PR Newswire | Feb 17, 2021 04:06PM EST

02/17 15:05 CST

Synopsys Posts Financial Results for First Quarter Fiscal Year 2021Q1 2021 Financial Highlights- Revenue: $970.3 million- GAAP earnings per share: $1.03- Non-GAAP earnings per share: $1.52 MOUNTAIN VIEW, Calif., Feb. 17, 2021

MOUNTAIN VIEW, Calif., Feb. 17, 2021 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its first quarter fiscal year 2021. Revenue for the first quarter was $970.3 million, compared to $834.4 million for the first quarter of fiscal 2020.

"The first quarter was a very good start to fiscal year 2021, with strength across all geographies and product groups. We delivered financial results at or above guidance targets, initiated a $250 million stock repurchase, and are reaffirming our outlook for the year," said Aart de Geus, chairman and co-CEO of Synopsys. "Our markets are strong, as companies across vertical segments are racing to leverage big data, faster computation, and machine learning to differentiate themselves. Synopsys is at the heart of this wave of advanced technology. Our highly differentiated portfolio of solutions, including exciting new innovations in EDA, state-of-the-art IP blocks and leading software security products and services, is generating high demand and excellent growth. In fiscal 2021, we expect to deliver low-to-mid teens non-GAAP earnings per share growth on revenue surpassing the $4 billion milestone and continued non-GAAP operating margin expansion, with more than $1 billion in operating cash flow."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2021 was $162.3 million, or $1.03 per share, compared to $104.1 million, or $0.67 per share, for the first quarter of fiscal 2020.

Non-GAAP Results

On a non-GAAP basis, net income for the first quarter of fiscal 2021 was $239.5 million, or $1.52 per share, compared to non-GAAP net income of $156.7 million, or $1.01 per share, for the first 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 second 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.

Second Quarter and Fiscal Year 2021 Financial Targets

(in millions except per share amounts)

Q2 FY 2021 FY 2021

Low High Low High

Revenue $ 970 $ 1,000 $ 4,000 $ 4,050

GAAP $ 801 $ 819 $ 3,234 $ 3,279Expenses

Non-GAAP $ 697 $ 707 $ 2,825 $ 2,855Expenses

OtherIncome $ (4) $ (2) $ (11) $ (7)(Expense)

NormalizedAnnual Tax 16% 16% 16% 16%Rate ^(1)

OutstandingShares 156 159 156 159(fullydiluted)

GAAP EPS $ 0.93 $ 1.02 $ 4.29 $ 4.45

Non-GAAP $ 1.50 $ 1.55 $ 6.23 $ 6.30EPS

Operating $ 1,200 $ 1,300Cash Flow

(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 9968053, beginning at 5:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on February 24, 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 second quarter of fiscal year 2021 in May 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 second quarter fiscal year 2021 earnings call in May 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 second 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 first quarter fiscal year 2021 in its quarterly report on Form 10-Q to be filed by March 11, 2021.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) is the Silicon to Software(tm) 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.

INVESTOR CONTACT:Lisa L. EwbankSynopsys, Inc.650-584-1901Synopsys-ir@synopsys.com

EDITORIAL CONTACT:Simone SouzaSynopsys, Inc.650-584-6454simone@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 February 17, 2021 for additional information about the measures Synopsys uses to evaluate its core business operations.

Reconciliation of First 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 First Quarter Fiscal Year 2021 Results ^(1)

(unaudited and in thousands, except per share amounts)

Three Months Ended

January 31,

2021 2020

GAAP net income $ 162,345 $ 104,061

Adjustments:

Amortization of 20,276 22,533intangible assets

Stock compensation 83,782 51,883

Acquisition-related 3,548 3,777costs

Restructuring charges - 8,751

Tax adjustments (30,478) (34,331)

Non-GAAP net income $ 239,473 $ 156,674

Three Months Ended

January 31,

2021 2020

GAAP diluted net income $ 1.03 $ 0.67per share

Adjustments:

Amortization of 0.13 0.15intangible assets

Stock compensation 0.53 0.34

Acquisition-related 0.02 0.02costs

Restructuring charges - 0.06

Tax adjustments (0.19) (0.23)

Non-GAAP diluted net $ 1.52 $ 1.01income per share

Shares used in computingdiluted net income per 157,277 154,504share amounts:

(1) Synopsys' first quarter of fiscal year 2021 and 2020 ended on January 30,2021 and February 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 Second Quarter Fiscal Year 2021 Targets ^(1)

(in thousands, except per share amounts)

Range for Three Months

April 30, 2021

Low High

Target GAAP expenses $ 801,000 $ 819,000

Adjustments:

Estimated impact ofamortization of intangible (19,000) (22,000)assets

Estimated impact of (85,000) (90,000)stock compensation

Target non-GAAP expenses $ 697,000 $ 707,000

Range for Three Months

April 30, 2021

Low High

Target GAAP earnings per $ 0.93 $ 1.02share

Adjustments:

Estimated impact ofamortization of intangible 0.14 0.12assets

Estimated impact of 0.57 0.54stock compensation

Estimated impact of (0.14) (0.13)tax adjustments

Target non-GAAP earnings $ 1.50 $ 1.55per share

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

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 $ 3,233,548 $ 3,278,548

Adjustments:

Estimated impact ofamortization of intangible (75,000) (80,000)assets

Estimated impact of (330,000) (340,000)stock compensation

Acquisition-related (3,548) (3,548)costs

Target non-GAAP expenses $ 2,825,000 # $ 2,855,000

Range for Fiscal Year

October 31, 2021

Low High

Target GAAP earnings per $ 4.29 $ 4.45share

Adjustments:

Estimated impact ofamortization of intangible 0.51 0.48assets

Estimated impact of 2.16 2.10stock compensation

Acquisition-related 0.02 0.02costs

Estimated impact of (0.75) (0.75)tax adjustments

Target non-GAAP earnings $ 6.23 $ 6.30per share

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

(1) Synopsys' second fiscal quarter and fiscal year will end on May 1, 2021 andOctober 30, 2021, respectively.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 expected 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 effect of the COVID-19 pandemic and the associated economic downturn 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 February 17, 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

January 31,

2021 2020

Revenue:

Time-based products $ 631,290 $ 556,439

Upfront products 174,381 150,721

Maintenance and 164,650 127,221service

Total revenue 970,321 834,381

Cost of revenue:

Products 127,347 117,784

Maintenance and 68,766 61,915service

Amortization of 11,886 13,169intangible assets

Total cost of 207,999 192,868revenue

Gross margin 762,322 641,513

Operating expenses:

Research and 357,468 314,283development

Sales and marketing 170,628 152,855

General and 77,488 68,744administrative

Amortization of 8,390 9,364intangible assets

Restructuring charges - 8,751

Total operating 613,974 553,997expenses

Operating income 148,348 87,516

Other income (expense), 28,756 12,057net

Income before income 177,104 99,573taxes

Provision (benefit) for 15,076 (4,488)income taxes

Net income 162,028 104,061

Net income (loss)attributed to (317) -non-controlling interest

Net income attributed to $ 162,345 $ 104,061Synopsys

Net income per share:

Basic $ 1.06 $ 0.69

Diluted $ 1.03 $ 0.67

Shares used in computingper share amounts:

Basic 152,498 150,244

Diluted 157,277 154,504

(1) Synopsys' first quarter of fiscal year 2021 and 2020 ended on January 30,2021 and February 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)

January 31, 2021 October 31, 2020

ASSETS:

Current assets:

Cash and cash $ 1,023,074 $ 1,235,653equivalents

Accounts 789,320 780,709receivable, net

Inventories, 230,907 192,333net

Income taxesreceivable and 25,190 32,355prepaid taxes

Prepaid andother current 329,233 308,167assets

Total 2,397,724 2,549,217current assets

Property and 486,604 483,818equipment, net

Operating leaseright-of-use 462,136 465,818assets, net

Goodwill 3,433,003 3,365,114

Intangible 254,375 254,322assets, net

Long-term 8,285 8,276prepaid taxes

Deferred income 522,871 497,546taxes

Other long-term 447,840 405,951assets

$ 8,012,838 $ 8,030,062Total assets

LIABILITIES ANDSTOCKHOLDERS'EQUITY:

Currentliabilities:

Accountspayable and $ 422,928 $ 623,664accruedliabilities

Operatinglease 72,769 73,173liabilities,current

Accrued 32,227 27,738income taxes

Deferred 1,546,038 1,388,263revenue

Short-term 97,421 27,084debt

Total current 2,171,383 2,139,922liabilities

Operating leaseliabilities, 459,880 462,411non-current

Long-termaccrued income 25,184 25,178taxes

Long-termdeferred 107,001 104,850revenue

Long-term debt 25,658 100,823

Other long-term 336,834 284,511liabilities

Total 3,125,940 3,117,695liabilities

Stockholders'equity:

Preferredstock, $0.01par value:2,000 shares - -authorized;noneoutstanding

Common stock,$0.01 parvalue: 400,000sharesauthorized;152,364 and

152,618shares 1,526 1,528outstanding,respectively

Capital inexcess of par 1,589,175 1,653,166value

Retained 3,954,542 3,795,397earnings

Treasurystock, at cost:4,897 and 4,643 (628,216) (488,613)shares,respectively

Accumulatedother (34,775) (54,074)comprehensiveincome (loss)

Total Synopsys 4,882,252 4,907,404stockholders'equity

Non-controlling 4,646 4,963interest

Total 4,886,898 4,912,367stockholders'equity

Totalliabilities and $ 8,012,838 $ 8,030,062stockholders'equity

(1) Synopsys' first quarter of fiscal year 2021 ended on January 30, 2021 andits fiscal year 2020 ended on October 31, 2020, respectively.For presentation purposes, we refer to the closest calendar month end.

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows ^(1)

(in thousands)

Three Months Ended

January 31,

2021 2020

CASH FLOWS FROM OPERATINGACTIVITIES:

Net income attributed to Synopsys $ 162,345 $ 104,061

Adjustments to reconcile net incometo net cash provided by

operating activities:

Amortization and depreciation 50,628 52,232

Reduction of operating lease 20,974 23,201right-of-use assets

Amortization of capitalized costs to 15,008 13,762obtain revenue contracts

Stock-based compensation 83,782 51,883

Deferred income taxes (20,222) (17,694)

Other non-cash (3,984) (629)

Net changes in operating assets andliabilities, net of

acquired assets and liabilities:

Accounts receivable (7,433) (241,503)

Inventories (37,139) (5,302)

Prepaid and other current assets (12,289) 8,697

Other long-term assets (50,385) (27,103)

Accounts payable and accrued (171,137) (132,814)liabilities

Operating lease liabilities (20,707) (20,979)

Income taxes 12,226 5,039

Deferred revenue 152,291 196,969

Net cash provided by operating 173,958 9,820activities

CASH FLOWS FROM INVESTINGACTIVITIES:

Purchases of long-term investments - (2,500)

Purchases of property and equipment (27,779) (54,605)

Cash paid for acquisitions, net of (74,670) (75,388)cash acquired

Capitalization of software (1,011) (1,065)development costs

Net cash used in investing (103,460) (133,558)activities

CASH FLOWS FROM FINANCINGACTIVITIES:

Proceeds from credit facilities - 196,490

Repayment of debt (5,694) (3,750)

Issuances of common stock 15,092 14,982

Payments for taxes related to net (49,591) (14,242)share settlement of equity awards

Purchase of equity forward contract (50,000) (20,000)

Purchases of treasury stock (202,871) (80,000)

Net cash (used in) provided by (293,064) 93,480financing activities

Effect of exchange rate changes oncash, cash equivalents and 10,001 2,013restricted cash

Net change in cash, cash equivalents (212,565) (28,245)and restricted cash

Cash, cash equivalents and 1,237,970 730,527restricted cash, beginning of year

Cash, cash equivalents and $ 1,025,405 $ 702,282restricted cash, end of period

(1) Synopsys' first quarter of fiscal year 2021 and 2020 ended on January 30,2021 and February 1, 2020, respectively.For presentation purposes, we refer to the closest calendar month end.

SYNOPSYS, INC.

Business Segment Reporting ^(1)

(in millions)

Q1'21 Q1'20

Revenue by segment

- Semiconductor & $ 878.3 $ 748.8System Design

% of Total 90.5% 89.7%

- Software Integrity $ 92.0 $ 85.6

% of Total 9.5% 10.3%

Total segment $ 970.3 $ 834.4revenue

Adjusted operatingincome by segment

- Semiconductor & $ 278.9 $ 178.8System Design

- Software Integrity $ 7.9 $ 8.1

Total adjustedsegment operating $ 286.8 $ 186.9income

Adjusted operatingmargin by segment

- Semiconductor & 31.8% 23.9%System Design

- Software Integrity 8.6% 9.4%

Total adjustedsegment operating 29.6% 22.4%margin

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

(in millions)

Three Months Ended

January 31, 2021 ^(3) January 31, 2020 ^(3)

GAAP total operating $ 148.3 $ 87.5income - as reported

Other expensesmanaged atconsolidated level

-Amortization of 20.3 22.5intangible assets

-Stock compensation 83.8 51.9

-Fair value changesin executive 30.9 12.5deferredcompensation plan

-Acquisition-related 3.5 3.8costs

-Restructuring - 8.8

Total adjustedsegment operating $ 286.8 $ 186.9income

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

(2) These segment results are consistent with the information required by ASC280, Segment Reporting. They are presented to reflect the information that isconsidered by Synopsys' chief operating decision makers (CODMs) to evaluate theoperating performance of its segments. The CODMs do not allocate certainoperating expenses managed at a consolidated level to our reportable segments,and as a result, the reported operating income and operating margin do notinclude these unallocated expenses as shown in the table above. Amounts may notfoot due to rounding.

(3) Synopsys' first quarter of fiscal year 2021 and 2020 ended on January 30,2021 and February 1, 2020, respectively. For presentation purposes, we refer tothe closest calendar month end.

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SOURCE Synopsys, Inc.