Synopsys Posts Financial Results for Third Quarter Fiscal Year 2017
MOUNTAIN VIEW, Calif., Aug. 16, 2017 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter of fiscal year 2017.
Synopsys reported revenue of $695.4 million, compared to $615.2 million for the third quarter of fiscal year 2016, an increase of 13.0 percent.
"In our fiscal third quarter, we again delivered excellent results and are raising annual revenue and non-GAAP earnings per share targets," said Aart de Geus, chairman and co-CEO of Synopsys. "Our strategy and investments are paying off. Demand for EDA and IP products is robust and growing, as semiconductor and systems companies tackle immense complexity in both chips and ever-increasing software content. We are making very good progress in the fast-growing software security and quality market, helping software developers from a wide range of industries navigate daunting security challenges. In addition, we continue to return capital to shareholders, repurchasing $100 million of our stock in the quarter, and $300 million so far this year."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2017 was $116.8 million, or $0.75 per share, compared to $64.7 million, or $0.42 per share, for the third quarter of fiscal 2016.
Non-GAAP Results
On a non-GAAP basis, net income was $141.6 million, or $0.92 per share, compared to non-GAAP net income of $116.2 million, or $0.76 per share, for the third 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 fourth 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.
Fourth Quarter of Fiscal Year 2017 Targets:
-- Revenue: $642 million - $657 million
-- GAAP expenses: $586 million - $602 million
-- Non-GAAP expenses: $535 million - $545 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: 153 million - 156 million
-- GAAP earnings per share: $0.26 - $0.33
-- Non-GAAP earnings per share: $0.55 - $0.58
Full Fiscal Year 2017 Targets:
-- Revenue: $2.670 billion - $2.685 billion
-- Other income and expense: $4 million - $6 million
-- Normalized annual tax rate applied in non-GAAP net income calculations:
19 percent
-- Fully diluted outstanding shares: 153 million - 156 million
-- GAAP earnings per share: $1.92 - $1.99
-- Non-GAAP earnings per share: $3.29 - $3.32
-- Cash flow from operations: $580 million - $600 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, (iv) restructuring charges, (v) the effects of certain settlements, final judgments and loss contingencies related to legal proceedings, and (vi) the income tax effect of non-GAAP pre-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 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 August 16, 2017 for additional information about the measures Synopsys uses to evaluate its core business operations.
Reconciliation of Third 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 Third Quarter Fiscal Year 2017 Results
(unaudited and in thousands, except per share amounts)
Three Months Ended Nine Months Ended
July 31, July 31,
2017 2016 2017 2016
---- ---- ---- ----
GAAP net income $116,751 $64,718 $256,645 $194,129
Adjustments:
Amortization of intangible
assets 26,520 31,518 83,526 100,558
Stock compensation 28,301 25,571 79,697 72,043
Acquisition-related costs 1,232 1,155 6,253 6,968
Restructuring charges 6,026 - 31,038 2,987
Legal matters - - 38,000 -
Tax adjustments (37,185) (6,747) (72,593) (28,909)
------- ------ ------- -------
Non-GAAP net income $141,645 $116,215 $422,566 $347,776
======== ======== ======== ========
Three Months Ended Nine Months Ended
July 31, July 31,
2017 2016 2017 2016
---- ---- ---- ----
GAAP net income per share $0.75 $0.42 $1.66 $1.26
Adjustments:
Amortization of intangible
assets 0.17 0.20 0.54 0.65
Stock compensation 0.18 0.17 0.51 0.47
Acquisition-related costs 0.01 0.01 0.04 0.05
Restructuring charges 0.04 - 0.20 0.02
Legal matters - - 0.25 -
Tax adjustments (0.23) (0.04) (0.47) (0.20)
Non-GAAP net income per
share $0.92 $0.76 $2.73 $2.25
===== ===== ===== =====
Shares used in calculation 154,683 153,890 154,787 154,629
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 2017 Targets
(in thousands, except per share amounts)
Range for Three Months
Ending October 31, 2017 (1)
Low High
--- ----
Target GAAP expenses $586,000 $602,000
Adjustments:
Estimated impact of
amortization of
intangible assets (23,000) (26,000)
Estimated impact of stock
compensation (28,000) (31,000)
Target non-GAAP expenses $535,000 $545,000
======== ========
Range for Three Months
Ending October 31, 2017 (1)
Low High
--- ----
Target GAAP earnings per
share $0.26 $0.33
Adjustments:
Estimated impact of
amortization of
intangible assets 0.17 0.15
Estimated impact of stock
compensation 0.20 0.18
Estimated impact of tax
adjustments (0.08) (0.08)
Target non-GAAP earnings
per share $0.55 $0.58
===== =====
Shares used in non-GAAP
calculation (midpoint of
target range) 154,500 154,500
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 $1.92 $1.99
Adjustments:
Estimated impact of
amortization of
intangible assets 0.71 0.69
Estimated impact of stock
compensation 0.72 0.70
Estimated impact of
acquisition-related
costs 0.04 0.04
Estimated impact of
restructuring 0.20 0.20
Estimated impact of legal
matters 0.25 0.25
Estimated impact of tax
adjustments (0.55) (0.55)
Target non-GAAP earnings
per share $3.29 $3.32
===== =====
Shares used in non-GAAP
calculation (midpoint of
target range) 154,500 154,500
(1) Synopsys' fourth quarter
and fiscal year end on October
28, 2017. 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 428130, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on August 23, 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 fourth quarter and fiscal year in late November 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 fourth quarter and fiscal year 2017 earnings call in November 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 fourth 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 third quarter of fiscal year 2017 in its quarterly report on Form 10-Q to be filed by September 7, 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 and our dependence on a relatively small number of large 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 July 31, 2017, to be filed with the SEC. The information provided herein is as of August 16, 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 Nine Months Ended
July 31, July 31,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Time-based
products $503,530 $479,285 $1,493,991 $1,427,740
Upfront products 100,251 66,885 263,310 168,485
Maintenance and
service 91,600 69,034 270,935 192,588
------ ------ ------- -------
Total revenue 695,381 615,204 2,028,236 1,788,813
Cost of revenue:
Products 107,104 92,042 304,982 253,879
Maintenance and
service 43,828 23,172 122,618 67,328
Amortization of
intangible assets 18,614 24,463 59,720 79,544
Total cost of
revenue 169,546 139,677 487,320 400,751
Gross margin 525,835 475,527 1,540,916 1,388,062
Operating expenses:
Research and
development 228,663 221,874 664,326 634,751
Sales and marketing 131,520 127,328 395,242 370,874
General and
administrative 46,350 42,548 170,654 123,798
Amortization of
intangible assets 7,906 7,055 23,806 21,014
Restructuring
charges 6,026 - 31,038 2,987
Total operating
expenses 420,465 398,805 1,285,066 1,153,424
Operating income 105,370 76,722 255,850 234,638
Other income
(expense), net 7,421 8,509 27,322 12,158
----- ----- ------ ------
Income before
income taxes 112,791 85,231 283,172 246,796
Provision (benefit)
for income taxes (3,960) 20,513 26,527 52,667
Net income $116,751 $64,718 $256,645 $194,129
======== ======= ======== ========
Net income per share:
Basic $0.78 $0.43 $1.71 $1.28
Diluted $0.75 $0.42 $1.66 $1.26
Shares used in computing per share amounts:
Basic 150,214 151,169 150,460 152,129
======= ======= ======= =======
Diluted 154,683 153,890 154,787 154,629
======= ======= ======= =======
(1) Synopsys' third quarter of
fiscal year 2017 and 2016 ended
on July 29, 2017 and July 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)
July 31, 2017 October 31, 2016
------------- ----------------
ASSETS:
Current assets:
Cash and cash equivalents $1,154,986 $976,620
Short-term investments 147,508 140,695
------- -------
Total cash, cash equivalents and
short-term investments 1,302,494 1,117,315
Accounts receivable, net 411,262 438,873
Income taxes receivable and prepaid
taxes 55,750 56,091
Prepaid and other current assets 125,126 104,659
------- -------
Total current assets 1,894,632 1,716,938
Property and equipment, net 262,025 257,035
Goodwill 2,660,680 2,518,245
Intangible assets, net 248,335 266,661
Long-term prepaid taxes 15,706 13,991
Deferred income taxes 382,495 281,926
Other long-term assets 215,066 185,569
Total assets $5,678,939 $5,240,365
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued
liabilities $403,302 $401,451
Accrued income taxes 16,270 22,693
Deferred revenue 1,046,801 1,085,802
Short-term debt 298,025 205,000
------- -------
Total current liabilities 1,764,398 1,714,946
Long-term accrued income taxes 23,545 39,562
Long-term deferred revenue 83,001 79,856
Long-term debt 137,813 -
Other long-term liabilities 247,014 210,855
------- -------
Total liabilities 2,255,771 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; 150,238
and 151,454 shares outstanding,
respectively
1,503 1,515
Capital in excess of par value 1,631,200 1,644,675
Retained earnings 2,277,499 1,947,585
Treasury stock, at cost: 7,024 and
5,811 shares, respectively (419,370) (294,052)
Accumulated other comprehensive
income (loss) (67,664) (104,577)
------- --------
Total stockholders' equity 3,423,168 3,195,146
Total liabilities and stockholders'
equity $5,678,939 $5,240,365
========== ==========
(1) Synopsys' third quarter of fiscal 2017 ended on July 29, 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)
Nine Months Ended July 31,
--------------------------
2017 2016
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $256,645 $194,129
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization and depreciation 144,112 157,814
Stock compensation 79,697 72,043
Allowance for doubtful accounts 1,289 650
(Gain) loss on sale of investments (1) (15)
Write-down of long-term investments 1,300 -
Deferred income taxes (10,960) 2,747
Net changes in operating assets and liabilities, net of acquired assets
and liabilities:
Accounts receivable 42,413 77,532
Prepaid and other current assets (13,636) (22,941)
Other long-term assets (33,416) (8,118)
Accounts payable and accrued
liabilities 36,129 (41,749)
Income taxes (19,169) (3,314)
Deferred revenue (34,692) 10,195
------- ------
Net cash provided by operating
activities 449,711 438,973
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
short-term investments 130,529 111,078
Purchases of short-term investments (137,486) (126,216)
Proceeds from sales of long-term
investments 839 1,785
Purchases of long-term investments - (1,002)
Purchases of property and equipment (50,227) (48,249)
Cash paid for acquisitions and
intangible assets, net of cash
acquired (187,624) (60,056)
Capitalization of software development
costs (3,130) (2,959)
Other 2,100 -
Net cash used in investing activities (244,999) (125,619)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facilities 270,000 185,000
Repayment of debt (38,750) (112,500)
Issuances of common stock 78,718 69,884
Payments for taxes related to net share
settlement of equity awards (35,376) (25,718)
Purchase of equity forward contract - (25,000)
Purchases of treasury stock (300,000) (300,000)
Other (482) 2,713
Net cash used in financing activities (25,890) (205,621)
Effect of exchange rate changes on cash
and cash equivalents (456) 2,396
Net change in cash and cash equivalents 178,366 110,129
Cash and cash equivalents, beginning of
the year 976,620 836,188
Cash and cash equivalents, end of the
period $1,154,986 $946,317
========== ========
(1) Synopsys' third quarter of
fiscal year 2017 and 2016 ended
on July 29, 2017 and July 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.
