Release Date: December 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Synopsys Inc (SNPS, Financial) achieved a record revenue of $6.13 billion in FY24, marking a 15% year-over-year growth.
- The company reported a significant EPS growth at a 24% CAGR over the last five years.
- Synopsys Inc (SNPS) is expanding its focus on growth segments, highlighted by the sale of its Software Integrity business and the pending acquisition of ANSYS.
- The company is leveraging AI across its product portfolio, with Synopsys.ai solutions delivering substantial customer results, including up to 4x improvement in hardware utilization.
- Synopsys Inc (SNPS) has a strong backlog of $8.1 billion, indicating high visibility and stability in future revenue streams.
Negative Points
- The company anticipates macroeconomic uncertainties, particularly in China, which could impact growth.
- Synopsys Inc (SNPS) is preparing for the largest acquisition in its history, which may introduce integration challenges.
- The company's guidance for FY25 reflects a more conservative outlook, with expected revenue growth of 10.1% to 11.1%, lower than previous years.
- There is a noted deceleration in the Chinese market due to economic conditions and expanding restrictions.
- The first half of FY25 is expected to be weaker due to fewer business days and timing of customer pull-downs, leading to a more back-loaded revenue profile.
Q & A Highlights
Q: Can you explain the rationale behind the lower growth guidance for FY25 compared to previous years, and how the pending ANSYS acquisition might impact this?
A: Sassine Ghazi, President and CEO, explained that the guidance reflects a balanced view considering market dynamics, macro uncertainties, particularly in China, and preparations for the ANSYS acquisition. The company is still guiding for 11.5% to 12.5% growth, following a 15% growth in FY24.
Q: With an $8.1 billion backlog, how do you view the visibility and potential challenges for the next 12 months?
A: Sassine Ghazi noted that the backlog indicates business health, with no significant depletion despite strong FY24 performance. While the company is cautious about foundry investments and geopolitical factors, it continues to invest in IP across various foundries.
Q: Can you clarify the seasonality and sequential decline in Q1 guidance, especially considering the strong Q4 performance?
A: Shelagh Glaser, CFO, explained that the fiscal year change results in eight fewer days in Q1, impacting revenue by about $80 million. Additionally, Q1 is a low quarter for IP pull-downs, with a stronger second half expected.
Q: How do the recent U.S. export control updates on EDA software impact your FY25 outlook?
A: Sassine Ghazi confirmed that some customers were added to the entity list, and technology restrictions were updated. These factors are fully incorporated into the FY25 guidance.
Q: How are you preparing for growth in FY25 and beyond, especially with the ANSYS acquisition?
A: Sassine Ghazi highlighted efforts to scale operations and modernize engineering workflows, leveraging technology to enhance efficiency and productivity. These initiatives are part of a broader strategy to support growth and innovation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
