Synopsys(SNPS) - 2024 Q2 - Quarterly Results

Financial Performance Overview 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 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][5] Management Commentary 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] - 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] - CFO Shelagh Glaser cited relentless execution, leading technology, and a resilient business model as drivers for the strong Q2 results[5] Discontinued Operations 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] - The Software Integrity business is classified as a discontinued operation, and all financial results and targets in this report exclude this segment[3][5] Financial Targets Synopsys provided an optimistic outlook, raising its full-year 2024 guidance Third Quarter and Full Fiscal Year 2024 Financial Targets 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][12] Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including income statements, balance sheets, and cash flow statements Condensed Consolidated Statements of Income 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 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 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 This section details the financial performance of Synopsys's key business segments Segment Performance 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 This section provides a reconciliation of GAAP to non-GAAP financial measures, explaining key adjustments Reconciliation of Q2 FY2024 Results 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 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] Explanation of Non-GAAP Adjustments 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][56] - 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] - 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]