Synopsys Posts Financial Results for Third Quarter Fiscal Year 2019
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Synopsys Posts Financial Results for Third Quarter Fiscal Year 2019

Q3 2019 Financial Highlights

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™ 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
ASC 606


Adjustments


Balances under
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
ASC 606


Adjustments


Balances under
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.

Contact:
Company Name: Synopsys, Inc.
Web: http://www.synopsys.com
Financial data for Synopsys, Inc.