Synopsys, Inc. Net Income jumped on 217% while EBITDA Margin decreased slightly on 1.5 pp from 19.7% to 18.2%
12/05/2018 • About Synopsys, Inc. (
$SNPS) • By InTwits
Synopsys, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Synopsys, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 4.1% while average EBITDA Margin was 20.3% for the sames years. In FY2018 SBC/Revenue was even higher: 4.5%
- Synopsys, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.5%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $53m in 2018, $135m in 2017, $67m in 2016, $37m in 2015, $32m in 2014
- In the last 5 years the company invested considerably less than D&A: $426m vs. $1,010m. In FY2018 this situation was still the same: CAPEX was 99 while D&A was 209
- The company has business model with low profitability: ROIC is 9.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Synopsys, Inc.'s Revenue surged on 14.5%. Revenue growth showed small slowdown in FY18Q4 - it was 14.1% YoY. Revenue growth was accelerating on average by 2.3 pp per annum in the last 5 years. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018. EBITDA Margin declined at -0.81 pp per annum in the last 5 years.
Gross Margin showed almost no change in FY2018. SG&A as a % of Revenue increased slightly on 0.99 pp from 27.4% to 28.4% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue bottomed in FY2017 at 27.4%. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 0.51 pp from 4.0% to 4.5% in FY2018.
Net Income margin increased on 8.8 pp from 5.0% to 13.9% in FY2018.
Investments (CAPEX, working capital and M&A)
Synopsys, Inc.'s CAPEX/Revenue was 3.2% in FY2018. The company showed small CAPEX/Revenue decline of 0.71 pp from 3.9% in FY2015 to 3.2% in FY2018. For the last three years the average CAPEX/Revenue was 2.8%. During FY2014-FY2018 CAPEX as a % of Revenue bottomed in FY2017 at 2.6%.
Accounts receivable as a % of Revenue increased slightly on 1.2 pp from 16.6% to 17.8% in FY2018. Inventories as a % of Revenue increased slightly on 1.7 pp from 2.3% to 3.9% in FY2018.
Return on investment
The company operates at good ROE (12.8%) while ROIC is low (9.7%). ROIC showed almost no change in FY2018. ROE increased on 8.6 pp from 4.2% to 12.8% in FY2018. ROIC grew at 0.48 pp per annum in FY2014-FY2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -0.4x and Debt / EBITDA is 0.8x. Debt jumped on 226% while cash dropped on 31.0%.
Synopsys, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 23.1x. Synopsys, Inc. has no short term refinancing risk: cash is higher than short term debt (210.3%).
Average interest expence paid by the company was 3.3% in FY2018.
Management team
Synopsys, Inc.'s CEO is Aart J De Geus. Aart J De Geus is a founder and has 7 years tenure with the company. CEO total compensation was
$14,865,960 in FY2018 which included
$1,070,200 salary. The company's CFO Trac Pham has spent 4 years with the company.
0.69% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 13,245 employees. The number of employees jumped on 13.3%. Average revenue per employee in FY2018 was
$235,640 and it increased slightly on 1.1%.
Financial and operational results
FY ended 10/31/2018
Synopsys, Inc. ($SNPS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,057 | 2,242 | 2,423 | 2,725 | 3,121 | 14.5% |
| Gross Profit | 1,601 | 1,723 | 1,880 | 2,071 | 2,385 | 15.2% |
| SG&A | 608 | 640 | 668 | 746 | 886 | 18.7% |
| EBITDA | 442 | 478 | 524 | 537 | 569 | 6.0% |
| EBIT | 249 | 266 | 317 | 348 | 360 | 3.6% |
| Interest expence | 2 | 3 | 4 | 7 | 16 | 113.7% |
| Tax | 13 | 56 | 63 | 247 | -69 | -128.0% |
| Net Income | 259 | 226 | 267 | 137 | 433 | 216.7% |
| Stock Based Compensation | 79 | 86 | 98 | 108 | 140 | 29.3% |
Balance Sheet
|
|---|
| Cash | 986 | 836 | 977 | 1,048 | 723 | -31.0% |
| Accounts Receivable | 327 | 386 | 439 | 451 | 554 | 22.8% |
| Inventory | | | | 62 | 122 | 97.8% |
| Short Term Debt | 30 | 205 | 205 | 10 | 344 | 3,364.0% |
| Long Term Debt | 45 | 0 | 0 | 134 | 126 | -6.4% |
Cash flow
|
|---|
| Capex | 103 | 87 | 67 | 70 | 99 | 40.7% |
Ratios
|
|---|
| Revenue growth | 4.9% | 9.0% | 8.0% | 12.5% | 14.5% | |
| EBITDA growth | 1.8% | 8.3% | 9.6% | 2.4% | 6.0% | |
|
|---|
| Gross Margin | 77.8% | 76.9% | 77.6% | 76.0% | 76.4% | 0.4% |
| EBITDA Margin | 21.5% | 21.3% | 21.6% | 19.7% | 18.2% | -1.5% |
| EBIT Margin | 12.1% | 11.9% | 13.1% | 12.8% | 11.5% | -1.2% |
| SG&A, % of revenue | 29.6% | 28.5% | 27.6% | 27.4% | 28.4% | 1.0% |
| SBC, % of revenue | 3.9% | 3.9% | 4.0% | 4.0% | 4.5% | 0.5% |
| Net Income Margin | 12.6% | 10.1% | 11.0% | 5.0% | 13.9% | 8.8% |
| CAPEX, % of revenue | 5.0% | 3.9% | 2.8% | 2.6% | 3.2% | 0.6% |
|
|---|
| ROIC | 8.2% | 8.2% | 9.4% | 10.1% | 9.7% | -0.4% |
| ROE | 8.9% | 7.3% | 8.4% | 4.2% | 12.8% | 8.6% |
| Net Debt/EBITDA | -2.1x | -1.3x | -1.5x | -1.7x | -0.4x | 1.2x |
| Interest expence / Average debt | 2.5% | 2.0% | 1.8% | 4.2% | 3.3% | -0.9% |
People
|
|---|
| Insider ownership | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | 0.0% |
| Employees | 9,436 | 10,284 | 10,669 | 11,686 | 13,245 | 13.3% |
| Revenue/Employee, th. $ | 218 | 218 | 227 | 233 | 236 | 1.1% |
Synopsys, Inc. ($SNPS) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 769 | 777 | 780 | 795 | | 17.9% | 14.2% | 12.1% | 14.1% |
| EBITDA | 152 | 180 | 117 | 120 | | 3.6% | 77.8% | -23.0% | -12.1% |
| Net Income | -4 | 102 | 79 | 254 | | -104.3% | 92.2% | -32.0% | |
Balance Sheet
|
|---|
| Cash | 606 | 571 | 741 | 723 | | -26.8% | -42.4% | -35.8% | -31.0% |
| Short Term Debt | 441 | 397 | 498 | 344 | | 149.0% | 42.8% | 67.0% | 3,364.0% |
| Long Term Debt | 131 | 128 | 124 | 126 | | -7.9% | -8.7% | -10.2% | -6.4% |
Ratios
|
|---|
| Gross Margin | 76.5% | 77.0% | 76.2% | 76.0% | | 0.3% | 0.8% | 0.6% | -0.0% |
| EBITDA Margin | 19.7% | 23.2% | 15.1% | 15.2% | | -2.7% | 8.3% | -6.9% | -4.5% |
| Net Income Margin | -0.5% | 13.2% | 10.2% | 32.0% | | -13.7% | 5.4% | -6.6% | 49.2% |
Peers in Application Software
Below we provide Synopsys, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| Synopsys, Inc. ($SNPS) | | 9.0% | 8.0% | 12.5% | 14.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.3% |
|---|
| Synopsys, Inc. ($SNPS) | 77.8% | 76.9% | 77.6% | 76.0% | 76.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Synopsys, Inc. ($SNPS) | 21.5% | 21.3% | 21.6% | 19.7% | 18.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| Synopsys, Inc. ($SNPS) | 5.0% | 3.9% | 2.8% | 2.6% | 3.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| Synopsys, Inc. ($SNPS) | 8.2% | 8.2% | 9.4% | 10.1% | 9.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.2x | -0.9x | -0.9x | -0.8x | -0.7x |
|---|
| Synopsys, Inc. ($SNPS) | -2.1x | -1.3x | -1.5x | -1.7x | -0.4x |
