Synopsys (SNPS) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 revenue of $1.53 billion, up 13% year-over-year, with strong growth across products and geographies.

• Non-GAAP EPS rose 27% year-over-year to $3.43, exceeding guidance; GAAP EPS was $2.73.

• Operating income increased 20% to $360.2 million; net income from continuing operations was $425.9 million.

• The company is divesting its Software Integrity business and expects the sale to close in H2 2024.

• Pending $35 billion acquisition of Ansys, expected to close in H1 2025, will expand TAM and system design capabilities.

Financial highlights

• Q3 total revenue: $1.53 billion (+13% YoY); Design Automation: $1.06 billion (+6% YoY); Design IP: $463 million (+32% YoY).

• Non-GAAP operating margin: 40% (up 3.6 points YoY); Design Automation margin: 41.5%; Design IP margin: 36.7%.

• GAAP EPS: $2.73; Non-GAAP EPS: $3.43; net income for nine months: $1.15 billion.

• Operating cash flow for nine months: $844 million; cash and short-term investments: ~$2 billion.

• Backlog at $7.9 billion, up from $6.5 billion YoY.

Outlook and guidance

• FY2024 revenue guidance: $6.105–$6.135 billion, up 15% YoY; Q4 revenue: $1.614–$1.644 billion.

• FY2024 non-GAAP EPS: $13.07–$13.12 (up 24% YoY); GAAP EPS: $9.71–$9.85.

• FY2024 non-GAAP operating margin targeted at ~38.5%; free cash flow projected at ~$1.1 billion.

• Long-term objectives for the combined company: double-digit revenue growth, mid-40s non-GAAP operating margins, high-teens non-GAAP EPS growth.

• Management notes near-term headwinds in China due to macroeconomic and regulatory factors.