SYNOPSYS INC. MOUNTAIN VIEW, Calif., May 18, 2016 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2016.
For the second quarter of fiscal year 2016, Synopsys reported revenue of $605.0 million, compared to $557.2 million for the second quarter of fiscal 2015, an increase of 8.6 percent.
"Our second fiscal quarter results were very strong. Consequently, we are increasing our annual revenue and operating cash flow targets, as well as raising the midpoint of our non-GAAP earnings per share guidance range," said Aart de Geus, chairman and co-CEO of Synopsys. "In an environment where semiconductor companies are restructuring and in transition, and where system houses and software developers are grappling with growing code complexity and increased security vulnerabilities, Synopsys is executing very well. By balancing our investments for near-term customer success and long-term product differentiation, we continue to drive and deliver solid shareholder value."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2016 was $69.4 million, or $0.45 per share, compared to $55.6 million, or $0.35 per share, for the second quarter of fiscal 2015.
Non-GAAP Results
On a non-GAAP basis, net income for the second quarter of fiscal 2016 was $125.6 million, or $0.81 per share, compared to non-GAAP net income of $107.6 million, or $0.68 per share, for the second quarter of fiscal 2015. 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 third 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 fiscal year 2016. In fiscal year 2016, Synopsys began utilizing a normalized annual non-GAAP tax rate in calculating non-GAAP financial measures in order to provide better consistency across interim reporting periods by eliminating the effects of non-recurring and period-specific items.
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.
Third Quarter of Fiscal Year 2016 Targets:
-- Revenue: $595 million - $610 million
-- GAAP expenses: $517 million - $536 million
-- Non-GAAP expenses: $463 million - $473 million
-- Other income and expense: $0 - $2 million
-- Tax rate applied in non-GAAP net income calculations: 19 percent
-- Fully diluted outstanding shares: 153 million - 156 million
-- GAAP earnings per share: $0.42 - $0.51
-- Non-GAAP earnings per share: $0.72 - $0.75
Full Fiscal Year 2016 Targets:
-- Revenue: $2.360 billion - $2.400 billion
-- Other income and expense: $4 million - $6 million
-- Tax rate applied in non-GAAP net income calculations: 19 percent
-- Fully diluted outstanding shares: 153 million - 156 million
-- GAAP earnings per share: $1.67 - $1.79
-- Non-GAAP earnings per share: $2.95 - $3.00
-- Cash flow from operations: $510 million - $530 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 Second 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 Second Quarter Fiscal Year 2016 Results
(unaudited and in thousands, except per share amounts)
Three Months Ended Six Months Ended
April 30, April 30,
2016 2015 2016 2015
---- ---- ---- ----
GAAP net income $69,376 $55,596 $129,411 $120,785
Adjustments:
Amortization of intangible
assets 31,579 32,048 69,040 64,356
Stock compensation 23,459 20,283 46,472 40,864
Acquisition-related costs 1,941 3,472 5,813 4,184
Restructuring charges 894 - 2,987 15,336
Legal and tax matters - - - (1,519)
Tax adjustments (1) (1,621) (3,840) (22,162) (10,776)
------ ------ ------- -------
Non-GAAP net income $125,628 $107,559 $231,561 $233,230
======== ======== ======== ========
Three Months Ended Six Months Ended
April 30, April 30,
2016 2015 2016 2015
---- ---- ---- ----
GAAP net income per share $0.45 $0.35 $0.84 $0.77
Adjustments:
Amortization of intangible
assets 0.20 0.20 0.45 0.41
Stock compensation 0.15 0.13 0.29 0.26
Acquisition-related costs 0.01 0.02 0.03 0.03
Restructuring charges 0.01 - 0.02 0.10
Legal and tax matters - - - (0.01)
Tax adjustments (1) (0.01) (0.02) (0.14) (0.08)
Non-GAAP net income per
share $0.81 $0.68 $1.49 $1.48
===== ===== ===== =====
Shares used in calculation 154,536 157,483 154,921 157,409
(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 Third Quarter Fiscal Year 2016 Targets
(in thousands, except per share amounts)
Range for Three Months
Ending July 31, 2016 (1)
Low High
--- ----
Target GAAP expenses $517,000 $536,000
Adjustments:
Estimated impact of
amortization of intangible
assets (31,000) (35,000)
Estimated impact of stock
compensation (23,000) (28,000)
Target non-GAAP expenses $463,000 $473,000
======== ========
Range for Three Months
Ending July 31, 2016 (1)
Low High
--- ----
Target GAAP earnings per
share $0.42 $0.51
Adjustments:
Estimated impact of
amortization of intangible
assets 0.23 0.20
Estimated impact of stock
compensation 0.18 0.15
Estimated impact of tax
adjustments (2) (0.11) (0.11)
Target non-GAAP earnings
per share $0.72 $0.75
===== =====
Shares used in non-GAAP
calculation (midpoint of
target range) 154,500 154,500
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 $1.67 $1.79
Adjustments:
Estimated impact of
amortization of intangible
assets 0.87 0.83
Estimated impact of stock
compensation 0.66 0.62
Acquisition-related costs 0.03 0.03
Estimated impact of
restructuring 0.02 0.02
Estimated impact of tax
adjustments (2) (0.30) (0.29)
Target non-GAAP earnings
per share $2.95 $3.00
===== =====
Shares used in non-GAAP
calculation (midpoint of
target range) 154,500 154,500
(1) Synopsys' third quarter and
fiscal year end on July 30,
2016 and October 29, 2016,
respectively. 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 392961, 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 third fiscal quarter in August 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 third quarter fiscal year 2016 earnings call in August 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 third 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 second quarter fiscal 2016 in its quarterly report on Form 10-Q to be filed by June 9, 2016.
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 16th 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." 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 April 30, 2016 to be filed with the SEC. The information provided herein is as of May 18, 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 Six Months Ended
April 30, April 30,
--------- ---------
2016 2015 2016 2015
---- ---- ---- ----
Revenue:
Time-based license $484,175 $447,844 $948,455 $878,870
Upfront license 58,163 44,313 101,600 90,793
Maintenance and
service 62,667 65,047 123,554 129,584
------ ------ ------- -------
Total revenue 605,005 557,204 1,173,609 1,099,247
Cost of revenue:
License 85,444 70,350 161,837 141,134
Maintenance and
service 21,631 29,010 44,156 56,993
Amortization of
intangible assets 24,555 25,612 55,081 51,478
Total cost of
revenue 131,630 124,972 261,074 249,605
Gross margin 473,375 432,232 912,535 849,642
Operating expenses:
Research and
development 216,172 188,315 412,877 369,925
Sales and marketing 120,926 120,579 243,546 226,748
General and
administrative 41,553 40,975 81,250 77,329
Amortization of
intangible assets 7,024 6,436 13,959 12,878
Restructuring
charges 894 - 2,987 15,336
Total operating
expenses 386,569 356,305 754,619 702,216
Operating income 86,806 75,927 157,916 147,426
Other income
(expense), net 10,417 7,957 3,649 13,073
------ ----- ----- ------
Income before income
taxes 97,223 83,884 161,565 160,499
Provision (benefit)
for income taxes 27,847 28,288 32,154 39,714
Net income $69,376 $55,596 $129,411 $120,785
======= ======= ======== ========
Net income per share:
Basic $0.46 $0.36 $0.85 $0.78
Diluted $0.45 $0.35 $0.84 $0.77
Shares used in computing per share amounts:
Basic 152,250 154,515 152,609 154,486
======= ======= ======= =======
Diluted 154,536 157,483 154,921 157,409
======= ======= ======= =======
(1) Synopsys' second quarter of
fiscal year 2016 and 2015 ended
on April 30, 2016 and May 2,
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)
April 30, 2016 October
31, 2015
--------
ASSETS:
Current assets:
Cash and cash equivalents $827,946 $836,188
Short-term investments 131,976 128,747
------- -------
Total cash, cash equivalents and short-term investments 959,922 964,935
Accounts receivable, net 299,076 385,694
Income taxes receivable and prepaid taxes 48,397 46,732
Prepaid and other current assets 95,802 71,446
------ ------
Total current assets 1,403,197 1,468,807
Property and equipment, net 258,856 263,077
Goodwill 2,500,804 2,471,241
Intangible assets, net 320,076 363,659
Long-term prepaid taxes 17,480 18,736
Long-term deferred income taxes 282,393 273,909
Other long-term assets 182,457 186,310
Total assets $4,965,263 $5,045,739
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities $285,196 $385,542
Accrued income taxes 23,653 19,565
Deferred revenue 926,363 968,246
Short-term debt 250,000 205,000
------- -------
Total current liabilities 1,485,212 1,578,353
Long-term accrued income taxes 34,471 37,763
Long-term deferred revenue 91,420 93,613
Other long-term liabilities 204,155 202,021
------- -------
Total liabilities 1,815,258 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; 152,255
and 155,157 shares outstanding, respectively 1,523 1,552
Capital in excess of par value 1,642,783 1,610,460
Retained earnings 1,838,704 1,725,727
Treasury stock, at cost: 5,009 and 2,107 shares, respectively (229,942) (98,375)
Accumulated other comprehensive income (loss) (103,063) (105,375)
-------- --------
Total stockholders' equity 3,150,005 3,133,989
Total liabilities and stockholders' equity $4,965,263 $5,045,739
========== ==========
(1) Synopsys' second quarter of
fiscal 2016 ended on April 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)
Six Months Ended April 30,
--------------------------
2016 2015
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $129,411 $120,785
Adjustments to reconcile net income to net cash provided by
operating
activities:
Amortization and depreciation 107,226 102,051
Stock compensation 46,472 40,864
Allowance for doubtful accounts 450 600
(Gain) loss on sale of investments (10) (17)
Excess tax benefits on stock-based
awards (920) -
Deferred income taxes (9,984) 27,636
Net changes in operating assets and liabilities, net of acquired
assets and liabilities:
Accounts receivable 93,619 (16,491)
Prepaid and other current assets (23,208) (34,584)
Other long-term assets 656 (13,359)
Accounts payable and accrued
liabilities (108,005) (62,142)
Income taxes 4,409 (27,077)
Deferred revenue (52,852) (70,530)
------- -------
Net cash provided by operating
activities 187,264 67,736
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
short-term investments 75,570 17,721
Purchases of short-term investments (79,079) (154,744)
Proceeds from sales of long-term
investments 1,785 -
Purchases of property and equipment (28,900) (43,979)
Cash paid for acquisitions and
intangible assets, net of cash
acquired (46,100) (2,303)
Capitalization of software development
costs (1,973) (1,865)
Other - 900
Net cash used in investing activities (78,697) (184,270)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility 60,000 250,000
Repayment of debt (15,000) (105,424)
Issuances of common stock 36,783 54,006
Purchase of equity forward contract (20,000) (36,000)
Purchases of treasury stock (180,000) (144,000)
Excess tax benefits on stock-based
awards 920 -
Other (1,470) (116)
Net cash provided by (used in)
financing activities (118,767) 18,466
Effect of exchange rate changes on cash
and cash equivalents 1,958 (18,849)
Net change in cash and cash equivalents (8,242) (116,917)
Cash and cash equivalents, beginning of
the year 836,188 985,762
Cash and cash equivalents, end of the
period $827,946 $868,845
======== ========
(1) Synopsys' second quarter of
fiscal year 2016 and 2015 ended
on April 30, 2016 and May 2,
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
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SOURCE Synopsys, Inc.
