Press Releases

Synopsys Posts Financial Results for Third Quarter Fiscal Year 2016
Q3 2016 Financial Highlights
- Revenue: $615.2 million
- GAAP earnings per share: $0.42
- Non-GAAP earnings per share: $0.76
- Operating cash flow: $251.7 million

MOUNTAIN VIEW, Calif., Aug. 17, 2016 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter of fiscal year 2016.

For the third quarter of fiscal year 2016, Synopsys reported revenue of $615.2 million, compared to $555.8 million for the third quarter of fiscal 2015, an increase of 10.7 percent.  

"In our fiscal third quarter, we again delivered strong results across the board and are raising our annual revenue, non-GAAP earnings per share, and operating cash flow targets," said Aart de Geus, chairman and co-CEO of Synopsys.  "While semiconductor consolidation has continued, investments in EDA and IP by semiconductor and systems companies are robust as they tackle highly complex designs within unforgiving market windows. Our state-of-the-art products, along with expert engineering support, are key differentiators for us. We are also making good progress in the promising new software quality and security market. Lastly, we continue to drive long-term shareholder value through prudent organic investments, value-creating acquisitions, and returning $325 million to shareholders in the form of share repurchases this year."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2016 was $64.7 million, or $0.42 per share, compared to $55.4 million, or $0.35 per share, for the third quarter of fiscal 2015.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2016 was $116.2 million, or $0.76 per share, compared to non-GAAP net income of $99.7 million, or $0.63 per share, for the third quarter of fiscal 2015.  Reconciliation between GAAP and non-GAAP results is provided below. 

Financial Targets

Synopsys also provided its financial targets for the fourth quarter and full fiscal year 2016.  These targets do not include any impact of future acquisition-related activities or costs that may be incurred in the remainder of fiscal year 2016.  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. 

Fourth Quarter of Fiscal Year 2016 Targets:

  • Revenue: $621 million - $636 million
  • GAAP expenses: $537 million - $556 million
  • Non-GAAP expenses: $483 million - $493 million
  • Other income and expense: $0 - $2 million
  • Tax rate applied in non-GAAP net income calculations: 19 percent
  • Fully diluted outstanding shares: 152 million - 155 million
  • GAAP earnings per share: $0.46 - $0.55
  • Non-GAAP earnings per share: $0.75 - $0.78

Full Fiscal Year 2016 Targets:

  • Revenue: $2.410 billion - $2.425 billion
  • Other income and expense: $6 million - $8 million
  • Tax rate applied in non-GAAP net income calculations: 19 percent
  • Fully diluted outstanding shares: 153 million - 156 million
  • GAAP earnings per share: $1.72 - $1.81
  • Non-GAAP earnings per share: $3.00 - $3.03
  • Cash flow from operations: $525 million - $545 million

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 ongoing business operations and what Synopsys uses to evaluate its ongoing 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, and (iv) other significant items, including restructuring charges and, in fiscal 2015, certain accruals for legal and tax matters.  In fiscal 2015, the non-GAAP tax provision excluded the income tax effect of above-mentioned non-GAAP pre-tax adjustments as well as unusual or infrequent 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. In fiscal 2016, Synopsys began utilizing a normalized annual non-GAAP tax rate in the calculation of its non-GAAP measures that is based on our projected annual tax rate through fiscal 2018.  In projecting this rate, we evaluated our historical and projected mix of U.S. and international profit before tax, excluding the impact of stock-based compensation, the amortization of purchased intangibles and other non-GAAP adjustments described above. We also took into account 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. We intend to re-evaluate this rate on an annual basis for any significant events that may materially affect our projections, such as significant changes in our geographic earnings mix or significant tax law changes in major jurisdictions where we operate. 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.

Reconciliation of Third Quarter Fiscal Year 2016 Results

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

 

GAAP to Non-GAAP Reconciliation of Third Quarter Fiscal Year 2016 Results

 

(unaudited and in thousands, except per share amounts)

 
                 
 

Three Months Ended

 

Nine Months Ended

 
 

July 31,

 

July 31,

 
 

2016

 

2015

 

2016

 

2015

 

GAAP net income

$   64,718

 

$ 55,387

 

$ 194,129

 

$ 176,172

 

Adjustments:

               

Amortization of intangible assets

31,518

 

32,892

 

100,558

 

97,248

 

Stock compensation

25,571

 

23,905

 

72,043

 

64,769

 

Acquisition-related costs

1,155

 

4,431

 

6,968

 

8,615

 

Restructuring charges

-

 

(248)

 

2,987

 

15,088

 

Legal and tax matters

-

 

(10,270)

 

-

 

(11,789)

 

Tax adjustments (1)

(6,747)

 

(6,419)

 

(28,909)

 

(17,195)

 

Non-GAAP net income 

$ 116,215

 

$ 99,678

 

$ 347,776

 

$ 332,908

 
                 
                 
                 
 

Three Months Ended

 

Nine Months Ended

 
 

July 31,

 

July 31,

 
 

2016

 

2015

 

2016

 

2015

 

GAAP net income per share

$       0.42

 

$0.35

 

$       1.26

 

$1.12

 

Adjustments:

               

Amortization of intangible assets

0.20

 

0.21

 

0.65

 

0.62

 

Stock compensation

0.17

 

0.14

 

0.47

 

0.40

 

Acquisition-related costs

0.01

 

0.03

 

0.05

 

0.05

 

Restructuring charges

-

 

-

 

0.02

 

0.10

 

Legal and tax matters

-

 

(0.06)

 

-

 

(0.07)

 

Tax adjustments (1)

(0.04)

 

(0.04)

 

(0.20)

 

(0.11)

 

Non-GAAP net income per share

$       0.76

 

$0.63

 

$       2.25

 

$2.11

 
                 

Shares used in calculation

153,890

 

158,584

 

154,629

 

157,850

 
                 

(1) Fiscal 2016 tax adjustments reflect the application of our normalized annual non-GAAP tax rate to non-GAAP pre-tax income.

 

 

Reconciliation of Target Non-GAAP Operating Results

The following tables reconcile the specific items excluded from GAAP in the calculation of target non-GAAP operating results for the periods indicated below.

 

GAAP to Non-GAAP Reconciliation of Fourth Quarter Fiscal Year 2016 Targets

(in thousands, except per share amounts)

       
 

 Range for Three Months 

 

Ending October 31, 2016 (1)

 

Low

 

High

Target GAAP expenses

$   537,000

 

$   556,000

Adjustments:

     

      Estimated impact of amortization of intangible assets

(29,000)

 

(34,000)

      Estimated impact of stock compensation

(25,000)

 

(29,000)

Target non-GAAP expenses

$   483,000

 

$   493,000

       
       
 

Range for Three Months

 

Ending October 31, 2016 (1)

 

Low

 

High

Target GAAP earnings per share

$         0.46

 

$         0.55

Adjustments:

     

Estimated impact of amortization of intangible assets

0.22

 

0.19

Estimated impact of stock compensation

0.19

 

0.16

Estimated impact of tax adjustments (2)

(0.12)

 

(0.12)

Target non-GAAP earnings per share

$         0.75

 

$         0.78

       

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

153,500

 

153,500

       
       

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2016 Targets

       
 

Range for Fiscal Year

 

Ending October 31, 2016 (1)

 

Low

 

High

Target GAAP earnings per share

$         1.72

 

$         1.81

Adjustments:

     

Estimated impact of amortization of intangible assets

$         0.87

 

$         0.84

Estimated impact of stock compensation

$         0.66

 

$         0.63

Acquisition-related costs

$         0.05

 

$         0.05

Estimated impact of restructuring

$         0.02

 

$         0.02

Estimated impact of tax adjustments (2)

$        (0.32)

 

$        (0.32)

Target non-GAAP earnings per share

$         3.00

 

$         3.03

       

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

154,500

 

154,500

       

(1) Synopsys' fourth quarter and fiscal year end on October 29, 2016. For presentation purposes, we refer to the closest calendar month end.

(2) Fiscal 2016 tax adjustments reflect the application of our normalized annual non-GAAP tax rate to non-GAAP pre-tax income.

 

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 at Synopsys' corporate website at www.synopsys.com.  A recording of the call will be available by calling +1-800-475-6701 (+1-320-365-3844 for international callers), access code 399721, beginning at 4:00 p.m. Pacific Time today.  A webcast replay will also be available on the website from approximately 4:30 p.m. Pacific Time today through the time Synopsys announces its results for the fourth quarter and fiscal year 2016 earnings in November 2016.  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 the call.  In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, also posted on the corporate website.

Effectiveness of Information

The targets included in this 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' 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 corporate overview presentation will remain available on Synopsys' website through the date of the fourth quarter and fiscal year 2016 earnings call in November 2016, 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 2016 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the third quarter fiscal 2016 in its quarterly report on Form 10-Q to be filed by Sept. 8, 2016.

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 quality and security solutions. Whether you're a system-on-chip (SoC) designer creating advanced semiconductors, or a software developer writing applications that require the highest quality and security, Synopsys has the solutions needed to deliver innovative, high-quality, secure products. Learn more at www.synopsys.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including, but not limited to, information in the sections entitled "Financial Targets" and "Reconciliation of Target Non-GAAP Operating Results" and statements related to the expected strength of customer investments, success of acquisitions and progress in new markets.  These statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements.  Accordingly, we caution stockholders and prospective investors not to place undue reliance on these statements.  Such risks, uncertainties and factors include, but are not limited to: uncertainty in the growth of the semiconductor and electronics industry; consolidation among our customers; continued uncertainty in the global economy; our ability to realize the potential financial or strategic benefits of acquisitions we complete; changes in accounting principles or standards; fluctuation of our operating results; our highly competitive industries and our ability to meet our customers' demand for innovative technology at lower costs; our ability to protect our proprietary technology; application of the actual consolidated GAAP tax rate, or our decision to change our non-GAAP normalized tax rate, as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, tax law changes, actions by government authorities, or judgment by management, based upon the status of pending audits and settlements, to increase or decrease an income tax asset or liability; investments of more resources in research and development than anticipated; risks and compliance obligations relating to the global nature of our operations; cybersecurity threats or other security breaches; liquidity requirements in our U.S. operations; claims that our products infringe on third-party intellectual property rights; product errors or defects; litigation; the ability to obtain licenses to third-party software and intellectual property on reasonable terms or at all; the ability to timely recruit and retain senior management and key employees; evolving corporate governance and public disclosure regulations; the inherent limitations on the effectiveness of our controls and compliance programs; the impairment of our investment portfolio by the deterioration of capital markets and the change in the fair value of our non-qualified deferred compensation plan obligations; the accuracy of certain assumptions, judgments and estimates that affect amounts reported in our financial statements; and the impact of catastrophic events.  More information on potential risks, uncertainties and other factors that could affect Synopsys' results is included in filings it makes 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, 2015 and in its Form 10-Q for the fiscal quarter ended July 31, 2016 to be filed with the SEC.  The information provided herein is as of Aug. 17, 2016.  Synopsys undertakes no duty, 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 Consolidated Statements of Operations (1)

(in thousands, except per share amounts)

               
               
 

Three Months Ended 

 

Nine Months Ended

 

July 31,

 

July 31,

 

2016

 

2015

 

2016

 

2015

Revenue:

             

  Time-based license

$   479,285

 

$   445,807

 

$    1,427,740

 

$    1,324,677

  Upfront license

66,885

 

48,878

 

168,485

 

139,671

  Maintenance and service

69,034

 

61,120

 

192,588

 

190,704

      Total revenue

615,204

 

555,805

 

1,788,813

 

1,655,052

Cost of revenue:

             

  License

92,042

 

77,516

 

253,879

 

218,650

  Maintenance and service

23,172

 

25,251

 

67,328

 

82,244

  Amortization of intangible assets

24,463

 

26,704

 

79,544

 

78,182

     Total cost of revenue

139,677

 

129,471

 

400,751

 

379,076

Gross margin

475,527

 

426,334

 

1,388,062

 

1,275,976

Operating expenses:

             

  Research and development

221,874

 

197,999

 

634,751

 

567,924

  Sales and marketing

127,328

 

116,988

 

370,874

 

343,736

  General and administrative

42,548

 

43,925

 

123,798

 

121,254

  Amortization of intangible assets 

7,055

 

6,188

 

21,014

 

19,066

  Restructuring charges

-

 

(248)

 

2,987

 

15,088

     Total operating expenses

398,805

 

364,852

 

1,153,424

 

1,067,068

Operating income

76,722

 

61,482

 

234,638

 

208,908

Other income (expense), net

8,509

 

3,711

 

12,158

 

16,784

Income before income taxes

85,231

 

65,193

 

246,796

 

225,692

Provision (benefit) for income taxes

20,513

 

9,806

 

52,667

 

49,520

Net income

$     64,718

 

$     55,387

 

$       194,129

 

$       176,172

               

Net income per share:

             

  Basic

$         0.43

 

$0.36

 

$             1.28

 

$1.14

  Diluted

$         0.42

 

$0.35

 

$             1.26

 

$1.12

               

Shares used in computing per share amounts:

             

  Basic

151,169

 

155,533

 

152,129

 

154,835

  Diluted

153,890

 

158,584

 

154,629

 

157,850

               

(1)  Synopsys' third quarter of fiscal year 2016 and 2015 ended on July 30, 2016 and August 1, 2015, respectively. For presentation purposes, we refer to the closest calendar month end.

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

         
   

July 31, 2016

 

October 31, 2015

ASSETS:

       

Current assets:

       

  Cash and cash equivalents

 

$      946,317

 

$             836,188

  Short-term investments

 

143,542

 

128,747

          Total cash, cash equivalents and short-term investments

 

1,089,859

 

964,935

  Accounts receivable, net

 

317,067

 

385,694

  Income taxes receivable and prepaid taxes

 

51,463

 

46,732

  Prepaid and other current assets

 

93,649

 

71,446

          Total current assets

 

1,552,038

 

1,468,807

Property and equipment, net

 

258,794

 

263,077

Goodwill

 

2,515,091

 

2,471,241

Intangible assets, net

 

295,436

 

363,659

Long-term prepaid taxes

 

18,619

 

18,736

Long-term deferred income taxes

 

278,225

 

273,909

Other long-term assets

 

190,586

 

186,310

           Total assets

 

$   5,108,789

 

$          5,045,739

         

LIABILITIES AND STOCKHOLDERS' EQUITY:

       

Current liabilities:

       

  Accounts payable and accrued liabilities

 

$      347,606

 

$             385,542

  Accrued income taxes

 

29,420

 

19,565

  Deferred revenue

 

1,009,070

 

968,246

  Short-term debt

 

277,500

 

205,000

           Total current liabilities

 

1,663,596

 

1,578,353

Long-term accrued income taxes

 

33,388

 

37,763

Long-term deferred revenue

 

77,786

 

93,613

Other long-term liabilities

 

213,273

 

202,021

           Total liabilities

 

1,988,043

 

1,911,750

Stockholders' equity:

       

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

 

-

 

-

  Common stock, $0.01 par value: 400,000 shares authorized; 151,437 and 155,157 shares outstanding, respectively

 

 

1,514

 

 

1,552

  Capital in excess of par value

 

1,605,267

 

1,610,460

  Retained earnings

 

1,894,333

 

1,725,727

  Treasury stock, at cost: 5,827 and 2,107 shares, respectively

 

(270,813)

 

(98,375)

  Accumulated other comprehensive income (loss) 

 

(109,555)

 

(105,375)

           Total stockholders' equity

 

3,120,746

 

3,133,989

           Total liabilities and stockholders' equity

 

$   5,108,789

 

$          5,045,739

         

(1)  Synopsys' third quarter of fiscal 2016 ended on July 30, 2016, and its fiscal year 2015 ended on October 31, 2015. For presentation purposes, we refer to the closest calendar month end.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)

       
 

 Nine Months Ended July 31, 

 

2016

 

2015

CASH FLOWS FROM OPERATING ACTIVITIES:

     

Net income

$194,129

 

$176,172

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

     

Amortization and depreciation

157,814

 

154,535

Stock compensation

72,043

 

63,463

Allowance for doubtful accounts 

650

 

1,100

(Gain) loss on sale of investments

(15)

 

(22)

Excess tax benefits on stock-based awards

(5,653)

 

-

Deferred income taxes

2,747

 

24,134

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

     

Accounts receivable

77,532

 

16,976

Prepaid and other current assets

(22,941)

 

(35,836)

Other long-term assets

(8,118)

 

(16,141)

Accounts payable and accrued liabilities

(41,749)

 

(25,512)

Income taxes

2,339

 

(20,633)

Deferred revenue

10,195

 

4,507

Net cash provided by operating activities

438,973

 

342,743

       

CASH FLOWS FROM INVESTING ACTIVITIES:

     

Proceeds from sales and maturities of short-term investments

111,078

 

48,155

Purchases of short-term investments

(126,216)

 

(185,402)

Proceeds from sales of long-term investments

1,785

 

-

Purchases of long-term investments

(1,002)

 

-

Purchases of property and equipment

(48,249)

 

(67,708)

Cash paid for acquisitions and intangible assets, net of cash acquired

(60,056)

 

(126,883)

Capitalization of software development costs

(2,959)

 

(2,798)

Other

-

 

900

Net cash used in investing activities

(125,619)

 

(333,736)

       

CASH FLOWS FROM FINANCING ACTIVITIES:

     

Proceeds from credit facility

185,000

 

410,000

Repayment of debt

(112,500)

 

(272,924)

Issuances of common stock

44,166

 

56,414

Purchase of equity forward contract

(25,000)

 

-

Purchases of treasury stock

(300,000)

 

(180,000)

Excess tax benefits on stock-based awards

5,653

 

-

Other

(2,940)

 

(116)

Net cash provided by (used in)  financing activities

(205,621)

 

13,374

Effect of exchange rate changes on cash and cash equivalents

2,396

 

(21,720)

Net change in cash and cash equivalents

110,129

 

661

Cash and cash equivalents, beginning of the year

836,188

 

985,762

Cash and cash equivalents, end of the period

$946,317

 

$986,423

       
       

(1)  Synopsys' third quarter of fiscal year 2016 and 2015 ended on July 30, 2016 and August 1, 2015, respectively. For presentation purposes, we refer to the closest calendar month end.

 

INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901
Synopsys-ir@synopsys.com

EDITORIAL CONTACT:
Sheryl Gulizia
Synopsys, Inc.
650-584-8635
sgulizia@synopsys.com

 

SOURCE Synopsys, Inc.