Synopsys Delivers Strong Financial Performance in Fiscal 2024

Synopsys, a leading provider of electronic design automation (EDA) solutions and semiconductor intellectual property (IP), reported impressive financial results for fiscal year 2024. The company’s revenue grew 15% year-over-year to $6.1 billion, driven by increased demand across all its product groups and geographies.

Financial Highlights

• Revenues increased 15% to $6.1 billion, up from $5.3 billion in fiscal 2023. This growth was seen across the company’s two main business segments - Design Automation and Design IP.

• Total cost of revenue and operating expenses increased 18% to $4.8 billion, primarily due to higher employee-related costs from headcount increases.

• Operating income grew 6% to $1.4 billion, reflecting the company’s ability to manage costs while driving top-line growth.

• Net income from discontinued operations (the Software Integrity business) was $821.7 million, a significant increase from $2.8 million in fiscal 2023, mainly due to the gain on the divestiture of this business.

• Diluted earnings per share from continuing operations increased to $9.25, up from $7.91 in the prior year.

Segment Performance

The Design Automation segment, which includes the company’s EDA solutions, saw a 12% increase in revenue to $4.2 billion. Adjusted operating margin for this segment improved to 39%, up from 37% in fiscal 2023. The growth was driven by increased demand for the company’s digital, custom and FPGA IC design software, verification products and system integration offerings.

The Design IP segment, which provides interface, foundation, security and embedded processor IP, experienced a 24% revenue increase to $1.9 billion. Adjusted operating margin for this segment expanded to 38%, up from 33% in the prior year. This strong performance was enabled by higher demand for the company’s IP products.

Pending Ansys Acquisition

A key development during the year was Synopsys’ announcement of its plan to acquire Ansys, a provider of engineering simulation and analysis software, in a cash-and-stock transaction valued at approximately $35 billion. This transformative acquisition, expected to close in the first half of calendar year 2025, will significantly expand Synopsys’ total addressable market and product portfolio.

To finance the Ansys acquisition, Synopsys has secured a $10.6 billion bridge commitment and a $4.3 billion term loan facility. The company has also suspended its $1.5 billion stock repurchase program until it reduces its expected debt levels post-acquisition.

Macroeconomic and Geopolitical Impacts

Synopsys acknowledged the uncertain macroeconomic environment, including the effects of global inflationary pressures, potential economic slowdowns, and geopolitical tensions. While the company’s time-based business model has provided stability, it expects a challenging near-term growth environment, particularly in China, due to these factors as well as export control regulations.

Outlook and Strategy

Despite the near-term headwinds, Synopsys remains confident in its long-term growth prospects. The company’s strategy is focused on maintaining its leadership in Design Automation, expanding its Design IP offerings, and continuing to broaden its product portfolio and total addressable market.

The pending Ansys acquisition is a key part of this strategy, as it will allow Synopsys to offer a more comprehensive suite of solutions to its customers, from chip design to system-level engineering. The combined company will be well-positioned to capitalize on the growing demand for advanced semiconductor and system-level design and analysis tools.

Conclusion

Synopsys delivered another year of strong financial performance in fiscal 2024, demonstrating the resilience of its business model and the strength of its product offerings. The company’s pending acquisition of Ansys represents a transformative move that will significantly expand its capabilities and market reach. While near-term macroeconomic and geopolitical challenges may impact growth, Synopsys remains focused on executing its long-term strategy and delivering value to its customers and shareholders.