SYNOPSYS INC false 0000883241 0000883241 2024-05-22 2024-05-22

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): May 22, 2024

 

 

SYNOPSYS, INC.

(Exact name of Registrant as specified in charter)

 

 

 

Delaware   000-19807   56-1546236

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

675 Almanor Ave.

Sunnyvale, California 94085

(Address of principal executive offices)

Registrant’s telephone number, including area code: (650) 584-5000

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading
Symbol(s)

 

Name of each exchange

on which registered

Common Stock (par value of $0.01 per share)   SNPS   Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 


Item 2.02

Results of Operations and Financial Condition.

On May 22, 2024, Synopsys, Inc. (“Synopsys”, “we”, “our”, or “us”) issued a press release announcing the financial results of its second fiscal quarter ended April 30, 2024. A copy of the press release is furnished and attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Current Report, including Exhibit 99.1 attached hereto and incorporated by reference herein, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by Synopsys whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
Number
  

Exhibit Title

99.1    Press release dated May 22, 2024 containing Synopsys, Inc.’s results of operations for its second fiscal quarter ended April 30, 2024.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    SYNOPSYS, INC.
 Dated: May 22, 2024     By:  

/s/ John F. Runkel, Jr.

            John F. Runkel, Jr.
            General Counsel and Corporate Secretary

EXHIBIT 99.1

PRESS RELEASE

INVESTOR CONTACT:

Trey Campbell

Synopsys, Inc.

650-584-4289

Synopsys-ir@synopsys.com

EDITORIAL CONTACT:

Cara Walker

Synopsys, Inc.

650-584-5000

corp-pr@synopsys.com

Synopsys Posts Financial Results for Second Quarter Fiscal Year 2024

Results Summary1

 

   

Quarterly revenue of $1.455 billion, up approximately 15% year over year and at the high-end of guidance.

 

   

Quarterly GAAP earnings per diluted share of $1.92; non-GAAP earnings per diluted share of $3.00, up approximately 26% year over year1 and exceeding guidance.

 

   

Raising full year targets for revenue and non-GAAP EPS, based on strong execution and continued business momentum.

SUNNYVALE, Calif. May 22, 2024Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2024. Revenue for the second quarter of fiscal year 2024 was $1.455 billion, compared to $1.263 billion for the second quarter of fiscal year 2023.

“We continued our strong operational execution and business momentum in Q2. Customers continue investing in Synopsys solutions to maximize their R&D and power their future innovations for this era of pervasive intelligence,” said Sassine Ghazi, president and CEO of Synopsys. “We expect our planned acquisition of Ansys, which was approved today by Ansys shareholders, to further our mission of empowering technology innovators everywhere with essential silicon to systems design solutions.”

 

1 

Synopsys’ Software Integrity business has been presented as a discontinued operation in the consolidated financial statements for all periods presented herein and all financial results and targets are presented herein on a continuing operations basis unless otherwise noted.

 

1


“Synopsys’ strong Q2 results were driven by our team’s relentless focus on execution, our leading technology that is mission-critical to customers, and our resilient business model,” said Shelagh Glaser, Synopsys CFO. “We remain confident in our business, and as a result, we are again raising our full-year targets for revenue and non-GAAP EPS.”

Continuing Operations

On May 5, 2024, Synopsys entered into an agreement to sell its Software Integrity business. Unless otherwise noted, Synopsys’ Software Integrity business has been presented as a discontinued operation in the consolidated financial statements for all periods presented herein and all financial results and targets are presented herein on a continuing operations basis.

GAAP Results

On a U.S. generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal year 2024 was $299.1 million, or $1.92 per diluted share, compared to $275.6 million, or $1.78 per diluted share, for the second quarter of fiscal year 2023.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal year 2024 was $466.9 million, or $3.00 per diluted share, compared to non-GAAP net income of $368.3 million, or $2.38 per diluted share, for the second quarter of fiscal year 2023.

For a reconciliation of net income, earnings per diluted share and other measures on a GAAP and non-GAAP basis, see “GAAP to Non-GAAP Reconciliation” in the accompanying tables below.

Business Segments

Synopsys reports revenue and operating income in two segments: (1) Design Automation, which includes our advanced silicon design, verification products and services, system integration products and services, digital, custom and field programmable gate array (FPGA) IC design software, verification software and hardware products, manufacturing software products and other and (2) Design IP, which includes our Design IP products.

 

2


Financial Targets

Synopsys also provided its consolidated financial targets for continuing operations for the third quarter and full fiscal year 2024. The fiscal year targets include the impact of an extra week in fiscal year 2024, which was included in the first quarter of fiscal year 2024. These financial targets assume no further changes to export control restrictions or the current U.S. government “Entity List” restrictions. 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 Full Fiscal Year 2024 Financial Targets (1)(2)

(in millions except per share amounts)

 

     Range for Three Months Ending
July 31, 2024
     Range for Fiscal Year Ending
October 31, 2024
 
     Low     High      Low     High  

Revenue

   $ 1,505     $ 1,535      $ 6,090     $ 6,150  

GAAP Expenses

   $ 1,099     $ 1,119      $ 4,559     $ 4,614  

Non-GAAP Expenses

   $ 920     $ 930      $ 3,770     $ 3,810  

Non-GAAP Interest and Other Income (Expense), net

   $ 4     $ 6      $ 32     $ 36  

Non-GAAP Tax Rate

     15        15  

Outstanding Shares (fully diluted)

     155       157        155       157  

GAAP EPS

   $ 2.22     $ 2.35      $ 9.14     $ 9.36  

Non-GAAP EPS

   $ 3.25     $ 3.30      $ 12.90     $ 12.98  

Operating Cash Flow

        ~ $ 1,300    

Free Cash Flow(3)

        ~ $ 1,100    

Capital Expenditures

        ~ $ 200    

 

(1)

Synopsys’ third quarter of fiscal year 2024 and its fiscal year 2024 will end on August 3, 2024 and November 2, 2024, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

(2)

Presented on a continuing operations basis.

(3)

Free cash flow is calculated as cash provided from operating activities less capital expenditures and capitalization of software development costs.

For a reconciliation of Synopsys’ third quarter and fiscal year 2024 targets, including expenses, earnings per diluted share and other measures on a GAAP and non-GAAP basis and a discussion of the financial targets that we are not able to reconcile without unreasonable efforts, see “GAAP to Non-GAAP Reconciliation” in the accompanying tables below.

 

3


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.investor.synopsys.com. Synopsys uses its website as a tool to disclose important information about Synopsys and comply with its disclosure obligations under Regulation Fair Disclosure. A webcast replay will also be available on the corporate website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the third quarter of fiscal year 2024 in August 2024.

Effectiveness of Information

The targets included in this press release, the statements made during the earnings conference call, the information contained in the financial supplement and the corporate overview presentation, each of which are available on Synopsys’ corporate website at www.synopsys.com (collectively, the “Earnings Materials”), represent Synopsys’ expectations and beliefs as of May 22, 2024. Although these Earnings Materials will remain available on Synopsys’ website through the date of the earnings call for the third quarter of fiscal year 2024, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity. Synopsys undertakes no duty and does not intend to update any forward-looking statement, whether as a result of new information or future events, or otherwise update, the targets given in this press release unless required by law.

Availability of Final Financial Statements

Synopsys will include final financial statements for the second quarter of fiscal year 2024 in its quarterly report on Form 10-Q to be filed on or before June 13, 2024.

About Synopsys

Catalyzing the era of pervasive intelligence, Synopsys, Inc. (Nasdaq: SNPS) delivers trusted and comprehensive silicon to systems design solutions, from electronic design automation to silicon IP and system verification and validation. We partner closely with semiconductor and systems customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow. Learn more at www.synopsys.com.

 

4


Reconciliation of Second Quarter Fiscal Year 2024 Results for Continuing Operations

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

GAAP to Non-GAAP Reconciliation of Second Quarter Fiscal Year 2024 Results(1)

(unaudited and in thousands, except per share amounts)

 

     Three Months Ended
April 30,
     Six Months Ended
April 30,
 
     2024      2023      2024      2023  

GAAP net income from continuing operations attributed to Synopsys

   $ 299,111      $ 275,602      $ 736,561      $ 545,286  

Adjustments:

           

Amortization of acquired intangible assets

     16,925        11,387        32,526        23,640  

Stock-based compensation

     162,346        130,114        327,487        252,352  

Acquisition/divestiture related items

     25,256        2,641        57,188        4,975  

Restructuring charges

     —         (5,578      —         32,560  

Gain on sale of strategic investments

     —         —         (55,077      —   

Tax adjustments

     (36,694      (45,878      (106,261      (106,033
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income from continuing operations attributed to Synopsys

   $ 466,944      $ 368,288      $ 992,424      $ 752,780  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Three Months Ended
April 30,
     Six Months Ended
April 30,
 
     2024      2023      2024      2023  

GAAP net income from continuing operations per diluted share attributed to Synopsys

   $ 1.92      $ 1.78      $ 4.73      $ 3.52  

Adjustments:

           

Amortization of acquired intangible assets

     0.11        0.07        0.21        0.15  

Stock-based compensation

     1.04        0.84        2.10        1.63  

Acquisition/divestiture related items

     0.16        0.02        0.37        0.03  

Restructuring charges

     —         (0.04      —         0.21  

Gain on sale of strategic investments

     —         —         (0.35      —   

Tax adjustments

     (0.23      (0.29      (0.68      (0.68
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income from continuing operations per diluted share attributed to Synopsys

   $ 3.00      $ 2.38      $ 6.38      $ 4.86  
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used in computing net income per diluted share amounts:

     155,770        154,730        155,610        155,044  

 

(1)

Synopsys’ second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

 

5


GAAP to Non-GAAP Tax Rate Reconciliation (1)(2)

(unaudited)

 

    Three Months Ended     Six Months Ended  
    April 30, 2024     April 30, 2024  

GAAP effective tax rate

    13.3     8.6

Income tax effect of above non-GAAP adjustments

    1.7     6.4
 

 

 

   

 

 

 

Non-GAAP effective tax rate

    15.0     15.0
 

 

 

   

 

 

 

 

(1)

Synopsys’ second quarter of fiscal year 2024 ended on May 4, 2024. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

(2)

Presented on a continuing operations basis.

Reconciliation of 2024 Targets for Continuing Operations

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 2024 Targets (1)(2)

(in thousands, except per share amounts)

 

     Range for Three Months Ending  
     July 31, 2024  
     Low      High  

Target GAAP expenses

   $ 1,099,000      $ 1,119,000  

Adjustments:

     

Amortization of acquired intangible assets

     (17,000      (20,000

Stock-based compensation

     (162,000      (169,000
  

 

 

    

 

 

 

Target non-GAAP expenses

   $ 920,000      $ 930,000  
  

 

 

    

 

 

 

 

6


     Range for Three Months Ending  
     July 31, 2024  
     Low      High  

Target GAAP earnings per diluted share attributed to Synopsys

   $ 2.22      $ 2.35  

Adjustments:

     

Amortization of acquired intangible assets

     0.13        0.11  

Stock-based compensation

     1.08        1.04  

Acquisition/divestiture related items (3)

     0.10        0.07  

Tax adjustments

     (0.28      (0.27
  

 

 

    

 

 

 

Target non-GAAP earnings per diluted share attributed to Synopsys

   $ 3.25      $ 3.30  
  

 

 

    

 

 

 

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

     156,000        156,000  

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2024 Targets (1)(2)

(in thousands, except per share amounts)

 

     Range for Fiscal Year Ending  
     October 31, 2024  
     Low      High  

Target GAAP expenses

   $ 4,559,099      $ 4,614,099  

Adjustments:

     

Amortization of acquired intangible assets

     (67,000      (72,000

Stock-based compensation

     (672,000      (682,000

Acquisition/divestiture related items(3)

     (50,099      (50,099
  

 

 

    

 

 

 

Target non-GAAP expenses

   $ 3,770,000      $ 3,810,000  
  

 

 

    

 

 

 
     Range for Fiscal Year Ending  
     October 31, 2024  
     Low      High  

Target GAAP earnings per diluted share attributed to Synopsys

   $ 9.14      $ 9.36  

Adjustments:

     

Amortization of acquired intangible assets

     0.46        0.43  

Stock-based compensation

     4.37        4.31  

Acquisition/divestiture related items(3)

     0.55        0.49  

Gain on sale of strategic investments

     (0.35      (0.35

Tax adjustments

     (1.27      (1.26
  

 

 

    

 

 

 

Target non-GAAP earnings per diluted share attributed to Synopsys

   $ 12.90      $ 12.98  
  

 

 

    

 

 

 

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

     156,000        156,000  

 

7


(1)

Synopsys’ third quarter of fiscal year 2024 and its fiscal year 2024 will end on August 3, 2024 and November 2, 2024, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

(2)

Presented on a continuing operations basis.

(3)

Adjustments reflect actual expenses incurred by Synopsys as of May 4, 2024 as well as certain contractually obligated financing fees and related amortization expenses, and do not fully reflect all potential adjustments for future periods for the reasons set forth in “GAAP to Non-GAAP Reconciliation” below.

Forward-Looking Statements

This press release and the investor conference call contain forward-looking statements, including, but not limited to, statements regarding short-term and long-term financial targets, expectations and objectives, including, among others, the anticipated effects of our pending acquisition of ANSYS, Inc. (the Ansys Merger); strategies related to our products, technology and services; business and market outlook, opportunities, strategies and technological trends, such as artificial intelligence; the pending Ansys Merger, including, among other things, its anticipated benefits; planned dispositions and their expected impact, such as the previously announced divestiture of our Software Integrity business (the Software Integrity Divestiture); the potential impact of the uncertain macroeconomic and geopolitical environment on our financial results; the expected impact of U.S. and foreign government actions and regulatory changes, including export control restrictions on our financial results; customer demand and market expansion; our planned product releases and capabilities; industry growth rates; the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations (backlog); software trends; planned stock repurchases; our expected tax rate; and the impact and result of pending legal, administrative and tax proceedings. 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 such forward-looking statements. Such risks, uncertainties and factors include, but are not limited to: macroeconomic conditions and geopolitical uncertainty in the global economy; uncertainty in the growth of the semiconductor and electronics industries; the highly competitive industry we operate in; actions by the U.S. or foreign governments, such as the imposition of additional export restrictions or tariffs; 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;

 

8


failure to complete the Ansys Merger on the terms described in our filings with the SEC, if at all; failure to obtain required governmental approvals related to the Ansys Merger or the imposition of conditions to such governmental approvals that may have an adverse effect on us; failure to realize the benefits expected from the Ansys Merger; failure to complete the Software Integrity Divestiture, or the Software Integrity Divestiture disrupting our business or failing to achieve its intended benefits, and more. Additional information on potential risks, uncertainties and other factors that could affect Synopsys’ results is included in filings we make with the SEC from time to time, including in the sections entitled “Risk Factors” in our latest Annual Report on Form 10-K and in our latest Quarterly Report on Form 10-Q. The financial information contained in this press release should be read in conjunction with the consolidated financial statements and notes thereto included in Synopsys’ most recent reports on Forms 10-K and 10-Q, each as may be amended from time to time. Synopsys’ financial results for its second quarter of fiscal year 2024 are not necessarily indicative of Synopsys’ operating results for any future periods. The information provided herein is as of May 22, 2024. Synopsys undertakes no duty to, 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 Condensed Consolidated Statements of Income (1)

(in thousands, except per share amounts)

 

     Three Months Ended      Six Months Ended  
     April 30,      April 30,  
     2024      2023      2024      2023  

Revenue:

           

Time-based products

   $ 781,714      $ 717,845      $ 1,586,777      $ 1,408,135  

Upfront products

     396,389        335,009        838,755        665,978  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total products revenue

     1,178,103        1,052,854        2,425,532        2,074,113  

Maintenance and service

     276,609        209,890        540,169        422,128  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     1,454,712        1,262,744        2,965,701        2,496,241  

Cost of revenue:

           

Products

     198,719        169,062        374,217        325,686  

Maintenance and service

     88,178        68,687        178,718        136,855  

Amortization of acquired intangible assets

     13,500        10,492        26,655        21,689  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenue

     300,397        248,241        579,590        484,230  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross margin

     1,154,315        1,014,503        2,386,111        2,012,011  

Operating expenses:

           

Research and development

     493,136        460,463        1,018,670        899,650  

Sales and marketing

     209,783        180,658        428,626        352,212  

General and administrative

     114,763        84,685        246,027        174,656  

 

9


Amortization of acquired intangible assets

     4,561       1,900       8,090       3,935  

Restructuring charges

     —        (5,578     —        32,560  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     822,243       722,128       1,701,413       1,463,013  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     332,072       292,375       684,698       548,998  

Interest and other income (expense), net

     9,458       4,212       114,286       27,147  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     341,530       296,587       798,984       576,145  

Provision (benefit) for income taxes

     45,437       23,947       68,346       36,730  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     296,093       272,640       730,638       539,415  

Income (loss) from discontinued operations, net of income taxes

     (7,004     (2,692     4,658       (840
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     289,089       269,948       735,296       538,575  

Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest

     (3,018     (2,962     (5,923     (5,871
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributed to Synopsys

   $ 292,107     $ 272,910     $ 741,219     $ 544,446  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributed to Synopsys

        

Continuing operations

   $ 299,111     $ 275,602     $ 736,561     $ 545,286  

Discontinued operations

     (7,004     (2,692     4,658       (840
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 292,107     $ 272,910     $ 741,219     $ 544,446  

Net income (loss) per share attributed to Synopsys - basic:

        

Continuing operations

   $ 1.96     $ 1.81     $ 4.83     $ 3.58  

Discontinued operations

     (0.05     (0.02     0.03       (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share

   $ 1.91     $ 1.79     $ 4.86     $ 3.57  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share attributed to Synopsys - diluted:

        

Continuing operations

   $ 1.92     $ 1.78     $ 4.73     $ 3.52  

Discontinued operations

     (0.04     (0.02     0.03       (0.01
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per share

   $ 1.88     $ 1.76     $ 4.76     $ 3.51  
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing per share amounts:

        

Basic

     152,971       152,187       152,629       152,294  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     155,770       154,730       155,610       155,044  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Synopsys’ second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

 

10


SYNOPSYS, INC.

Unaudited Condensed Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

 

     April 30, 2024     October 31, 2023  

ASSETS:

    

Current assets:

    

Cash and cash equivalents

   $ 1,502,920     $ 1,433,966  

Short-term investments

     156,780       151,639  
  

 

 

   

 

 

 

Total cash, cash equivalents and short-term investments

     1,659,700       1,585,605  

Accounts receivable, net

     834,918       856,660  

Inventories

     377,875       325,590  

Prepaid and other current assets

     760,269       548,115  

Current assets held for sale

     1,020,358       114,654  
  

 

 

   

 

 

 

Total current assets

     4,653,120       3,430,624  

Property and equipment, net

     566,832       549,837  

Operating lease right-of-use assets, net

     528,011       559,923  

Goodwill

     3,427,424       3,346,065  

Intangible assets, net

     276,877       239,577  

Deferred income taxes

     1,004,660       853,526  

Other long-term assets

     554,913       444,820  

Long-term assets held for sale

     —        908,759  
  

 

 

   

 

 

 

Total assets

   $ 11,011,837     $ 10,333,131  
  

 

 

   

 

 

 

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY:

    

Current liabilities:

    

Accounts payable and accrued liabilities

   $ 635,916     $ 1,059,914  

Operating lease liabilities

     84,550       79,832  

Deferred revenue

     1,457,282       1,559,461  

Current liabilities held for sale

     330,602       286,244  
  

 

 

   

 

 

 

Total current liabilities

     2,508,350       2,985,451  

Long-term operating lease liabilities

     543,207       579,686  

Long-term deferred revenue

     307,965       150,827  

Long-term debt

     16,960       18,078  

Other long-term liabilities

     446,514       381,531  

Long-term liabilities held for sale

     —        33,257  
  

 

 

   

 

 

 

Total liabilities

     3,822,996       4,148,830  

Redeemable non-controlling interest

     31,043       31,043  

Stockholders’ equity:

    

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

     —        —   

Common stock, $0.01 par value: 400,000 shares authorized; 153,204 and 152,053 shares outstanding, respectively

     1,532       1,521  

Capital in excess of par value

     1,182,829       1,276,152  

Retained earnings

     7,478,366       6,741,699  

Treasury stock, at cost: 4,056 and 5,207 shares, respectively

     (1,321,554     (1,675,650

Accumulated other comprehensive income (loss)

     (188,013     (196,414
  

 

 

   

 

 

 

Total Synopsys stockholders’ equity

     7,153,160       6,147,308  

Non-controlling interest

     4,638       5,950  
  

 

 

   

 

 

 

Total stockholders’ equity

     7,157,798       6,153,258  
  

 

 

   

 

 

 

Total liabilities, redeemable non-controlling interest and stockholders’ equity

   $ 11,011,837     $ 10,333,131  
  

 

 

   

 

 

 

 

(1)

Synopsys’ second quarter of fiscal year 2024 ended on May 4, 2024 and its fiscal year 2023 ended on October 28, 2023, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

 

11


SYNOPSYS, INC.

Unaudited Condensed Consolidated Statements of Cash Flows (1)

(in thousands)

 

     Six Months Ended April 30,  
       2024         2023    

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 735,296     $ 538,575  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Amortization and depreciation

     123,886       116,922  

Reduction of operating lease right-of-use assets

     48,179       48,073  

Amortization of capitalized costs to obtain revenue contracts

     37,912       39,588  

Stock-based compensation

     358,487       277,485  

Allowance for credit losses

     9,987       6,134  

Gain on sale of strategic investments

     (55,077     —   

Amortization of bridge financing costs

     7,085       —   

Deferred income taxes

     (170,854     (125,090

Other non-cash

     (2,607     4,972  

Net changes in operating assets and liabilities, net of acquired assets and assumed liabilities:

    

Accounts receivable

     20,889       9,289  

Inventories

     (60,518     (48,648

Prepaid and other current assets

     (191,595     49,437  

Other long-term assets

     (104,551     (75,324

Accounts payable and accrued liabilities

     (142,086     (162,840

Operating lease liabilities

     (48,709     (31,634

Income taxes

     (229,536     94,587  

Deferred revenue

     52,612       76,165  
  

 

 

   

 

 

 

Net cash provided by operating activities

     388,800       817,691  

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Proceeds from sales and maturities of short-term investments

     63,159       67,717  

Purchases of short-term investments

     (65,861     (68,738

Proceeds from sales of strategic investments

     55,696       7,248  

Purchases of strategic investments

     (860     —   

Purchases of property and equipment

     (78,763     (91,368

Acquisitions, net of cash acquired

     (139,557     (41,324

Capitalization of software development costs

     —        (1,247
  

 

 

   

 

 

 

Net cash used in investing activities

     (166,186     (127,712

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Repayment of debt

     (1,303     (1,294

Payment of bridge financing and term loan costs

     (54,715     —   

Issuances of common stock

     115,111       132,808  

Payments for taxes related to net share settlement of equity awards

     (212,577     (116,838

 

12


Purchase of equity forward contract

     —        (45,000

Purchases of treasury stock

     —        (560,724

Other

     (1,096     (122
  

 

 

   

 

 

 

Net cash used in financing activities

     (154,580     (591,170

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

     2,423       27,708  
  

 

 

   

 

 

 

Net change in cash, cash equivalents and restricted cash

     70,457       126,517  

Cash, cash equivalents and restricted cash, beginning of year, including cash from discontinued operations

     1,441,187       1,419,864  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period, including cash from discontinued operations

     1,511,644       1,546,381  
  

 

 

   

 

 

 

Less: Cash, cash equivalents and restricted cash from discontinued operations

     6,445       4,140  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash from continuing operations

   $ 1,505,199     $ 1,542,241  
  

 

 

   

 

 

 

 

(1)

Synopsys’ second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

Synopsys provides segment information, namely revenue, adjusted segment operating income and adjusted segment operating margin, in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 280, Segment Reporting. Synopsys’ chief operating decision maker (“CODM”) is our Chief Executive Officer. In evaluating our business segments, the CODM considers the income and expenses that the CODM believes are directly related to those segments. The CODM does not allocate certain operating expenses managed at a consolidated level to our business segments and, as a result, the reported operating income and operating margin do not include these unallocated expenses as shown in the table below. These unallocated expenses are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income from continuing operations:

SYNOPSYS, INC.

Business Segment Reporting (1)(2)(5)

(in millions)

 

     Three Months
Ended
April 30, 2024
    Three Months
Ended
April 30, 2023
    Six Months
Ended
April 30, 2024
    Six Months
Ended
April 30, 2023
 

Revenue by segment

        

- Design Automation

   $ 1,054.9     $ 927.5     $ 2,040.3     $ 1,817.4  

% of Total

     72.5     73.5     68.8     72.8

- Design IP

   $ 399.8     $ 335.2     $ 925.4     $ 678.8  

% of Total

     27.5     26.5     31.2     27.2

Adjusted operating income by segment

        

 

13


- Design Automation

   $   418.2     $   353.4     $   777.7     $   692.8  

- Design IP

   $ 124.8     $ 81.5     $ 370.5     $ 194.9  

Adjusted operating margin by segment

        

- Design Automation

     39.6     38.1     38.1     38.1

- Design IP

     31.2     24.3     40.0     28.7

Total Adjusted Segment Operating Income Reconciliation (1)(2)(5)

(in millions)

 

     Three Months Ended
April 30, 2024
     Three Months Ended
April 30, 2023
     Six Months Ended
April 30, 2024
     Six Months Ended
April 30, 2023
 

GAAP total operating income – as reported

   $ 332.1      $ 292.4      $ 684.7      $ 549.0  

Other expenses managed at consolidated level

           

-Amortization of acquired intangible assets (3)

     18.1        12.4        34.7        25.6  

-Stock-based compensation (3)

     162.7        130.4        328.2        253.0  

-Non-qualified deferred compensation plan

     11.1        2.8        50.5        22.6  

-Acquisition/divestiture related items (4)

     19.2        2.6        50.1        5.0  

-Restructuring charges

     —         (5.6      —         32.6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total adjusted segment operating income

   $ 543.0      $ 435.0      $ 1,148.2      $ 887.7  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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)

Synopsys’ second quarter of fiscal year 2024 and 2023 ended on May 4, 2024 and April 29, 2023, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal year 2024 included one extra week.

(3)

The adjustment includes non-GAAP expenses attributable to non-controlling interest and redeemable non-controlling interest.

(4)

The adjustment excludes the amortization of bridge financing costs entered into in connection with the pending acquisition of Ansys, that was recorded in interest and other income (expense), net in our unaudited condensed consolidated statements of income.

(5)

Presented on a continuing operations basis.

GAAP to Non-GAAP Reconciliation

Synopsys continues to provide all information required in accordance with GAAP but acknowledges 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 budgeting and resource allocation purposes. This press release includes non-GAAP earnings per diluted share, non-GAAP net income and non-GAAP tax rate for the periods presented. It also includes future estimated ranges for non-GAAP expenses, non-GAAP interest and other income (expense), non-GAAP tax rate, non-GAAP earnings per diluted share and free cash flow. These non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.

 

14


When possible, Synopsys provides a reconciliation of non-GAAP financial measures to their most closely applicable GAAP financial measures. Synopsys is unable to provide a full reconciliation of certain third quarter and full fiscal year 2024 non-GAAP financial targets to the corresponding GAAP financial measures on a forward-looking basis because Synopsys believes that it would not be possible for it to have the required information necessary to quantitatively reconcile such measures with sufficient precision without unreasonable efforts due to, among other things, the potential variability and limited predictability of the excluded adjustment items necessary for a full reconciliation such as certain acquisition/divestiture related items, restructuring charges, tax deduction variability, changes in the fair value of non-qualified deferred compensation plan, and gains (losses) on the sale of strategic investments. For the same reasons, Synopsys is unable to address the probable significance of the unavailable information.

Synopsys’ management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, as superior to, or as a substitute for, financial information prepared in accordance with GAAP. These non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, the corresponding GAAP financial measures. Synopsys’ management believes presentation of non-GAAP financial measures, when shown in conjunction with the corresponding GAAP financial measures, provides useful information to investors allowing them to view financial and business trends relating to our financial condition and results of operations through the eyes of management. Synopsys’ management evaluates and makes decisions about our business operations using both GAAP financial measures and non-GAAP financial measures to help facilitate internal comparisons to Synopsys’ historical operating results and forecasted targets, planning and forecasting in subsequent periods and comparisons to competitors’ operating results.

The following are descriptions of the adjustments made to reconcile non-GAAP financial measures (other than free cash flow) to the most directly comparable GAAP financial measures:

(i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets, which include, among other things, core/developed technology, customer relationships, contract rights, trademarks and trade names, and other intangibles related to

 

15


acquisitions. We amortize the intangible assets over their estimated useful lives. We do not enter into acquisitions on a predictable cycle. The amount of an acquisition’s purchase price allocated to intangible assets and their estimated useful lives can vary significantly and are unique to each acquisition. We believe that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods. We also exclude this item because such expenses are non-cash in nature and we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our core operational performance and liquidity, and ability to invest in research and development and fund future acquisitions and capital expenditures.

(ii) Stock-based compensation. Stock-based compensation expenses consist primarily of expenses related to restricted stock units, stock options, employee stock purchase rights and other stock awards, including such expenses associated with acquisitions. We exclude stock-based compensation expense from our non-GAAP financial measures primarily because it is not an expense that typically requires or will require cash settlement by us. Further, the expense for the fair value of the stock-based instruments we utilize may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards and, therefore, is not used by management to assess the core profitability of our business operations.

(iii) Acquisition/divestiture related items. In connection with certain of our business combinations and/or divestitures, we incur significant expenses that we would not have otherwise incurred as part of our business operations. These expenses include, among other things, compensation expenses, professional fees and other direct expenses, concurrent restructuring activities and divestiture activities, including employee severance and other exit costs, bridge financing costs, costs related to integration activities, changes to the fair value of contingent consideration related to the acquired company, and amortization of the fair value difference of below-market value assets arising from arrangements entered into or acquired in conjunction with an acquisition. We also recognize the gains and losses from the mark-up of equity or cost method investments to fair value upon obtaining control through acquisition. We exclude these items because they are related to acquisitions and have no direct correlation to the core operation of our business. Further, because we do not acquire businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, we believe it is useful to exclude such expenses when looking for a consistent basis for comparison across accounting periods.

 

16


(iv) Restructuring charges. We initiate restructuring activities to align our costs to our operating plans and business strategies based on then-current economic conditions, and such activities have a specific and defined term. Restructuring costs generally include severance and other termination benefits related to voluntary retirement programs, involuntary headcount reductions and facilities closures. Such restructuring costs include elimination of operational redundancy, permanent reductions in workforce and facilities closures and, therefore, are not considered by us to be a part of the core operation of our business and are not used by management when assessing the core profitability and performance of our business operations.

(v) Gains (losses) on the sale of strategic investments. We exclude gains and losses on the sale of equity investments in privately held companies because we do not believe they are reflective of our core business and operating results.

(vi) Deferred compensation. We exclude changes in the fair value of our non-qualified deferred compensation plan because we do not use these to assess the core profitability of our business operations.

(vii) Income tax effect of non-GAAP pre-tax adjustments. Excluding the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effect on net income. We utilize an annual non-GAAP tax rate in calculating non-GAAP financial measures to provide better consistency across interim reporting periods by eliminating the effects of certain non-recurring and other period-specific items, which can vary in size and frequency and do not necessarily reflect our normal operations, and to more closely align our tax rate with our expected geographic earnings mix. This annual non-GAAP tax rate is based on an evaluation of our historical and projected mix of U.S. and international profit before tax, taking into account the impact of non-GAAP adjustments, U.S. tax law changes, as well as other factors such as our current tax structure, existing tax positions and expected recurring tax incentives. Based on these considerations, we have elected to adopt a non-GAAP tax rate of 15% for fiscal year 2024.

 

17

v3.24.1.1.u2
Document and Entity Information
May 22, 2024
Cover [Abstract]  
Entity Registrant Name SYNOPSYS INC
Amendment Flag false
Entity Central Index Key 0000883241
Document Type 8-K
Document Period End Date May 22, 2024
Entity Incorporation State Country Code DE
Entity File Number 000-19807
Entity Tax Identification Number 56-1546236
Entity Address, Address Line One 675 Almanor Ave.
Entity Address, City or Town Sunnyvale
Entity Address, State or Province CA
Entity Address, Postal Zip Code 94085
City Area Code (650)
Local Phone Number 584-5000
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Common Stock (par value of $0.01 per share)
Trading Symbol SNPS
Security Exchange Name NASDAQ
Entity Emerging Growth Company false

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