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
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SOURCE Synopsys, Inc.