proceeds of approximately $9.9 billion intended for the Ansys Merger and related expenses[255] Cash Flow and Investments - Cash provided by operating activities decreased to $207.9 million for the six months ended April 30, 2025, down from $388.8 million in 2024[236] - Cash provided by investing activities improved to $54.0 million for the six months ended April 30, 2025, compared to cash used of $166.2 million in the same period of 2024[239] - As of April 30, 2025, the company held $14.3 billion in cash, cash equivalents, and short-term investments[228] Market and Economic Conditions - The company has consistently grown revenue since 2005, despite global economic uncertainties, due to strong customer relationships and execution[161] - The company is actively monitoring geopolitical pressures and changes in U.S. and global trade policy, but these have not materially impacted business results to date[175] - The company anticipates growth across its geographies in fiscal 2025, except for China, which is facing a challenging economic environment[174] - The U.S. Export Regulations have not materially impacted the company's business, although future changes are anticipated[178] - The company’s time-based model provides stability, but the long-term implications of macroeconomic and geopolitical events remain uncertain[177] Debt and Credit Facilities - The company has an unsecured $850.0 million committed multicurrency revolving credit facility and an unsecured uncommitted incremental revolving loan facility of up to $150.0 million, with a maturity date of December 14, 2027[250] - As of April 30, 2025, the company had no outstanding balance under the Revolving Credit Agreement[250] - The applicable margin for Adjusted Term SOFR Rate based loans ranges from 0.785% to 0.975%, based on the company's consolidated leverage ratio[251] - As of April 30, 2025, the company had approximately $9.9 billion of Senior Notes outstanding, which have fixed annual interest rates, thus avoiding economic interest rate exposure[259] - The financial covenant requires the company to maintain a maximum consolidated leverage ratio, and it was in compliance as of April 30, 2025[253] - Interest under the Revolving Credit Agreement will accrue at a floating rate based on the Adjusted Term SOFR Rate or the ABR, with margins based on credit ratings ranging from 0.080% to 0.175%[252] Other Financial Metrics - Contracted but unsatisfied performance obligations (backlog) as of April 30, 2025, were $8.1 billion, with approximately 42% expected to be recognized as revenue over the next 12 months[196] - Interest expense for the three months ended April 30, 2025, was $(94.3) million, a significant increase of 1,228% compared to $(7.1) million in 2024[219] - The effective tax rate decreased due to a capital loss on the sale of ownership in OpenLight in the first quarter of 2025[226] - As of April 30, 2025, $194.3 million remained available for future stock repurchases under the stock repurchase program, which has been suspended in connection with the Ansys Merger[231] - The company had a $14.1 million outstanding balance under a 12-year credit agreement in China as of April 30, 2025[254] - The company has a deferred payment agreement with an outstanding balance of $122.5 million related to the 2025 Rate Lock agreements as of April 30, 2025[256] - The company’s exposure to market risk had not changed materially since November 2, 2024[258]

Financial Performance - Revenue for Q2 FY 2025 was $1.604 billion, a 10.2% increase from $1.455 billion in Q2 FY 2024[2] - GAAP net income for Q2 FY 2025 was $349.2 million, or $2.24 per diluted share, compared to $299.1 million, or $1.92 per diluted share in Q2 FY 2024[6] - Non-GAAP net income for Q2 FY 2025 was $572.7 million, or $3.67 per diluted share, up from $466.9 million, or $3.00 per diluted share in Q2 FY 2024[7] - The company reported a net income of $345,110,000 for the three months ended April 30, 2025, compared to $289,089,000 for the same period in 2024, marking a year-over-year increase of 19.4%[35] - Net income for the six months ended April 30, 2025, was $642.5 million, a decrease of 12.6% compared to $735.3 million for the same period in 2024[40] Revenue Guidance - The company reaffirmed its full-year 2025 revenue guidance, projecting revenue between $6.745 billion and $6.805 billion[12] - For Q3 FY 2025, revenue is expected to range from $1.755 billion to $1.785 billion[12] Operating Performance - Non-GAAP operating margin guidance for FY 2025 remains unchanged, reflecting confidence in business demand[5] - Operating income for the six months ended April 30, 2025, was $628,265,000, a decrease from $684,698,000 in the same period of 2024[35] - Revenue from the Design Automation segment for the six months ended April 30, 2025, was $2.14 billion, representing a 5.0% increase from $2.04 billion in the same period of 2024[46] - Adjusted operating income for the Design IP segment was $277.1 million for the six months ended April 30, 2025, down 25.2% from $370.5 million in the prior year[46] - The adjusted operating margin for the Design Automation segment improved to 40.3% from 38.1% year-over-year[46] Cash and Assets - Cash and cash equivalents increased significantly to $14,119,095,000 as of April 30, 2025, compared to $3,896,532,000 on October 31, 2024[38] - Total current assets rose to $16,879,029,000 as of April 30, 2025, up from $6,469,666,000 on October 31, 2024[38] - Cash, cash equivalents, and restricted cash at the end of the period totaled $14.12 billion, significantly up from $1.51 billion at the end of the previous year[42] Expenses and Liabilities - Research and development expenses for the three months ended April 30, 2025, were $553,979,000, compared to $493,136,000 in the same period of 2024, reflecting an increase of 12.3%[35] - Total liabilities as of April 30, 2025, were $13,840,912,000, significantly higher than $4,050,355,000 on October 31, 2024[38] - Cash flows from operating activities provided $207.9 million, down 46.5% from $388.8 million in the prior year[42] Strategic Focus - The company continues to focus on AI and software-defined systems as key growth drivers in a complex design environment[3] - The company anticipates the completion of the acquisition of ANSYS, Inc., which is expected to impact future financial results positively[31] - Synopsys delivers comprehensive silicon to systems design solutions, partnering with semiconductor and systems customers to enhance R&D capabilities[63] Tax and Non-GAAP Measures - The effective tax rate for Q2 FY 2025 was 11.9% on a GAAP basis, while the non-GAAP effective tax rate was 16.0%[24] - The company adopts a non-GAAP tax rate of 16% for fiscal year 2025 to provide consistency across reporting periods and align with expected geographic earnings mix[61] - The company continues to focus on non-GAAP financial measures to provide a clearer view of its core business operations and future performance expectations[50] Acquisitions and Divestitures - The company completed the sale of its Software Integrity business on September 30, 2024, which is now classified as a discontinued operation[5] - The company incurs significant expenses related to acquisitions and divestitures, including compensation expenses and professional fees, which are excluded from core operations for consistent comparison across periods[57] - Restructuring charges include severance and termination benefits, aimed at aligning costs with business strategies, and are not considered part of core operations[59] - Gains and losses from the sale of strategic investments in privately held companies are excluded as they do not reflect core business results[60] Financing Activities - Proceeds from debt issuance amounted to $10.03 billion, indicating significant financing activity during the period[42]

Corporate Overview for Investors May 2025 Forward-Looking Statements This presentation contains forward-looking statements, including, but not limited to, statements regarding Synopsys, Inc.'s (Synopsys, we or our) 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); our products, technology and services; business and market outlo ...

Results Summary Quarterly revenue of $1.604 billion, exceeding midpoint of guidance. Quarterly GAAP earnings per diluted share of $2.24; non-GAAP earnings per diluted share of $3.67, exceeding guidance. Reaffirming full-year 2025 revenue guidance, and non-GAAP operating margin guidance. SUNNYVALE, Calif., May 28, 2025 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2025. Revenue for the second quarter of fiscal year 2025 was $1.604 billion, compared ...