Synopsys

’

SNPS

third-quarter fiscal 2021 non-GAAP earnings of $1.81 per share beat the Zacks Consensus Estimate by 3 cents. Moreover, the figure improved 4% year over year.

Further, revenues surged 96% year over year to $1.06 billion and surpassed the Zacks Consensus Estimate $1.04 billion, driven by growth across all its business segments.

The company is benefiting from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized, and secure chips and systems are gaining strong momentum, driving Synopsys’ business.

Moreover, robust adoption of the company’s Verification Continuum Platform and Fusion Compiler product within the Fusion Design Platform was a major growth driver during the third quarter.

Quarter in Detail

In the license type revenue group, Time-Based Product revenues (63% of total revenues) of $665.6 million were up 8.7% year over year. Maintenance and Service revenues (18%) improved 33.4% to $188.6 million. However, Upfront Product revenues (19%) marginally declined to $203.3 million from the year-ago quarter’s $210.9 million.

Segment wise, Semiconductor & System Design revenues (91% of total revenues) were $959.1 million, up 10.2% year over year. Within the segment, EDA revenues (56% of revenues) were $590.3 million and IP & Systems Integration revenues (34% of revenues) came in at $363.8 million.

Software Integrity revenues totaled $98 million, contributing approximately 9% to the top line in the reported quarter.

Geographically, Synopsys’ revenues in North America (46% of total) were $487 million and $112.9 million in Europe (11%). Revenues from Korea (10%), China (16%) and Other (17%) came in at $110.5 million, $164.2 million and $182.6 million, respectively.

Non-GAAP operating margin was 31.9%, contracting 170 basis points (bps) year over year. Semiconductor & System Design delivered an adjusted operating margin of 34.3%, shrinking 110 bps year over year, while Software Integrity margin contracted 700 bps year over year to 8.8%.

Balance Sheet & Cash Flow

Synopsys had cash and short-term investments of $1.53 billion as of Jul 31, 2021, compared with $1.46 billion as of Apr 30, 2021.

Total long-term debt came in at $24.8 million in the reported quarter, down slightly from $25.6 million as of Apr 30.

Operating cash flow in the second quarter was $422 million. During the first nine months of fiscal 2021, the company generated operating cash flow of $1.12 billion.

Guidance

For fourth-quarter fiscal 2021, the company’s revenues are expected between $1.138 billion and $1.168 billion.

Management estimates non-GAAP earnings between $1.75 and $1.80 per share.

Non-GAAP expenses are anticipated to be $805-$815 million.

For fiscal 2021, management projects revenues of $4.19-$4.22 billion.

Non-GAAP earnings for the fiscal year are expected between $6.78 and $6.83 per share.

Operating cash flow is predicted to be approximately $1.35 billion.

Further, management anticipates strong demand for the company’s advanced solutions and cloud computing services, along with growing customer acceptance, for its new capabilities to drive growth for its robust product portfolio.

Zacks Rank & Key Picks

Currently, Synopsys carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include

Microsoft


MSFT

,

Cadence Design Systems


CDNS

and

Texas Instruments


TXN

, all carrying a Zacks Rank of 2 (Buy), at present. You can see


the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here


.

The long-term earnings growth rate for Microsoft, Cadence Design and Texas Instruments is currently pegged at 11.5%, 11.7% and 9.3%, respectively.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $2.4 trillion by 2028 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Recommendations from previous editions of this report have produced gains of +205%, +258% and +477%. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.

Click to get this free report

To read this article on Zacks.com click here.