Synopsys Posts Financial Results for Third Quarter Fiscal Year 2019

MOUNTAIN VIEW, Calif., Aug. 21, 2019 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter of fiscal year 2019. Revenue was $853.0 million, compared to $779.7 million for the third quarter of fiscal year 2018, an increase of 9.4 percent.

"Synopsys continues to execute very well and delivered excellent third fiscal quarter revenue, operating margin, non-GAAP earnings and cash flow. In Q3, we also implemented a $100 million share repurchase, bringing our total for the year to $229 million," said Aart de Geus, chairman and co-CEO of Synopsys. "Despite the uncertain geopolitical and economic backdrop, global design activity and customer engagements are thriving. Our product platforms are the strongest they've ever been, driving technology wins and competitive displacements. As a result of our year-to-date overachievement and broad-based strength across the business, we're raising our annual guidance ranges."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2019 was $99.9 million, or $0.65 per share, compared to $79.4 million, or $0.52 per share, for the third quarter of fiscal 2018.

Non-GAAP Results

For the third quarter of fiscal 2019, on a non-GAAP basis, net income was $182.5 million, or $1.18 per share, compared to non-GAAP net income of $145.6 million, or $0.95 per share, for the third quarter of fiscal 2018.

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

Business Segments

Effective in fiscal year 2019, 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 provides its consolidated financial targets for the fourth quarter and full fiscal year 2019, which do not include any impact of future acquisition-related activities or costs. These financial targets reflect the current status of certain customers currently on the U.S. government's "Entity List," and do not assume any revenue in the fourth fiscal quarter from such customers. 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 2019 Financial Targets - ASC 606


                                             
      
              (in millions except per share amounts)




                                                                Q4'19                                          FY'19



                                                                 Low                        High                     
     
     Low    
      
        High

                                                                                                                                          ---


     Revenue (2)                                                $830                        $860                        $3,340           $3,370



     GAAP Expenses                                              $701                        $733                        $2,820           $2,852



     Non-GAAP Expenses                                          $630                        $650                        $2,512           $2,532



     Other Income (expense)                                     $(2)           
            $     -                         $(4)            $(2)



     Normalized Annual Tax Rate (1)                              16%                        16%                          16%             16%



     Outstanding Shares (fully diluted)                          153                         156                           153              156



     GAAP EPS                                                  $0.69                       $0.82                         $3.11            $3.24



     Non-GAAP EPS                                              $1.10                       $1.15                         $4.52            $4.57



     Operating Cash Flow                                                                                                     
       ~$750



               (1) Applied in non-GAAP net income
                calculations.


               (2) We operate and plan the
                business under current ASC 606
                rules and regulations. In previous
                quarters, we provided a set of
                FY19 comparative metrics based on
                the former ASC 605 rules. However,
                our estimates of what revenue
                would have been under the previous
                rules have become increasingly
                inconsistent with, and therefore
                do not reflect, the underlying
                fundamentals of the business.
                Nevertheless, we estimate that
                FY19 target revenue using the
                previous ASC 605 would be
                approximately $80 million less
                than our actual target range under
                the current ASC 606. Given the
                lack of relevance, we no longer
                provide detailed comparative
                metrics.

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 +1-800-475-6701 (+1-320-365-3844 for international callers), access code 470604, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on Aug. 28, 2019. 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 2019 in December 2019. 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 2019 earnings call in December 2019, 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 2019 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 of fiscal year 2019 in its quarterly report on Form 10-Q to be filed by Sept. 12, 2019.

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 the world's 15th largest software company, Synopsys has a long history of being a global leader in electronic design automation (EDA) and semiconductor IP and is also growing its leadership in software security and quality solutions. Whether you're a system-on-chip (SoC) designer creating advanced semiconductors, or a software developer writing applications that require the highest security and quality, Synopsys has the solutions needed to deliver innovative, high-quality, secure 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, (vi) the various income tax impacts prompted by the Tax Cut and Jobs Act of 2017 enacted on December 22, 2017 ("U.S. Tax Reform"), including the income tax related to transition tax and the tax rate change, and (vii) 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 impact of stock-based compensation, the amortization of purchased intangibles and other non-GAAP adjustments described above. We also consider other factors including our current tax structure, our existing tax positions, and expected recurring tax incentives, such as the U.S. federal research and development tax credit. On an annual basis we re-evaluate this rate for significant events that may materially affect our projections. We expect our annual non-GAAP tax rate to be 16% in fiscal 2019 based upon our projected normalized non-GAAP annual tax rate through fiscal 2021. We will re-evaluate this rate on an annual basis, but further regulatory guidance regarding specific parts of U.S. Tax Reform could materially change our projections. Notwithstanding the foregoing, we excluded from the normalized annual non-GAAP tax rate unusual and infrequent events, such as tax audit settlements and certain impacts of U.S. Tax Reform in fiscal 2018.

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 Aug. 21, 2019 for additional information about the measures Synopsys uses to evaluate its core business operations.

Reconciliation of Third Quarter Fiscal Year 2019 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 and Fiscal Year 2019 Results (1)


                  
              
                (unaudited and in thousands, except per share amounts)




                                                                   Three Months Ended                                    Nine Months Ended


                                                                   July 31,                                     July 31,


                                                   2019                        2018                        2019                                   2018

                                                                                                                                                ---


       GAAP net income                         $99,929                     $79,409                    $371,653                               $178,190



       Adjustments:


        Amortization of intangible
         assets                                  23,714                      30,805                      77,138                                 90,538


        Stock compensation                       39,453                      37,252                     114,827                                102,540


        Acquisition-related costs                 1,796                       1,402                       3,948                                 19,622



       Restructuring                            19,338                          23                      33,746                                  1,917



       Legal matters                                                       26,000                    (18,000)                                26,000


        Income tax related to
         transition tax                                                                                                                      73,434


        Income tax related to tax
         rate change                                                                                                                         45,636



       Tax settlement                                                                                 17,418                                      -



       Tax adjustments                         (1,772)                   (29,275)                   (75,275)                              (57,714)

                                                                                                                                                ---

        Non-GAAP net income                    $182,458                    $145,616                    $525,455                               $480,163









                                                                   Three Months Ended                                    Nine Months Ended


                                                                   July 31,                                     July 31,


                                                   2019                        2018                        2019                                   2018

                                                                                                                                                ---

        GAAP net income per share                 $0.65                       $0.52                       $2.42                                  $1.16



       Adjustments:


        Amortization of intangible
         assets                                    0.15                        0.20                        0.50                                   0.59


        Stock compensation                         0.25                        0.24                        0.75                                   0.67


        Acquisition-related costs                  0.01                        0.01                        0.03                                   0.13



       Restructuring                              0.13                                                   0.22                                   0.01



       Legal matters                                                         0.17                      (0.12)                                  0.17


        Income tax related to
         transition tax                                                                                                                        0.48


        Income tax related to tax
         rate change                                                                                                                           0.30



       Tax settlement                                                                                   0.11                                      -



       Tax adjustments                          (0.01)                     (0.19)                     (0.49)                                (0.37)


        Non-GAAP net income per
         share                                    $1.18                       $0.95                       $3.42                                  $3.14





        Shares used in computing
         per share amounts:                     154,600                     152,614                     153,859                                153,118



               (1) Synopsys' third quarter of
                fiscal year 2019 and 2018 ended
                on August 3, 2019 and August 4,
                2018, respectively. For
                presentation purposes, we refer
                to the closest calendar month
                end. The first quarter of
                fiscal 2018 included an extra
                week.

Reconciliation of Target Non-GAAP Operating Results

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

                                             
              
                GAAP to Non-GAAP Reconciliation of Fourth Quarter Fiscal Year 2019 Targets (1)


                                                                
              
                (in thousands, except per share amounts)




                                                                                                               
              
                ASC 606


                                                                                                                                Range for Three Months


                                                                                                                             Ending October 31, 2019 (2)



                                                                                                                 
              
                Low             
     
       High

                                                                                                                                                                   ---


     Target GAAP expenses                                                                                                                      $701,000       $733,000



     Adjustments:



           Estimated impact of amortization of intangible assets                                                                               (23,000)      (26,000)



           Estimated impact of stock compensation                                                                                              (39,000)      (42,000)



           Estimated impact of restructuring                                                                                                    (9,000)      (15,000)



     Target non-GAAP expenses                                                                                                                  $630,000       $650,000

                                                                                                                                                                   ===





                                                                                                               
              
                ASC 606


                                                                                                                                Range for Three Months


                                                                                                                             Ending October 31, 2019 (2)



                                                                                                                 
              
                Low             
     
       High

                                                                                                                                                                   ---


     Target GAAP earnings per share                                                                                                               $0.69          $0.82



     Adjustments:



           Estimated impact of amortization of intangible assets                                                                                   0.17           0.15



           Estimated impact of stock compensation                                                                                                  0.27           0.25



           Estimated impact of restructuring                                                                                                       0.10           0.06



           Estimated impact of tax adjustments                                                                                                   (0.13)        (0.13)



     Target non-GAAP earnings per share                                                                                                           $1.10          $1.15

                                                                                                                                                                   ===




     Shares used in non-GAAP calculation (midpoint of target range)                                                                             154,500        154,500






                                                  
              
                GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2019 Targets(1)


                                                                
              
                (in thousands, except per share amounts)




                                                                                                               
              
                ASC 606


                                                                                                                                Range for Fiscal Year


                                                                                                                                 October 31, 2019 (2)



                                                                                                                 
              
                Low             
     
       High

                                                                                                                                                                   ---


     Target GAAP expenses                                                                                                                    $2,820,148     $2,852,148



     Adjustments:



           Estimated impact of amortization of intangible assets                                                                              (100,000)     (103,000)



           Estimated impact of stock compensation                                                                                             (154,000)     (157,000)



           Acquisition-related costs                                                                                                            (3,948)       (3,948)



           Estimated impact of restructuring                                                                                                   (43,000)      (49,000)



           Legal matters                                                                                                                         18,000         18,000



           Fair value changes in executive deferred compensation plan                                                                          (25,200)      (25,200)



     Target non-GAAP expenses                                                                                                                $2,512,000     $2,532,000

                                                                                                                                                                   ===





                                                                                                               
              
                ASC 606


                                                                                                                                Range for Fiscal Year


                                                                                                                                 October 31, 2019 (2)



                                                                                                                 
              
                Low             
     
       High

                                                                                                                                                                   ---


     Target GAAP earnings per share                                                                                                               $3.11          $3.24



     Adjustments:



          Estimated impact of amortization of intangible assets                                                                                    0.67           0.65



          Estimated impact of stock compensation                                                                                                   1.02           1.00



          Acquisition-related costs                                                                                                                0.03           0.03



          Estimated impact of restructuring                                                                                                        0.32           0.28



          Legal matters                                                                                                                          (0.12)        (0.12)



          Tax settlement                                                                                                                           0.11           0.11



          Impact of tax adjustments                                                                                                              (0.62)        (0.62)



     Target non-GAAP earnings per share                                                                                                           $4.52          $4.57

                                                                                                                                                                   ===




     Shares used in non-GAAP calculation (midpoint of target range)                                                                             154,500        154,500



               (1) Synopsys adopted new revenue
                recognition guidance ASC 606,
                Revenue from Contracts with
                Customers, at the beginning of
                fiscal 2019 under the modified
                retrospective method.


               (2) Synopsys' fourth fiscal
                quarter and fiscal year will
                end on November 2, 2019. For
                presentation purposes, we refer
                to the closest calendar month
                end.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including, but not limited to, financial targets for the fourth quarter and full fiscal year 2019, the comparative annual amounts under ASC 605, and GAAP to non-GAAP reconciliations of such targets, as well as statements related to our long-term revenue, non-GAAP EPS and non-GAAP operating margin objectives, the expected impact of ASC 606 on our results, and the expected impact of the recent U.S. government action on our results. These statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. Accordingly, we caution stockholders and prospective investors not to place undue reliance on these statements. Such risks, uncertainties and factors include, but are not limited to: additional administrative, legislative or regulatory action by the U.S. or foreign governments, such as the imposition of additional tariffs or export restrictions, which could further interfere with our ability to provide products and services in certain countries; the response by current or potential customers and their willingness to purchase products and services from us in the future; 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; 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; our highly competitive industries and our ability to meet our customers' demand for innovative technology at lower costs; risks and compliance obligations relating to the global nature of our operations; cybersecurity threats or other security breaches; our ability to protect our proprietary technology; our ability to realize the potential financial or strategic benefits of acquisitions we complete; our ability to carry out our new product and technology initiatives; investment of more resources in research and development than anticipated; increased risks resulting from an increase in sales of our hardware products, including increased variability in upfront revenue; changes in accounting principles or standards; changes in our effective tax rate; liquidity requirements in our U.S. operations; claims that our products infringe on third-party intellectual property rights; litigation; product errors or defects; the ability to obtain licenses to third-party software and intellectual property on reasonable terms or at all; the ability to timely recruit and retain senior management and key employees; the inherent limitations on the effectiveness of our controls and compliance programs; the impairment of our investment portfolio by the deterioration of capital markets; the accuracy of certain assumptions, judgments and estimates that affect amounts reported in our financial statements; and the impact of catastrophic events. More 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, 2018 and its latest Quarterly Report on Form 10-Q. The information provided herein is as of August 21, 2019. 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                     Nine Months Ended


                                                                             July 31,                      July 31,

                                                                                                 ---

                                                            2019                       2018           2019                                  2018

                                                                                                                                          ---


     Revenue:


        Time-based products                             $537,569                   $570,053     $1,649,590                            $1,697,756


        Upfront products                                 177,552                     99,579        451,466                               291,143


        Maintenance and
         service                                         137,849                    110,082        408,557                               337,077

                                                                                                                                          ---

            Total revenue                                852,970                    779,714      2,509,613                             2,325,976



     Cost of revenue:


        Products                                         113,533                    115,437        346,163                               335,030


        Maintenance and
         service                                          59,496                     49,790        178,113                               150,674


        Amortization of
         intangible assets                                13,603                     20,154         45,927                                59,612


           Total cost of
            revenue                                      186,632                    185,381        570,203                               545,316


      Gross margin                                       666,338                    594,333      1,939,410                             1,780,660



     Operating expenses:


        Research and
         development                                     284,804                    277,402        846,429                               793,947


        Sales and marketing                              157,109                    157,953        471,720                               455,653


        General and
         administrative                                   67,382                     84,336        165,794                               199,517


        Amortization of
         intangible assets                                10,111                     10,651         31,211                                30,926


        Restructuring                                     19,338                         23         33,746                                 1,917


           Total operating
            expenses                                     538,744                    530,365      1,548,900                             1,481,960


      Operating income                                   127,594                     63,968        390,510                               298,700


      Other income
       (expense), net                                      5,317                      7,925         23,373                                12,595

                                                                                                                                          ---

      Income before income
       taxes                                             132,911                     71,893        413,883                               311,295


      Provision (benefit)
       for income taxes                                   32,982                    (7,516)        42,230                               133,105


      Net income                                         $99,929                    $79,409       $371,653                              $178,190






     Net income (loss) per share:



       Basic                                              $0.67                      $0.53          $2.48                                 $1.20



       Diluted                                            $0.65                      $0.52          $2.42                                 $1.16




      Shares used in computing per share amounts:



       Basic                                            150,123                    148,490        149,708                               148,760

                                                                                                                                          ===


       Diluted                                          154,600                    152,614        153,859                               153,118

                                                                                                                                          ===


               (1) Synopsys' third quarter of
                fiscal year 2019 and 2018 ended
                on August 3, 2019 and August 4,
                2018, respectively. For
                presentation purposes, we refer
                to the closest calendar month
                end. The first quarter of
                fiscal 2018 included an extra
                week.

                                                                         
              
                SYNOPSYS, INC.


                                                 
             
                Unaudited Reconciliation of Consolidated Statements of Operations


                                                     
              
                Under ASC 606 & ASC 605 
                
                  (1)


                                                            
              
                (in thousands, except per share amounts)






                                         
             
                Three Months Ended


                                           
             
                July 31, 2019



                                     
              
               As reported under                                         Adjustments         
     
             Balances under
                                                     ASC 606                                                                                  ASC 605




     Revenue:


        Time-based products                                            $537,569                                            $55,604                             $593,173


        Upfront products                                                177,552                                           (73,267)                             104,285


        Maintenance and
         service                                                        137,849                                           (26,914)                             110,935



            Total revenue                                               852,970                                           (44,577)                             808,393



     Cost of revenue:


        Products                                                        113,533                                                                                113,533


        Maintenance and
         service                                                         59,496                                                                                 59,496


        Amortization of
         intangible assets                                               13,603                                                                                 13,603


           Total cost of
            revenue                                                     186,632                                                                                186,632



      Gross margin                                                      666,338                                           (44,577)                             621,761



     Operating expenses:


        Research and
         development                                                    284,804                                                                                284,804


        Sales and marketing                                             157,109                                            (2,731)                             154,378


        General and
         administrative                                                  67,382                                                                                 67,382


        Amortization of
         intangible assets                                               10,111                                                                                 10,111


        Restructuring                                                    19,338                                                                                 19,338


           Total operating
            expenses                                                    538,744                                            (2,731)                             536,013



      Operating income                                                  127,594                                           (41,846)                              85,748


      Other income
       (expense), net                                                     5,317                                                                                  5,317



      Income before income
       taxes                                                            132,911                                           (41,846)                              91,065


      Provision (benefit)
       for income taxes                                                  32,982                                            (9,127)                              23,855



      Net income (loss)                                                 $99,929                                          $(32,719)                             $67,210






     Net income (loss) per share:



       Basic                                                             $0.67                                            $(0.22)                               $0.45



       Diluted                                                           $0.65                                            $(0.22)                               $0.43





     Shares used in computing per share amounts:



       Basic                                                           150,123                                                                                150,123




       Diluted                                                         154,600                                                                                154,600




               (1)  Synopsys' third quarter of
                fiscal year 2019 ended on
                August 3, 2019. For
                presentation purposes, we refer
                to the closest calendar month
                end.

                                                                         
              
                SYNOPSYS, INC.


                                                 
             
                Unaudited Reconciliation of Consolidated Statements of Operations


                                                     
              
                Under ASC 606 & ASC 605 
                
                  (1)


                                                            
              
                (in thousands, except per share amounts)






                                         
             
                Nine Months Ended


                                           
             
                July 31, 2019



                                     
              
               As reported under                                         Adjustments         
     
             Balances under
                                                     ASC 606                                                                                  ASC 605




     Revenue:


        Time-based products                                          $1,649,590                                           $158,222                           $1,807,812


        Upfront products                                                451,466                                          (151,110)                             300,356


        Maintenance and
         service                                                        408,557                                           (57,707)                             350,850



            Total revenue                                             2,509,613                                           (50,595)                           2,459,018


      Cost of revenue:                                                        -


        Products                                                        346,163                                                                                346,163


        Maintenance and
         service                                                        178,113                                                                                178,113


        Amortization of
         intangible assets                                               45,927                                                                                 45,927


           Total cost of
            revenue                                                     570,203                                                                                570,203



      Gross margin                                                    1,939,410                                           (50,595)                           1,888,815


      Operating expenses:                                                     -


        Research and
         development                                                    846,429                                                                                846,429


        Sales and marketing                                             471,720                                             10,395                              482,115


        General and
         administrative                                                 165,794                                                                                165,794


        Amortization of
         intangible assets                                               31,211                                                                                 31,211


        Restructuring                                                    33,746                                                                                 33,746


           Total operating
            expenses                                                  1,548,900                                             10,395                            1,559,295



      Operating income                                                  390,510                                           (60,990)                             329,520


      Other income
       (expense), net                                                    23,373                                                                                 23,373



      Income before income
       taxes                                                            413,883                                           (60,990)                             352,893


      Provision (benefit)
       for income taxes                                                  42,230                                           (12,198)                              30,032



      Net income (loss)                                                $371,653                                          $(48,792)                            $322,861






     Net income (loss) per share:



       Basic                                                             $2.48                                            $(0.33)                               $2.16



       Diluted                                                           $2.42                                            $(0.32)                               $2.10





     Shares used in computing per share amounts:



       Basic                                                           149,708                                                                                149,708




       Diluted                                                         153,859                                                                                153,859




               (1)  Synopsys' third quarter of
                fiscal year 2019 ended on
                August 3, 2019. 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, 2019         
     
     October 31, 2018




     
                ASSETS:



     Current assets:



       Cash and cash equivalents                                                 $686,780                       $723,115



       Accounts receivable, net                                                   457,390                        554,217



       Inventories                                                                155,108                        122,407


        Income taxes receivable and prepaid
         taxes                                                                      29,751                         76,525


        Prepaid and other current assets                                           288,616                         67,533



                Total current assets                                             1,617,645                      1,543,797



     Property and equipment, net                                                  372,566                        309,310



     Goodwill                                                                   3,143,056                      3,143,249



     Intangible assets, net                                                       283,305                        360,404



     Long-term prepaid taxes                                                       13,973                        138,312



     Deferred income taxes                                                        339,354                        404,166



     Other long-term assets                                                       383,509                        246,736



                Total assets                                                   $6,153,408                     $6,145,974





                   LIABILITIES AND STOCKHOLDERS' EQUITY:



     Current liabilities:


        Accounts payable and accrued liabilities                                  $471,629                       $578,326



       Accrued income taxes                                                         3,175                         27,458



       Deferred revenue                                                         1,138,993                      1,152,862



       Short-term debt                                                             16,653                        343,769



                 Total current liabilities                                       1,630,450                      2,102,415


      Long-term accrued income taxes                                                27,847                         50,590



     Long-term deferred revenue                                                    91,229                        116,859



     Long-term debt                                                               125,285                        125,535



     Other long-term liabilities                                                  338,928                        265,560




                Total liabilities                                               2,213,739                      2,660,959



     Stockholders' equity:


        Preferred stock, $0.01 par value: 2,000
         shares authorized; none outstanding


        Common stock, $0.01 par value: 400,000
         shares authorized; 150,373 and


            149,265 shares outstanding, respectively                                 1,504                          1,493


        Capital in excess of par value                                           1,597,629                      1,644,830



       Retained earnings                                                        3,003,430                      2,543,688


        Treasury stock, at cost: 6,888 and 7,996
         shares, respectively                                                    (572,104)                     (597,682)


        Accumulated other comprehensive income
         (loss)                                                                   (96,653)                     (113,177)



                 Total Synopsys stockholders' equity                             3,933,806                      3,479,152



     Non-controlling interest                                                       5,863                          5,863



                 Total stockholders' equity                                      3,939,669                      3,485,015


                 Total liabilities and stockholders'
                  equity                                                        $6,153,408                     $6,145,974




               (1) Synopsys' third quarter of
                fiscal year 2019 ended on
                August 3, 2019, and its fiscal
                year 2018 ended on November 3,
                2018. For presentation
                purposes, we refer to the
                closest calendar month end.

                   
              
                SYNOPSYS, INC.


      
         
                Unaudited Consolidated Statements of Cash Flows (1)


                   
              
                (in thousands)




                                                                             Nine Months Ended July 31,



                                                                   2019                 2018

                                                                                        ---


       CASH FLOWS FROM OPERATING ACTIVITIES:



       Net income                                             $371,653             $178,190


        Adjustments to reconcile net income to net cash
         used in



       operating activities:


        Amortization and
         depreciation                                           152,133              150,245


        Amortization of
         capitalized costs to
         obtain revenue
         contracts                                               46,230


        Stock compensation                                      114,826              102,540


        Allowance for doubtful
         accounts                                                 8,950                3,368


        (Gain) loss on sale of
         property and
         investments                                            (4,052)                (93)


        Deferred income taxes                                   (9,664)               5,509


        Net changes in operating assets and liabilities,
         net of



       acquired assets and liabilities:


        Accounts receivable                                      89,370             (41,695)



       Inventories                                            (39,431)            (48,440)


        Prepaid and other
         current assets                                        (38,224)             (9,766)


        Other long-term
         assets                                               (114,344)            (31,652)


        Accounts payable and
         accrued liabilities                                   (45,200)            (56,491)


        Income taxes                                            (6,963)            (35,014)


        Deferred revenue                                         53,980               76,780


        Net cash provided by
         operating activities                                   579,264              293,481





       CASH FLOWS FROM INVESTING ACTIVITIES:


        Proceeds from sales
         and maturities of
         short-term
         investments                                                                 12,449


        Proceeds from sales of
         long-term
         investments                                              6,361                  494


        Purchases of long-
         term investments                                                             (645)


        Proceeds from sales of
         property and
         equipment                                                                    1,662


        Purchases of property
         and equipment                                        (122,358)            (70,469)


        Cash paid for
         acquisitions and
         intangible assets,
         net of cash acquired                                                     (646,687)


        Capitalization of
         software development
         costs                                                  (2,245)             (2,714)


        Net cash used in
         investing activities                                 (118,242)           (705,910)





       CASH FLOWS FROM FINANCING ACTIVITIES:


        Proceeds from credit
         facility                                               192,897              615,000


        Repayment of debt                                     (520,312)           (137,500)


        Issuances of common
         stock                                                  107,354               72,722


        Payments for taxes
         related to net share
         settlement of equity
         awards                                                (52,309)            (42,636)


        Purchase of equity
         forward contract                                      (20,000)            (33,000)


        Purchases of treasury
         stock                                                (209,185)           (367,000)



       Other                                                     (762)               1,759


        Net cash (used in)
         provided by financing
         activities                                           (502,317)             109,345


        Effect of exchange
         rate changes on cash,
         cash equivalents and
         restricted cash                                          4,975              (3,826)


        Net change in cash,
         cash equivalents and
         restricted cash                                       (36,320)           (306,910)


        Cash, cash equivalents
         and restricted cash,
         beginning of the year                                  725,001            1,050,075


        Cash, cash equivalents
         and restricted cash,
         end of the period                                     $688,681             $743,165

                                                                                        ===


               (1) Synopsys' third quarter of
                fiscal year 2019 and 2018 ended
                on August 3, 2019 and August 4,
                2018, respectively. For
                presentation purposes, we refer
                to the closest calendar month
                end. The first quarter of
                fiscal 2018 included an extra
                week.

                                                                   
        
             SYNOPSYS, INC.


                                                             
            
       Business Segment Reporting (1)


                                                                   
        
             (in millions)




                                                
      
      FY18                                     
              
      Q3'19         
      
      YTD Q3'19


                                               
      
      ASC 605                                  
              
      ASC 606         
      
      ASC 606

                                                                                                                                              ---


     Revenue by segment (3)


      -Semiconductor &
       System Design                                           $2,840.6                                             $769.4                 $2,260.3


                   % of Total                                     91.0%                                             90.2%                   90.1%


      -Software Integrity                                        $280.5                                              $83.6                   $249.3


                   % of Total                                      9.0%                                              9.8%                    9.9%


                   Total segment revenue                       $3,121.1                                             $853.0                 $2,509.6





     Adjusted operating income by segment (3)


      -Semiconductor &
       System Design                                             $701.3                                             $207.8                   $604.5


      -Software Integrity                                       $(10.6)                                              $8.8                    $22.9


                   Total adjusted segment
                    operating income                             $690.7                                             $216.6                   $627.4





     Adjusted operating margin by segment (3)


      -Semiconductor &
       System Design                                              24.7%                                             27.0%                   26.7%


      -Software Integrity                                        (3.8)%                                             10.5%                    9.2%


                   Total adjusted segment
                    operating margin                              22.1%                                             25.4%                   25.0%

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


                                                                                            
              
                (in millions)




                                         
             
         Twelve Months Ended                               
              
                Three Months Ended                 
       
         Nine Months Ended


                                                 
         
             October 31, 2018 (3)                               
              
                 July 31, 2019 (3)          
         
             July 31, 2019 (3)


                                                     
         
                ASC 605                                           
              
                ASC 606                   
       
                ASC 606

                                                                                                                                                                                                            ---

      GAAP total operating income
       - as reported                                                                  $360.2                                                                   $127.6                                      $390.5



     Other expenses managed at consolidated level


      -Amortization of intangible
       assets                                                                          125.7                                                                     23.7                                        77.1


      -Stock compensation                                                              140.0                                                                     39.5                                       114.8


      -Fair value changes in
       executive deferred
       compensation plan                                                                 4.6                                                                      4.7                                        25.2


      -Acquisition-related
       costs                                                                            21.2                                                                      1.8                                         3.9



     -Restructuring                                                                    12.9                                                                     19.3                                        33.7



     -Legal matters                                                                    26.0                                                                                                              (18.0)


      Total adjusted segment
       operating income                                                               $690.7                                                                   $216.6                                      $627.4

                                                                                                                                                                                                            ===


               (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. Quarterly
                variability, which increases as
                a result of ASC 606, should be
                expected.




               (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 maker (CODM) to
                evaluate the operating
                performance of its segments.
                The CODM does 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 2019 ended on
                August 3, 2019, and its fiscal
                year 2018 ended on November 3,
                2018. For presentation
                purposes, we refer to the
                closest calendar month end. The
                first quarter of fiscal 2018
                included an extra week.

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

View original content:http://www.prnewswire.com/news-releases/synopsys-posts-financial-results-for-third-quarter-fiscal-year-2019-300905411.html

SOURCE Synopsys, Inc.