SNPS
$91.49
Synopsys
$.08
.09%
Earnings Details
2nd Quarter April 2018
Wednesday, May 23, 2018 4:05:00 PM
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Summary

Synopsys Misses

Synopsys (SNPS) reported 2nd Quarter April 2018 earnings of $0.92 per share on revenue of $776.8 million. The consensus earnings estimate was $0.98 per share on revenue of $774.8 million. The Earnings Whisper number was $1.03 per share. Revenue grew 14.2% on a year-over-year basis.

The company said it expects third quarter non-GAAP earnings of $0.89 to $0.93 per share on revenue of $760.0 million to $785.0 million. The current consensus earnings estimate is $0.78 per share on revenue of $699.5 million for the quarter ending July 31, 2018. The company also said it now expects fiscal 2018 earnings of $3.76 to $3.83 per share on revenue of $3.07 billion to $3.10 billion. The company's previous guidance was earnings of $3.67 to $3.74 per share on revenue of $2.92 billion to $2.95 billion and the current consensus earnings estimate is $3.72 per share on revenue of $2.95 billion for the year ending October 31, 2018.

Synopsys Inc is a provider of software, intellectual property and services used to design integrated circuits and electronics systems. It also provides software & services used to develop electronic systems that incorporate chips.

Results
Reported Earnings
$0.92
Earnings Whisper
$1.03
Consensus Estimate
$0.98
Reported Revenue
$776.8 Mil
Revenue Estimate
$774.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Synopsys Posts Financial Results for Second Quarter Fiscal Year 2018

MOUNTAIN VIEW, Calif., May 23, 2018 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2018. Revenue came in at $776.8 million, compared to $680.1 million for the second quarter of fiscal 2017, an increase of approximately 14.2 percent.

"Synopsys is hitting on all cylinders. We had an excellent fiscal second quarter, with strength across all geographies and product groups, and are raising our revenue and non-GAAP earnings per share guidance for the year. We also continued to return capital to shareholders through our previously announced accelerated share repurchase, as well as an open market purchase this quarter," said Aart de Geus, chairman and co-CEO. "With the clear drive towards growing artificial intelligence applications and the resulting need for increased data capacity, semiconductor and systems companies are making substantial investments. In addition, software developers across many industries are highly sensitized to security challenges. Synopsys is thus ideally positioned to partner with our customers, with a second-to-none portfolio of EDA, IP and software security solutions."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2018 was $102.5 million, or $0.67 per share, compared to $53.3 million, or $0.34 per share, for the second quarter of fiscal 2017.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2018 was $165.0 million, or $1.08 per share, compared to non-GAAP net income of $135.8 million, or $0.88 per share, for the second quarter of fiscal 2017.

A reconciliation between GAAP and non-GAAP results is provided later in this press release.  

Financial Targets

Synopsys also provided its financial targets for the third quarter and full fiscal year 2018, 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.

Third Quarter of Fiscal Year 2018 Targets:

  • Revenue: $760 million - $785 million
  • GAAP expenses: $669 million - $685 million
  • Non-GAAP expenses: $605 million - $615 million
  • Other income and expense: ($3) million($1) million
  • Annual tax rate applied in non-GAAP net income calculations: 13 percent
  • Fully diluted outstanding shares: 153 million - 156 million
  • GAAP earnings per share: $0.65 - $0.75
  • Non-GAAP earnings per share: $0.89 - $0.93

Full Fiscal Year 2018 Targets:

  • Revenue: $3.07 billion - $3.10 billion
  • Other income and expense: ($6) million($2) million
  • Annual tax rate applied in non-GAAP net income calculations: 13 percent
  • Fully diluted outstanding shares: 153 million - 156 million
  • GAAP earnings per share: $1.66 - $1.76
  • Non-GAAP earnings per share: $3.76 - $3.83
  • Cash flow from operations: $500 million - $550 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, (vi) the impact of a one-time transition tax resulting from U.S. tax reform (referred to as the "income tax related to transition tax"), (vii) the impact of a reduction in value of deferred tax assets caused by a reduction of the U.S. corporate tax rate (referred to as the "income tax related to tax rate change"), and (viii) 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 considered 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. On an annual basis we re-evaluate this rate for significant events that may materially affect our projections and, as a result of U.S. tax reform in December 2017, which lowered the U.S. statutory rate from 35% to 21%, we adjusted our normalized annual non-GAAP tax rate from 19% to 13% for fiscal 2018.  We will re-evaluate this rate again for fiscal 2019, but we expect that our normalized annual non-GAAP tax rate will exceed 13%, but be below 19%, for fiscal 2019.

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 May 23, 2018 for additional information about the measures Synopsys uses to evaluate its core business operations.

Reconciliation of Second Quarter Fiscal Year 2018 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 Second Quarter and Fiscal Year 2018 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Six Months Ended


April 30,


April 30,


2018


2017


2018


2017

GAAP net income 

$ 102,472


$   53,306


$   98,781


$ 139,894

Adjustments:








Amortization of intangible assets

31,186


27,498


59,733


57,006

Stock compensation

32,965


25,562


65,288


51,396

Acquisition-related costs

4,020


1,722


18,220


5,021

Restructuring charges

2,176


12,907


1,894


25,012

Legal matters

-


38,000


-


38,000

Income tax related to transition tax

-


-


73,434


-

Income tax related to tax rate change

-


-


45,636


-

Tax adjustments

(7,827)


(23,151)


(28,439)


(35,408)

Non-GAAP net income 

$ 164,992


$ 135,844


$ 334,547


$ 280,921


























Three Months Ended


Six Months Ended


April 30,


April 30,


2018


2017


2018


2017

GAAP net income per share 

$       0.67


$       0.34


$       0.64


$       0.90

Adjustments:








Amortization of intangible assets

0.20


0.18


0.39


0.37

Stock compensation

0.22


0.17


0.43


0.34

Acquisition-related costs

0.03


0.01


0.12


0.03

Restructuring charges

0.01


0.08


0.01


0.16

Legal matters

-


0.25


-


0.25

Income tax related to transition tax

-


-


0.47


-

Income tax related to tax rate change

-


-


0.29


-

Tax adjustments

(0.05)


(0.15)


(0.17)


(0.23)

Non-GAAP net income per share

$       1.08


$       0.88


$       2.18


$       1.82









Shares used in computing per share amounts: 

153,167


154,861


153,664


154,754

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 2018 Targets

(in thousands, except per share amounts)






 Range for Three Months 


Ending July 31, 2018 (1)


Low


High

Target GAAP expenses

$   669,000


$   685,000

Adjustments:




      Estimated impact of amortization of intangible assets

(30,000)


(33,000)

      Estimated impact of stock compensation

(34,000)


(37,000)

Target non-GAAP expenses

$   605,000


$   615,000










Range for Three Months


Ending July 31, 2018 (1)


Low


High

Target GAAP earnings per share

$         0.65


$         0.75

Adjustments:




Estimated impact of amortization of intangible assets

0.21


0.19

Estimated impact of stock compensation

0.24


0.22

Estimated impact of tax adjustments

(0.21)


(0.23)

Target non-GAAP earnings per share

$         0.89


$         0.93





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

154,500


154,500









GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2018 Targets






Range for Fiscal Year


Ending October 31, 2018 (1)


Low


High

Target GAAP earnings per share

$         1.66


$         1.76

Adjustments:




Estimated impact of amortization of intangible assets

0.79


0.76

Estimated impact of stock compensation

0.91


0.88

Acquisition-related costs

0.12


0.12

Restructuring charges

0.01


0.01

Income tax related to transition tax

0.47


0.47

Income tax related to tax rate change

0.29


0.29

Estimated impact of tax adjustments

(0.49)


(0.46)

Target non-GAAP earnings per share

$         3.76


$         3.83





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

154,500


154,500





(1) Synopsys' third quarter and fiscal year end on August 4, 2018 and November 3, 2018, respectively. For presentation purposes, we refer to the closest calendar month end. The first quarter of fiscal 2018 included an extra week.

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 448713, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time, on May 30, 2018. 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 2018. 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 2018 earnings call in August 2018, 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 2018 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 of fiscal year 2018 in its quarterly report on Form 10-Q to be filed by June 14, 2018.

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 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 titled "Financial Targets" and "GAAP to Non-GAAP Reconciliation". 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; 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; cybersecurity threats or other security breaches; risks and compliance obligations relating to the global nature of our operations; our ability to protect our proprietary technology; investments of more resources in research and development than anticipated; increased risks resulting from an increase in sales of our hardware products; changes in accounting principles or standards; changes in our effective 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; 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; 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, 2017 and Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2018. The information provided herein is as of May 23, 2018.  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.

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

EDITORIAL CONTACT:
Simone Souza
Synopsys, Inc.
650-584-6454
simone@synopsys.com

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)


















Three Months Ended 


Six Months Ended


April 30,


April 30,


2018


2017


2018


2017

Revenue:








  Time-based products

$ 556,770


$ 501,096


$ 1,127,703


$  990,461

  Upfront products

99,960


83,450


191,564


163,059

  Maintenance and service

120,106


95,523


226,995


179,335

      Total revenue

776,836


680,069


1,546,262


1,332,855

Cost of revenue:








  Products

108,199


100,907


219,593


197,878

  Maintenance and service

50,130


41,487


100,884


78,790

  Amortization of intangible assets

20,450


19,634


39,458


41,106

     Total cost of revenue

178,779


162,028


359,935


317,774

Gross margin

598,057


518,041


1,186,327


1,015,081

Operating expenses:








  Research and development

252,134


223,015


516,545


435,663

  Sales and marketing

147,188


137,211


297,700


263,722

  General and administrative

58,809


83,438


115,181


124,304

  Amortization of intangible assets 

10,736


7,864


20,275


15,900

  Restructuring charges

2,176


12,907


1,894


25,012

     Total operating expenses

471,043


464,435


951,595


864,601

Operating income

127,014


53,606


234,732


150,480

Other income (expense), net

(7,715)


8,414


4,670


19,901

Income before income taxes

119,299


62,020


239,402


170,381

Provision (benefit) for income taxes

16,827


8,714


140,621


30,487

Net income

$ 102,472


$   53,306


$      98,781


$  139,894









Net income per share:








  Basic

$       0.69


$       0.35


$          0.66


$       0.93

  Diluted

$       0.67


$       0.34


$          0.64


$       0.90









Shares used in computing per share amounts:








  Basic

149,034


150,384


149,245


150,583

  Diluted

153,167


154,861


153,664


154,754


(1)  Synopsys' second quarter of fiscal year 2018 and 2017 ended on May 5, 2018 and April 29, 2017, respectively.  The first quarter of fiscal 2018 included an extra week. 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, 2018


October 31, 2017

ASSETS:







Current assets:







  Cash and cash equivalents




$       570,801


$          1,048,356

  Accounts receivable, net




568,434


451,144

  Income taxes receivable and prepaid taxes




46,847


48,257

  Prepaid and other current assets




184,104


134,836

          Total current assets




1,370,186


1,682,593

Property and equipment, net




283,782


266,014

Goodwill




3,147,124


2,706,974

Intangible assets, net




422,195


253,843

Long-term prepaid taxes




94,266


20,157

Long-term deferred income taxes




138,066


243,989

Other long-term assets




243,452


222,844

           Total assets




$    5,699,071


$          5,396,414








LIABILITIES AND STOCKHOLDERS' EQUITY:







Current liabilities:







  Accounts payable and accrued liabilities




$       373,938


$             499,846

  Accrued income taxes




9,251


39,811

  Deferred revenue




1,101,886


1,064,528

  Short-term debt




396,847


9,924

           Total current liabilities




1,881,922


1,614,109

Long-term accrued income taxes




37,460


33,239

Long-term deferred revenue




119,930


83,252

Long-term debt




127,500


134,063

Other long-term liabilities




271,862


252,027

           Total liabilities




2,438,674


2,116,690

Stockholders' equity:







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




-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 148,961and 150,445 shares outstanding, respectively




1,490


1,505

  Capital in excess of par value




1,678,921


1,622,429

  Retained earnings




2,223,287


2,143,873

  Treasury stock, at cost: 8,300 and 6,817 shares, respectively




(585,016)


(426,208)

  Accumulated other comprehensive income (loss) 




(62,389)


(65,979)

           Total Synopsys stockholders' equity




3,256,293


3,275,620

Non-controlling interest




4,104


4,104

           Total stockholders' equity




3,260,397


3,279,724

           Total liabilities and stockholders' equity




$    5,699,071


$          5,396,414








(1)  Synopsys' second quarter of fiscal 2018 ended on May 5, 2018, and its fiscal year 2017 ended on October 28, 2017.  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


2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$   98,781


$ 139,894

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




Amortization and depreciation

96,829


97,044

Stock compensation

65,288


51,396

Allowance for doubtful accounts 

3,367


679

(Gain) loss on sale of investments

4


(1)

(Gain) loss on sale of property and equipment

(97)


-

Write-down of long-term investments

-


1,300

Deferred income taxes

38,878


3,339

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




Accounts receivable

(105,457)


81,098

Prepaid and other current assets

(47,664)


(13,291)

Other long-term assets

(21,753)


(24,021)

Accounts payable and accrued liabilities

(131,763)


(23,341)

Income taxes

(44,577)


(11,436)

Deferred revenue

52,229


(132,803)

Net cash provided by operating activities

4,065


169,857





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales and maturities of short-term investments

12,449


94,512

Purchases of short-term investments

-


(94,182)

Proceeds from sales of property and equipment

1,662


-

Purchases of property and equipment

(48,612)


(31,195)

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

(643,537)


(187,624)

Capitalization of software development costs

(1,760)


(2,066)

Other

-


2,100

Net cash used in investing activities

(679,798)


(218,455)





CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from credit facility

450,000


250,000

Repayment of debt

(69,687)


(36,875)

Issuances of common stock

58,975


62,254

Payments for taxes related to net share settlement of equity awards

(11,883)


(8,058)

Purchase of equity forward contract

-


(20,000)

Purchases of treasury stock

(235,000)


(180,000)

Other

-


(482)

Net cash provided by financing activities

192,405


66,839

Effect of exchange rate changes on cash and cash equivalents

5,773


(3,536)

Net change in cash and cash equivalents

(477,555)


14,705

Cash and cash equivalents, beginning of the year

1,048,356


976,620

Cash and cash equivalents, end of the period

$ 570,801


$ 991,325









(1)  Synopsys' second quarter of fiscal year 2018 and 2017 ended on May 5, 2018 and April 29, 2017, respectively. For presentation purposes, we refer to the closest calendar month end.

 

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SOURCE Synopsys, Inc.