SYNOPSYS INC. 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(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 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
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SOURCE Synopsys, Inc.
