Synopsys Inc. (NASDAQ:SNPS)

The financial data reveals several notable trends in the valuation and composition of intangible assets over the six-year period ending October 31, 2024. Overall, the total of goodwill and intangible assets experienced growth from 2019 through 2023, followed by a decline in 2024.

Goodwill

Goodwill increased steadily from approximately $3.17 billion in 2019 to a peak of about $4.07 billion in 2023, indicating perhaps acquisitions or revaluations contributing to its growth. However, in 2024, goodwill decreased significantly to about $3.45 billion, suggesting possible impairment or divestitures.

Core/Developed Technology

This asset category showed a consistent upward trend from about $792 million in 2019 to roughly $1.14 billion in 2023, reflecting investments or capitalizations in technology development. Notably, in 2024 the value declined sharply to approximately $904 million, indicating amortization effects or asset write-downs.

Customer Relationships

Values for customer relationships also increased year over year from $359 million in 2019 to a high of $463 million in 2023, reinforcing the significance of this intangible asset in the company's portfolio. However, a notable reduction occurred in 2024, dropping to around $314 million.

Contract Rights Intangible

The value of contract rights remained relatively stable across the years, fluctuating slightly within the range of roughly $176 million to $195 million, with a mild downward shift in 2024.

Trademarks and Trade Names

Trademarks and trade names values were steady around $43 million to $53 million between 2019 and 2023, but experienced a substantial decline to about $13 million in 2024, highlighting a possible impairment, disposal, or reclassification.

In-Process Research and Development (IPR&D)

This category showed minimal and sporadic values, with slight presence only during 2019 and 2020, and no recorded amounts thereafter, hinting at an absence of ongoing capitalized in-process research and development projects or changes in accounting treatment.

Capitalized Software Development Costs

There was a gradual increase in capitalized software development costs from approximately $40 million in 2019 to $51 million in 2023, suggesting ongoing investment in software assets. Data for 2024 was not provided.

Intangible Assets, Gross Carrying Amount

The gross carrying amount of intangible assets increased steadily from $1.42 billion in 2019 to $1.90 billion in 2023, indicating asset acquisitions or capitalizations. A decrease to about $1.41 billion in 2024 was observed, consistent with the decline in various intangible asset categories.

Accumulated Amortization and Impairment

Accumulated amortization and impairment consistently increased in magnitude (more negative) from approximately -$1.14 billion in 2019 to -$1.52 billion in 2023, reflecting ongoing amortization and potential impairments. In 2024, this figure decreased in absolute value to about -$1.21 billion, possibly due to asset disposals, impairments write-offs, or reclassifications.

Intangible Assets, Net Amount

The net intangible assets fluctuated during the period, starting at $279 million in 2019 and moving to a high of about $386 million in 2022. The subsequent years saw a decline to $374 million in 2023 and a steeper drop to $195 million in 2024, signaling a significant reduction in the book value of intangible assets after amortization and impairment considerations.

In summary, the data outlines a general trend of growth in goodwill and intangible assets from 2019 through 2023, with a marked reversal occurring in 2024 characterized by decreases across multiple categories including goodwill, core technology, customer relationships, trademarks, and net intangible assets. The accumulated amortization and impairment also decreased in absolute terms in 2024, suggesting that impairments, disposals, or reclassifications played a significant role in the asset base reduction during that year. These trends may reflect strategic changes, asset impairments, or shifts in accounting policies impacting the reported valuations.

The analysis of the financial data over the reported periods reveals several key trends in both reported and goodwill adjusted figures.

Total Assets

The reported total assets demonstrate a consistent upward trend from 6,405,160 thousands US$ in 2019 to 13,073,561 thousands US$ in 2024, indicating substantial growth over five years.

The adjusted total assets also show a steady increase, rising from 3,233,981 thousands US$ in 2019 to 9,624,711 thousands US$ in 2024. Although the adjusted base is significantly lower than the reported figures, the proportionate growth is similarly substantial, reflecting sizable asset revaluation when goodwill and similar adjustments are excluded.

Stockholders' Equity

The reported total stockholders’ equity similarly grows each year, from 4,083,013 thousands US$ in 2019 to 8,990,702 thousands US$ in 2024. This continual increase reflects strengthening equity and potentially retained earnings over the timeframe.

The adjusted total stockholders’ equity, however, starts much lower at 911,834 thousands US$ in 2019, increasing steadily to 5,541,852 thousands US$ in 2024. This metric illustrates a pronounced growth trajectory, with accelerated increases observed particularly after 2020, which may point to changes in goodwill impairments or reclassifications impacting equity adjustments.

Overall, the reported data and adjusted data exhibit consistent growth patterns across the analyzed periods. The difference between reported and adjusted figures highlights the significant presence of goodwill or intangible assets, which when excluded, still demonstrate robust underlying asset and equity growth. The marked increase in the adjusted equity figure in the later years indicates a positive shift in the company's core net asset base, independent of goodwill valuations.

An analysis of the financial ratios over the six-year period reveals several noteworthy trends in operational efficiency, financial leverage, and profitability, both on a reported and goodwill-adjusted basis.

Total Asset Turnover

The reported total asset turnover ratio experienced a gradual decline from 0.52 in 2019 to a low of 0.46 in 2020, followed by modest fluctuations and a brief peak of 0.57 in 2023 before dropping to 0.47 in 2024. Conversely, the adjusted total asset turnover started at a significantly higher level of 1.04 in 2019, decreased sharply to 0.79 in 2020, and then showed a moderate recovery trend reaching 0.93 in 2023 before decreasing to 0.64 in 2024. This pattern suggests that removing goodwill from assets provides a more favorable view of asset utilization, although efficiency showed signs of weakening in the most recent year.

Financial Leverage

Reported financial leverage showed a steady incremental rise from 1.57 in 2019 to 1.71 in 2022, followed by a slight decline to 1.45 by 2024. Adjusted financial leverage exhibited much higher magnitudes initially, starting at 3.55 in 2019, dropping to the low threes range over the subsequent years, and then declining noticeably to 1.74 in 2024. This downward trend in adjusted leverage in the latest year indicates a reduction in dependence on debt or liabilities when goodwill is excluded, potentially reflecting improved capital structure or asset base adjustments.

Return on Equity (ROE)

The reported ROE steadily improved from 13.04% in 2019 to a pronounced 25.17% in 2024, signifying stronger profitability and effective equity utilization. The adjusted ROE, reflecting the exclusion of goodwill, was substantially higher initially, peaking at 59.22% in 2023 before decreasing to 40.84% in 2024. Although still well above the reported figures, the declining trend in adjusted ROE in the last year points to some moderation in returns after excluding intangible asset effects.

Return on Assets (ROA)

Reported ROA maintained relative stability with slight growth from 8.31% in 2019, rising steadily to 17.31% in 2024, showing improved asset profitability over time. Adjusted ROA values were consistently almost double the reported rates, increasing from 16.46% in 2019 to a high of 23.52% in 2024. This persistent premium in adjusted ROA indicates that goodwill adjustments reveal a stronger asset return performance, although the upward trajectory in both measures illustrates enhanced operational efficiency and profitability.

Overall, the analysis of these ratios highlights improvements in profitability metrics, both on equity and asset bases, amid fluctuating asset turnover efficiency and a trend towards lowered financial leverage in recent years when goodwill is excluded. The divergence between reported and adjusted figures underscores the significant impact of intangible assets on financial metrics and capital structure interpretation. The decrease in adjusted totals in 2024 suggests a potential rebalancing or impairment affecting the asset base and leverage ratios, warranting further investigation.

The financial data reveals several notable trends regarding the total assets and asset turnover ratios over the six-year period.

Total Assets

The reported total assets have consistently increased each year, rising from approximately $6.41 billion in 2019 to about $13.07 billion in 2024. This represents more than a doubling of reported assets over the period, indicating significant growth in the company's asset base.

Similarly, the adjusted total assets, which presumably exclude goodwill or intangible assets, also display continual growth, increasing from roughly $3.23 billion in 2019 to around $9.62 billion in 2024. Although starting at a much lower base than reported assets, the adjusted total assets have nearly tripled over the six years.

Asset Turnover Ratios

The reported total asset turnover ratio, which reflects the company's efficiency in using its assets to generate revenue, initially declined from 0.52 in 2019 to 0.46 in 2020. It then showed a gradual increase, peaking at 0.57 in 2023 before dropping to 0.47 in 2024. This pattern suggests some fluctuations in asset utilization efficiency, with an overall moderate level of turnover relative to the asset base.

In contrast, the adjusted total asset turnover ratio started significantly higher at 1.04 in 2019, indicating greater efficiency when goodwill is excluded. This ratio declined sharply to 0.79 in 2020 and remained relatively stable around 0.80 to 0.93 through 2023, before a noticeable decline to 0.64 in 2024. The higher turnover ratios on an adjusted basis reflect that core operating assets are generating more revenue per dollar of asset compared to the reported figures that include goodwill.

Insights

The substantial increase in total assets, both reported and adjusted, points to expansion, potentially through acquisitions or capital investments. However, the declining trend in adjusted asset turnover since 2019, especially the drop in 2024, may suggest diminishing efficiency in asset utilization or increased investments that have not yet fully translated into proportional revenue increases.

The divergence between reported and adjusted figures highlights the impact of goodwill on financial metrics. The lower turnover ratios on a reported basis are consistent with the inclusion of goodwill, which does not directly contribute to revenue generation but inflates the asset base.

Overall, while the company shows growth in assets, the variations and recent declines in asset turnover ratios call for monitoring asset utilization performance and the returns on recent asset expansions.

Assets

The reported total assets demonstrate a consistent upward trend over the six-year period, increasing from approximately $6.4 billion to $13.1 billion. This signifies a steady expansion in the company's asset base. The adjusted total assets, which exclude goodwill, also show a growth pattern, rising from about $3.2 billion in 2019 to roughly $9.6 billion in 2024. The increase in adjusted assets is more pronounced after 2022, indicating possible acquisition activities or revaluation of non-goodwill assets contributing significantly to asset growth.

Stockholders’ Equity

The reported total stockholders' equity follows a similar upward trajectory, growing from about $4.1 billion to $9.0 billion over the period. The adjusted stockholders' equity, which removes goodwill effects, starts much lower at approximately $0.9 billion but increases considerably to $5.5 billion by 2024. Notably, the adjusted equity shows a particularly strong rise in the last year, indicating either a substantial reduction in goodwill or a significant boost in equity components excluding goodwill.

Financial Leverage

Reported financial leverage ratios fluctuate mildly but generally remain in the 1.5 to 1.7 range, peaking around 1.71 in 2022 before declining to 1.45 in 2024. This stability suggests a relatively consistent use of debt relative to equity in the company’s capital structure. The adjusted financial leverage, however, starts much higher at 3.55 in 2019, indicating greater leverage when goodwill is excluded. This ratio decreases over time, with a dip to 1.74 in 2024, reflecting a reduction in adjusted leverage possibly due to equity increases or debt reduction when goodwill is disregarded.

Overall Observations

The company exhibits steady growth in both its reported and adjusted asset and equity values, highlighting expansion and potentially improved asset quality. The decrease in adjusted financial leverage ratio towards the end of the period may reflect stronger underlying equity positions or lowered reliance on financial borrowing when goodwill is not considered. These trends suggest improving financial stability and a more conservative leverage profile when analyzing the company's balance sheet exclusive of goodwill.

Total Stockholders’ Equity (Reported)

The reported total stockholders’ equity exhibited a consistent upward trend from 4,083,013 thousand US dollars in 2019 to 8,990,702 thousand US dollars in 2024. This reflects a significant increase over the six-year period, with notable acceleration particularly between 2023 and 2024.

Total Stockholders’ Equity (Adjusted for Goodwill)

The goodwill adjusted equity values also showed growth from 911,834 thousand US dollars in 2019 to 5,541,852 thousand US dollars in 2024. Although growth was generally steady, there was a slight decline observed in 2022 compared to 2021, followed by a recovery and substantial increase in 2024, indicating fluctuations possibly related to goodwill accounting adjustments.

Reported Return on Equity (ROE)

The reported ROE demonstrated a generally upward trend across the period, rising from 13.04% in 2019 to 25.17% in 2024. This increase in ROE indicates improved profitability and efficient use of reported equity over time, with a particularly strong increase seen after 2020.

Adjusted Return on Equity (ROE)

The adjusted ROE, which accounts for goodwill adjustments, showed more volatility but remained at relatively high levels. Starting at 58.38% in 2019, it declined to a low of 40.84% in 2024 after peaking at 59.22% in 2023. The fluctuations suggest variations in profitability when excluding goodwill, with a downward trend towards the end of the period.

Overall Observations

The data reveal that the company's reported equity base and profitability have strengthened steadily over the reviewed period. Conversely, the adjusted equity and adjusted ROE figures indicate more variability, reflecting the impact of goodwill and related accounting adjustments on financial metrics. The disparity between reported and adjusted figures underscores the importance of considering both perspectives for a comprehensive understanding of equity performance and return metrics.

Total Assets

Reported total assets demonstrated a consistent upward trend from 6,405,160 thousand US dollars in 2019 to 13,073,561 thousand US dollars in 2024. This represents more than a twofold increase over the six-year period. Adjusted total assets, which exclude goodwill, also increased steadily from 3,233,981 thousand US dollars in 2019 to 9,624,711 thousand US dollars in 2024, nearly tripling during the same timeframe. The gap between reported and adjusted total assets widened substantially, indicating a growing proportion of goodwill or intangible assets over time.

Return on Assets (ROA)

The reported ROA remained relatively stable from 2019 to 2021, fluctuating slightly between 8.27% to 8.66%. From 2022 onwards, the reported ROA experienced a notable rise, accelerating from 10.45% in 2022 to 17.31% in 2024. This upward trajectory suggests improved profitability or asset utilization efficiency on a reported basis.

Adjusted ROA, calculated without goodwill, followed a similar but more pronounced trend. It started at 16.46% in 2019, decreased moderately to 14.24% in 2020, and then gradually increased to 23.52% in 2024. The higher adjusted ROA compared to reported ROA throughout the period implies that excluding goodwill assets yields a more efficient asset base from which income is generated.

Insights

The data indicates robust growth in the company's asset base, both reported and adjusted. The increasing divergence between reported and adjusted assets highlights the rising impact of goodwill or intangible assets on the balance sheet. Profitability, as measured by ROA, has improved significantly in recent years, especially when adjusted for goodwill, suggesting enhanced operational performance or more effective asset management excluding intangible assets. The sustained improvements in adjusted ROA may reflect positive underlying business fundamentals independent of non-physical asset values.