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Yahoo
29-05-2025
- Business
- Yahoo
Synopsys Delivers Earnings Win As US Tech Export Curbs Loom Over Industry
Synopsys, Inc. (NASDAQ:SNPS) shares are trading higher premarket on Thursday after the company reported second-quarter 2025 after market close on Wednesday. The company reported revenue of $1.60 billion, in line with the consensus estimate. The adjusted EPS of $3.67 beat the street view of $3.38. Gross profit increased to $1.29 billion from $1.15 billion in the year-ago quarter, and the operating income rose to $376.4 million from $332.1 million in the prior year Ghazi, president and CEO of Synopsys, said, 'The mega trends of AI, software-defined systems, and silicon proliferation continue to drive our growth. These trends are increasing design complexity and costs, while also increasing compute performance and energy demands. Synopsys is a trusted partner in addressing these challenges and a leader in applying AI to help customers innovate faster.' 'In a dynamic macro environment, Synopsys continues to execute with strong Q2 results on the top and bottom line,' said Shelagh Glaser, CFO of Synopsys. 'We're poised to deliver a solid second half, and we're reaffirming our full-year revenue and operating margin guidance, reflecting our confidence in the business and continued healthy demand for our products.' Synopsys increased its adjusted EPS guidance for FY25 to $15.11-$15.19, from the previous outlook of $14.88-$14.96. This new range surpasses the analyst consensus estimate of $14.89. The company has, however, reaffirmed its FY2025 sales outlook at $6.75 billion-$6.80 billion, which aligns with the $6.77 billion analyst estimate. Synopsys expects third-quarter revenue of $1.75 billion–$1.78 billion versus estimates of $1.76 billion and adjusted EPS of $3.82-$3.87 vs. consensus of $3.39. These new targets reflect Synopsys' shift in its fiscal year definition. Previously, the fiscal year concluded on the Saturday closest to October 31st, but it will now end precisely on October 31st each year. This change results in a shorter first half of fiscal year 2025 by ten days, compensated by an extra two days in the second half, leading to a total of eight fewer days in fiscal year 2025 compared to fiscal year 2024. The latest U.S. restrictions, designed to limit China's access to essential technology, are anticipated to have a notable impact on major electronic design automation (EDA) software providers Cadence Design Systems, Inc. (NASDAQ:CDNS) and Synopsys, which have significant exposure. According to Reuters, the U.S. Commerce Department has informed companies about expanded controls affecting EDA software, butane and ethane chemicals, machine tools, and aviation equipment. Addressing these reports, Synopsys CEO Sassine Ghazi told analysts that the company has not received a notice from the Commerce Department's Bureau of Industry and Security (BIS). Investors can gain exposure to the stock via AXS Esoterica NextG Economy ETF (BATS:WUGI) and VanEck Fabless Semiconductor ETF (NASDAQ:SMHX). Price Action: SNPS shares are trading higher by 2.07% to $472 premarket at last check Thursday. Read Next:Photo via Shutterstock Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market. Get the latest stock analysis from Benzinga? SYNOPSYS (SNPS): Free Stock Analysis Report This article Synopsys Delivers Earnings Win As US Tech Export Curbs Loom Over Industry originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved.
Yahoo
27-02-2025
- Business
- Yahoo
Synopsys Posts Financial Results for First Quarter Fiscal Year 2025
Results Summary Quarterly revenue of $1.455 billion, exceeding midpoint of guidance. Quarterly GAAP earnings per diluted share of $1.89; non-GAAP earnings per diluted share of $3.03, exceeding guidance. Reaffirming full-year 2025 guidance. SUNNYVALE, Calif., Feb. 26, 2025 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its first quarter of fiscal year 2025. Revenue for the first quarter of fiscal year 2025 was $1.455 billion, compared to $1.511 billion for the first quarter of fiscal year 2024. "In Q1, Synopsys' relentless focus on execution and innovation was evident across the business. We launched industry-leading silicon IP and hardware-assisted verification solutions while expanding generative AI capabilities in EDA," said Sassine Ghazi, president and CEO of Synopsys. "We are continuing to see strong design activity at advanced nodes, fueled by the AI-driven reinvention of compute. As the pace and complexity of technology innovation increases, new silicon-to-systems design paradigms are essential, and Synopsys is well-positioned to deliver." "We delivered a solid start to the year, with non-GAAP earnings above guidance, and revenue in the upper end of our guided range," said Shelagh Glaser, CFO of Synopsys. "These results are a product of our resilient business model, strong operational execution, and leading technology that is mission-critical to customers. We are reaffirming our full-year guidance including expectations for double-digit revenue growth." Continuing Operations On September 30, 2024, Synopsys completed the sale of its Software Integrity business. Unless otherwise noted, Synopsys' Software Integrity business has been presented as a discontinued operation in the Synopsys' consolidated financial statements for all periods presented herein and all financial results and targets are presented herein on a continuing operations basis. GAAP ResultsOn a U.S. generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal year 2025 was $295.7 million, or $1.89 per diluted share, compared to $437.5 million, or $2.82 per diluted share, for the first quarter of fiscal year 2024. Non-GAAP ResultsOn a non-GAAP basis, net income for the first quarter of fiscal year 2025 was $473.2 million, or $3.03 per diluted share, compared to non-GAAP net income of $525.5 million, or $3.38 per diluted share, for the first quarter of fiscal year 2024. For a reconciliation of net income, earnings per diluted share and other measures on a GAAP and non-GAAP basis, see "GAAP to Non-GAAP Reconciliation" in the accompanying tables below. Business Segments Synopsys reports revenue and operating income in two segments: (1) Design Automation, which includes our advanced silicon design, verification products and services, system integration products and services, digital, custom and field programmable gate array IC design software, verification software and hardware products, manufacturing software products and other and (2) Design IP, which includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services. Financial Targets Synopsys also provided its consolidated financial targets for the second quarter and full fiscal year 2025. These targets reflect a change in Synopsys' fiscal year from a 52/53-week period ending on the Saturday nearest to October 31 of each year to October 31 of each year. As a result of this change, there will be ten fewer days in the first half of fiscal year 2025 and two extra days in the second half of fiscal year 2025, which results in eight fewer days in the aggregate in Synopsys' fiscal year 2025 as compared to its fiscal year 2024. These targets also assume no further changes to export control restrictions or the current U.S. government "Entity List" restrictions. These targets constitute forward-looking statements and are based on current expectations. For a discussion of factors that could cause actual results to differ materially from these targets, see "Forward-Looking Statements" below. Second Quarter and Full Fiscal Year 2025 Financial Targets (1) (in millions except per share amounts) Range for Three Months EndingRange for Fiscal Year EndingApril 30, 2025October 31, 2025Low HighLow High Revenue $ 1,585 $ 1,615$ 6,745 $ 6,805 GAAP Expenses $ 1,191 $ 1,211$ 4,972 $ 5,029 Non-GAAP Expenses $ 985 $ 995$ 4,045 $ 4,085 Non-GAAP Interest and Other Income (Expense), net $ 24 $ 26$ 94 $ 98 Non-GAAP Tax Rate 16 % 16 %16 % 16 % Outstanding Shares (fully diluted) 156 158157 159 GAAP EPS $ 2.21 $ 2.33$ 10.09 $ 10.31 Non-GAAP EPS $ 3.37 $ 3.42$ 14.88 $ 14.96 Operating Cash Flow~$1,800 Free Cash Flow(2)~$1,600 Capital Expenditures ~$170 (1) Targets do not reflect the impact of any future financing transactions related to the Ansys Merger (as defined below) or targets for the combined company. (2) Free cash flow is calculated as cash provided from operating activities less capital expenditures. For a reconciliation of Synopsys' second quarter and fiscal year 2025 targets, including expenses, earnings per diluted share and other measures on a GAAP and non-GAAP basis and a discussion of the financial targets that we are not able to reconcile without unreasonable efforts, see "GAAP to Non-GAAP Reconciliation" in the accompanying tables below. Earnings Call Open to InvestorsSynopsys will hold a conference call for financial analysts and investors today at 2:00 p.m. Pacific Time. A live webcast of the call will be available on Synopsys' corporate website at Synopsys uses its website as a tool to disclose important information about Synopsys and comply with its disclosure obligations under Regulation Fair Disclosure. A webcast replay will also be available on the corporate website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the second quarter of fiscal year 2025 in May 2025. Effectiveness of InformationThe targets included in this press release, the statements made during the earnings conference call, the information contained in the financial supplement and the corporate overview presentation, each of which are available on Synopsys' corporate website at (collectively, the "Earnings Materials"), represent Synopsys' expectations and beliefs as of February 26, 2025. Although these Earnings Materials will remain available on Synopsys' website through the date of the earnings call for the second quarter of fiscal year 2025, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys undertakes no duty and does not intend to update any forward-looking statement, whether as a result of new information or future events, or otherwise update, the targets given in this press release unless required by law. Availability of Final Financial StatementsSynopsys will include final financial statements for the first quarter of fiscal year 2025 in its quarterly report on Form 10-Q to be filed on or before March 12, 2025. About SynopsysCatalyzing the era of pervasive intelligence, Synopsys, Inc. (Nasdaq: SNPS) delivers trusted and comprehensive silicon to systems design solutions, from electronic design automation to silicon IP and system verification and validation. We partner closely with semiconductor and systems customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow. Learn more at Reconciliation of First Quarter Fiscal Year 2025 ResultsThe following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income, earnings per diluted share, and tax rate for the periods indicated below. GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2025 Results(1) (unaudited and in thousands, except per share amounts)Three Months EndedJanuary 31,20252024 GAAP net income from continuing operations attributed to Synopsys $ 295,683$ 437,450 Adjustments:Amortization of acquired intangible assets 12,59615,601 Stock-based compensation 186,279165,141 Acquisition/divestiture related items 74,82931,932 Gain on sale of strategic investments —(55,077) Tax adjustments (96,214)(69,567) Non-GAAP net income from continuing operations attributed to Synopsys $ 473,173$ 525,480Three Months EndedJanuary 31,20252024 GAAP net income from continuing operations per diluted share attributed to Synopsys $ 1.89$ 2.82 Adjustments:Amortization of acquired intangible assets 0.080.10 Stock-based compensation 1.191.06 Acquisition/divestiture related items 0.480.21 Gain on sale of strategic investments —(0.35) Tax adjustments (0.61)(0.46) Non-GAAP net income from continuing operations per diluted share attributed to Synopsys $ 3.03$ 3.38 Shares used in computing net income per diluted share amounts: 156,189155,334 (1) Synopsys' first quarter of fiscal year 2025 and 2024 ended on January 31, 2025 and February 3, 2024, respectively. For presentation purposes, we refer to the closest calendar month end. Fiscal year 2024 was a 53-week year, which included an extra week in the first quarter. GAAP to Non-GAAP Tax Rate Reconciliation (unaudited)Three Months EndedJanuary 31, 2025 GAAP effective tax rate (2.2) % Stock-based compensation 4.3 % Acquisition/divestiture related items (1) 12.6 % Tax adjustments (2) 1.3 % Non-GAAP effective tax rate 16.0 % (1) The adjustment is primarily due to the capital loss on the sale of Synopsys' ownership in OpenLight Photonics, Inc. (2) The adjustments are primarily related to the differences in the tax rate effect of certain deductions, such as the deduction for foreign-derived intangible income and credits. Reconciliation of 2025 TargetsThe following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP targets for the periods indicated below. GAAP to Non-GAAP Reconciliation of Second Quarter Fiscal Year 2025 Targets (in thousands, except per share amounts) Range for Three Months Ending April 30, 2025 LowHigh Target GAAP expenses$ 1,191,000$ 1,211,000 Adjustments: Amortization of acquired intangible assets(12,000)(15,000) Stock-based compensation(194,000)(201,000) Target non-GAAP expenses$ 985,000$ 995,000Range for Three Months Ending April 30, 2025 LowHigh Target GAAP earnings per diluted share attributed to Synopsys$ 2.21$ 2.33 Adjustments: Amortization of acquired intangible assets0.100.08 Stock-based compensation1.281.24 Acquisition/divestiture related items (1)0.080.06 Tax adjustments(0.30)(0.29) Target non-GAAP earnings per diluted share attributed to Synopsys$ 3.37$ 3.42Shares used in non-GAAP calculation (midpoint of target range)157,000157,000 GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2025 Targets (in thousands, except per share amounts) Range for Fiscal Year Ending October 31, 2025 LowHigh Target GAAP expenses$ 4,971,681$ 5,028,681 Adjustments: Amortization of acquired intangible assets(46,000)(51,000) Stock-based compensation(820,000)(832,000) Acquisition/divestiture related items (1)(60,681)(60,681) Target non-GAAP expenses$ 4,045,000$ 4,085,000Range for Fiscal Year Ending October 31, 2025 LowHigh Target GAAP earnings per diluted share attributed to Synopsys$ 10.09$ 10.31 Adjustments: Amortization of acquired intangible assets0.320.29 Stock-based compensation5.275.19 Acquisition/divestiture related items (1) 0.700.66 Tax adjustments(1.50)(1.49) Target non-GAAP earnings per diluted share attributed to Synopsys$ 14.88$ 14.96Shares used in non-GAAP calculation (midpoint of target range)158,000158,000(1) Adjustments reflect actual expenses incurred by Synopsys as of January 31, 2025 or certain contractually obligated financing fees and related amortization expenses, and do not fully reflect all potential adjustments for future periods for the reasons set forth in "GAAP to Non-GAAP Reconciliation" below. Forward-Looking StatementsThis press release and the investor conference call contain forward-looking statements, including, but not limited to, statements regarding 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 outlook, opportunities, strategies and technological trends, such as artificial intelligence (AI); planned acquisitions and their expected impact, such as the Ansys Merger; planned dispositions and their expected impact; the potential impact of the uncertain macroeconomic environment on our financial results, including, but not limited to, the effects of sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, including, among others, the unknown impact of current and future U.S. and foreign trade regulations, government actions and regulatory changes, such as export control restrictions and tariffs, and regional or global military conflicts, and fluctuations in foreign exchange rates, and associated global economic conditions; customer demand and market expansion; our planned product releases and capabilities; industry growth rates; the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations (backlog); software trends; planned stock repurchases; our expected tax rate; and the impact and result of pending legal, regulatory, administrative and tax proceedings. These statements involve risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in such forward-looking statements. Such risks, uncertainties and factors include, but are not limited to: macroeconomic conditions and geopolitical uncertainty in the global economy; uncertainty in the growth of the semiconductor and electronics industries; the highly competitive industry we operate in; actions by the U.S. or foreign governments, such as the imposition of additional export restrictions or tariffs; consolidation among our customers and our dependence on a relatively small number of large customers; risks and compliance obligations relating to the global nature of our operations; failure to complete the Ansys Merger on the terms described in our filings with the SEC, if at all; failure to obtain required governmental approvals related to the Ansys Merger or the imposition of conditions to such governmental approvals that may have an adverse effect on us; failure to realize the benefits expected from the Ansys Merger; and more. Additional information on potential risks, uncertainties and other factors that could affect Synopsys' results is included in filings we make with the SEC from time to time, including in the sections entitled "Risk Factors" in our latest Annual Report on Form 10-K and in our latest Quarterly Report on Form 10-Q. The financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto included in Synopsys' most recent reports on Forms 10-K and 10-Q, each as may be amended from time to time. Synopsys' financial results for its first quarter of fiscal year 2025 are not necessarily indicative of Synopsys' operating results for any future periods. The information provided herein is as of February 26, 2025. Synopsys undertakes no duty to, and does not intend to, update any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law. SYNOPSYS, INC. Unaudited Condensed Consolidated Statements of Income (1) (in thousands, except per share amounts)Three Months EndedJanuary 31,20252024 Revenue: Time-based products $ 828,238$ 805,063 Upfront products 368,124442,366 Total products revenue 1,196,3621,247,429 Maintenance and service 258,953263,560 Total revenue 1,455,3151,510,989 Cost of revenue: Products 168,842175,498 Maintenance and service 92,53790,540 Amortization of acquired intangible assets 8,59613,155 Total cost of revenue 269,975279,193 Gross margin 1,185,3401,231,796 Operating expenses: Research and development 553,216525,534 Sales and marketing 209,199218,843 General and administrative 167,086131,264 Amortization of acquired intangible assets 4,0003,529 Total operating expenses 933,501879,170 Operating income 251,839352,626 Interest and other income (expense), net 39,278104,828 Income before income taxes 291,117457,454 Provision (benefit) for income taxes (6,294)22,909 Net income from continuing operations 297,411434,545 Income from discontinued operations, net of income taxes —11,662 Net income 297,411446,207 Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest 1,728(2,905) Net income attributed to Synopsys $ 295,683$ 449,112 Net income attributed to Synopsys Continuing operations $ 295,683$ 437,450 Discontinued operations —11,662 Net income $ 295,683$ 449,112 Net income per share attributed to Synopsys - basic: Continuing operations $ 1.91$ 2.87 Discontinued operations —0.08 Basic net income per share $ 1.91$ 2.95 Net income per share attributed to Synopsys - diluted: Continuing operations $ 1.89$ 2.82 Discontinued operations —0.07 Diluted net income per share $ 1.89$ 2.89 Shares used in computing per share amounts: Basic 154,408152,311 Diluted 156,189155,334 (1) Synopsys' first quarter of fiscal year 2025 and 2024 ended on January 31, 2025 and February 3, 2024, presentation purposes, we refer to the closest calendar month end. Fiscal year 2024 was a 53-week year, which included an extra week in the first quarter. SYNOPSYS, Condensed Consolidated Balance Sheets (1)(in thousands, except par value amounts)January 31, 2025October 31, 2024ASSETS:Current assets: Cash and cash equivalents$ 3,653,880$ 3,896,532 Short-term investments155,489153,869 Total cash, cash equivalents and short-term investments3,809,3694,050,401 Accounts receivable, net892,647934,470 Inventories415,199361,849 Prepaid and other current assets1,206,4011,122,946 Total current assets6,323,6166,469,666Property and equipment, net546,406563,006Operating lease right-of-use assets, net545,867565,917Goodwill3,433,3693,448,850Intangible assets, net180,950195,164Deferred income taxes1,393,0441,247,258Other long-term assets617,837583,700 Total assets$ 13,041,089$ 13,073,561LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS' EQUITY:Current liabilities: Accounts payable and accrued liabilities$ 938,679$ 1,163,592 Operating lease liabilities99,31094,791 Deferred revenue1,320,6051,391,737 Total current liabilities2,358,5942,650,120Long-term operating lease liabilities551,507574,065Long-term deferred revenue316,178340,831Long-term debt14,22015,601Other long-term liabilities495,689469,738 Total liabilities3,736,1884,050,355Redeemable non-controlling interest—30,000Stockholders' equity: Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding—— Common stock, $0.01 par value: 400,000 shares authorized; 154,618 and 154,112 shares outstanding, respectively1,5471,541 Capital in excess of par value1,127,1811,211,206 Retained earnings9,278,9508,984,105 Treasury stock, at cost: 2,643 and 3,148 shares, respectively(860,967)(1,025,770) Accumulated other comprehensive income (loss)(241,919)(180,380) Total Synopsys stockholders' equity9,304,7928,990,702Non-controlling interest1092,504 Total stockholders' equity9,304,9018,993,206 Total liabilities, redeemable non-controlling interest and stockholders' equity$ 13,041,089$ 13,073,561(1) Synopsys' first quarter of fiscal year 2025 ended on January 31, 2025 and its fiscal year 2024 ended on November 2, 2024, respectively. For presentation purposes, we refer to the closest calendar month end. Fiscal year 2024 was a 53-week year, which included an extra week in the first quarter. SYNOPSYS, INC. Unaudited Condensed Consolidated Statements of Cash Flows (1) (in thousands)Three Months Ended January 31,20252024 CASH FLOWS FROM OPERATING ACTIVITIES:Net income $ 297,411$ 446,207 Adjustments to reconcile net income to net cash used in operating activities: Amortization and depreciation 47,93462,888 Reduction of operating lease right-of-use assets 25,47324,376 Amortization of capitalized costs to obtain revenue contracts 12,46618,726 Stock-based compensation 186,463180,652 Allowance for credit losses 9,9196,059 Gain on sale of strategic investments —(55,077) Amortization of bridge financing costs 10,4681,000 Deferred income taxes (139,075)(101,332) Other 186(786) Net changes in operating assets and liabilities, net of effects from acquisitions and dispositions:Accounts receivable 30,948(119,571) Inventories (55,852)(60,883) Prepaid and other current assets (103,567)(96,916) Other long-term assets (43,494)(72,096) Accounts payable and accrued liabilities (313,651)(266,704) Operating lease liabilities (23,102)(23,569) Income taxes 86,992(117,798) Deferred revenue (96,974)87,034 Net cash used in operating activities (67,455)(87,790) CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from maturities of short-term investments 19,68424,559 Proceeds from sales of short-term investments 16,411— Purchases of short-term investments (37,269)(25,612) Proceeds from sales of strategic investments —55,696 Purchases of strategic investments (3,288)(822) Purchases of property and equipment, net (40,715)(40,391) Acquisitions, net of cash acquired —(67,827) Proceeds from business divestiture, net of cash divested 23,808— Other (611)— Net cash used in investing activities (21,980)(54,397) CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of debt (1,289)(1,303) Payment of bridge financing and term loan costs —(48,000) Issuances of common stock 14,4179,483 Payments for taxes related to net share settlement of equity awards (124,966)(147,330) Redemption of redeemable non-controlling interest (30,000)— Net cash used in financing activities (141,838)(187,150) Effect of exchange rate changes on cash, cash equivalents and restricted cash (9,676)9,320 Net change in cash, cash equivalents and restricted cash (240,949)(320,017) Cash, cash equivalents and restricted cash, beginning of year, including cash from discontinued operations 3,898,7291,441,187 Cash, cash equivalents and restricted cash, end of period, including cash from discontinued operations 3,657,7801,121,170 Less: Cash, cash equivalents and restricted cash from discontinued operations —4,962 Cash, cash equivalents and restricted cash from continuing operations $ 3,657,780$ 1,116,208 (1) Synopsys' first quarter of fiscal year 2025 and 2024 ended on January 31, 2025 and February 3, 2024, respectively. For presentation purposes, we refer to the closest calendar month end. Fiscal year 2024 was a 53-week year, which included an extra week in the first quarter. Synopsys provides segment information, namely revenue, adjusted segment operating income and adjusted segment operating margin, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting. Synopsys' chief operating decision maker ("CODM") is our Chief Executive Officer. In evaluating our business segments, the CODM considers the income and expenses that the CODM believes are directly related to those segments. The CODM does not allocate certain operating expenses managed at a consolidated level to our business segments and, as a result, the reported operating income and operating margin do not include these unallocated expenses as shown in the table below. These unallocated expenses are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income from continuing operations: SYNOPSYS, INC. Business Segment Reporting (1)(2) (in millions)Three Months EndedJanuary 31, 2025Three Months EndedJanuary 31, 2024 Revenue by segment- Design Automation $ 1,020.2$ 985.3 % of Total 70.1 %65.2 % - Design IP $ 435.1$ 525.7 % of Total 29.9 %34.8 % Adjusted operating income by segment- Design Automation $ 404.7$ 359.5 - Design IP $ 126.5$ 245.7 Adjusted operating margin by segment- Design Automation 39.7 %36.5 % - Design IP 29.1 %46.7 % Total Adjusted Segment Operating Income Reconciliation (1)(2) (in millions)Three Months Ended January 31, 2025Three Months Ended January 31, 2024 GAAP total operating income – as reported $ 251.8$ 352.6 Other expenses managed at consolidated level-Amortization of acquired intangible assets 12.616.7 -Stock-based compensation (3) 186.5165.5 -Non-qualified deferred compensation plan 19.639.4 -Acquisition/divestiture related items (4) 60.730.9 Total adjusted segment operating income $ 531.2$ 605.2 (1) Synopsys manages the business on a long-term, annual basis, and considers quarterly fluctuations of revenue and profitability as normal elements of our business. Amounts may not foot due to rounding. (2) Synopsys' first quarter of fiscal year 2025 and 2024 ended on January 31, 2025 and February 3, 2024, respectively. For presentation purposes, we refer to the closest calendar month end. Fiscal year 2024 was a 53-week year, which included an extra week in the first quarter. (3) The adjustment includes non-GAAP expenses attributable to non-controlling interest and redeemable non-controlling interest. (4) The adjustment excludes the amortization of bridge financing costs entered into in connection with the pending Ansys Merger, and certain divestiture related items that were recorded in interest and other income (expense), net, in our unaudited condensed consolidated statements of income. GAAP to Non-GAAP ReconciliationSynopsys continues to provide all information required in accordance with GAAP but acknowledges evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, Synopsys presents non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Synopsys' operating results in a manner that focuses on what Synopsys believes to be its core business operations and what Synopsys uses to evaluate its business operations and for internal budgeting and resource allocation purposes. This press release includes non-GAAP earnings per diluted share, non-GAAP net income and non-GAAP tax rate for the periods presented. It also includes future estimates for non-GAAP expenses, non-GAAP interest and other income (expense), non-GAAP tax rate, non-GAAP earnings per diluted share and free cash flow. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies. When possible, Synopsys provides a reconciliation of non-GAAP financial measures to their most closely applicable GAAP financial measures. Synopsys is unable to provide a full reconciliation of certain second quarter and full fiscal year 2025 non-GAAP financial targets to the corresponding GAAP financial measures on a forward-looking basis because Synopsys believes that it would not be possible for it to have the required information necessary to quantitatively reconcile such measures with sufficient precision without unreasonable efforts due to, among other things, the potential variability and limited predictability of the excluded adjustment items necessary for a full reconciliation such as certain acquisition/divestiture related items, restructuring charges, tax deduction variability, changes in the fair value of non-qualified deferred compensation plan, and gains (losses) on the sale of strategic investments. For the same reasons, Synopsys is unable to address the probable significance of the unavailable information. Synopsys' management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, as superior to, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, the corresponding GAAP financial measures. Synopsys' management believes presentation of non-GAAP financial measures, when shown in conjunction with the corresponding GAAP financial measures, provides useful information to investors allowing them to view financial and business trends relating to our financial condition and results of operations through the eyes of management. Synopsys' management evaluates and makes decisions about our business operations using both GAAP financial measures and non-GAAP financial measures to help facilitate internal comparisons to Synopsys' historical operating results and forecasted targets, planning and forecasting in subsequent periods and comparisons to competitors' operating results. The following are descriptions of the adjustments made to reconcile non-GAAP financial measures (other than free cash flow, which is defined in the footnote to the Financial Targets table above) to the most directly comparable GAAP financial measures: (i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets, which may include impairment charges from write-downs of acquired intangible assets. Acquired intangible assets include, among other things, core/developed technology, customer relationships, contract rights, trademarks and trade names, and other intangibles related to acquisitions. We amortize the intangible assets over their estimated useful lives. We do not enter into acquisitions on a predictable cycle. The amount of an acquisition's purchase price allocated to intangible assets and their estimated useful lives can vary significantly and are unique to each acquisition. From time to time, we incur impairment charges due to write-downs of acquired intangible assets. We believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets, including impairment charges, provides investors and others with a consistent basis for comparison across accounting periods. We also exclude this item because such expenses are non-cash in nature and we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our core operational performance and liquidity, and ability to invest in research and development and fund future acquisitions and capital expenditures. (ii) Stock-based compensation. Stock-based compensation expenses consist primarily of expenses related to restricted stock units, stock options, employee stock purchase rights and other stock awards, including such expenses associated with acquisitions. We exclude stock-based compensation expense from our non-GAAP financial measures primarily because it is not an expense that typically requires or will require cash settlement by us. Further, the expense for the fair value of the stock-based instruments we utilize may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards and, therefore, is not used by management to assess the core profitability of our business operations. (iii) Acquisition/divestiture related items. In connection with certain of our business combinations and/or divestitures, we incur significant expenses that we would not have otherwise incurred as part of our business operations. These expenses include, among other things, compensation expenses, professional fees and other direct expenses, concurrent restructuring activities and divestiture activities, including employee severance and other exit costs, bridge financing costs, costs related to integration activities, debt forgiveness, changes to the fair value of contingent consideration related to the acquired company, and amortization of the fair value difference of below-market value assets arising from arrangements entered into or acquired in conjunction with an acquisition. We also recognize the gains and losses from the mark-up of equity or cost method investments to fair value upon obtaining control through acquisition. We exclude these items because they are related to acquisitions and divestitures and have no direct correlation to the core operation of our business. Further, because we do not acquire or divest businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, we believe it is useful to exclude such expenses when looking for a consistent basis for comparison across accounting periods. (iv) Restructuring charges. We initiate restructuring activities to align our costs to our operating plans and business strategies based on then-current economic conditions, and such activities have a specific and defined term. Restructuring costs generally include severance and other termination benefits related to voluntary retirement programs, involuntary headcount reductions and facilities closures. Such restructuring costs include elimination of operational redundancy, permanent reductions in workforce and facilities closures and, therefore, are not considered by us to be a part of the core operation of our business and are not used by management when assessing the core profitability and performance of our business operations. (v) Gains (losses) on the sale of strategic investments. We exclude gains and losses on the sale of equity investments in privately held companies because we do not believe they are reflective of our core business and operating results. (vi) Deferred compensation. We exclude changes in the fair value of our non-qualified deferred compensation plan because we do not use these to assess the core profitability of our business operations. (vii) Income tax effect of non-GAAP pre-tax adjustments. Excluding the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effect on net income. We utilize an annual non-GAAP tax rate in calculating non-GAAP financial measures to provide better consistency across interim reporting periods by eliminating the effects of certain non-recurring and other period-specific items, which can vary in size and frequency and do not necessarily reflect our normal operations, and to more closely align our tax rate with our expected geographic earnings mix. This annual non-GAAP tax rate is based on an evaluation of our historical and projected mix of U.S. and international profit before tax, taking into account the impact of non-GAAP adjustments, U.S. tax law changes, as well as other factors such as our current tax structure, existing tax positions and expected recurring tax incentives. Based on these considerations, we have elected to adopt a non-GAAP tax rate of 16% for fiscal year 2025. INVESTOR CONTACT:Trey CampbellSynopsys, Inc.650-584-4289Synopsys-ir@ EDITORIAL CONTACT:Cara WalkerSynopsys, Inc.650-584-5000corp-pr@ View original content to download multimedia: SOURCE Synopsys, Inc. Sign in to access your portfolio
