Synopsys Q3 Soft on IP, Closes Ansys Deal

This article first appeared on GuruFocus.

Synopsys (NASDAQ:SNPS) just wrapped up a quarter that CEO Sassine Ghazi called transformational, thanks to the closing of its Ansys acquisition. But the numbers also showed some bumps along the way. Revenue came in at $1.74 billion with non-GAAP EPS of $3.39, dragged down by weakness in the IP business.

Ghazi pointed to three culprits: tougher export restrictions that hit design starts in China, issues at a major foundry customer, and some internal resource bets that didn’t pay off. While Design Automation revenue jumped 23% to $1.31 billion, IP revenue fell 8% to $428 milion.The management said it’s pivoting resources to faster-growing areas and taking a more cautious approach to Q4.

The Ansys deal gives Synopsys a much bigger footprint, moving it from silicon to systems, as Ghazi put it. Backlog now sits at $10.1 bilion, including Ansys. CFO Shelagh Glaser guided for Q4 revenue of $2.23 billion$2.26 billion and non-GAAP EPS of $2.76$2.80, with full-year sales expected at $7.03 billion$7.06 billion.

Even with IP headwinds and a trimmed outlook, management said record revenue is still on the table this year and that Ansys will help fuel long-term growth and diversification.