Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2020
MOUNTAIN VIEW, Calif., Dec. 2, 2020 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its fourth quarter and full fiscal year 2020. Revenue for the fourth quarter was $1.025 billion, compared to $851.1 million for the fourth quarter of fiscal year 2019. Revenue for fiscal year 2020 was $3.685 billion, an increase of 9.6 percent from $3.361 billion in fiscal year 2019.
"Synopsys is entering fiscal 2021 with considerable financial, technology and customer momentum as we substantially exceeded our original plan, with excellent growth in revenue, non-GAAP operating margin and earnings, and operating cash flow. Given the unprecedented macro challenges in 2020, it is with particular gratitude that we thank our customers, partners, and the entire Synopsys team for this outcome," said Aart de Geus, chairman and co-CEO of Synopsys. "Looking forward, market demand is strong, fueled by complex technologies and a multitude of high-profile verticals. Our innovation engine continues to deliver highly advanced capabilities throughout the portfolio. In fiscal 2021, we aim to surpass $4 billion in revenue, with continued non-GAAP operating margin expansion, low-to-mid teens non-GAAP earnings per share growth, and more than $1 billion in operating cash flow."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal year 2020 was $197.5 million, or $1.26 per share, compared to $160.7 million, or $1.04 per share, for the fourth quarter of fiscal year 2019. GAAP net income for fiscal year 2020 was $664.3 million, or $4.27 per share, compared to $532.4 million, or $3.45 per share, for fiscal year 2019.
Non-GAAP Results
On a non-GAAP basis, net income for the fourth quarter of fiscal year 2020 was $247.7 million, or $1.58 per share, compared to non-GAAP net income of $177.1 million, or $1.15 per share, for the fourth quarter of fiscal year 2019. Non-GAAP net income for fiscal year 2020 was $864.6 million, or $5.55 per share, compared to non-GAAP net income of $702.5 million, or $4.56 per share, for fiscal year 2019.
For a reconciliation between GAAP and non-GAAP results, see "GAAP to Non-GAAP Reconciliation" and the accompanying tables below.
Business Segments
Synopsys reports revenue and operating income in two segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and associated services, and (2) Software Integrity, which includes security and quality solutions for software development across many industries. Further information regarding these segments is provided at the end of this press release.
Financial Targets
Synopsys also provided its consolidated financial targets for the first quarter and full fiscal year 2021. These financial targets assume that there are no changes to the current U.S. government "Entity List" restrictions for the full fiscal year. These targets constitute forward-looking statements and are based on current expectations. For a discussion of factors that could cause actual results to differ materially from these targets, see "Forward-Looking Statements" below.
First Quarter and Fiscal Year 2021 Financial Targets
(in millions except per share amounts)
Q1 FY 2021 FY 2021
Low High Low High
---
Revenue $935 $965 $4,000 $4,050
GAAP Expenses $767 $785 $3,226 $3,271
Non-GAAP
Expenses $674 $684 $2,825 $2,855
Other Income
(Expense) $(2)
$ - $(11) $(7)
Normalized
Annual Tax Rate
(1) 16% 16% 16% 16%
Outstanding
Shares (fully
diluted) 155 158 156 159
GAAP EPS $1.05 $1.16 $4.39 $4.54
Non-GAAP EPS $1.44 $1.49 $6.23 $6.30
Operating Cash Flow $1,200 $1,300
(1) Applied in non-GAAP net
income calculations
Earnings Call Open to Investors
Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m. Pacific Time. A live webcast of the call will be available on Synopsys' corporate website at www.synopsys.com. A recording of the call will be available by calling +1-866-207-1041 (+1-402-970-0847 for international callers), access code 2523787, beginning at 5:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on December 9, 2020. 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 first quarter of fiscal year 2021 in February 2021. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Trac Pham, chief financial officer, on its website following today's call. In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, which are 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 first quarter of fiscal year 2021 earnings call in February 2021, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys does not currently intend to report on its progress during the first quarter of fiscal year 2021 or comment to analysts or investors on, or otherwise update, the targets given in this release.
Availability of Final Financial Statements
Synopsys will include final financial statements for fiscal year 2020 in its annual report on Form 10-K to be filed by December 30, 2020.
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, and (vi) the income tax effect of non-GAAP pre-tax adjustments; and the non-GAAP measures that exclude such information in order to assess the performance of Synopsys' business and for planning and forecasting in subsequent periods.
Synopsys utilizes a normalized annual non-GAAP tax rate in the calculation of its non-GAAP measures to provide better consistency across interim reporting periods by eliminating the effects of non-recurring and period-specific items such as tax audit settlements, which can vary in size and frequency and not necessarily reflect our normal operations, and to more clearly align our tax rate with our expected geographic earnings mix. In projecting this rate, we evaluate our historical and projected mix of U.S. and international profit before tax, excluding the non-GAAP adjustments described above. We also consider other factors including our current tax structure, our existing tax positions, and expected recurring tax incentives. On an annual basis, we re-evaluate this rate for significant events, including changes in tax laws and regulations, that may materially affect our projections. Based upon our review, our projected normalized annual non-GAAP tax rate remains 16% through fiscal year 2021.
Whenever Synopsys uses a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed below, as well as Item 2.02 of the Current Report on Form 8-K filed on December 2, 2020 for additional information about the measures Synopsys uses to evaluate its core business operations.
Reconciliation of Fourth Quarter and Fiscal Year 2020 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 Fourth Quarter and Fiscal Year 2020 Results (1)
(unaudited and in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
October 31, October 31,
2020 2019 2020 2019
---
GAAP net income $197,455 $160,714 $664,347 $532,367
Adjustments:
Amortization of intangible
assets 21,004 23,776 91,281 100,914
Stock compensation 78,429 40,174 248,584 155,001
Acquisition-related costs 3,259 1,782 14,096 5,730
Restructuring charges (387) 13,440 36,059 47,186
Legal matters (18,000)
Tax settlement 17,418
Tax adjustments (52,084) (62,818) (189,798) (138,093)
---
Non-GAAP net income $247,676 $177,068 $864,569 $702,523
Three Months Ended Twelve Months Ended
October 31, October 31,
2020 2019 2020 2019
---
GAAP diluted net income
per share $1.26 $1.04 $4.27 $3.45
Adjustments:
Amortization of intangible
assets 0.13 0.15 0.59 0.65
Stock compensation 0.50 0.26 1.60 1.01
Acquisition-related costs 0.02 0.01 0.08 0.04
Restructuring charges 0.09 0.23 0.31
Legal matters (0.12)
Tax settlement 0.11
Tax adjustments (0.33) (0.40) (1.22) (0.89)
Non-GAAP diluted net
income per share $1.58 $1.15 $5.55 $4.56
Shares used in computing
diluted net income per
share amounts: 156,825 154,532 155,706 154,190
(1) Synopsys' fourth quarter of
fiscal year 2020 and 2019 ended
on October 31, 2020 and
November 2, 2019, respectively.
For presentation purposes, we
refer to the closest calendar
month end.
Reconciliation of Fiscal Year 2021 Targets
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP targets for the periods indicated below.
GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2021 Targets (1)
(in thousands, except per share amounts)
Range for Three Months
Ending
January 31, 2021
Low
High
---
Target GAAP expenses $767,000 $785,000
Adjustments:
Estimated impact of
amortization of
intangible assets (19,000) (22,000)
Estimated impact of
stock compensation (74,000) (79,000)
Target non-GAAP
expenses $674,000 $684,000
===
Range for Three Months
Ending
January 31, 2021
Low
High
---
Target GAAP earnings
per share $1.05 $1.16
Adjustments:
Estimated impact of
amortization of
intangible assets 0.14 0.12
Estimated impact of
stock compensation 0.50 0.47
Estimated impact of
tax adjustments (0.25) (0.26)
Target non-GAAP
earnings per share $1.44 $1.49
===
Shares used in non-
GAAP calculation
(midpoint of target
range) 156,500 156,500
GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2021 Targets(1)
(in thousands, except per share amounts)
Range for Fiscal Year
Ending
October 31, 2021
Low
High
---
Target GAAP expenses $3,226,000 $3,271,000
Adjustments:
Estimated impact of
amortization of
intangible assets (71,000) (76,000)
Estimated impact of
stock compensation (330,000) (340,000)
Target non-GAAP
expenses $2,825,000 $2,855,000
Range for Fiscal Year
Ending
October 31, 2021
Low
High
---
Target GAAP earnings
per share $4.39 $4.54
Adjustments:
Estimated impact of
amortization of
intangible assets 0.48 0.45
Estimated impact of
stock compensation 2.16 2.10
Estimated impact of
tax adjustments (0.80) (0.79)
Target non-GAAP
earnings per share $6.23 $6.30
===
Shares used in non-
GAAP calculation
(midpoint of target
range) 157,500 157,500
(1) Synopsys' first fiscal
quarter and fiscal year will
end on January 30, 2021 and
October 30, 2021, respectively.
For presentation purposes, we
refer to the closest calendar
month end.
Forward-Looking Statements
This press release contains forward-looking statements including, but not limited to, statements regarding Synopsys' short-term and long-term financial targets, expectations and objectives; business outlook, opportunities and strategies; customer demand and market expansion; strategies related to our products and technology; our planned product releases and capabilities; industry growth rates; software trends; planned acquisitions and buybacks; our expected tax rate; the expected impact of U.S. and foreign government action on our results; and the expected impact of the COVID-19 pandemic. These statements involve risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements. Such risks, uncertainties and factors include, but are not limited to: risks from the effect of the COVID-19 pandemic and the associated economic downturn on our business, operations and financial condition; uncertainty in the growth of the semiconductor and electronics industries; consolidation among our customers and our dependence on a relatively small number of large customers; risks and compliance obligations relating to the global nature of our operations as well as actions by the U.S. or foreign governments, such as measures in response to the COVID-19 pandemic or the imposition of additional tariffs or export restrictions; macroeconomic conditions and uncertainty in the global economy; fluctuation of our operating results; increased variability in our revenue due to the adoption of ASC 606, including the resulting increase in recognizing upfront revenue as a percentage of total revenue; and more. Additional information on potential risks, uncertainties and other factors that could affect Synopsys' results is included in filings it makes with the Securities and Exchange Commission from time to time, including in the sections entitled "Risk Factors" in its Annual Report on Form 10-K for the fiscal year ended October 31, 2019 and its latest Quarterly Report on Form 10-Q. The information provided herein is as of December 2, 2020. 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 Twelve Months Ended
October 31, October 31,
---
2020 2019 2020 2019
---
Revenue:
Time-based
products $606,598 $548,375 $2,365,199 $2,197,965
Upfront products 244,155 168,325 735,572 619,791
Maintenance and
service 174,686 134,381 584,510 542,938
---
Total revenue 1,025,439 851,081 3,685,281 3,360,694
Cost of revenue:
Products 142,838 112,964 487,307 459,127
Maintenance and
service 69,991 56,083 254,931 234,196
Amortization of
intangible assets 11,720 13,696 52,452 59,623
Total cost of
revenue 224,549 182,743 794,690 752,946
Gross margin 800,890 668,338 2,890,591 2,607,748
Operating expenses:
Research and
development 339,566 290,503 1,279,022 1,136,932
Sales and marketing 176,499 161,170 632,010 632,890
General and
administrative 79,796 63,424 284,530 229,218
Amortization of
intangible assets 9,284 10,080 38,829 41,291
Restructuring
charges (387) 13,440 36,059 47,186
Total operating
expenses 604,758 538,617 2,270,450 2,087,517
Operating income 196,132 129,721 620,141 520,231
Other income
(expense), net (4,095) 1,902 18,018 25,275
---
Income before
income taxes 192,037 131,623 638,159 545,506
Provision (benefit)
for income taxes (4,989) (29,091) (25,288) 13,139
Net income 197,026 160,714 663,447 532,367
Net income (loss)
attributed to non-
controlling
interest (429) (900) -
Net income
attributed to
Synopsys $197,455 $160,714 $664,347 $532,367
Net income per share:
Basic $1.30 $1.07 $4.40 $3.55
Diluted $1.26 $1.04 $4.27 $3.45
Shares used in computing per share amounts:
Basic 152,349 150,367 151,135 149,872
===
Diluted 156,825 154,532 155,706 154,190
===
(1) Synopsys' fourth quarter of
fiscal year 2020 and 2019 ended
on October 31, 2020 and
November 2, 2019, respectively.
For presentation purposes, we
refer to the closest calendar
month end.
SYNOPSYS, INC.
Unaudited Consolidated Balance Sheets (1)
(in thousands, except par value amounts)
October 31, 2020
October 31, 2019
---
ASSETS:
Current assets:
Cash and cash equivalents $1,235,653 $728,597
Accounts receivable, net 780,709 553,895
Inventories, net 192,333 141,518
Income taxes receivable and
prepaid taxes 32,355 24,855
Prepaid and other current
assets 308,167 290,052
Total current assets 2,549,217 1,738,917
Property and equipment, net 483,818 429,532
Operating lease right-of-use
assets, net 465,818 -
Goodwill 3,365,114 3,171,179
Intangible assets, net 254,322 279,374
Long-term prepaid taxes 8,276 15,503
Deferred income taxes 497,546 390,129
Other long-term assets 405,951 380,526
Total assets $8,030,062 $6,405,160
===
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued
liabilities $623,664 $506,459
Operating lease liabilities,
current 73,173 -
Accrued income taxes 27,738 15,904
Deferred revenue 1,388,263 1,212,476
Short-term debt 27,084 17,614
Total current liabilities 2,139,922 1,752,453
Operating lease liabilities,
non-current 462,411 -
Long-term accrued income
taxes 25,178 29,911
Long-term deferred revenue 104,850 90,102
Long-term debt 100,823 120,093
Other long-term liabilities 284,511 323,725
Total liabilities 3,117,695 2,316,284
Stockholders' equity:
Preferred stock, $0.01 par
value: 2,000 shares
authorized; none outstanding -
Common stock, $0.01 par value: 400,000 shares authorized; 152,618 and
150,331 shares outstanding,
respectively 1,528 1,503
Capital in excess of par value 1,653,166 1,635,455
Retained earnings 3,795,397 3,164,144
Treasury stock, at cost: 4,643
and 6,930 shares,
respectively (488,613) (625,642)
Accumulated other
comprehensive income (loss) (54,074) (92,447)
Total Synopsys stockholders'
equity 4,907,404 4,083,013
Non-controlling interest 4,963 5,863
Total stockholders' equity 4,912,367 4,088,876
Total liabilities and
stockholders' equity $8,030,062 $6,405,160
===
(1) Synopsys' fiscal year 2020
and 2019 ended on October 31,
2020 and November 2, 2019,
respectively. For presentation
purposes, we refer to the
closest calendar month end.
SYNOPSYS, INC.
Unaudited Consolidated Statements of Cash Flows (1)
(in thousands)
Twelve Months Ended
October 31,
2020 2019
---
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributed
to Synopsys $664,347 $532,367
Adjustments to reconcile net income to net cash
provided by
operating activities:
Amortization and
depreciation 209,986 201,676
Reduction of operating
lease right-of-use
assets 82,895
Amortization of
capitalized costs to
obtain revenue
contracts 61,185 62,750
Stock-based
compensation 248,584 155,001
Allowance for doubtful
accounts 20,875 11,669
(Gain) loss on sale of
property and
investments (1,994) (4,052)
Deferred income taxes (111,526) (82,620)
Other non-cash 5,419 (993)
Net changes in operating assets and liabilities,
net of
acquired assets and liabilities:
Accounts receivable (236,806) (8,575)
Inventories (55,024) (17,396)
Prepaid and other
current assets (11,298) (49,779)
Other long-term
assets (83,367) (125,749)
Accounts payable and
accrued liabilities 113,773 (19,280)
Operating lease
liabilities (78,578)
Income taxes 14,120 19,777
Deferred revenue 148,722 125,717
Net cash provided by
operating activities 991,313 800,513
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of
long-term
investments 2,151 6,361
Purchases of long-
term investments (2,762) (3,245)
Purchases of property
and equipment (154,717) (198,129)
Cash paid for
acquisitions and
intangible assets,
net of cash acquired (201,045) (36,605)
Capitalization of
software development
costs (4,045) (4,259)
Net cash used in
investing activities (360,418) (235,877)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit
facilities 276,489 192,897
Repayment of debt (288,879) (524,063)
Issuances of common
stock 197,403 156,364
Payments for taxes
related to net share
settlement of equity
awards (82,225) (57,143)
Purchases of treasury
stock (242,078) (329,185)
Other (1,316) (762)
Net cash used in
financing activities (140,606) (561,892)
Effect of exchange
rate changes on cash,
cash equivalents and
restricted cash 17,154 2,782
Net change in cash,
cash equivalents and
restricted cash 507,443 5,526
Cash, cash equivalents
and restricted cash,
beginning of year 730,527 725,001
Cash, cash equivalents
and restricted cash,
end of period $1,237,970 $730,527
===
(1) Synopsys' fiscal year 2020
and 2019 ended on October 31,
2020 and November 2, 2019,
respectively. For presentation
purposes, we refer to the
closest calendar month end.
SYNOPSYS, INC.
Business Segment Reporting (1)
(in millions)
Q4'20
Q4'19
FY'20
FY'19
---
Revenue by segment
-Semiconductor & System
Design $934.6 $765.8 $3,327.2 $3,026.1
% of Total 91.1% 90.0% 90.3% 90.0%
-Software Integrity $90.8 $85.3 $358.1 $334.6
% of Total 8.9% 10.0% 9.7% 10.0%
Total segment revenue $1,025.4 $851.1 $3,685.3 $3,360.7
Adjusted operating income by segment
-Semiconductor & System
Design $293.5 $202.1 $990.8 $806.6
-Software Integrity $6.2 $9.4 $40.8 $32.2
Total adjusted segment
operating income $299.7 $211.5 $1,031.6 $838.8
Adjusted operating margin by segment
-Semiconductor & System
Design 31.4% 26.4% 29.8% 26.7%
-Software Integrity 6.8% 11.0% 11.4% 9.6%
Total adjusted segment
operating margin 29.2% 24.8% 28.0% 25.0%
Total Adjusted Segment Operating Income Reconciliation (1)(2)
(in millions)
Three Months
Three Months
Twelve Months
Twelve Months
Ended
Ended
Ended
Ended
October 31, 2020 October 31, 2019 October 31, 2020 October 31, 2019
(3) (3) (3) (3)
---
GAAP total operating
income - as reported $196.1 $129.7 $620.1 $520.2
Other expenses managed at consolidated level
-Amortization of
intangible assets 21.0 23.8 91.3 100.9
-Stock compensation 78.4 40.2 248.6 155.0
-Fair value changes in
executive deferred
compensation plan 1.3 2.6 21.5 27.8
-Acquisition-related
costs 3.3 1.8 14.1 5.7
-Restructuring (0.4) 13.4 36.1 47.2
-Legal matters - (18.0)
Total adjusted segment
operating income $299.7 $211.5 $1,031.6 $838.8
===
(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. Amounts may not foot
due to rounding.
(2) These segment results are
consistent with the information
required by ASC 280, Segment
Reporting. They are presented to
reflect the information that is
considered by Synopsys' chief
operating decision makers
(CODMs) to evaluate the
operating performance of its
segments. The CODMs do not
allocate certain operating
expenses managed at a
consolidated level to our
reportable segments, and as a
result, the reported operating
income and operating margin do
not include these unallocated
expenses as shown in the table
above. Amounts may not foot due
to rounding.
(3) Synopsys' fourth quarter of
fiscal year 2020 ended on
October 31, 2020, and its fiscal
year 2019 ended on November 2,
2019. For presentation purposes,
we refer to the closest calendar
month end.
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.
