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Synopsys' (SNPS) Q2 Earnings and Revenues Beat Estimates

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Synopsys Inc.’s SNPS second-quarter fiscal 2021 non-GAAP earnings of $1.70 per share beat the Zacks Consensus Estimate by 11.8%. Moreover, the figure improved 39.3% year over year.

Further, revenues increased 18.9% year over year to $1.02 billion and surpassed the Zacks Consensus Estimate by 3.6%, driven by growth across all its business segments.

The company is benefiting from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized, and secure chips and systems are gaining strong momentum, driving Synopsys’ business.

Moreover, robust adoption of the company’s Verification Continuum Platform and Fusion Compiler product within the Fusion Design Platform was a major growth driver in the second quarter.

Synopsys, Inc. Price, Consensus and EPS Surprise

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

In the license type revenue group, Time-Based Product revenues (63.4% of total revenues) of $648.8 million were up 9.9% year over year. Maintenance and Service revenues (16.2%) improved 17.6% to $166.4 million. Upfront Product revenues (20.4%) grew 15.7% to $209.1 million.

Segment-wise, Semiconductor & System Design revenues (91% of total revenues) were $930.4 million, up 20.4% year over year. Within the segment, EDA revenues (57% of revenues) were $587.6 million and IP & Systems Integration revenues (33% of revenues) came in at $339.6 million. Software Integrity revenues totaled $93.9 million, contributing approximately 9% to the top line in the reported quarter.

Notably, the company updated its reportable geographical segments in the previous quarter. Geographically, Synopsys’ revenues in North America (47% of total) were $479.2 million and $106.2 million in Europe (10%). Revenues from Korea (10%), China (12%) and Other (20%) came in at $105.4 million, $125.5 million and $208.1 million, respectively.

Non-GAAP operating margin was 31%, expanding 530 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 33.2%, up 610 bps year over year, while Software Integrity margin contracted 430 bps year over year to 9%.

Balance Sheet & Cash Flow

Synopsys had cash and cash equivalents of $1.46 billion as of Apr 30, 2021, compared with $1.02 billion as of Jan 31, 2021.

Total long-term debt came in at $25.6 million in the reported quarter, flat sequentially. Outstanding debt of $116 million was lower than the previous quarter’s $123 million.

Operating cash flow in the first quarter was $526 million.

Guidance

For third-quarter fiscal 2021, the company’s revenues are expected between $1.03 billion and $1.06 billion.

Management expects non-GAAP earnings between $1.75 and $1.80 per share.

Non-GAAP expenses are anticipated to be $707-$717 million.

For fiscal 2021, management projects revenues of $4.04-$4.09 billion.

Non-GAAP earnings for the fiscal year are expected between $6.38 and $6.45 per share.

Operating cash flow is expected between $1.25 billion and $1.30 billion.

Further, management expects strong demand for the company’s advanced solutions and cloud computing services along with growing customer acceptance for its new capabilities to drive growth for its robust product portfolio.

Zacks Rank and Stocks to Consider

Synopsys currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Silicon Motion Technology Corporation SIMO, Lam Research Corporation LRCX and LG Display Co., Ltd. LPL, all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Silicon Motion Technology Corporation, Lam Research and LG Display is currently pegged at 8%, 32.8% and 32.56%, respectively.

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