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Synopsys(SNPS) - 2025 Q2 - Quarterly Report
SNPSSynopsys(SNPS)2025-05-28 20:41
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Financial Performance - Revenue for Q2 fiscal 2025 was 1.604billion,anincreaseof1.604 billion, an increase of 149.6 million or 10% compared to Q2 fiscal 2024[157] - Operating income for Q2 fiscal 2025 was 376.4million,anincreaseof376.4 million, an increase of 44.4 million or 13% year-over-year[163] - Total revenue for the six months ended April 30, 2025, was 3.059billion,anincreaseof3.059 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 1,604.3million,representinga101,604.3 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 1,122.3millionforthethreemonthsendedApril30,2025,comparedto1,122.3 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 482.0millionforthethreemonthsendedApril30,2025,upfrom482.0 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 510.7million,a29510.7 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 828.3million,a6828.3 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 117.8million,up6117.8 million, up 6% from 110.9 million in 2024, while total maintenance and service revenue decreased by 4% to 265.2million[203]−AdjustedoperatingincomefortheDesignAutomationSegmentroseto265.2 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 418.2millionin2024[223]−AdjustedoperatingincomefortheDesignIPSegmentincreasedto418.2 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 124.8millionin2024[224]CostsandExpenses−TotalcostofrevenueandoperatingexpensesforQ2fiscal2025was124.8 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 105.2millionor9105.2 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 300.4millionin2024[205]−ResearchanddevelopmentexpensesforthethreemonthsendedApril30,2025,roseto300.4 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 493.1millionin2024[210]−SalesandmarketingexpensesforthethreemonthsendedApril30,2025,were493.1 million in 2024[210] - Sales and marketing expenses for the three months ended April 30, 2025, were 215.0 million, a 2% increase from 209.8millionin2024[212]−GeneralandadministrativeexpensesforthethreemonthsendedApril30,2025,increasedto209.8 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 114.8millionin2024[214]−Theincreaseincostofrevenuewasprimarilydueto114.8 million in 2024[214] - The increase in cost of revenue was primarily due to 23.2 million in employee-related costs and 9.0millioninhardware−relatedcosts[208]NetIncomeandOtherIncome−NetincomefromcontinuingoperationsattributedtoSynopsysforQ2fiscal2025was9.0 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 644.9millionforthesameperiodinfiscal2024[158]−TotalotherincomeforthethreemonthsendedApril30,2025,was644.9 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 16.5millioninthesameperiodof2024[221]−Interestincomeincreasedto16.5 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 11.6millioninthesameperiodof2024[221]AcquisitionandFinancing−ThependingacquisitionofAnsysisvaluedatapproximately11.6 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 10.1billioninSeniorNotestofundaportionofthecashconsiderationfortheAnsysMerger[171]−ThependingAnsysMergerisexpectedtorequireacashconsiderationpaymentof10.1 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 10billionaggregateprincipalamountofSeniorNotesinMarch2025,withnetproceedsofapproximately10 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 207.9millionforthesixmonthsendedApril30,2025,downfrom207.9 million for the six months ended April 30, 2025, down from 388.8 million in 2024[236] - Cash provided by investing activities improved to 54.0millionforthesixmonthsendedApril30,2025,comparedtocashusedof54.0 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 14.3billionincash,cashequivalents,andshort−terminvestments[228]MarketandEconomicConditions−Thecompanyhasconsistentlygrownrevenuesince2005,despiteglobaleconomicuncertainties,duetostrongcustomerrelationshipsandexecution[161]−ThecompanyisactivelymonitoringgeopoliticalpressuresandchangesinU.S.andglobaltradepolicy,butthesehavenotmateriallyimpactedbusinessresultstodate[175]−Thecompanyanticipatesgrowthacrossitsgeographiesinfiscal2025,exceptforChina,whichisfacingachallengingeconomicenvironment[174]−TheU.S.ExportRegulationshavenotmateriallyimpactedthecompany′sbusiness,althoughfuturechangesareanticipated[178]−Thecompany’stime−basedmodelprovidesstability,butthelong−termimplicationsofmacroeconomicandgeopoliticaleventsremainuncertain[177]DebtandCreditFacilities−Thecompanyhasanunsecured14.3 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 150.0million,withamaturitydateofDecember14,2027[250]−AsofApril30,2025,thecompanyhadnooutstandingbalanceundertheRevolvingCreditAgreement[250]−TheapplicablemarginforAdjustedTermSOFRRatebasedloansrangesfrom0.785150.0 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 8.1billion,withapproximately428.1 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)millionin2024[219]−TheeffectivetaxratedecreasedduetoacapitallossonthesaleofownershipinOpenLightinthefirstquarterof2025[226]−AsofApril30,2025,(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 14.1millionoutstandingbalanceundera12−yearcreditagreementinChinaasofApril30,2025[254]−Thecompanyhasadeferredpaymentagreementwithanoutstandingbalanceof14.1 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]