SYNOPSYS INC. MOUNTAIN VIEW, Calif., Feb. 15, 2017 /PRNewswire/ --
Q1 2017 Financial Highlights
-- Revenue: $652.8 million
-- GAAP earnings per share: $0.56
-- Non-GAAP earnings per share: $0.94
Synopsys, Inc. (Nasdaq: SNPS) today reported results for its first quarter of fiscal year 2017.
For the first quarter of fiscal 2017, Synopsys reported revenue of $652.8 million, compared to $568.6 million for the first quarter of fiscal 2016, an increase of approximately 15 percent.
"The first fiscal quarter was an excellent beginning to the year, as we substantially exceeded expectations. Business was strong across the board, amplified by the timing of hardware and IP deliverables. Our first quarter results and confidence in the year lead us to increase annual revenue, earnings per share and operating cash flow targets. In addition, we continued to return capital to shareholders with a $100 million share repurchase," said Aart de Geus, chairman and co-CEO of Synopsys. "Meanwhile, semiconductor and systems companies, as well as software developers across industries, continue to invest in many of the areas that enable the era of 'smart everything,' and our Silicon to Software vision and portfolio set us apart as a highly valued partner in these efforts."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2017 was $86.6 million, or $0.56 per share, compared to $60.0 million, or $0.39 per share, for the first quarter of fiscal 2016.
Non-GAAP Results
On a non-GAAP basis, net income for the first quarter of fiscal 2017 was $145.1 million, or $0.94 per share, compared to non-GAAP net income of $105.9 million, or $0.68 per share, for the first quarter of fiscal 2016.
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
Financial Targets
Synopsys also provided its financial targets for the second quarter and full fiscal year 2017, which do not include any impact of future acquisition-related activities or costs. 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.
Second Quarter of Fiscal Year 2017 Targets:
-- Revenue: $665 million - $680 million
-- GAAP expenses: $560 million - $579 million
-- Non-GAAP expenses: $507 million - $517 million
-- Other income and expense: ($1) million - $1 million
-- Normalized annual tax rate applied in non-GAAP net income calculations:
19 percent
-- Fully diluted outstanding shares: 152 million - 155 million
-- GAAP earnings per share: $0.51 - $0.59
-- Non-GAAP earnings per share: $0.85 - $0.88
Full Fiscal Year 2017 Targets:
-- Revenue: $2.58 billion - $2.61 billion
-- Other income and expense: $2 million - $6 million
-- Normalized annual tax rate applied in non-GAAP net income calculations:
19 percent
-- Fully diluted outstanding shares: 152 million - 155 million
-- GAAP earnings per share: $2.01 - $2.12
-- Non-GAAP earnings per share: $3.21 - $3.26
-- Cash flow from operations: $500 million - $520 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 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, and (iv) other significant items, including restructuring charges and certain accruals for legal matters. 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, as well as in Item 2.02 of the Current Report on Form 8-K filed on February 15, 2017 for additional information about the measures Synopsys uses to evaluate its core business operations.
Reconciliation of First Quarter Fiscal Year 2017 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 periods indicated below.
GAAP to Non-GAAP Reconciliation of First Quarter and Fiscal Year 2017 Results
(unaudited and in thousands, except per share amounts)
Three Months Ended
January 31,
2017 2016
---- ----
GAAP net income $86,588 $60,035
Adjustments:
Amortization of
intangible assets 29,508 37,461
Stock compensation 25,834 23,013
Acquisition-related costs 3,299 3,872
Restructuring charges 12,105 2,093
Tax adjustments (12,257) (20,541)
------- -------
Non-GAAP net income $145,077 $105,933
======== ========
Three Months Ended
January 31,
2017 2016
---- ----
GAAP net income per share $0.56 $0.39
Adjustments:
Amortization of
intangible assets 0.19 0.24
Stock compensation 0.17 0.15
Acquisition-related costs 0.02 0.02
Restructuring charges 0.08 0.01
Tax adjustments (0.08) (0.13)
Non-GAAP net income per
share $0.94 $0.68
===== =====
Shares used in
calculation 154,433 155,283
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 Second Quarter Fiscal Year 2017 Targets
(in thousands, except per share amounts)
Range for Three Months
Ending April 30, 2017 (1)
------------------------
Low High
--- ----
Target GAAP expenses $560,000 $579,000
Adjustments:
Estimated impact of
amortization of
intangible assets (28,000) (33,000)
Estimated impact of stock
compensation (25,000) (29,000)
Target non-GAAP expenses $507,000 $517,000
======== ========
Range for Three Months
Ending April 30, 2017 (1)
------------------------
Low High
--- ----
Target GAAP earnings per
share $0.51 $0.59
Adjustments:
Estimated impact of
amortization of
intangible assets 0.21 0.18
Estimated impact of stock
compensation 0.19 0.16
Estimated impact of tax
adjustments (0.06) (0.05)
Target non-GAAP earnings
per share $0.85 $0.88
===== =====
Shares used in non-GAAP
calculation (midpoint of
target range) 153,500 153,500
GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2017 Targets
Range for Fiscal Year
Ending October 31, 2017 (1)
---------------------------
Low High
--- ----
Target GAAP earnings per
share $2.01 $2.12
Adjustments:
Estimated impact of
amortization of
intangible assets 0.75 0.72
Estimated impact of stock
compensation 0.68 0.64
Acquisition-related costs 0.02 0.02
Estimated impact of
restructuring 0.08 0.08
Estimated impact of tax
adjustments (0.33) (0.32)
Target non-GAAP earnings
per share $3.21 $3.26
===== =====
Shares used in non-GAAP
calculation (midpoint of
target range) 153,500 153,500
(1) Synopsys' second quarter
and fiscal year end on April
29, 2017 and October 28, 2017,
respectively. For presentation
purposes, we refer to the
closest calendar month end.
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 417535, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on February 22, 2017. 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 second fiscal quarter in May 2017. 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 second quarter fiscal year 2017 earnings call in May 2017, 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 second quarter of fiscal year 2017 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 first quarter of fiscal year 2017 in its quarterly report on Form 10-Q to be filed by March 9, 2017.
About Synopsys
Synopsys, Inc. (Nasdaq: SNPS) is the Silicon to Software(TM) 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.
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" as well as statements related to customer demand for our technology and projected financial results and business objectives. 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; 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 carry out our new product and technology initiatives; our ability to protect our proprietary technology; changes in accounting principles or standards; 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; changes in our GAAP or non-GAAP tax rate; liquidity requirements in our U.S. operations; claims that our products infringe on third-party intellectual property rights; litigation; product errors or defects; increased risks resulting from an increase in sales of our hardware products; 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, 2016 and in its Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2017 to be filed with the SEC. The information provided herein is as of February 15, 2017. 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
January 31,
-----------
2017 2016
---- ----
Revenue:
Time-based products $489,365 $464,280
Upfront products 79,609 43,437
Maintenance and service 83,812 60,887
------ ------
Total revenue 652,786 568,604
Cost of revenue:
Products 96,971 76,393
Maintenance and service 37,303 22,525
Amortization of
intangible assets 21,472 30,526
Total cost of revenue 155,746 129,444
Gross margin 497,040 439,160
Operating expenses:
Research and development 212,648 196,705
Sales and marketing 126,511 122,620
General and
administrative 40,866 39,697
Amortization of
intangible assets 8,036 6,935
Restructuring charges 12,105 2,093
Total operating expenses 400,166 368,050
Operating income 96,874 71,110
Other income (expense),
net 11,487 (6,768)
------ ------
Income before income
taxes 108,361 64,342
Provision (benefit) for
income taxes 21,773 4,307
Net income $86,588 $60,035
======= =======
Net income per share:
Basic $0.57 $0.39
Diluted $0.56 $0.39
Shares used in computing per share amounts:
Basic 150,782 152,968
======= =======
Diluted 154,433 155,283
======= =======
(1) Synopsys' first quarter of
fiscal year 2017 and 2016
ended on January 28, 2017 and
January 30, 2016,
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)
January 31, 2017 October 31, 2016
---------------- ----------------
ASSETS:
Current assets:
Cash and cash equivalents $827,709 $976,620
Short-term investments 138,648 140,695
------- -------
Total cash, cash equivalents and
short-term investments 966,357 1,117,315
Accounts receivable, net 331,984 438,873
Income taxes receivable and prepaid
taxes 54,596 56,091
Prepaid and other current assets 131,106 104,659
------- -------
Total current assets 1,484,043 1,716,938
Property and equipment, net 256,811 257,035
Goodwill 2,652,257 2,518,245
Intangible assets, net 301,922 266,661
Long-term prepaid taxes 15,800 13,991
Long-term deferred income taxes 355,469 281,926
Other long-term assets 197,952 185,569
Total assets $5,264,254 $5,240,365
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Accounts payable and accrued
liabilities $251,098 $401,451
Accrued income taxes 9,583 22,693
Deferred revenue 1,018,834 1,085,802
Short-term debt 177,040 205,000
------- -------
Total current liabilities 1,456,555 1,714,946
Long-term accrued income taxes 37,394 39,562
Long-term deferred revenue 74,955 79,856
Long-term debt 142,500 -
Other long-term liabilities 228,165 210,855
------- -------
Total liabilities 1,939,569 2,045,219
Stockholders' equity:
Preferred stock, $0.01 par value:
2,000 shares authorized; none
outstanding - -
Common stock, $0.01 par value:
400,000 shares authorized; 150,428
and 151,454 shares outstanding,
respectively
1,505 1,515
Capital in excess of par value 1,640,036 1,644,675
Retained earnings 2,137,395 1,947,585
Treasury stock, at cost: 6,836 and
5,811 shares, respectively (355,257) (294,052)
Accumulated other comprehensive
income (loss) (98,994) (104,577)
------- --------
Total stockholders' equity 3,324,685 3,195,146
Total liabilities and stockholders'
equity $5,264,254 $5,240,365
========== ==========
(1) Synopsys' first quarter
of fiscal 2017 ended on
January 28, 2017, and its
fiscal year 2016 ended on
October 29, 2016. For
presentation purposes, we
refer to the closest calendar
month end.
SYNOPSYS, INC.
Unaudited Consolidated Statements of Cash Flows (1)
(in thousands)
Three Months Ended January 31,
------------------------------
2017 2016
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $86,588 $60,035
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Amortization and depreciation 49,464 56,436
Stock compensation 25,834 23,013
Allowance for doubtful accounts 229 250
(Gain) loss on sale of investments (1) 3
Write-down of long-term investments 1,300 -
Deferred income taxes 12,989 (3,955)
Net changes in operating assets and liabilities, net of acquired assets
and liabilities:
Accounts receivable 122,192 30,365
Prepaid and other current assets (24,893) (27,825)
Other long-term assets (13,931) 9,008
Accounts payable and accrued
liabilities (129,316) (145,229)
Income taxes (14,201) (5,174)
Deferred revenue (69,372) (32,097)
------- -------
Net cash provided by (used in)
operating activities 46,882 (35,170)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
short-term investments 37,284 40,489
Purchases of short-term investments (35,338) (34,933)
Proceeds from sales of long-term
investments - 161
Purchases of property and equipment (18,178) (15,337)
Cash paid for acquisitions and
intangible assets, net of cash
acquired (187,624) (18,941)
Capitalization of software development
costs (1,033) (920)
Other 2,100 -
Net cash used in investing activities (202,789) (29,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility 150,000 30,000
Repayment of debt (35,000) (7,500)
Issuances of common stock 7,205 1,486
Payments for taxes related to net
share settlement of equity awards (6,887) (5,211)
Purchase of equity forward contract (20,000) (40,000)
Purchases of treasury stock (80,000) (160,000)
Other 559 (1,030)
Net cash provided by (used in)
financing activities 15,877 (182,255)
Effect of exchange rate changes on
cash and cash equivalents (8,881) (6,296)
Net change in cash and cash
equivalents (148,911) (253,202)
Cash and cash equivalents, beginning
of the year 976,620 836,188
Cash and cash equivalents, end of the
period $827,709 $582,986
======== ========
(1) Synopsys' first quarter of
fiscal year 2017 and 2016
ended on January 28, 2017 and
January 30, 2016,
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:
Carole Murchison
Synopsys, Inc.
650-584-4632
carolem@synopsys.com
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SOURCE Synopsys, Inc.
