Synopsys, Inc. (SNPS) Earnings Call Transcript & Summary

Good morning, and welcome to Synopsys' 2021 Annual Meeting of Stockholders. I'm Aart de Geus, Co-Chief Executive Officer and Chairman of the Board of Synopsys. I thank you all for attending today's meeting and for your continued support as we hold our second annual meeting virtually in order to support the health and safety of our stockholders, Board of Directors, employees and other members of our communities. Before turning to the formal items of business for the meeting, I would first like to introduce our Board members, officers and others who are in attendance today. Joining us by phone are Board members, Chi-Foon Chan, our Co-Chief Executive Officer and President; Janice Chaffin; Bruce Chizen; Mercedes Johnson; Max Nikias; Jeannine Sargent; John Schwarz; and Roy Vallee. Each of them are standing for election at today's annual meeting. Also attending today's meeting telephonically are Trac Pham, our Chief Financial Officer; Rick Runkel, our General Counsel and Corporate Secretary; and Lisa Ewbank, our Vice President of Investor Relations. In addition, Jeff Ford and Cecil Mak of KPMG LLP, our independent registered public accounting firm, are present at today's meeting. Rick Runkel will facilitate today's meeting and take the meeting minutes. We will now move forward with the formal items of business, and I will turn the meeting over to Rick Runkel. Rick?

Welcome to everyone. Thank you, Aart, and welcome, everyone. It's now 8:03 a.m., and I call this meeting to order. I will briefly go over today's meeting agenda. First, I will confirm a quorum and report on the mailing with respect to this meeting. Then we will conduct the official business of the meeting, which is to vote on management's proposals contained in our proxy statement as well as a shareholder proposal. If you have any questions about these proposals, please answer them in the space provided on the virtual meeting screen. Before asking a question, we invite you to refer to the 2021 proxy statement, which contains information about the proposals on today's agenda. We are not planning to answer any question that is unrelated to the formal business of today's meeting or if the answer is substantially covered in the proxy statement. After the vote, I'll adjourn the meeting. We ask that you refer to the rules of conduct for this meeting, which are available under the Materials tab within the virtual meeting platform. We have appointed American Election Services to serve as our inspector of election, meaning that it will tally the votes. Jim Raitt has taken an oath of office agreeing to fairly and impartially perform this duty. We will file this oath with the records of the meeting. Only stockholders of record as of February 9, 2021, the record date for this meeting, are entitled to vote. I've been informed by Mr. Raitt, our inspector of elections, that we have represented in person or by proxy, at least 135,064,363 shares out of a total of 152,368,887 shares of Synopsys' common stock outstanding as of the record date, which constitutes more than a majority of the outstanding voting shares. A quorum is therefore present. This meeting is authorized to transact business. I have also received an affidavit of mailing from Broadridge Financial Solutions, the company's investor communications agent, certifying as to the giving of notice of this meeting and commencing on February 18, 2021, sending the notice of Internet availability of proxy materials to stockholders of record as of February 9, 2021. If you have already sent in your proxy card or voted by Internet or telephone, you do not need to vote at today's meeting. If you are a stockholder as of the record date and haven't voted yet, or if you would like to change your vote, you can do so by clicking on the voting button on the web portal and following the outlined instructions. It is now 8:05 a.m. The polls are now open for voting on the 5 matters to be considered at this meeting as set forth in our 2021 proxy statement, which are as follows: the first proposal is to elect 9 directors nominated by our Board of Directors to serve until our next Annual Meeting of Stockholders or until their successors have been elected. The Board recommends you vote for each of the nominees. The second proposal is to approve our 2006 Employee Equity Incentive Plan as amended, in order to, among other items, increase the number of shares available for issuance under the plan by 4,700,000 shares. The Board recommends you vote for this proposal. The third proposal is to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the proxy statement. The Board recommends you vote for this proposal. The fourth proposal is to ratify the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending October 30, 2021. The Board recommends you vote for this proposal. The fifth proposal is a stockholder proposal regarding the right for shareholders to call a special shareholder meeting, submitted by Mr. John Chevedden, who will present this proposal. I ask that Mr. Chevedden please limit his remarks to 3 minutes. Operator, will you please open the line for Mr. Chevedden so he can present the proposal? Mr. Chevedden, your line is now open, and you have 3 minutes to present your proposal. Please proceed.

Can you hear me?

Yes. You're coming through loud and clear. Yes, we can.

Okay. Thank you. Proposal 5, shareholder right to call a special shareholder meeting. Shareholders ask our Board to take the steps necessary to amend the governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting. This proposal is already a success because it prompted management to give shareholders at least a less effective right to call a special shareholder meeting soon after this proposal was submitted. This proposal was submitted in October 2020, and management took action in December. This proposal calls for a 10% stock ownership requirement to call a special shareholder meeting versus the 20% stock ownership threshold recently adopted by management. Plus, this proposal does not disqualify all shares held for less than 1 continuous year. Management is in the precarious position of arguing that disenfranchising shares held for less than 1 year is not a big deal. Then why did management even adopt it? It must be a big deal. Otherwise, why disenfranchise shares held for less than 1 year? Why would management choose the stigma of disenfranchising certain shareholders, if disenfranchising certain shareholders did not materially hobble the right of shareholders to call a special shareholder meeting? It is also undemocratic to deny an important right to shareholders simply because they have not held their shares for a certain period of time. Nuance Communications shareholders gave 94% shareholder support to a 2018 shareholder proposal calling for 10% of shareholders that call a special shareholder meeting. It is also important to adopt this proposal to help make up for the loss of the right of shareholders to an in-person annual shareholder meeting. With the near universal use of online annual shareholder meeting starting in 2020, shareholders no longer have the right to discuss concerns with other shareholders and with their directors at an annual shareholder meeting, which can now be an online meeting. This is an inferior format compared to even a Zoom meeting. Shareholders are also severely restricted in making their views known at an online shareholder meeting because all their questions and comments can be arbitrarily screened out. For instance, Goodyear management hit the mute button right in the middle of a formal shareholder proposal presentation at its 2020 Shareholder Meeting to bar well-deserved critical observations. Please vote yes for a more effective shareholder right to call a special shareholder meeting, proposal 5.

Thank you, Mr. Chevedden. The Board recommends that stockholders vote against this proposal for the reasons we set forth in our proxy statement. So we will not repeat them again here today. Are there any questions regarding the matters to be considered during this meeting? We have received a few questions, all of which pertain to matters that are addressed in the proxy or other public materials. Accordingly, we will now proceed with the voting. The polls are about to close. So if you've not yet voted, please do so now. [Voting]

I hereby declare the polls for voting on the matters before this meeting closed at 8:13 a.m. The inspector of election has delivered his preliminary report to me on each of the proposals before this meeting, and I will now announce the preliminary results. Matter one, election of directors. The first matter considered at this meeting is the election of 9 directors to serve until the next annual meeting of stockholders, or until their successors have been elected. As set forth in the proxy statement, the 9 nominees standing for election are: Aart de Geus; Chi-Foon Chan; Janice Chaffin; Bruce Chizen; Mercedes Johnson; Max Nikias; Jeannine Sargent; John Schwarz; and Roy Vallee. No other nominations were received prior to the deadline for submission as set forth in the Synopsys' bylaws. Therefore, no additional nominations may be made at this meeting. All votes have been cast in the election of the directors. Based on the preliminary results I received from the inspector of elections, each of the 9 Director nominees has been elected to serve as a Director of Synopsys until the next Annual Meeting of Stockholders or until his or her successor has been elected and qualified. The second matter considered is the approval of our 2006 Employee Equity Incentive Plan as amended. All votes have been cast on this matter. Based on the preliminary results I have received from the inspector of elections, Synopsys' 2006 Employee Equity Incentive Plan, as amended, has been approved. The third matter considered is the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in the proxy statement. All votes have been cast on this matter. Based on the preliminary results I've received from the inspector of elections, the compensation of Synopsys' named executive officers, as disclosed in the proxy statement, has been approved on an advisory basis. The fourth matter considered is the ratification of the selection of KPMG LLP as Synopsys' independent registered public accounting firm for the fiscal year ending October 30, 2021. All votes have been cast on this matter. Based on the preliminary results I have received from the inspector of elections, the appointment of KPMG as Synopsys' independent registered public accounting firm for the fiscal year ending October 30, 2021, has been approved. The fifth and final matter considered is the stockholder proposal regarding the right for shareholders to call a special shareholder meeting. All votes have been cast on this matter. Based on the preliminary results I have received from the inspector of elections, the stockholder proposal regarding the right for shareholders to call a special shareholder meeting has not been approved. The final tally of votes will be reported in a current report on Form 8-K to be filed with the Securities and Exchange Commission by April 14. This concludes the formal business of the meeting. It is 8:16, and I hereby declare the meeting adjourned.