News Releases

Synopsys Posts Financial Results for Second Quarter Fiscal Year 2021
Q2 2021 Financial Highlights
- Revenue: $1,024.3 million
- GAAP earnings per share: $1.24
- Non-GAAP earnings per share: $1.70

MOUNTAIN VIEW, Calif., May 19, 2021 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter fiscal year 2021. Revenue for the second quarter was $1,024.3 million, compared to $861.3 million for the second quarter of fiscal 2020.  

"Synopsys continues to execute very well. We delivered outstanding second quarter results, exceeding all of our key guidance metrics, and business was robust across all product groups and geographies. Market demand is strong, and we see a new wave of growth on the horizon, driven by an increasing need for highly complex, connected, specialized, and secure chips and systems," said Aart de Geus, chairman and co-CEO of Synopsys. "Recent transformative technology innovations position us particularly well to enable this new era. And combined with our multi-year focus on accelerating growth and expanding non-GAAP operating margin, we continue to manage the business to drive significant long-term shareholder value. Our excellent year-to-date results, coupled with increased confidence in our business, lead us to raise our fiscal 2021 revenue, non-GAAP earnings and operating margin, and operating cash flow targets."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2021 was $195.1 million, or $1.24 per share, compared to $109.9 million, or $0.71 per share, for the second quarter of fiscal 2020.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2021 was $267.1 million, or $1.70 per share, compared to non-GAAP net income of $188.3 million, or $1.22 per share, for the second quarter of fiscal 2020.

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

Business Segments

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

Financial Targets

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

 

Third Quarter and Fiscal Year 2021 Financial Targets

(in millions except per share amounts)








Q3 FY 2021


FY 2021


Low

High


Low

High

Revenue

$               1,030

$               1,060


$               4,035

$               4,085

GAAP Expenses

$                  807

$                  825


$               3,241

$               3,286

Non-GAAP Expenses

$                  707

$                  717


$               2,835

$               2,865

Other Income (Expense)

$                    (3)

$                    (1)


$                    (9)

$                    (5)

Normalized Annual Tax Rate (1)

16%

16%


16%

16%

Outstanding Shares (fully diluted)

156

159


156

159

GAAP EPS

$                 1.30

$                 1.41


$                 4.55

$                 4.72

Non-GAAP EPS

$                 1.75

$                 1.80


$                 6.38

$                 6.45

Operating Cash Flow




$               1,250

$               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 8802871, beginning at 5:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on May 26, 2021. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the third quarter of fiscal year 2021 in August 2021. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Trac Pham, chief financial officer, on its website following today's call. In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, also posted on the corporate website.

Effectiveness of Information

The targets included in this press release, the statements made during the earnings conference call and the information contained in the financial supplement and corporate overview presentation (available in the Investor Relations section of Synopsys' corporate website at www.synopsys.com) represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the co-chief executive officer and chief financial officer made during the call, the financial supplement, and the corporate overview presentation will remain available on Synopsys' website through the date of the third quarter fiscal year 2021 earnings call in August 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 third quarter of fiscal year 2021 or comment to analysts or investors on, or otherwise update, the targets given in this release.

Availability of Final Financial Statements

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

About Synopsys

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

GAAP to Non-GAAP Reconciliation

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

Synopsys utilizes a normalized annual non-GAAP tax rate in the calculation of its non-GAAP measures to provide better consistency across interim reporting periods by eliminating the effects of non-recurring and period-specific items such as tax audit settlements, which can vary in size and frequency and not necessarily reflect our normal operations, and to more clearly align our tax rate with our expected geographic earnings mix.  In projecting this rate, we evaluate our historical and projected mix of U.S. and international profit before tax, excluding the non-GAAP adjustments described above. We also consider other factors including our current tax structure, our existing tax positions, and expected recurring tax incentives. On an annual basis, we re-evaluate this rate for significant events, including changes in tax laws and regulations, that may materially affect our projections.  Based upon our review, our projected normalized annual non-GAAP tax rate remains 16% through fiscal year 2021.

Whenever Synopsys uses a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed below, as well as Item 2.02 of the Current Report on Form 8-K filed on May 19, 2021 for additional information about the measures Synopsys uses to evaluate its core business operations.

Reconciliation of Second Quarter Fiscal Year 2021 Results

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

 

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


(unaudited and in thousands, except per share amounts)












Three Months Ended


Six Months Ended



April 30,


April 30,



2021


2020


2021


2020


GAAP net income

$               195,078


$               109,920


$               357,423


$               213,981


Adjustments:









Amortization of intangible assets

19,721


24,095


39,997


46,628


Stock compensation

79,586


56,435


163,368


108,318


Acquisition-related costs

2,344


3,767


5,892


7,544


Restructuring charges

-


29,672


-


38,423


Tax adjustments

(29,630)


(35,616)


(60,108)


(69,947)


Non-GAAP net income 

$               267,099


$               188,273


$               506,572


$               344,947






























Three Months Ended


Six Months Ended



April 30,


April 30,



2021


2020


2021


2020


GAAP diluted net income per share

$                     1.24


$                     0.71


$                     2.27


$                     1.39


Adjustments:









Amortization of intangible assets

0.13


0.16


0.25


0.30


Stock compensation

0.51


0.37


1.04


0.70


Acquisition-related costs

0.01


0.02


0.04


0.05


Restructuring charges

-


0.19


-


0.25


Tax adjustments

(0.19)


(0.23)


(0.38)


(0.46)


Non-GAAP diluted net income per share

$                     1.70


$                     1.22


$                     3.22


$                     2.23











Shares used in computing diluted net income per share amounts:

157,077


154,379


157,226


154,471











(1) Synopsys' second quarter of fiscal year 2021 and 2020 ended on May 1, 2021 and May 2, 2020, respectively. For presentation purposes, we refer to the closest calendar month end.

 

Reconciliation of 2021 Targets
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP targets for the periods indicated below.

 

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

(in thousands, except per share amounts)











 Range for Three Months 



July 31, 2021



Low


High

Target GAAP expenses


$             807,000


$             825,000

Adjustments:





      Estimated impact of amortization of intangible assets


(19,000)


(22,000)

      Estimated impact of stock compensation


(81,000)


(86,000)

Target non-GAAP expenses


$             707,000


$             717,000
















Range for Three Months



July 31, 2021



Low


High

Target GAAP earnings per share


$                   1.30


$                   1.41

Adjustments:





      Estimated impact of amortization of intangible assets


0.14


0.12

      Estimated impact of stock compensation


0.55


0.51

      Estimated impact of tax adjustments


(0.24)


(0.24)

Target non-GAAP earnings per share


$                   1.75


$                   1.80






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


157,500


157,500











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

(in thousands, except per share amounts)











Range for Fiscal Year



October 31, 2021



Low


High

Target GAAP expenses


$          3,240,892


$          3,285,892

Adjustments:





      Estimated impact of amortization of intangible assets


(75,000)


(80,000)

      Estimated impact of stock compensation


(325,000)


(335,000)

      Acquisition-related costs


(5,892)


(5,892)

Target non-GAAP expenses


$          2,835,000


$          2,865,000
















Range for Fiscal Year



October 31, 2021



Low


High

Target GAAP earnings per share


$                   4.55


$                   4.72

Adjustments:





     Estimated impact of amortization of intangible assets


0.51


0.48

     Estimated impact of stock compensation


2.13


2.06

     Acquisition-related costs


0.04


0.04

     Estimated impact of tax adjustments


(0.85)


(0.85)

Target non-GAAP earnings per share


$                   6.38


$                   6.45






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


157,500


157,500






(1) Synopsys' third fiscal quarter and fiscal year will end on July 31, 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, 2020 and its latest Quarterly Report on Form 10-Q. The information provided herein is as of May 19, 2021.  Synopsys undertakes no duty, and does not intend to update any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations(1)

(in thousands, except per share amounts)


















Three Months Ended 


Six Months Ended


April 30,


April 30,


2021


2020


2021


2020

Revenue:








  Time-based products

$               648,794


$               590,097


$            1,280,084


$            1,146,536

  Upfront products

209,116


129,765


383,497


280,486

  Maintenance and service

166,413


141,465


331,063


268,686

      Total revenue

1,024,323


861,327


1,994,644


1,695,708

Cost of revenue:








  Products

134,738


108,207


262,085


225,991

  Maintenance and service

67,840


62,213


136,606


124,128

  Amortization of intangible assets

11,408


13,845


23,294


27,014

     Total cost of revenue

213,986


184,265


421,985


377,133

Gross margin

810,337


677,062


1,572,659


1,318,575

Operating expenses:








  Research and development

362,345


302,571


719,813


616,854

  Sales and marketing

172,754


146,200


343,382


299,055

  General and administrative

72,694


62,474


150,182


131,218

  Amortization of intangible assets 

8,313


10,250


16,703


19,614

  Restructuring charges

-


29,672


-


38,423

     Total operating expenses

616,106


551,167


1,230,080


1,105,164

Operating income

194,231


125,895


342,579


213,411

Other income (expense), net

21,764


(15,729)


50,520


(3,672)

Income before income taxes

215,995


110,166


393,099


209,739

Provision (benefit) for income taxes

21,193


246


36,269


(4,242)

Net income

194,802


109,920


356,830


213,981

Net income (loss) attributed to non-controlling interest

(276)


-


(593)


-

Net income attributed to Synopsys

$               195,078


$               109,920


$               357,423


$               213,981









Net income per share:








  Basic

$                     1.28


$                     0.73


$                     2.34


$                     1.42

  Diluted

$                     1.24


$                     0.71


$                     2.27


$                     1.39









Shares used in computing per share amounts:








  Basic

152,725


150,597


152,612


150,421

  Diluted

157,077


154,379


157,226


154,471









(1) Synopsys' second quarter of fiscal year 2021 and 2020 ended on May 1, 2021 and May 2, 2020, respectively. For presentation purposes, we refer to the closest calendar month end.

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)












April 30, 2021


October 31, 2020

ASSETS:







Current assets:







  Cash and cash equivalents




$                    1,457,918


$                    1,235,653

  Accounts receivable, net




612,285


780,709

  Inventories, net




230,068


192,333

  Income taxes receivable and prepaid taxes




32,657


32,355

  Prepaid and other current assets




356,872


308,167

          Total current assets




2,689,800


2,549,217

Property and equipment, net




478,975


483,818

Operating lease right-of-use assets, net




505,225


465,818

Goodwill




3,432,577


3,365,114

Intangible assets, net




233,809


254,322

Long-term prepaid taxes




10,416


8,276

Deferred income taxes




514,064


497,546

Other long-term assets




474,699


405,951

           Total assets




$                    8,339,565


$                    8,030,062








LIABILITIES AND STOCKHOLDERS' EQUITY:







Current liabilities:







  Accounts payable and accrued liabilities




$                       480,831


$                       623,664

  Operating lease liabilities, current




77,610


73,173

  Accrued income taxes




25,473


27,738

  Deferred revenue




1,581,841


1,388,263

  Short-term debt




89,945


27,084

           Total current liabilities




2,255,700


2,139,922

Operating lease liabilities, non-current




498,953


462,411

Long-term accrued income taxes




24,658


25,178

Long-term deferred revenue




98,470


104,850

Long-term debt




25,620


100,823

Other long-term liabilities




343,659


284,511

           Total liabilities




3,247,060


3,117,695

Stockholders' equity:







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




-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 152,554 and







      152,618 shares outstanding, respectively




1,526


1,528

  Capital in excess of par value




1,679,801


1,653,166

  Retained earnings




4,149,620


3,795,397

  Treasury stock, at cost: 4,706 and 4,643 shares, respectively




(701,457)


(488,613)

  Accumulated other comprehensive income (loss) 




(41,355)


(54,074)

           Total Synopsys stockholders' equity




5,088,135


4,907,404

Non-controlling interest




4,370


4,963

           Total stockholders' equity




5,092,505


4,912,367

           Total liabilities and stockholders' equity




$                    8,339,565


$                    8,030,062








(1) Synopsys' second quarter of fiscal year 2021 ended on May 1, 2021, and its fiscal year 2020 ended on October 31, 2020. For presentation purposes, we refer to the closest calendar month end.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






Six Months Ended


April 30,


2021


2020

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income attributed to Synopsys

$            357,423


$            213,981

Adjustments to reconcile net income to net cash provided by




operating activities:




Amortization and depreciation

100,066


105,078

Reduction of operating lease right-of-use assets

42,711


39,513

Amortization of capitalized costs to obtain revenue contracts

30,475


28,279

Stock-based compensation

163,368


108,318

Allowance for doubtful accounts

10,051


9,982

Deferred income taxes

(16,461)


(37,681)

Other non-cash

(401)


97

Net changes in operating assets and liabilities, net of




acquired assets and liabilities:




Accounts receivable

157,637


(84,533)

Inventories

(38,305)


(25,237)

Prepaid and other current assets

(45,972)


(5,889)

Other long-term assets

(97,519)


(38,378)

Accounts payable and accrued liabilities

(96,798)


(78,989)

Operating lease liabilities

(41,105)


(32,432)

Income taxes

(8,386)


1,270

Deferred revenue

183,512


186,360

Net cash provided by operating activities

700,296


389,739





CASH FLOWS FROM INVESTING ACTIVITIES:




Purchases of long-term investments

-


(2,762)

Purchases of property and equipment

(44,060)


(80,663)

Cash paid for acquisitions, net of cash acquired

(74,626)


(151,178)

Capitalization of software development costs

(1,264)


(2,130)

Other 

(800)


-

Net cash used in investing activities

(120,750)


(236,733)





CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from credit facilities

-


276,490

Repayment of debt

(13,194)


(178,437)

Issuances of common stock

103,203


98,361

Payments for taxes related to net share settlement of equity awards

(54,664)


(17,105)

Purchase of equity forward contract

-


(20,000)

Purchases of treasury stock

(398,082)


(180,000)

Other

(1,000)


-

Net cash used in financing activities

(363,737)


(20,691)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

6,457


(4,424)

Net change in cash, cash equivalents and restricted cash

222,266


127,891

Cash, cash equivalents and restricted cash, beginning of year

1,237,970


730,527

Cash, cash equivalents and restricted cash, end of period

$         1,460,236


$            858,418









(1) Synopsys' second quarter of fiscal year 2021 and 2020 ended on May 1, 2021 and May 2, 2020, respectively. For presentation purposes, we refer to the closest calendar month end.

 

SYNOPSYS, INC.

Business Segment Reporting (1)

(in millions)










Q2'21


Q2'20


YTD Q2'21


YTD Q2'20

Revenue by segment








- Semiconductor & System Design

$                        930.4


$                        773.0


$            1,808.8


$             1,521.8

% of Total

90.8%


89.7%


90.7%


89.7%

- Software Integrity

$                          93.9


$                          88.3


$               185.8


$                173.9

% of Total

9.2%


10.3%


9.3%


10.3%

Total segment revenue

$                     1,024.3


$                        861.3


$            1,994.6


$             1,695.7









Adjusted operating income by segment








- Semiconductor & System Design

$                        308.8


$                        209.7


$               587.7


$                388.5

- Software Integrity

$                            8.4


$                          11.7


$                 16.4


$                  19.8

Total adjusted segment operating income

$                        317.2


$                        221.4


$               604.1


$                408.3









Adjusted operating margin by segment








- Semiconductor & System Design

 

33.2%


27.1%


32.5%


25.5%

- Software Integrity

9.0%


13.3%


8.8%


11.4%

Total adjusted segment operating margin

31.0%


25.7%


30.3%


24.1%









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

(in millions)










Three Months Ended


Three Months Ended


Six Months 


Six Months 


April 30, 2021 (3)


April 30, 2020 (3)


April 30 2021 (3)


April 30, 2020 (3)

GAAP total operating income – as reported

$                        194.2


$                        125.9


$               342.6


$                213.4

Other expenses managed at consolidated level








-Amortization of intangible assets

19.7


24.1


40.0


46.6

-Stock compensation

79.6


56.4


163.4


108.3

-Fair value changes in executive deferred compensation plan

21.4


(18.5)


52.2


(6.0)

-Acquisition-related costs

2.3


3.8


5.9


7.5

-Restructuring

-


29.7


-


38.4

Total adjusted segment operating income

$                        317.2


$                        221.4


$           604.1


$                408.3









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

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

(3) Synopsys' second quarter of fiscal year 2021 and 2020 ended on May 1, 2021 and May 2, 2020, respectively. 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

 

SOURCE Synopsys, Inc.