Synopsys Stock Gets Wings After Impressive Q2 Performance

Synopsys, Inc. (NASDAQ: SNPS) announced impressive results for the second quarter of fiscal 2022 (ended April 30, 2022). Its earnings beat the consensus estimate of 5.5% and its revenue exceeded expectations by 1.5%.

Better-than-expected results and healthy projections bolstered market sentiments for the stock. Shares of the $41.7 billion software company rose 3.9% in Wednesday’s extended trading session. In the normal trading session, the stock was down 3.6%.

Financial Highlights

Adjusted earnings were $2.50 per share in the second quarter, above the consensus estimate of $2.37 per share and the company’s guidance of $2.35 to $2.40 per share. stock. Year-over-year, net income jumped 47.1% on healthy growth in its businesses, partially offset by higher costs and expenses.

Revenue for the quarter was $1.28 billion, above the consensus estimate of $1.26 billion and the company’s projection of $1.24 billion to $1.27 billion. Additionally, revenue grew 24.9% year-on-year driven by an 11.6% increase in time-based revenue, a 61% increase in upfront revenue, and 31.5% increase in maintenance and service.

On a segment basis, Semiconductor & System Design revenue increased 25.4% year-on-year to $1.17 billion and Software Integrity revenue increased 20.2% to $112.9 million. dollars.

During the quarter, total revenue cost increased 18.1% to $252.8 million and total operating expenses increased 7.6% to $662.7 million. Total segment operating profit increased 48.2% year-over-year to $470.2 million, while the corresponding margin increased 580 basis points to 36.8%.

Balance sheet and cash flow

Coming out of the second quarter, Synopsys’ cash and cash equivalents of $1,573.6 million increased 9.8% from the end of fiscal 2021 (ended October 31, 2021). Long-term debt decreased by 5.3% to $23.8 million.

During the quarter, the company generated net cash of $905.7 million from operating activities, up 29.3% year-over-year. Capital expenditures were $67.4 million compared to $44.1 million in the prior year quarter.

Screenings

For the third quarter of fiscal 2022 (ending July 2022), Synopsys forecasts revenue of $1.21 billion to $1.24 billion and adjusted earnings of $2.01 to $2.06 per share.

For fiscal 2022 (ending October 31, 2022), the company is forecasting revenue of $5 billion to $5.05 billion, up from the previous projection of $4.775 billion to $4.825 billion. Adjusted earnings per share are expected to be $8.63 to $8.70 per share, above the range of $7.85 to $7.92 per share anticipated earlier.

Management’s point of view

Synopsys Chairman and CEO Aart de Geus said, “Our financial momentum is driven by three drivers: an unparalleled product portfolio with groundbreaking new innovations, robust demand from the semiconductor market and electronics and excellent operational execution.

Capital deployment

Synopsys used $109.1 million to make acquisitions in the second quarter, $75.9 million to pay down debt and $500 million to repurchase stock.

The Taking of Wall Street

The Street is bullish on SNPS and has a strong buy consensus rating based on three buys. Synopsys’ price prediction is set at $379.67, reflecting a potential upside of 39.29% from current levels.

Shares of Synopsys are up 35.2% over the past year.

Blogger sentiment

The ratings of financial bloggers tracked by TipRanks are 100% bullish on SNPS, against an industry average of 68%.

Conclusion

According to Aart de Geus, Synopsis has strong growth potential as its customers “continue to prioritize investments to enable the new era of ‘everything smart’.” Along with this, the company has the capabilities to effectively deal with geopolitical and cost issues.

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