Financial Data and Key Metrics Changes - Revenue for Q2 was $1.45 billion, representing a 15% year-over-year increase and at the high end of the guided range [22][17] - Non-GAAP operating margin improved to 37.3%, up approximately 3 percentage points year-over-year [17][117] - Non-GAAP EPS increased by 26% year-over-year, exceeding guidance [17] - Operating cash flow was $477 million, and free cash flow was $438 million for the quarter [8] - The company ended the quarter with cash and short-term investments totaling $1.66 billion [8] Business Line Data and Key Metrics Changes - Design Automation revenue grew by 14% year-over-year, driven by strength in EDA software and hardware [113] - Design IP segment revenue increased by 19%, supported by strong demand in automotive and advanced nodes [5][117] - The analog design environment saw significant adoption, with a reported 10x productivity gain using the ASO.ai engine [4] Market Data and Key Metrics Changes - Demand for interface IP for AI and data center applications is growing rapidly, with the launch of a 1.6 terabyte Ethernet solution [20] - The company secured over 10 design wins for PCIe 6.0 and CXL 3.0 solutions, indicating strong market traction [20] - The backlog stands at $7.9 billion, reflecting strong customer commitment [95] Company Strategy and Development Direction - The company is prioritizing growth investments in core EDA and IP businesses while accelerating its Silicon to Systems strategy [6] - The planned acquisition of Ansys is expected to expand the total addressable market (TAM) and enhance system design solutions [18][91] - The company is focusing on modernizing analog workflows and leveraging AI technologies to improve productivity [57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth of 14.5% to 15.6% and non-GAAP EPS growth of 22% to 23% for fiscal year 2024 [23] - The company noted ongoing demand for advanced EDA technology driven by semiconductor companies and hyperscalers [101] - Management highlighted the importance of AI in driving customer adoption and improving operational efficiency [69] Other Important Information - The company announced the definitive agreement to sell its software integrity business, which will be classified as a discontinued operation [6][22] - The transaction with Clear Lake Capital and Francisco Partners is valued at up to $2.1 billion and is expected to close in the second half of 2024 [94][83] Q&A Session Summary Question: What is the uplift around ACV with customers adopting newer AI products? - Management indicated that the uplift is still being assessed for ASO.ai and VSO.ai, but confirmed that as customers use the technology, monetization opportunities will arise [25] Question: What drove the strength and upside in the quarter? - Management attributed the strength to strong execution and demand for their solutions, particularly in semiconductor and systems companies [11] Question: Can you provide insights on the regulatory approval process for the Ansys acquisition? - Management confirmed that they are following a thorough roadmap for regulatory approvals and are confident in the process [36] Question: How is the IP business expected to perform in the second half of the year? - Management expects continued growth in the IP business, with a strong Q4 anticipated [55] Question: What are the adoption rates for DSO.ai? - Management stated that they are currently at roughly 20% of the total addressable market for DSO.ai, with significant room for growth [79] Question: Are there any changes in purchasing behavior due to the Ansys acquisition? - Management noted that there have been no significant changes in customer behavior at this stage, as they continue to engage with established customers [131]

Core Insights - Synopsys reported $1.45 billion in revenue for the quarter ended April 2024, a year-over-year increase of 4.3% [1] - The EPS for the same period was $3.00, compared to $2.54 a year ago [1] - The reported revenue was below the Zacks Consensus Estimate of $1.51 billion, resulting in a surprise of -3.83% [1] - The EPS also fell short of the consensus estimate of $3.03, with a surprise of -0.99% [1] Revenue Breakdown - Maintenance and service revenue was $276.61 million, exceeding the average estimate of $244.73 million, representing a year-over-year change of +14.7% [4] - Total products revenue was $1.18 billion, below the average estimate of $1.27 billion [4] - Upfront products revenue was $396.39 million, surpassing the estimated $323.63 million, reflecting a +14.7% change year-over-year [4] - Time-based products revenue was $781.71 million, below the average estimate of $929.87 million, showing a year-over-year decline of -3.3% [4] - Design IP revenue was $399.80 million, compared to the average estimate of $419.91 million [4] - Design Automation revenue was $1.05 billion, slightly above the average estimate of $1.04 billion [4] Stock Performance - Synopsys shares returned +8.4% over the past month, outperforming the Zacks S&P 500 composite's +7.3% 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]

Company Performance - Synopsys reported quarterly earnings of $3 per share, missing the Zacks Consensus Estimate of $3.03 per share, but showing an increase from $2.54 per share a year ago, representing an earnings surprise of -0.99% [1] - The company posted revenues of $1.45 billion for the quarter ended April 2024, missing the Zacks Consensus Estimate by 3.83%, compared to year-ago revenues of $1.39 billion [2] - Over the last four quarters, Synopsys has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] Stock Outlook - Synopsys shares have added about 11% since the beginning of the year, slightly underperforming the S&P 500's gain of 11.6% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for investors [4] - The current consensus EPS estimate for the coming quarter is $3.24 on $1.59 billion in revenues, and $13.23 on $6.39 billion in revenues for the current fiscal year [7] Industry Context - The Computer - Software industry, to which Synopsys belongs, is currently in the top 19% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Synopsys' stock performance [5][6]

[Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Synopsys reported strong Q2 FY2024 results, with revenue up **15%** year-over-year and non-GAAP EPS exceeding guidance [Second Quarter Fiscal Year 2024 Financial Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%20Year%202024%20Financial%20Highlights) Synopsys reported strong Q2 FY2024 financial results, with revenue up **15%** to **$1.455 billion** and non-GAAP EPS growing **26%** to **$3.00** Q2 FY2024 Key Financial Metrics (Continuing Operations) | Metric | Q2 FY2024 | Q2 FY2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $1.455 billion | $1.263 billion | +15.2% | | GAAP Net Income | $299.1 million | $275.6 million | +8.5% | | GAAP EPS (diluted) | $1.92 | $1.78 | +7.9% | | Non-GAAP Net Income | $466.9 million | $368.3 million | +26.8% | | Non-GAAP EPS (diluted) | $3.00 | $2.38 | +26.1% | - Due to strong business momentum and operational execution, the company raised its full-year targets for both revenue and non-GAAP EPS[4](index=4&type=chunk)[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted strong operational execution, customer investment, and the strategic Ansys acquisition, leading to raised full-year targets - CEO Sassine Ghazi noted that customers continue to invest in Synopsys solutions to power innovations in the era of 'pervasive intelligence'[3](index=3&type=chunk) - The planned acquisition of Ansys was approved by Ansys shareholders, a key step in furthering Synopsys' mission to provide essential silicon to systems design solutions[3](index=3&type=chunk) - CFO Shelagh Glaser cited relentless execution, leading technology, and a resilient business model as drivers for the strong Q2 results[5](index=5&type=chunk) [Discontinued Operations](index=1&type=section&id=Discontinued%20Operations) Synopsys agreed to sell its Software Integrity business on May 5, 2024, now classified as a discontinued operation, with all financials based on continuing operations - Synopsys entered into an agreement to sell its Software Integrity business on May 5, 2024[5](index=5&type=chunk) - The Software Integrity business is classified as a discontinued operation, and all financial results and targets in this report exclude this segment[3](index=3&type=chunk)[5](index=5&type=chunk) [Financial Targets](index=3&type=section&id=Financial%20Targets) Synopsys provided an optimistic outlook, raising its full-year 2024 guidance [Third Quarter and Full Fiscal Year 2024 Financial Targets](index=3&type=section&id=Third%20Quarter%20and%20Full%20Fiscal%20Year%202024%20Financial%20Targets) Synopsys provided an optimistic outlook, raising its full-year 2024 guidance for both revenue and non-GAAP EPS Q3 FY2024 Financial Targets | Metric | Low | High | | :--- | :--- | :--- | | Revenue | $1.505 billion | $1.535 billion | | GAAP EPS | $2.22 | $2.35 | | Non-GAAP EPS | $3.25 | $3.30 | Full Fiscal Year 2024 Financial Targets | Metric | Low | High | | :--- | :--- | :--- | | Revenue | $6.090 billion | $6.150 billion | | GAAP EPS | $9.14 | $9.36 | | Non-GAAP EPS | $12.90 | $12.98 | | Operating Cash Flow | ~ $1.300 billion | | - The fiscal year 2024 targets include the impact of an extra week that occurred in the first quarter[10](index=10&type=chunk)[12](index=12&type=chunk) [Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited consolidated financial statements, including income statements, balance sheets, and cash flow statements [Condensed Consolidated Statements of Income](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Synopsys reported increased Q2 FY2024 revenue and improved profitability, with total revenue reaching **$1.455 billion** Q2 Income Statement Highlights | Line Item | Three Months Ended April 30, 2024 (in thousands) | Three Months Ended April 30, 2023 (in thousands) | | :--- | :--- | :--- | | Total revenue | $1,454,712 | $1,262,744 | | Gross margin | $1,154,315 | $1,014,503 | | Operating income | $332,072 | $292,375 | | Net income from continuing operations | $296,093 | $272,640 | [Condensed Consolidated Balance Sheets](index=11&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of April 30, 2024, Synopsys reported total assets of **$11.012 billion**, an increase from October 2023, with strong cash and growing equity Balance Sheet Highlights | Line Item | April 30, 2024 (in thousands) | October 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total cash, cash equivalents and short-term investments | $1,659,700 | $1,585,605 | | Total current assets | $4,653,120 | $3,430,624 | | Total assets | $11,011,837 | $10,333,131 | | Total liabilities | $3,822,996 | $4,148,830 | | Total stockholders' equity | $7,157,798 | $6,153,258 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of FY2024, net cash from operating activities was **$388.8 million**, with cash used in investing and financing, ending with **$1.505 billion** cash Cash Flow Highlights - Six Months Ended | Line Item | April 30, 2024 (in thousands) | April 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $388,800 | $817,691 | | Net cash used in investing activities | ($166,186) | ($127,712) | | Net cash used in financing activities | ($154,580) | ($591,170) | [Business Segment Reporting](index=13&type=section&id=Business%20Segment%20Reporting) This section details the financial performance of Synopsys's key business segments [Segment Performance](index=13&type=section&id=Segment%20Performance) In Q2 FY2024, both Design Automation and Design IP segments showed revenue growth, with Design IP significantly expanding its operating margin Q2 FY2024 Revenue by Segment | Segment | Q2 2024 Revenue (in millions) | Q2 2023 Revenue (in millions) | % of Total (Q2 2024) | | :--- | :--- | :--- | :--- | | Design Automation | $1,054.9 | $927.5 | 72.5% | | Design IP | $399.8 | $335.2 | 27.5% | Q2 FY2024 Adjusted Operating Margin by Segment | Segment | Q2 2024 Margin | Q2 2023 Margin | | :--- | :--- | :--- | | Design Automation | 39.6% | 38.1% | | Design IP | 31.2% | 24.3% | [GAAP to Non-GAAP Reconciliation](index=5&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliation) This section provides a reconciliation of GAAP to non-GAAP financial measures, explaining key adjustments [Reconciliation of Q2 FY2024 Results](index=5&type=section&id=Reconciliation%20of%20Q2%20FY2024%20Results) For Q2 FY2024, Synopsys reconciled GAAP net income of **$299.1 million** to non-GAAP net income of **$466.9 million**, primarily adjusting for non-cash and acquisition-related items Q2 FY2024 GAAP to Non-GAAP Net Income Reconciliation | Description | Amount (in thousands) | | :--- | :--- | | **GAAP net income from continuing operations** | **$299,111** | | Amortization of acquired intangible assets | $16,925 | | Stock-based compensation | $162,346 | | Acquisition/divestiture related items | $25,256 | | Tax adjustments | ($36,694) | | **Non-GAAP net income from continuing operations** | **$466,944** | [Reconciliation of Financial Targets](index=6&type=section&id=Reconciliation%20of%20Financial%20Targets) The company provided reconciliations for its Q3 and full-year 2024 financial targets, primarily adjusting GAAP expenses for non-cash items - The reconciliation for full-year 2024 targets shows significant adjustments for stock-based compensation and amortization of acquired intangible assets to bridge from GAAP to non-GAAP EPS[30](index=30&type=chunk) [Explanation of Non-GAAP Adjustments](index=14&type=section&id=Explanation%20of%20Non-GAAP%20Adjustments) Synopsys uses non-GAAP measures to reflect core operations, excluding non-cash items and acquisition costs, adopting a **15%** non-GAAP tax rate for FY2024 consistency - Management excludes non-cash expenses like amortization of intangibles and stock-based compensation to provide a clearer view of core operational performance[55](index=55&type=chunk)[56](index=56&type=chunk) - Costs related to acquisitions and divestitures are excluded as they are not considered part of normal business operations and can vary significantly between periods[57](index=57&type=chunk) - A **15%** annual non-GAAP tax rate is used for fiscal year 2024 to provide better consistency by eliminating the effects of non-recurring or period-specific tax items[61](index=61&type=chunk)

Core Viewpoint - Ansys, Inc. has received overwhelming approval from its stockholders for the proposed acquisition by Synopsys, Inc., marking a significant step towards completing the transaction valued at approximately $35 billion [1][2][3] Group 1: Transaction Details - Ansys stockholders will receive $197.00 in cash and 0.3450 shares of Synopsys common stock for each Ansys share owned, based on Synopsys' closing price on December 21, 2023 [1] - Approximately 98.7% of the shares voted at the Special Meeting were in favor of the transaction, representing about 83.8% of the total outstanding shares of Ansys as of April 9, 2024 [2] - The transaction is expected to close in the first half of 2025, pending regulatory approvals and other closing conditions [3] Group 2: Management Commentary - Ajei Gopal, Ansys president and CEO, emphasized that the merger is transformative and will create a leader in silicon-to-systems design solutions, reshaping everyday products and creating new opportunities for stakeholders [3] Group 3: Future Steps - Ansys plans to file the final vote results from the Special Meeting with the U.S. Securities and Exchange Commission within four business days [3]

Core Viewpoint - Synopsys, Inc. reported strong financial results for the second quarter of fiscal year 2024, with revenue of $1.455 billion, a 15% increase year-over-year, and raised its full-year revenue and non-GAAP EPS targets due to strong operational execution and business momentum [10][1][6]. Financial Performance - Revenue for Q2 FY2024 was $1.455 billion, compared to $1.263 billion in Q2 FY2023, marking a 15% increase [10][1]. - GAAP net income for Q2 FY2024 was $299.1 million, or $1.92 per diluted share, up from $275.6 million, or $1.78 per diluted share in Q2 FY2023 [3][10]. - Non-GAAP net income for Q2 FY2024 was $466.9 million, or $3.00 per diluted share, compared to $368.3 million, or $2.38 per diluted share in Q2 FY2023, reflecting a 26% increase [4][10]. Business Segments - Synopsys operates in two segments: Design Automation and Design IP. In Q2 FY2024, Design Automation generated $1.0549 billion in revenue, accounting for 72.5% of total revenue, while Design IP contributed $399.8 million, representing 27.5% [30][31]. Financial Targets - For Q3 FY2024, Synopsys targets revenue between $1.505 billion and $1.535 billion and expects full-year revenue to be between $6.090 billion and $6.150 billion [7][6]. - The company anticipates GAAP EPS for Q3 FY2024 to be between $2.22 and $2.35, and non-GAAP EPS to be between $3.25 and $3.30 [7][6]. Strategic Initiatives - The planned acquisition of Ansys was approved by Ansys shareholders, which is expected to enhance Synopsys' capabilities in providing essential silicon to systems design solutions [1][10]. - The divestiture of the Software Integrity business is presented as a discontinued operation, allowing Synopsys to focus on its core business segments [2][10].

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Synopsys (SNPS), and highlights the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank for making informed investment decisions [1][4][9]. Summary by Sections Brokerage Recommendations for Synopsys - Synopsys has an average brokerage recommendation (ABR) of 1.19, indicating a consensus between Strong Buy and Buy, based on recommendations from 16 brokerage firms [2]. - Out of the 16 recommendations, 14 are Strong Buy and 1 is Buy, which accounts for 87.5% and 6.3% of all recommendations respectively [2]. Limitations of Brokerage Recommendations - The article notes that relying solely on brokerage recommendations may not be wise, as studies show limited success in guiding investors towards stocks with the best price increase potential [4]. - Brokerage firms often exhibit a positive bias in their ratings due to vested interests, leading to a disproportionate number of favorable ratings compared to negative ones [5][9]. Zacks Rank as an Alternative Tool - Zacks Rank categorizes stocks into five groups based on earnings estimate revisions, which have shown a strong correlation with near-term stock price movements [7][10]. - The Zacks Rank is updated more frequently than the ABR, making it a more timely indicator of future price movements [11]. Current Earnings Estimates for Synopsys - The Zacks Consensus Estimate for Synopsys remains unchanged at $13.23 for the current year, suggesting steady analyst views on the company's earnings prospects [12]. - Due to the unchanged consensus estimate and other factors, Synopsys holds a Zacks Rank of 3 (Hold), indicating a cautious approach despite the favorable ABR [13].

Core Viewpoint - Synopsys, Inc. is expected to report strong second-quarter fiscal 2024 results, with anticipated revenues between $1.56 billion and $1.59 billion, reflecting an 8.4% year-over-year growth, and non-GAAP earnings per share projected between $3.09 and $3.14, indicating a 19.3% increase from the previous year [1][3][4]. Revenue Expectations - The Zacks Consensus Estimate for revenues is $1.51 billion, which is lower than the company's guidance [1]. - The expected revenue growth is driven by increasing demand for Synopsys' comprehensive product portfolio, particularly in high-performance cloud computing and advanced solutions for AI, IoT, and 5G [3][4]. Earnings Projections - Non-GAAP earnings per share are projected to be between $3.09 and $3.14, with the Zacks Consensus Estimate at $3.03 per share [1]. - The anticipated earnings growth is attributed to the rising adoption of Synopsys.ai and strategic partnerships, particularly with Intel [5][6]. Market Drivers - The demand for Synopsys' Intellectual Property solutions, such as PCI Express and DDR5 memory, is expected to increase due to the hybrid work environment and the growing applications of AI and cloud technology [3][4]. - Significant growth in the Fusion Compiler, driven by major deals in the 5G and AI markets, is anticipated to be a key contributor to revenue growth [4]. Strategic Partnerships - Synopsys' partnerships with industry leaders like Microsoft and Taiwan Semiconductor Manufacturing Company are likely to enhance the deployment of its cloud solutions, contributing positively to revenue [7][8]. - The collaboration with Intel aims to improve fabrication processes, which is expected to play a crucial role in revenue growth [5]. Competitive Landscape - Despite the positive outlook, Synopsys faces rising competition from companies like Cadence Design Systems, which may pose challenges [9]. - Ongoing macroeconomic challenges and unfavorable currency exchange rates could partially offset the positive impacts of growth factors [9].

In its upcoming report, Synopsys (SNPS) is predicted by Wall Street analysts to post quarterly earnings of $3.03 per share, reflecting an increase of 19.3% compared to the same period last year. Revenues are forecasted to be $1.51 billion, representing a year-over-year increase of 8.4%. Over the last 30 days, there has been no revision in the consensus EPS estimate for the quarter. This signifies the covering analysts' collective reconsideration of their initial forecasts over the course of this timeframe. ...

More than half (54%) of organizations surveyed suffered a software supply chain attack in the past year, according to a new report from Synopsys Software Integrity Group and Ponemon Institute SUNNYVALE, Calif., May 16, 2024 /PRNewswire/ -- The majority of global organizations (54%) suffered a software supply chain attack over the past year, and most are unable to keep up with the growing risk landscape. This is according to "The State of Software Supply Chain Security Risk" report, released today by Synopsy ...