Synopsys : Financial Supplement for Q4 & FY2020 (PDF)

CONTENTS

• I. Financial Targets

• II. Revenue by Product Group

• III. Revenue by Geographic Region

• IV. Selected Financial and Operating Metrics

• V. Reconciliations and Adjustments

• VI. Notice to Investors

I. FISCAL YEAR 2021 SELECTED FINANCIAL TARGETS

Revenue (million)	$935 - $965	$4,000 - $4,050
GAAP Expenses (million)	$767 - $785	$3,226 - $3,271
Non-GAAP Expenses (million)	$674 - $684	$2,825 - $2,855
Other Income and Expense Net (million)	($2) - $0	($11) - ($7)
Annual Non-GAAP Tax Rate	16%	16%
Fully Diluted Outstanding Shares (million)	155 - 158	156 - 159
GAAP Operating Margin	18% - 20%
Non-GAAP Operating Margin	29% - 30%
GAAP Earnings Per Share	$1.05 - $1.16	$4.39 - $4.54
Non-GAAP Earnings Per Share	$1.44 - $1.49	$6.23 - $6.30
Cash Flow from Operations (million)	$1,200 - $1,300
Capital Expenditures (million)	~$100
Average Renewable License Duration	2.5 - 3 years

Q1FY2021

• (1) These targets were provided by Synopsys as of December 2, 2020.

  USEFUL LINKS

  Press Release

  Form 10-K FY2019Form 10-Q Q3 FY2020

  CONTACT

  Synopsys, Inc. Investor Relations Phone: [phone]

  Email:[e-mail]

  (1) (2)

  FY2021

• (2) These targets assume there are no changes to the current U.S. government "Entity List" restrictions for fiscal 2021.

RECENT ACQUISITIONS

Webcast

Moortec (Closed)

Light Tec (Closed)
•	Closed November 2020.	• Closed November 2020.
•	Terms not disclosed; not material.	• Terms not disclosed; not material
•	Enhances the new Synopsys Silicon Lifecycle Management	• Global provider of optical measurement
(SLM) platform.	solutions.
•	Moortec's monitors and sensors will feed data into the	• Augments Synopsys' optical design
platform's data analytics engines, providing detailed visibility	software tools, expanding our solutions for
into the chip's performance and allowing for optimizations at	imaging and illumination optics
each stage of the semiconductor lifecycle, from design to in-	applications
field operation.

The information provided herein should be reviewed in conjunction with Synopsys earnings results as disclosed on December 2, 2020.

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II. REVENUE BY PRODUCT GROUP (Unaudited)

($ millions)	Q119	Q219	Q319	Q419	FY19	Q120	Q220	Q320	Q420	FY20
EDA	500.8	492.7	481.6	489.2	1,964.3	492.6	511.4	531.8	580.5	2,116.3
% of Revenue	61%	59%	56%	57%	58%	59%	59%	55%	57%	57%
IP & System Integration	235.8	259.2	286.2	275.5	1,056.6	255.1	260.0	335.7	351.9	1,202.6
% of Revenue	29%	31%	34%	32%	31%	31%	30%	35%	34%	33%
Software Integrity	82.5	83.2	83.6	85.3	334.6	85.6	88.3	93.4	90.8	358.1
% of Revenue	10%	10%	10%	10%	10%	10%	10%	10%	9%	10%
Other	1.3	1.1	1.6	1.1	5.2	1.1	1.7	3.2	2.3	8.3
Total	820.4	836.2	853.0	851.1	3,360.7	834.4	861.3	964.1	1,025.4	3,685.3

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-level design products, prototyping products, and general 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.

III. REVENUE BY GEOGRAPHIC REGION (Unaudited)

($ millions)	Q119	Q219	Q319	Q419	FY19	Q120	Q220	Q320	Q420	FY20
North America	414.5	433.9	414.0	450.0	1,712.5	415.4	405.8	443.7	536.9	1,801.9
% of Revenue	51%	52%	49%	53%	51%	50%	47%	46%	52%	49%
Europe	83.9	83.5	90.1	91.5	349.0	94.4	89.3	94.3	107.3	385.3
% of Revenue	10%	10%	11%	11%	10%	11%	10%	10%	10%	10%
Japan	65.1	72.7	65.7	69.2	272.7	72.2	80.5	77.8	77.6	308.2
% of Revenue	8%	9%	8%	8%	8%	9%	9%	8%	8%	8%
Korea	102.7	84.9	85.0	80.9	353.4	89.5	105.3	96.3	97.8	389.0
% of Revenue	13%	10%	10%	10%	11%	11%	12%	10%	10%	11%
Asia Pacific*	154.2	161.2	198.2	159.5	673.2	162.9	180.4	251.9	205.8	800.9
% of Revenue	19%	19%	23%	19%	20%	20%	21%	26%	20%	22%
Total	820.4	836.2	853.0	851.1	3,360.7	834.4	861.3	964.1	1,025.4	3,685.3
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* China revenue totaled $421M, $322M and $259M for FY20, FY19 and FY18, respectively.

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.

IV. SELECTED FINANCIAL AND OPERATING METRICS

Revenue License Type (millions) (1)

• - Time-based Products

• - Upfront Products

• - Maintenance and Service (2)

Recurring Revenue (% of Total Revenue) (3) Avg Renewable License Duration (yrs) (4) Non-GAAP Operating Margin (5)

Cash, Cash Equivalents & Short-term Investments (millions)

- % held in U.S. Outstanding Debt

Operating Cash Flow (1),(6) Capital Expenditures (1)

Share Repurchases (millions) (1)

• - Number of Shares

• - Gross Share Repurchases

• - Remaining Repurchase Authorization

DSO

Employee Headcount

Revenue by Segment (millions) (7)(8)

• - Semiconductor & System Design % of Total

• - Software Integrity % of Total

Adjusted Op Income by Segment (millions) (7)(8)

- Semiconductor & System Design

- Software Integrity

Adjusted Operating Margin by Segment (7)(8)

- Semiconductor & System Design

- Software Integrity

• (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. Prior to ASC 606 adoption, multi-period IP contracts covering unspecified titles were recognized ratably and considered time-based revenue. Beginning in Q1'19 with the adoption of ASC 606, revenue from these contracts is considered upfront revenue. However, revenue from these contracts is still recognized over the duration of the contract as the customer draws down the contract balance.

• (4) Weighted average duration of the license arrangements closed in the period reported.

• (5) Should be read in conjunction with our Form 8-K filed with the SEC on December 2, 2020 and the reconciliations of the non-GAAP financial measures to their comparable GAAP measures found in this Financial Supplement.

• (6) Will typically track earnings before interest, taxes, depreciation and amortization (EBITDA) over time (less cash taxes). As operating cash flow is inherently lumpy, it is important to look at multi-year averages.

• (7) 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. Quarterly variability, which increased as a result of ASC 606, should be expected.

• (8) These segment results are consistent with the information required by ASC 280. They are presented to reflect the information that is considered by Synopsys' chief operating decision makers (CODMs) to evaluate the operating performance of its segments. The CODMs do not allocate certain operating expenses managed at a consolidated level to our reportable segments, and as a result, the reported operating income and operating margin do not include these unallocated expenses. Such unallocated expenses consist of stock-based compensation expense, amortization of intangible assets, restructuring, litigation and acquisition-related costs. Management excludes these same expenses to arrive at non-GAAP measures used to evaluate and make decisions about Synopsys as a whole.

The information provided herein should be reviewed in conjunction with our earnings results

as disclosed on December 2, 2020.

V. RECONCILIATIONS AND ADJUSTMENTS

SUPPLEMENTAL GAAP TO NON-GAAP INFORMATION (1)

(Unaudited and in thousands, except per share amounts)

Three Months Ended October 31, 2020

GAAP

Adjustments (2)

Non-GAAP

Cost of revenue: Products

$

Maintenance and service Amortization of intangible assets

• 142,838 $ 69,991 11,720

(9,140) $ 133,698

(3,240) 66,751

(11,720)

-Operating expenses: Research and development Sales and marketing General and administrative Amortization of intangible assets Restructuring charges

$

• 339,566 $

(41,158) $ 298,408

176,499

(13,983) 162,516

79,796

(15,470) 64,326

9,284

(9,284)

(387)

387

- -Operating income

Other income (expense), net

Provision (benefit) for income taxes

$ $ $

196,132

(4,095)

(4,989)

$ $ $

103,608

$

299,740

(1,303) $ (5,398)

52,084 $ 47,095

Net income (loss) attributed to non-controlling interest

$

(429)

$

- $ (429)

Net income attributed to Synopsys

Net income per share (Diluted)

$ $

197,455

1.26

$ $

50,221

0.32

$ $

247,676

1.58

Shares used in computing per share amounts: Diluted

156,825

156,825

• (1) Synopsys' fourth quarter of fiscal year 2020 ended on October 31, 2020.

• (2) The adjustments to the various line items resulted from excluding the following from non-GAAP measures: stock compensation of $78.4 million, amortization of intangible assets of $21.0 million, restructuring charges of ($0.4) million, acquisition-related costs of $3.3 million, changes in the fair value of the non-qualified deferred compensation plan of $1.3 million, and tax effect of non-GAAP adjustments of ($52.1) million.

GAAP TO NON-GAAP OPERATING MARGIN RECONCILIATION (1)

(Unaudited)

Three Months Ended
October 31, 2020
GAAP operating margin	19.1%
Amortization of intangible assets	2.0%
Stock compensation	7.6%
Acquisition-related costs	0.4%
Restructuring charges	0.0%
Change in value of non-qualified deferred compensation	0.1%
Non-GAAP operating margin	29.2%
(1) Synopsys' fourth quarter of fiscal year 2020 ended on October 31, 2020.

SUPPLEMENTAL GAAP TO NON-GAAP INFORMATION (1)

(Unaudited and in thousands, except per share amounts)

Twelve Months Ended October 31, 2020

GAAP

Adjustments (2)

Non-GAAP

Cost of revenue: Products

$

Maintenance and service Amortization of intangible assets

• 487,307 $ 254,931 52,452

(29,208) $ 458,099

(9,674) 245,257

(52,452)

-Operating expenses: Research and development Sales and marketing General and administrative Amortization of intangible assets Restructuring charges

$

1,279,022

$

(139,307) $

1,139,715

632,010

(47,500) 584,510

284,530

(58,460) 226,070

38,829

36,059

(38,829) (36,059)

- -

Operating income

Other income (expense), net

Provision (benefit) for income taxes

$ $ $

620,141 18,018

(25,288)

$ $ $

411,489

(21,469)

189,798

$ $ $

1,031,630

(3,451)

164,510

Net income (loss) attributed to non-controlling interest

$

(900)

$

-

$

(900)

Net income attributed to Synopsys

Net income per share (Diluted)

$ $

664,347

4.27

$ $

200,222

1.28

$ $

864,569

5.55

Shares used in computing per share amounts: Diluted

155,706

155,706

• (1) Synopsys' fiscal year 2020 ended on October 31, 2020.

• (2) The adjustments to the various line items resulted from excluding the following from non-GAAP measures: stock compensation of $248.6

million, amortization of intangible assets of $91.3 million, restructuring charges of $36.1 million, acquisition-related costs of $14.1 million, changes in the fair value of the non-qualified deferred compensation plan of $21.5 million, and tax effect of non-GAAP adjustments of ($189.8) million.

GAAP TO NON-GAAP OPERATING MARGIN RECONCILIATION (1)

(Unaudited)

Twelve Months Ended
October 31, 2020
GAAP operating margin	16.8%
Amortization of intangible assets	2.5%
Stock compensation	6.7%
Acquisition-related costs	0.4%
Restructuring charges	1.0%
Change in value of non-qualified deferred compensation	0.6%
Non-GAAP operating margin	28.0%
(1) Synopsys' fourth quarter of fiscal year 2020 ended on October 31, 2020.

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

(in millions)

GAAP total operating income - as reported Other expenses managed at consolidated level

Three Months	Twelve Months
Ended	Ended
October 31, 2020 (3)	October 31, 2020 (3)

$

196.1 $ 620.1

-Amortization of intangible assets

21.0 91.3

-Stock compensation

78.4 248.6

-Fair value changes in executive deferred compensation plan

1.3 21.5

-Acquisition-related costs -Restructuring

3.3 14.1

(0.4) 36.1

-Legal matters

-

-

Total adjusted segment operating income

$

299.7

$

1,031.6

(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. Amounts may not foot due to rounding.

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

(3) Synopsys' fourth quarter of fiscal year 2020 ended on October 31, 2020. For presentation purposes, we refer to the closest calendar month end.

The information provided herein should be reviewed in conjunction with Synopsys earnings results as disclosed on December 2, 2020.

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GAAP TO NON-GAAP RECONCILIATION OF FIRST QUARTER FISCAL YEAR 2021 TARGETS (1)

(in thousands, except per share amounts)

Range for Three Months Ending January 31, 2021

Target GAAP expenses Adjustments:

$

Estimated impact of amortization of intangible assets

Estimated impact of stock compensation

Target non-GAAP expenses

$

Low	High
767,000	$	785,000
(19,000)	(22,000)
(74,000)	(79,000)
674,000	$	684,000

Range for Three Months

Ending January 31, 2021

Target GAAP earnings per share Adjustments:

Low $

High

1.05 $ 1.16

Estimated impact of amortization of intangible assets Estimated impact of stock compensation

0.14 0.12

0.50 0.47

Estimated impact of tax adjustments Target non-GAAP earnings per share

(0.25) (0.26)

$

1.44

$

1.49

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

156,500

156,500

GAAP TO NON-GAAP RECONCILIATION OF FULL FISCAL YEAR 2021 TARGETS (1)

(in thousands, except per share amounts)

Range for Fiscal Year

October 31, 2021

Target GAAP expenses Adjustments:

$

Estimated impact of amortization of intangible assets

Estimated impact of stock compensation

Target non-GAAP expenses

$

Low	High
3,226,000	$	3,271,000
(71,000)	(76,000)
(330,000)	(340,000)
2,825,000	$	2,855,000

Range for Fiscal Year

October 31, 2021

Target GAAP earnings per share Adjustments:

Low $

High

4.39 $ 4.54

Estimated impact of amortization of intangible assets Estimated impact of stock compensation

0.48 0.45

2.16 2.10

Estimated impact of tax adjustments Target non-GAAP earnings per share

(0.80) (0.79)

$

6.23

$

6.30

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

157,500

157,500

(1) Synopsys' first fiscal quarter and fiscal year will end on January 30, 2021 and October 30, 2021, respectively. For presentation purposes, we refer to the closest calendar month end.

GAAP TO NON-GAAP RECONCILIATION OF OPERATING MARGIN AT MIDPOINT OF FULL FISCAL YEAR 2021 TARGETS (1)

Twelve Months Ended
October 31, 2021(2)
At midpoint of revenue and expense guidance ranges
GAAP operating margin	19.3%
Amortization of intangible assets	1.8%
Stock compensation	8.3%
Target non-GAAP operating margin	29.4%

(1) These numbers represent the midpoint of targets in the prepared remarks provided on December 2, 2020, and do not represent official guidance for 2021.

(2) Synopsys' fiscal year will end on October 30, 2021. For presentation purposes, we refer to the closest calendar month end.

The information provided herein should be reviewed in conjunction with our earnings results

NOTICE TO INVESTORS

GAAP TO NON-GAAP RECONCILIATIONS

Please see our Current Report on Form 8-K filed with the SEC on December 2, 2020 available athttp://www.sec.gov for the reasons why Synopsys believes that the presentation of non-GAAP financial measures provides useful information to our shareholders regarding our financial condition and results of operations and the purposes for which management uses such non-GAAP financial measures. Certain non-GAAP data used by management, as well as the reconciliation of such data to its most directly comparable GAAP measures, is contained in the fourth quarter and fiscal year 2020 earnings release available on Synopsys' website athttps://www.synopsys.com/company/investor-relations/financial-news.html and our Current Report on Form 8-K filed with the SEC on December 2, 2020. In addition to the adjustments described in the Current Report on Form 8-K, the non-GAAP financial measures provided in this Supplement also exclude changes in the fair value of our non-qualified deferred compensation plans since such changes typically do not require current cash settlement and because they are not used by us in assessing the profitability of our business operations.

FORWARD-LOOKING STATEMENTS

This Supplement contains forward-looking statements including, but not limited to, statements regarding Synopsys' short-term and long-term financial targets, expectations and objectives; business outlook, opportunities and strategies; customer demand and market expansion; strategies related to our products and technology; our planned product releases and capabilities; industry growth rates; software trends; planned acquisitions and buybacks; our expected tax rate; the expected impact of U.S. and foreign government action on our financial results; and the expected impact of the COVID-19 pandemic. These statements involve risks, uncertainties and other factors that could cause our actual results, timeframes or achievements to differ materially from those expressed or implied in our forward-looking statements. Such risks, uncertainties and factors include, but are not limited to: risks from the impact of the COVID-19 pandemic and the associated economic downturn on our business, operations and financial condition; uncertainty in the growth of the semiconductor and electronics industries; consolidation among our customers and our dependence on a relatively small number of large customers; risks and compliance obligations relating to the global nature of our operations as well as action by the U.S. or foreign governments, such as measures in response to the COVID-19 pandemic or the imposition of additional tariffs or export restrictions; macroeconomic conditions and uncertainty in the global economy; fluctuation of our operating results; increased variability in our revenue due to the adoption of ASC 606, including the resulting increase in recognizing upfront revenue as a percentage of total revenue; and more. Additional information on potential risks, uncertainties and other factors that could affect Synopsys' results is included in filings we make 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, 2019 and in its latest Quarterly Report on Form 10-Q.

EFFECTIVENESS OF INFORMATION

The information provided herein is as of December 2, 2020. Although this Supplement will remain available on Synopsys' website through the date of the first quarter of fiscal year 2021 earnings call in February 2021, its continued availability through such date does not mean that Synopsys is reaffirming or confirming its continued validity. Synopsys does not currently intend to, and assumes no obligation to, report on its progress during the first quarter of fiscal 2021 or comment to analysts or investors on, or otherwise update, the information contained in this Supplement.

The information provided herein should be reviewed in conjunction with Synopsys earnings results