Synopsys : Financial Supplement for Q3 FY2022 (PDF)

FINANCIAL SUPPLEMENT Q3 FY2022

August 17, 2022

	CONTENTS					USEFUL LINKS
	I.	Financial Targets					Press Release
					Webcast
	II.	Long-term Financial Objectives
					Form 10-K FY2021
	III.	Revenue by Product Group					Q2 2022 10-Q
	IV.	Revenue by Geographic Region
	V. Selected Financial and Operating Metrics					CONTACT
	VI.	Reconciliations and Adjustments					Synopsys, Inc.
					Investor Relations
	VII.	Notice to Investors					Phone: [phone]
						Email:[e-mail]
I. FISCAL YEAR 2022 SELECTED FINANCIAL TARGETS (1) (2)
				Q4 FY2022			FY2022
	Revenue (million)		$1,263 - $1,293		$5,060 - $5,090
	GAAP Expenses (million)		$1,076 - $1,096		$3,978 - $3,998
	Non-GAAP Expenses (million)		$919 - $929		$3,395 - $3,405
	Other Income and Expense Net (million)		$3 - $5		$12 - $14
	Non-GAAP Tax Rate		18%		18%
	Fully Diluted Outstanding Shares (million)		156 - 159		156 - 159
	GAAP Operating Margin						Midpoint: ~21.4%
	Non-GAAP Operating Margin						Midpoint: ~33.0%
	GAAP Earnings Per Share		$1.06 - $1.18		$6.37 - $6.49
	Non-GAAP Earnings Per Share		$1.80 - $1.85		$8.80 - $8.85
	Cash Flow from Operations (million)					$1,600 - $1,650
	Capital Expenditures (million)					~$145

II. LONG-TERM FINANCIAL OBJECTIVES(1)

While the results in any given period will vary due to timing of product deliverables, acquisitions or other near- term priorities, our long-term,multi-year objectives are:

Revenue	Margin	Earnings
Annual double-digit revenue	Annual non-GAAP	Annual non-GAAP EPS growth
growth	operating margin expansion	in the mid-teens range
• EDA: double-digits	of more than 100 bps
• IP: mid-teens
• SIG: 15-20%

Utilize our strong cash flow for organic investments, M&A and share buybacks.

1. These targets and multi-year objectives are provided as of August 17, 2022.
2. These targets and multi-year objectives assume there are no further changes to the current U.S. government "Entity List" restrictions.
   The information provided herein should be reviewed in conjunction with Synopsys, Inc.'s earnings results
   as disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission on August 17, 2022.

P a g e | 1

III. REVENUE BY PRODUCT GROUP (Unaudited)

($ millions)	FY20	Q121	Q221	Q321	Q421	FY21	Q122	Q222	Q322
EDA	2,116.3	536.2	587.6	590.3	617.2	2,331.3	632.3	641.8	623.0
% of Revenue	57%	55%	57%	56%	54%	56%	50%	50%	50%
IP & System Integration	1,202.6	339.6	339.3	363.8	420.6	1,463.3	527.5	520.6	495.9
% of Revenue	33%	35%	33%	34%	36%	35%	42%	41%	40%
Software Integrity	358.1	92.0	93.9	98.0	110.0	393.8	107.6	112.9	118.3
% of Revenue	10%	9%	9%	9%	10%	9%	8%	9%	9%
Other	8.3	2.6	3.5	5.0	4.7	15.8	2.9	4.0	10.5
% of Revenue	0%	0%	0%	0%	0%	0%	0%	0%	1%
Total	3,685.3	970.3	1,024.3	1,057.1	1,152.4	4,204.2	1,270.3	1,279.2	1,247.8

Revenue from our products and services is categorized into four groups:

• EDA, which includes digital and custom integrated circuit (IC) design software, verification products, manufacturing-related products, and field-programmable gate array (FPGA) design software;
• IP & System Integration, which includes our DesignWare® IP portfolio, system design products, prototyping products, and professional services;
• Software Integrity, which includes solutions that test software code for security vulnerabilities and quality defects, as well as professional and managed services; and
• Other, which includes university programs and the impact of gains and losses from foreign currency hedges.

Note: Amounts included in the table above may not foot due to rounding. Product revenue data for multi-product transactions reflect internal allocations based upon certain assumptions and management's methodology. In addition, we allocate maintenance revenue to the products to which those maintenance services relate.

IV. REVENUE BY GEOGRAPHIC REGION (Unaudited)

($ millions)	FY20	Q121	Q221	Q321	Q421	FY21	Q122	Q222	Q322
North America	1,801.9	474.2	479.2	487.0	545.3	1,985.7	618.0	586.2	591.8
% of Revenue	49%	49%	47%	46%	47%	47%	49%	46%	47%
Europe	385.3	105.2	106.2	112.9	116.3	440.5	132.7	116.2	127.3
% of Revenue	10%	11%	10%	11%	10%	10%	10%	9%	10%
Korea	389.0	98.3	105.4	110.5	113.7	427.8	114.4	119.2	125.3
% of Revenue	11%	10%	10%	10%	10%	10%	9%	9%	10%
China	420.8	115.8	125.5	164.2	157.3	562.7	212.8	215.6	189.1
% of Revenue	11%	12%	12%	16%	14%	13%	17%	17%	15%
Other	688.3	176.9	208.1	182.6	220.0	787.5	192.3	242.1	214.2
% of Revenue	19%	18%	20%	17%	19%	19%	15%	19%	17%
Total	3,685.3	970.3	1,024.3	1,057.1	1,152.4	4,204.2	1,270.3	1,279.2	1,247.8

Note: Amounts included in the table above may not foot due to rounding. Geographic revenue data for multi-regional,multi-product transactions reflect internal allocations and are based upon certain assumptions and management's methodology.

The information provided herein should be reviewed in conjunction with Synopsys, Inc.'s earnings results

as disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission on August 17, 2022. P a g e | 2

V. SELECTED FINANCIAL AND OPERATING METRICS

									FY20	Q121	Q221	Q321	Q421	FY21	Q122	Q222	Q322
Revenue License Type (millions)	(1)
- Time-based Products							$2,365.2	$631.3	$648.8	$665.6	$688.1	$2,633.8	$707.5	$723.8	$754.3
- Upfront Products									$735.6	$174.4	$209.1	$203.3	$274.3	$861.1	$368.3	$336.6	$268.6
- Maintenance and Service	(2)					$584.5	$164.7	$166.4	$188.3	$190.0	$709.4	$194.5	$218.8	$224.9
Recurring Revenue (% of Total Revenue)	(3)	86%	87%	86%	86%	81%	85%	80%	81%	84%
Non-GAAP Operating Margin	(4)					28.0%	29.6%	31.0%	31.9%	29.5%	30.5%	36.2%	36.8%	31.4%
Cash, Cash Equivalents & Short-term				$1,023	$1,458	$1,530	$1,581		$1,272	$1,721	$1,531
Investments (millions)
- % held in U.S.										40%	54%	56%	49%		38%	56%	49%
Outstanding Debt										$123	$116	$107	$100		$24	$24	$22
Operating Cash Flow		(1),(5)							$991	$174	$526	$422	$371	$1,493	$156	$750	$440
Capital Expenditures	(1)							$155	$28	$16	$23	$27	$94	$42	$26	$36
Share Repurchases (millions)	(1)
- Number of Shares								1.6	0.8	0.8	0.5	0.7	2.8	0.7	1.0	0.7
- Gross Share Repurchases						($242)	($253)	($145)	($175)	($215)	($788)	($250)	($250)	($257)
- Remaining Repurchase Authorization		$458	$205	$60	$325	$110	$110	$750	$500	$243
DSO										74	54	50	45		75	51	50
Employee Headcount									~15,355	~15,555	~15,870	~16,360		~16,640	~16,695	~18,330
Revenue by Segment (millions)	(6)(7)
- Semiconductor & System Design			$3,327.2	$878.3	$930.4	$959.1	$1,042.4	$3,810.4	$1,162.7	$1,166.4	$1,129.5
% of Total									90%	91%	91%	91%	90%	91%	92%	91%	91%
- Software Integrity									$358.1	$92.0	$93.9	$98.0	$110.0	$393.8	$107.6	$112.9	$118.3
% of Total									10%	9%	9%	9%	10%	9%	8%	9%	9%
Adjusted Op Income by Segment (millions)	(6)(7)
- Semiconductor & System Design			$990.8	$278.9	$308.8	$328.7	$326.6	$1,243.1	$447.4	$457.2	$380.8
- Software Integrity									$40.8	$7.9	$8.4	$8.7	$13.3	$38.3	$12.0	$13.0	$11.3
Adjusted Operating Margin by Segment	(6)(7)
- Semiconductor & System Design			29.8%	31.8%	33.2%	34.3%	31.3%	32.6%	38.5%	39.2%	33.7%
- Software Integrity									11.4%	8.6%	9.0%	8.8%	12.1%	9.7%	11.2%	11.5%	9.5%

1. Amounts may not foot due to rounding.
2. Includes maintenance on term and perpetual licenses.
3. We define recurring revenue as revenue generated from time-based products, multi-period IP contracts, and maintenance and services, for which revenue is recognized over time.
4. Should be read in conjunction with our Form 8-K filed with the Securities and Exchange Commission (SEC) on August 17, 2022 and the reconciliations of the non-GAAP financial measures to their comparable GAAP measures found in this financial supplement to our Q3 fiscal 2022 report (Supplement).
5. Typically tracks earnings before interest, taxes, depreciation and amortization (EBITDA) over time (less cash taxes). It is important to consider multi-year averages, as operating cash flow is inherently lumpy.
6. We manage the business on a long-term, annual basis, and consider quarterly fluctuations of revenue and profitability as a normal element of our business.
7. These segments results are consistent with the information required by ASC 280, Segment Reporting. Synopsys' chief operating decision maker (CODM) is our CEO. 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. Amount may not foot due to rounding.

The information provided herein should be reviewed in conjunction with Synopsys, Inc.'s earnings results

as disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission on August 17, 2022. P a g e | 3

VI. RECONCILIATIONS AND ADJUSTMENTS

SUPPLEMENTAL GAAP TO NON-GAAP INFORMATION (1)

(Unaudited and in thousands, except per share amounts)

			Three Months Ended July 31, 2022
		GAAP		Adjustments	(2)		Non-GAAP
Cost of revenue:
Products	$	164,077	$	(15,255)	$	148,822
Maintenance and service		87,774		(6,849)		80,925
Amortization of intangible assets		19,330		(19,330)		-
Operating expenses:
Research and development	$	444,826	$	(68,068)	$	376,758
Sales and marketing		199,246		(22,835)		176,411
General and administrative		91,461		(18,738)		72,723
Amortization of intangible assets		7,124		(7,124)		-
Operating income	$	233,928	$	158,199	$	392,127
Other income (expense), net	$	2,426	$	1,092	$	3,518
Provision for income taxes	$	16,708	$	54,508	$	71,216
Net income (loss) attributed to non-controlling interest and
redeemable non-controlling interest	$	(2,980)	$		-	$	(2,980)
Net income attributed to Synopsys	$	222,626	$	104,783	$	327,409
Net income per diluted share	$	1.43	$		0.67	$	2.10
Shares used in computing per share amounts:
Diluted		155,806					155,806

1. Synopsys' third quarter of fiscal year 2022 ended on July 30, 2022. For presentation purposes, we refer to the closest calendar month end.
2. The adjustments to the various line items resulted from excluding the following from non-GAAP measures: stock compensation of $127.6 million, amortization of intangible assets of $26.5 million, acquisition-related costs of $5.2 million, changes in the fair value of the non-qualified deferred compensation plan of ($1.1) million, and tax effect of non-GAAP adjustments of ($54.5) million.

GAAP TO NON-GAAP OPERATING MARGIN RECONCILIATION (1)

(Unaudited)

	Three Months Ended
	July 31, 2022
GAAP operating margin	18.7%
Amortization of intangible assets	2.1%
Stock compensation	10.2%
Acquisition-related costs	0.4%
Non-qualified deferred compensation plan	0.0%
Non-GAAP operating margin	31.4%

1. Synopsys' third quarter of fiscal year 2022 ended on July 30, 2022. For presentation purposes, we refer to the closest calendar month end.

The information provided herein should be reviewed in conjunction with Synopsys, Inc.'s earnings results

as disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission on August 17, 2022. P a g e | 4

TOTAL ADJUSTED SEGMENT OPERATING INCOME RECONCILIATION (1) (2) (3)

(in millions)

		Three Months
		Ended
		July 31, 2022
GAAP total operating income - as reported	$	233.9
Other expenses managed at consolidated level
-Amortization of intangible assets		26.5
-Stock compensation		127.6
-Non-qualified deferred compensation plan		(1.1)
-Acquisition-related costs		5.2
Total adjusted segment operating income	$	392.1

1. Synopsys manages the business on a long-term, annual basis, and considers quarterly fluctuations of revenue and profitability as normal elements of our business. Amounts may not foot due to rounding.
2. These segments results are consistent with the information required by ASC 280, Segment Reporting. Synopsys' chief operating decision maker (CODM) is our
   CEO. 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. Amount may not foot due to rounding.
3. Synopsys' third quarter of fiscal year 2022 ended on July 30, 2022. For presentation purposes, we refer to the closest calendar month end.

The information provided herein should be reviewed in conjunction with Synopsys, Inc.'s earnings results

as disclosed in its Current Report on Form 8-K filed with the Securities and Exchange Commission on August 17, 2022. P a g e | 5