Q3 2020 Financial Highlights
-- Revenue: $964.1 million
-- GAAP earnings per share: $1.62
-- Non-GAAP earnings per share: $1.74
MOUNTAIN VIEW, Calif., Aug. 19, 2020 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter fiscal year 2020. Revenue for the third quarter was $964.1 million, compared to $853.0 million for the third quarter of fiscal 2019.
"Synopsys again executed very well in the third quarter, delivering record revenue, non-GAAP earnings per share and operating cash flow. We saw double-digit revenue growth across all product groups and strength in all geographies. Our intense, multi-year innovation push is driving increased momentum in product successes and production adoptions," said Aart de Geus, chairman and co-CEO of Synopsys. "Even as the world navigates through the pandemic and economic challenges, global design activity and customer engagements are flourishing. Due to our very strong fiscal third quarter, confidence in our outlook and resilient business model, we are raising 2020 revenue, operating margin, non-GAAP earnings-per-share and operating cash flow targets."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2020 was $252.9 million, or $1.62 per share, compared to $99.9 million, or $0.65 per share, for the third quarter of fiscal 2019.
Non-GAAP Results
On a non-GAAP basis, net income for the third quarter of fiscal 2020 was $271.9 million, or $1.74 per share, compared to non-GAAP net income of $182.5 million, or $1.18 per share, for the third quarter of fiscal 2019.
For a reconciliation between GAAP and non-GAAP results, see "GAAP to Non-GAAP Reconciliation" and the accompanying tables below.
Business Segments
Synopsys reports revenue and operating income in two segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and associated services, and (2) Software Integrity, which includes security and quality solutions for software development across many industries. Further information regarding these segments is provided at the end of this press release.
Financial Targets
Synopsys also provided its consolidated financial targets for the fourth quarter and full fiscal year 2020. These financial targets assume that the current U.S. government "Entity List" restrictions remain in place 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.
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 8385903, beginning at 5:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on August 26, 2020. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the fourth quarter and fiscal year 2020 in December 2020. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Trac Pham, chief financial officer, on its website following today's call. In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, which are also posted on the corporate website.
Effectiveness of Information
The targets included in this press release, the statements made during the earnings conference call and the information contained in the financial supplement and corporate overview presentation (available in the Investor Relations section of Synopsys' corporate website at www.synopsys.com) represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the co-chief executive officer and chief financial officer made during the call, the financial supplement, and the corporate overview presentation will remain available on Synopsys' website through the date of the fourth quarter and fiscal year 2020 earnings call in December 2020, 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 2020 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 2020 in its quarterly report on Form 10-Q to be filed by September 10, 2020.
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, 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, 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. Based upon our review, our projected normalized annual non-GAAP tax rate remains 16% through fiscal year 2021. We will re-evaluate this rate on an annual basis, but further regulatory guidance regarding specific parts of recent U.S. Tax reform legislation could materially change our projections.
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 August 19, 2020 for additional information about the measures Synopsys uses to evaluate its core business operations.
Reconciliation of Third Quarter Fiscal Year 2020 Results
-- Revenue: $964.1 million
-- GAAP earnings per share: $1.62
-- Non-GAAP earnings per share: $1.74
MOUNTAIN VIEW, Calif., Aug. 19, 2020 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter fiscal year 2020. Revenue for the third quarter was $964.1 million, compared to $853.0 million for the third quarter of fiscal 2019.
"Synopsys again executed very well in the third quarter, delivering record revenue, non-GAAP earnings per share and operating cash flow. We saw double-digit revenue growth across all product groups and strength in all geographies. Our intense, multi-year innovation push is driving increased momentum in product successes and production adoptions," said Aart de Geus, chairman and co-CEO of Synopsys. "Even as the world navigates through the pandemic and economic challenges, global design activity and customer engagements are flourishing. Due to our very strong fiscal third quarter, confidence in our outlook and resilient business model, we are raising 2020 revenue, operating margin, non-GAAP earnings-per-share and operating cash flow targets."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2020 was $252.9 million, or $1.62 per share, compared to $99.9 million, or $0.65 per share, for the third quarter of fiscal 2019.
Non-GAAP Results
On a non-GAAP basis, net income for the third quarter of fiscal 2020 was $271.9 million, or $1.74 per share, compared to non-GAAP net income of $182.5 million, or $1.18 per share, for the third quarter of fiscal 2019.
For a reconciliation between GAAP and non-GAAP results, see "GAAP to Non-GAAP Reconciliation" and the accompanying tables below.
Business Segments
Synopsys reports revenue and operating income in two segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and associated services, and (2) Software Integrity, which includes security and quality solutions for software development across many industries. Further information regarding these segments is provided at the end of this press release.
Financial Targets
Synopsys also provided its consolidated financial targets for the fourth quarter and full fiscal year 2020. These financial targets assume that the current U.S. government "Entity List" restrictions remain in place 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.
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 8385903, beginning at 5:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on August 26, 2020. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the fourth quarter and fiscal year 2020 in December 2020. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Trac Pham, chief financial officer, on its website following today's call. In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, which are also posted on the corporate website.
Effectiveness of Information
The targets included in this press release, the statements made during the earnings conference call and the information contained in the financial supplement and corporate overview presentation (available in the Investor Relations section of Synopsys' corporate website at www.synopsys.com) represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the co-chief executive officer and chief financial officer made during the call, the financial supplement, and the corporate overview presentation will remain available on Synopsys' website through the date of the fourth quarter and fiscal year 2020 earnings call in December 2020, 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 2020 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 2020 in its quarterly report on Form 10-Q to be filed by September 10, 2020.
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, 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, 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. Based upon our review, our projected normalized annual non-GAAP tax rate remains 16% through fiscal year 2021. We will re-evaluate this rate on an annual basis, but further regulatory guidance regarding specific parts of recent U.S. Tax reform legislation could materially change our projections.
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 August 19, 2020 for additional information about the measures Synopsys uses to evaluate its core business operations.
Reconciliation of Third Quarter Fiscal Year 2020 Results