EX-99.1

EX-99.1 2 d219157dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

PRESS RELEASE

INVESTOR CONTACT:

Lisa L. Ewbank

Synopsys, Inc.

650-584-1901

Synopsys-ir@synopsys.com

EDITORIAL CONTACT:

Simone Souza

Synopsys, Inc.

650-584-6454

simone@synopsys.com

Synopsys Posts Financial Results for Third Quarter Fiscal Year 2021

Q3 2021 Financial Highlights

•

Revenue: $1,057.1 million

•

GAAP earnings per share: $1.27

•

Non-GAAP earnings per share: $1.81

MOUNTAIN VIEW, Calif. – August 18, 2021 – Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter fiscal year 2021. Revenue for the third quarter was $1,057.1 million, compared to $964.1 million for the third quarter of fiscal 2020.

“Synopsys delivered excellent results in the fiscal third quarter, including record revenue and non-GAAP earnings, and we are substantially raising our fiscal 2021 targets. On a trailing-12-month basis, we surpassed the major milestone we set a few years ago: $4 billion in revenue and 30% non-GAAP operating margin.” said Aart de Geus, chairman and co-CEO of Synopsys. “Vibrant markets, unparalleled technology innovations, and strong execution position us to continue to increase shareholder value going forward. As we look to next year and beyond, we are aiming at crossing $5 billion in revenue by 2023, with double-digit annual revenue growth and continuing margin expansion.”

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2021 was $198.6 million, or $1.27 per share, compared to $252.9 million, or $1.62 per share, for the third quarter of fiscal 2020.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2021 was $284.5 million, or $1.81 per share, compared to non-GAAP net income of $271.9 million, or $1.74 per share, for the third quarter of fiscal 2020.

For a reconciliation between GAAP and non-GAAP results, see “GAAP to Non-GAAP Reconciliation” and the accompanying tables below.

Business Segments

Synopsys reports revenue and operating income in two segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and associated services, and (2) Software Integrity, which includes security and quality solutions for software development across many industries. Further information regarding these segments is provided at the end of this press release.

Financial Targets

Synopsys also provided its consolidated financial targets for the fourth quarter and full fiscal year 2021. These financial targets assume that there are no further changes to the current U.S. government “Entity List” restrictions for the rest of the fiscal year. These targets constitute forward-looking statements and are based on current expectations. For a discussion of factors that could cause actual results to differ materially from these targets, see “Forward-Looking Statements” below.

Fourth Quarter and Fiscal Year 2021 Financial Targets

(in millions except per share amounts)


	Q4 FY 2021								FY 2021
	Low				High				Low				High
Revenue		$	1,138			$	1,168			$	4,190		$	4,220
GAAP Expenses		$	924			$	952			$	3,431		$	3,459
Non-GAAP Expenses		$	805			$	815			$	2,915		$	2,925
Other Income (Expense)		$	(5	)		$	(3	)		$	(6	)	$	(4	)
Normalized Annual Tax Rate ⁽¹⁾			16	%			16	%			16	%		16	%
Outstanding Shares (fully diluted)			156				159				156			159
GAAP EPS		$	1.09			$	1.25			$	4.63		$	4.79
Non-GAAP EPS		$	1.75			$	1.80			$	6.78		$	6.83
Operating Cash Flow											~ $1,350

(1)	Applied in non-GAAP net income calculations

Earnings Call Open to Investors

Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m. Pacific Time. A live webcast of the call will be available on Synopsys’ corporate website at www.synopsys.com. A recording of the call will be available by calling +1-866-207-1041 (+1-402-970-0847 for international callers), access code 9581321, beginning at 5:45 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on August 25, 2021. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the fourth quarter and fiscal year 2021 in December 2021. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Trac Pham, chief financial officer, on its website following today’s call. In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, also posted on the corporate website.

Effectiveness of Information

The targets included in this press release, the statements made during the earnings conference call and the information contained in the financial supplement and corporate overview presentation (available in the Investor Relations section of Synopsys’ corporate website at www.synopsys.com) represent Synopsys’ expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the co-chief executive officer and chief financial officer made during the call, the financial supplement, and the corporate overview presentation will remain available on Synopsys’ website through the date of the fourth quarter and fiscal year 2021 earnings call in December 2021, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys does not currently intend to report on its progress during the fourth quarter of fiscal year 2021 or comment to analysts or investors on, or otherwise update, the targets given in this release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the third quarter fiscal year 2021 in its quarterly report on Form 10-Q to be filed by September 9, 2021.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) is the Silicon to Software^™ partner for innovative companies developing the electronic products and software applications we rely on every day. As an S&P 500 company, Synopsys has a long history of being a global leader in electronic design automation (EDA) and semiconductor IP and offers the industry’s broadest portfolio of application security testing tools and services. Whether you’re a system-on-chip (SoC) designer creating advanced semiconductors, or a software developer writing more secure, high-quality code, Synopsys has the solutions needed to deliver innovative products. Learn more at www.synopsys.com.

GAAP to Non-GAAP Reconciliation

Synopsys continues to provide all information required in accordance with GAAP but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, Synopsys presents non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Synopsys’ operating results in a manner that focuses on what Synopsys believes to be its core business operations and what Synopsys uses to evaluate its business operations and for internal planning and forecasting purposes. Synopsys’ management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Synopsys’ management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes: (i) the amortization of acquired intangible assets, (ii) the impact of stock compensation, (iii) acquisition-related costs, (iv) restructuring charges, (v) the effects of certain settlements, final judgments and loss contingencies related to legal proceedings, and (vi) the income tax effect of non-GAAP pre-tax adjustments; and the non-GAAP measures that exclude such information in order to assess the performance of Synopsys’ business and for planning and forecasting in subsequent periods.

Synopsys utilizes a normalized annual non-GAAP tax rate in the calculation of its non-GAAP measures to provide better consistency across interim reporting periods by eliminating the effects of non-recurring and period-specific items such as tax audit settlements, which can vary in size and frequency and not necessarily reflect our normal operations, and to more clearly align our tax rate with our expected geographic earnings mix. In projecting this rate, we evaluate our

historical and projected mix of U.S. and international profit before tax, excluding the non-GAAP adjustments described above. We also consider other factors including our current tax structure, our existing tax positions, and expected recurring tax incentives. On an annual basis, we re-evaluate this rate for significant events, including changes in tax laws and regulations, that may materially affect our projections. Based upon our review, our projected normalized annual non-GAAP tax rate remains 16% through fiscal year 2021.

Whenever Synopsys uses a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed below, as well as Item 2.02 of the Current Report on Form 8-K filed on August 18, 2021 for additional information about the measures Synopsys uses to evaluate its core business operations.

Reconciliation of Third Quarter Fiscal Year 2021 Results

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for the periods indicated below.

GAAP to Non-GAAP Reconciliation of Third Quarter Fiscal Year 2021 Results ⁽¹⁾

(unaudited and in thousands, except per share amounts)


	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2021			2020			2021			2020
GAAP net income	$	198,646		$	252,911		$	556,069		$	466,892
Adjustments:
Amortization of intangible assets		20,440			23,649			60,437			70,277
Stock compensation		85,162			61,837			248,530			170,155
Acquisition-related costs		5,702			3,293			11,594			10,837
Restructuring charges		15,151			(1,977	)		15,151			36,446
Legal matters		(1,455	)		—			(1,455	)		—
Tax adjustments		(39,189	)		(67,767	)		(99,297	)		(137,714	)

Non-GAAP net income	$	284,457		$	271,946		$	791,029		$	616,893


	Three Months Ended						Nine Months Ended
	July 31,						July 31,
	2021			2020			2021			2020
GAAP diluted net income per share	$	1.27		$	1.62		$	3.54		$	3.01
Adjustments:
Amortization of intangible assets		0.13			0.15			0.38			0.45
Stock compensation		0.54			0.40			1.58			1.10
Acquisition-related costs		0.04			0.02			0.07			0.07
Restructuring charges		0.10			(0.01	)		0.10			0.24
Legal matters		(0.01	)		—			(0.01	)		—
Tax adjustments		(0.26	)		(0.44	)		(0.63	)		(0.89	)

Non-GAAP diluted net income per share	$	1.81		$	1.74		$	5.03		$	3.98

Shares used in computing diluted net income per share amounts		156,907			155,973			157,158			155,074

(1)	Synopsys’ third quarter of fiscal year 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively. For presentation purposes, we refer to the closest calendar month end.

Reconciliation of 2021 Targets

The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP targets for the periods indicated below.

GAAP to Non-GAAP Reconciliation of Fourth Quarter Fiscal Year 2021 Targets ⁽¹⁾

(in thousands, except per share amounts)


	Range for Three Months October 31, 2021
	Low			High
Target GAAP expenses	$	924,000		$	952,000
Adjustments:
Amortization of intangible assets		(20,000	)		(23,000	)
Stock compensation		(86,000	)		(91,000	)
Restructuring charges		(13,000	)		(23,000	)

Target non-GAAP expenses	$	805,000		$	815,000


	Range for Three Months October 31, 2021
	Low			High
Target GAAP earnings per share	$	1.09		$	1.25
Adjustments:
Amortization of intangible assets		0.15			0.13
Stock compensation		0.58			0.55
Restructuring charges		0.15			0.08
Tax adjustments		(0.22	)		(0.21	)

Target non-GAAP earnings per share	$	1.75		$	1.80

Shares used in non-GAAP calculation (midpoint of target range)		157,500			157,500

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2021 Targets ⁽¹⁾

(in thousands, except per share amounts)


	Range for Fiscal Year October 31, 2021
	Low			High
Target GAAP expenses	$	3,430,837		$	3,458,837
Adjustments:
Amortization of intangible assets		(80,000	)		(83,000	)
Stock compensation		(335,000	)		(340,000	)
Acquisition-related costs		(11,594	)		(11,594	)
Restructuring charges		(28,000	)		(38,000	)
Legal matters		1,455			1,455
Non-qualified deferred compensation plan		(62,698	)		(62,698	)

Target non-GAAP expenses	$	2,915,000		$	2,925,000


	Range for Fiscal Year October 31, 2021
	Low			High
Target GAAP earnings per share	$	4.63		$	4.79
Adjustments:
Amortization of intangible assets		0.53			0.51
Stock compensation		2.16			2.13
Acquisition-related costs		0.07			0.07
Restructuring charges		0.25			0.18
Legal matters		(0.01	)		(0.01	)
Tax adjustments		(0.85	)		(0.84	)

Target non-GAAP earnings per share	$	6.78		$	6.83

Shares used in non-GAAP calculation (midpoint of target range)		157,500			157,500

(1)	Synopsys’ fourth fiscal quarter and fiscal year will end on October 30, 2021. For presentation purposes, we refer to the closest calendar month end.

Forward-Looking Statements

This press release contains forward-looking statements including, but not limited to, statements regarding Synopsys’ short-term and long-term financial targets, expectations and objectives; business outlook, opportunities and strategies; customer demand and market expansion; strategies related to our products and technology; our planned product releases and capabilities; industry growth rates; software trends; planned acquisitions and buybacks; our expected tax rate; the continued impact of U.S. and foreign government action on our results; and the expected impact of the COVID-19 pandemic. These statements involve risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements. Such risks, uncertainties and factors include, but are not limited to: risks from the continued effect of the COVID-19

pandemic on the global economy and on our business, operations and financial condition; uncertainty in the growth of the semiconductor and electronics industries; consolidation among our customers and our dependence on a relatively small number of large customers; risks and compliance obligations relating to the global nature of our operations as well as actions by the U.S. or foreign governments, such as measures in response to the COVID-19 pandemic or the imposition of additional tariffs or export restrictions; macroeconomic conditions and uncertainty in the global economy; fluctuation of our operating results; increased variability in our revenue due to the adoption of ASC 606, including the resulting increase in recognizing upfront revenue as a percentage of total revenue; and more. Additional information on potential risks, uncertainties and other factors that could affect Synopsys’ results is included in filings it makes with the Securities and Exchange Commission from time to time, including in the sections entitled “Risk Factors” in its Annual Report on Form 10-K for the fiscal year ended October 31, 2020 and its latest Quarterly Report on Form 10-Q. The information provided herein is as of August 18, 2021. Synopsys undertakes no duty, and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law.

###

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations ⁽¹⁾

(in thousands, except per share amounts)


	Three Months Ended July 31,						Nine Months Ended July 31,
	2021			2020			2021			2020
Revenue:
Time-based products	$	665,563		$	612,065		$	1,945,647		$	1,758,601
Upfront products		203,301			210,931			586,798			491,417
Maintenance and service		188,266			141,138			519,329			409,824

Total revenue		1,057,130			964,134			3,051,774			2,659,842
Cost of revenue:
Products		127,592			118,478			389,677			344,469
Maintenance and service		65,604			60,812			202,210			184,940
Amortization of intangible assets		11,870			13,718			35,164			40,732

Total cost of revenue		205,066			193,008			627,051			570,141

Gross margin		852,064			771,126			2,424,723			2,089,701
Operating expenses:
Research and development		371,146			322,602			1,090,959			939,456
Sales and marketing		171,428			156,456			514,810			455,511
General and administrative		83,846			73,516			234,028			204,734
Amortization of intangible assets		8,570			9,931			25,273			29,545
Restructuring charges		15,151			(1,977	)		15,151			36,446

Total operating expenses		650,141			560,528			1,880,221			1,665,692

Operating income		201,923			210,598			544,502			424,009
Other income (expense), net		11,414			26,256			61,934			22,584

Income before income taxes		213,337			236,854			606,436			446,593
Provision (benefit) for income taxes		14,945			(16,057	)		51,214			(20,299	)

Net income		198,392			252,911			555,222			466,892
Net income (loss) attributed to non-controlling interest		(254	)		—			(847	)		—

Net income attributed to Synopsys	$	198,646		$	252,911		$	556,069		$	466,892


Net income per share:
Basic	$	1.30		$	1.67		$	3.64		$	3.10
Diluted	$	1.27		$	1.62		$	3.54		$	3.01

Shares used in computing per share amounts:
Basic		152,635			151,352			152,619			150,731

Diluted		156,907			155,973			157,158			155,074

(1)	Synopsys’ third quarter of fiscal year 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively. For presentation purposes, we refer to the closest calendar month end.

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets ⁽¹⁾

(in thousands, except par value amounts)


	July 31, 2021			October 31, 2020
ASSETS:
Current assets:
Cash and cash equivalents	$	1,385,395		$	1,235,653
Short-term investments		144,773			—

Total cash, cash equivalents & short-term investments		1,530,168			1,235,653
Accounts receivable, net		577,845			780,709
Inventories, net		241,103			192,333
Income taxes receivable and prepaid taxes		35,724			32,355
Prepaid and other current assets		379,136			308,167

Total current assets		2,763,976			2,549,217
Property and equipment, net		470,129			483,818
Operating lease right-of-use assets, net		493,899			465,818
Goodwill		3,485,181			3,365,114
Intangible assets, net		249,974			254,322
Long-term prepaid taxes		10,417			8,276
Deferred income taxes		527,753			497,546
Other long-term assets		484,577			405,951

Total assets	$	8,485,906		$	8,030,062


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued liabilities	$	615,737		$	623,664
Operating lease liabilities, current		79,289			73,173
Accrued income taxes		14,536			27,738
Deferred revenue		1,542,606			1,388,263
Short-term debt		82,468			27,084

Total current liabilities		2,334,636			2,139,922
Operating lease liabilities, non-current		487,574			462,411
Long-term accrued income taxes		24,600			25,178
Long-term deferred revenue		103,759			104,850
Long-term debt		24,754			100,823
Other long-term liabilities		355,447			284,511

Total liabilities		3,330,770			3,117,695
Stockholders’ equity:
Preferred stock, $ 0.01 par value: 2,000 shares authorized; none outstanding		—			—
Common stock, $ 0.01 par value: 400,000 shares authorized; 152,597 and 152,618 shares outstanding, respectively		1,526			1,528
Capital in excess of par value		1,606,980			1,653,166
Retained earnings		4,348,266			3,795,397
Treasury stock, at cost: 4,664 and 4,643 shares, respectively		(757,341	)		(488,613	)
Accumulated other comprehensive income (loss)		(48,411	)		(54,074	)

Total Synopsys stockholders’ equity		5,151,020			4,907,404
Non-controlling interest		4,116			4,963

Total stockholders’ equity		5,155,136			4,912,367

Total liabilities and stockholders’ equity	$	8,485,906		$	8,030,062

(1)	Synopsys’ third quarter of fiscal year 2021 ended on July 31, 2021, and its fiscal year 2020 ended on October 31, 2020.

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows ⁽¹⁾

(in thousands)


	Nine Months Ended July 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributed to Synopsys	$	556,069		$	466,892
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		151,274			159,156
Reduction of operating lease right-of-use assets		64,920			62,585
Amortization of capitalized costs to obtain revenue contracts		46,973			44,851
Stock-based compensation		248,530			170,155
Allowance for doubtful accounts		13,813			14,875
(Gain) loss on sale of property and investments		10			(1,994	)
Deferred income taxes		(33,116	)		(74,374	)
Other non-cash		2,926			2,750
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable		188,996			(89,667	)
Inventories		(51,448	)		(20,296	)
Prepaid and other current assets		(62,201	)		(21,350	)
Other long-term assets		(117,922	)		(77,860	)
Accounts payable and accrued liabilities		51,991			44,313
Operating lease liabilities		(61,666	)		(57,968	)
Income taxes		(29,414	)		6,128
Deferred revenue		152,328			160,966

Net cash provided by operating activities		1,122,063			789,162

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of short-term investments		1,128			—
Purchases of short-term investments		(146,082	)		—
Proceeds from sales of long-term investments		—			2,151
Purchases of long-term investments		(7,591	)		(2,762	)
Purchases of property and equipment		(66,957	)		(120,234	)
Cash paid for acquisitions, net of cash acquired		(164,053	)		(201,045	)
Capitalization of software development costs		(1,517	)		(3,035	)
Other		(800	)		—

Net cash used in investing activities		(385,872	)		(324,925	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facilities		—			276,490
Repayment of debt		(21,637	)		(284,218	)
Issuances of common stock		113,976			123,237
Payments for taxes related to net share settlement of equity awards		(104,291	)		(66,985	)
Purchase of equity forward contract		(35,000	)		—
Purchases of treasury stock		(538,082	)		(200,000	)
Other		(4,375	)		—

Net cash used in financing activities		(589,409	)		(151,476	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		2,985			8,700

Net change in cash, cash equivalents and restricted cash		149,767			321,461
Cash, cash equivalents and restricted cash, beginning of year		1,237,970			730,527

Cash, cash equivalents and restricted cash, end of period	$	1,387,737		$	1,051,988

(1)	Synopsys’ third quarter of fiscal year 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively. For presentation

purposes, we refer to the closest calendar month end.

SYNOPSYS, INC.

Business Segment Reporting⁽¹⁾

(in millions)


	Q3’21			Q3’20			YTD Q3’21			YTD Q3’20
Revenue by segment
- Semiconductor & System Design	$	959.1		$	870.7		$	2,768.0		$	2,392.5
% of Total		90.7	%		90.3	%		90.7	%		90.0	%
- Software Integrity	$	98.0		$	93.4		$	283.8		$	267.3
% of Total		9.3	%		9.7	%		9.3	%		10.0	%
Total segment revenue	$	1,057.1		$	964.1		$	3,051.8		$	2,659.8

Adjusted operating income by segment
- Semiconductor & System Design	$	328.7		$	308.7		$	916.5		$	697.3
- Software Integrity	$	8.7		$	14.8		$	25.0		$	34.6
Total adjusted segment operating income	$	337.4		$	323.6		$	941.5		$	731.9

Adjusted operating margin by segment
- Semiconductor & System Design		34.3	%		35.4	%		33.1	%		29.1	%
- Software Integrity		8.8	%		15.8	%		8.8	%		12.9	%
Total adjusted segment operating margin		31.9	%		33.6	%		30.8	%		27.5	%

Total Adjusted Segment Operating Income Reconciliation ⁽¹⁾⁽²⁾

(in millions)


	Three Months Ended July 31, 2021 ⁽³⁾			Three Months Ended July 31, 2020 ⁽³⁾			Nine Months Ended July 31, 2021(3)			Nine Months Ended July 31, 2020 ⁽³⁾
GAAP total operating income – as reported	$	201.9		$	210.6		$	544.5		$	424.0
Other expenses managed at consolidated level
-Amortization of intangible assets		20.4			23.6			60.4			70.3
-Stock compensation		85.2			61.8			248.5			170.2
-Non-qualified deferred compensation plan		10.5			26.2			62.7			20.2
-Acquisition-related costs		5.7			3.3			11.6			10.8
-Restructuring charges		15.2			(2.0	)		15.2			36.4
-Legal matters		(1.5	)		—			(1.5	)		—

Total adjusted segment operating income	$	337.4		$	323.6		$	941.5		$	731.9

(1)	Synopsys manages the business on a long-term, annual basis, and considers quarterly fluctuations of revenue and profitability as normal elements of our business. Amounts may not foot due to rounding.

(2)

These segment results are consistent with the information required by ASC 280, Segment Reporting . They are presented to reflect the information that is considered by Synopsys’ chief operating decision makers (CODMs) to evaluate the operating performance of its segments. The CODMs do not allocate certain operating expenses managed at a consolidated level to our reportable segments, and as a result, the reported operating income and operating margin do not include these unallocated expenses as shown in the table above. Amounts may not foot due to rounding.

(3)	Synopsys’ third quarter of fiscal year 2021 and 2020 ended on July 31, 2021 and August 1, 2020, respectively. For presentation purposes, we refer to the closest calendar month end.