Synopsys(SNPS) - 2025 Q1 - Quarterly Report

Financial Performance - For Q1 fiscal 2025, revenue was $1,455.3 million, a decrease of$55.7 million or 4% compared to $1,511.0 million in Q1 fiscal 2024[135]. - Operating income decreased by$100.8 million or 29%, totaling $251.8 million in Q1 fiscal 2025 compared to$352.6 million in Q1 fiscal 2024[136]. - Net income from continuing operations attributed to the company was $295.7 million, down from$437.5 million in the same period last year[136]. - Total revenue for the three months ended January 31, 2025, was $1,455.3 million, a decrease of$55.7 million or 4% compared to $1,511.0 million in the same period of fiscal 2024[168]. - The decrease in total revenues was primarily due to the impact of an extra week in the first quarter of fiscal 2024, which contributed approximately$63.2 million in revenue[171]. Merger and Acquisition - The company is in the process of acquiring Ansys, valued at approximately $35.0 billion, with the merger expected to close in the first half of calendar year 2025[140]. - The merger agreement includes a cash-and-stock transaction where Ansys shareholders will receive$197.00 in cash and 0.3450 shares of Synopsys common stock[142]. - The company has entered into a term loan facility credit agreement allowing borrowing up to $4.3 billion to finance part of the cash consideration for the Ansys merger[146]. - The company expects to fund the anticipated$19 billion cash consideration payment for the Ansys Merger through a combination of cash and debt, with $14.9 billion in fully-committed debt financing in place[199]. - The Bridge Commitment provides an aggregate principal amount of up to$10.6 billion, intended for financing a portion of the cash consideration for the Ansys Merger and related expenses[211]. - The Bridge Commitment was reduced by $1.1 billion to$10.6 billion following the closing of the Software Integrity Divestiture on October 3, 2024[212]. - The Term Loan Agreement allows borrowing up to $4.3 billion at the closing of the Ansys Merger, with no outstanding balance as of January 31, 2025[213][214]. - The Term Loan Agreement includes two tranches:$1.45 billion maturing in two years and $2.85 billion maturing in three years[214]. Revenue Segmentation - Design Automation segment revenue increased by$34.9 million or 4% to $1,020.2 million, while Design IP segment revenue decreased by$90.6 million or 17% to $435.1 million[168]. - Maintenance revenue increased by$15.8 million or 16% to $117.2 million, while professional service and other revenue decreased by$20.3 million or 13% to $141.8 million[177]. - Time-based products revenue for the three months ended January 31, 2025, was$828.2 million, an increase of $23.1 million or 3$805.1 million in the same period of fiscal 2024[174]. - Upfront products revenue decreased by $74.3 million or 17$368.1 million, primarily due to a decrease in the sale of IP and hardware products[175]. Expenses and Costs - Total cost of revenue and operating expenses increased by $45.1 million or 4$270.0 million, a decrease of $9.2 million (3$279.2 million in the same period of 2024[180]. - Research and development expenses increased to $553.2 million, up$27.7 million (5%) from $525.5 million in the prior year, representing 38$209.2 million, down $9.6 million (4$218.8 million in the same period of 2024[186]. - General and administrative expenses rose to $167.1 million, an increase of$35.8 million (27%) compared to $131.3 million in the prior year, primarily due to legal and consulting fees related to the Ansys Merger[187]. Cash Flow and Financing - Cash used in operating activities improved to$67.5 million for the three months ended January 31, 2025, a decrease of $20.3 million compared to$87.8 million in the same period of 2024[205]. - Cash used in financing activities decreased by $22.4 million compared to the first quarter of fiscal 2024, primarily due to lower taxes paid for net share settlements and offset by a$30.0 million redemption of redeemable non-controlling interest in the first quarter of fiscal 2025[210]. - Interest income increased significantly to $35.7 million, up$22.6 million (173%) from $13.1 million in the same period of 2024[190]. - As of January 31, 2025, the company held$3.8 billion in cash, cash equivalents, and short-term investments, with $800.8 million domiciled in foreign jurisdictions[197][198]. - The applicable margin for loans under the Revolving Credit Agreement ranges from 0.785$14.2 million under a 12-year credit agreement in China, with borrowings at a floating rate[223]. - The company was in compliance with the financial covenants as of January 31, 2025[222]. Market Outlook - The company anticipates a challenging near-term growth environment in China due to macroeconomic factors and global trade restrictions[149]. - The company expects growth across its geographies in fiscal 2025, despite some customers postponing decisions and decreasing spending due to macroeconomic uncertainty[149]. - The company anticipates additional changes to U.S. export regulations but does not expect them to materially impact its business at this time[152]. Discontinued Operations - The Software Integrity business was sold to entities controlled by funds affiliated with Clearlake Capital Group and Francisco Partners, classified as discontinued operations[153]. Fiscal Year Change - The fiscal year end has changed to October 31, effective with fiscal 2025, impacting revenue and operating results[158].