Synopsys’ (SNPS) Q2 Earnings and Revenues Surpass Estimates

Synopsys Inc.’s SNPS second-quarter fiscal 2020 non-GAAP earnings of $1.22 per share beat the Zacks Consensus Estimate by 23.2%. Moreover, the figure improved 5.2% year over year.

Further, revenues increased 3% year over year to $861.3 million and surpassed the Zacks Consensus Estimate by 2.9%.

Growth in work-from-home and e-learning trends induced by the coronavirus pandemic is driving demand for bandwidth, which drove the company’s fiscal second-quarter performance. Moreover, strong traction for Synopsys’ Fusion Compiler product boosted the top line.

However, supply-chain disruptions stemming from the pandemic are a headwind.

Synopsys, Inc. Price, Consensus and EPS Surprise


Synopsys, Inc. Price, Consensus and EPS Surprise

Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote


Quarter in Detail

Time-Based Product revenues (68.5% of total revenues) of $590.1 million were up 5.7% year over year. Moreover, Maintenance and Service revenues (15.2%) improved 5.2% to $141.5 million. However, Upfront Product revenues (15.1%) declined 9.5% to $129.8 million.

Segment wise, Semiconductor & System Design revenues (89.7% of total) were $773 million, up 2.7% year over year. The upside was driven by strong growth in IP. Within the same, EDA revenues (59% of revenues) were $511.4 million and IP & Systems Integration revenues (30% of revenues) were $260 million.

Software Integrity revenues were 88.3 million, contributing approximately 10% to the top line in the reported quarter.

Geographically, Synopsys’ revenues in North America (47% of total) were $405.8 million, while that in Europe (10%) was $89.3 million. Revenues from Japan (9%), Korea (12%) and the Asia Pacific (21%) were $80.5 million, $105.3 million and $180.4 million, respectively.

Non-GAAP operating margin was 25.7%, expanding 60 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 27.9%, up 30 bps year over year, while Software Integrity margin expanded 320 bps year over year to 13.3%.

Balance Sheet & Cash Flow

Synopsys had cash and cash equivalents of $856.4 million as of Apr 30, compared with $700.4 million as of Jan 31.

Total debt came in at $235.8 million in the reported quarter compared with $331.1 million in the previous quarter.

Operating cash flow for the quarter was $9.8 million, flat on a sequential basis.


For third-quarter fiscal 2020, the company’s revenues are expected to be $875-$905 million. The Zacks Consensus Estimate for revenues is currently pegged at $931.8 million, which indicates growth of 9.3% from the year-ago quarter’s reported figure.

Management expects non-GAAP earnings between $1.33 and $1.38 per share. The consensus mark for earnings is pegged at $1.42 cents, which suggests year-over-year growth of 20.3%.

Non-GAAP expenses are anticipated to be $640-$650 million.

For fiscal 2020, revenues are now projected in the range of $3.60-$3.65 billion. The Zacks Consensus Estimate for fiscal 2020 is pegged at $3.62 billion, which indicates year-over-year growth of 7.6%.

 Non-GAAP earnings for the period are expected between $5.21 and $5.28 per share. The consensus mark for 2020 earnings is pegged at $5.21, which suggests growth of 14.3% from the year-ago quarter’s figure.

Synopsys still expects operating-margin expansion of 2 percentage points for the fiscal year.

For fiscal 2020, operating cash flow is expected between $815 million and $840 million.

Zacks Rank & Stocks to Consider

Synopsys currently carries a Zacks Rank #2 (Buy).

NVIDIA NVDA, Workday WDAY and Okta OKTA are some stocks worth considering in the broader computer and technology sector. All the three stocks carry the same rank as of Synopsis. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

NVIDIA, Workday and Okta are set to report quarterly results on May 21, May 26 and May 28, respectively.

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