Synopsys Posts Financial Results for Second Quarter Fiscal Year 2017

(PRNewswire) —

Q2 2017 Financial Highlights

  • Revenue: $680.1 million
  • GAAP earnings per share: $0.34
  • Non-GAAP earnings per share: $0.88

Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2017.

Synopsys reported revenue of $680.1 million, compared to $605.0 million for the second quarter of fiscal year 2016, an increase of 12.4 percent.  

"In the second fiscal quarter, we again delivered strong results across our portfolio, enhanced by the timing of hardware shipments. Consequently, we are increasing our annual revenue, non-GAAP earnings per share and operating cash flow targets. In addition, we executed a second $100 million share repurchase," said Aart de Geus, chairman and co-CEO of Synopsys. "Our priorities remain centered on generating long-term shareholder value. We do this by investing prudently for current and future operations, acquisitions, and returning capital to shareholders; scaling revenue and profitability throughout our business; and sustainably growing our bottom line."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2017 was $53.3 million, or $0.34 per share, compared to $69.4 million, or $0.45 per share, for the second quarter of fiscal 2016. GAAP results include $12.9 million, or $0.08 per share, in restructuring charges, and a $38 million, or $0.25 per share, accrual for a litigation contingency.

Non-GAAP Results

On a non-GAAP basis, net income was $135.8 million, or $0.88 per share, compared to non-GAAP net income of $125.6 million, or $0.81 per share, for the second 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 third 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.

Third Quarter of Fiscal Year 2017 Targets:

  • Revenue: $685 million - $700 million
  • GAAP expenses: $574 million - $593 million
  • Non-GAAP expenses: $517 million - $527 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: $0.69 - $0.78
  • Non-GAAP earnings per share: $0.91 - $0.94

Full Fiscal Year 2017 Targets:

  • Revenue: $2.650 billion - $2.670 billion
  • Other income and expense: $2 million - $6 million
  • Normalized annual tax rate applied in non-GAAP net income calculations: 19 percent
  • Fully diluted outstanding shares: 153 million - 156 million
  • GAAP earnings per share: $1.84 - $1.97
  • Non-GAAP earnings per share: $3.24 - $3.29
  • 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 May 17, 2017 for additional information about the measures Synopsys uses to evaluate its core business operations.

Reconciliation of Second 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 Second Quarter and Fiscal Year 2017 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Six Months Ended


April 30,


April 30,


2017


2016


2017


2016

GAAP net income

$   53,306


$   69,376


$ 139,894


$ 129,411

Adjustments:








Amortization of intangible assets

27,498


31,579


57,006


69,040

Stock compensation

25,562


23,459


51,396


46,472

Acquisition-related costs

1,722


1,941


5,021


5,813

Restructuring charges

12,907


894


25,012


2,987

Legal matters

38,000


-


38,000


-

Tax adjustments

(23,151)


(1,621)


(35,408)


(22,162)

Non-GAAP net income 

$ 135,844


$ 125,628


$ 280,921


$ 231,561


























Three Months Ended


Six Months Ended


April 30,


April 30,


2017


2016


2017


2016

GAAP net income per share

$       0.34


$0.45


$       0.90


$0.84

Adjustments:








Amortization of intangible assets

0.18


0.20


0.37


0.45

Stock compensation

0.17


0.15


0.34


0.29

Acquisition-related costs

0.01


0.01


0.03


0.03

Restructuring charges

0.08


0.01


0.16


0.02

Legal matters

0.25


-


0.25


-

Tax adjustments

(0.15)


(0.01)


(0.23)


(0.14)

Non-GAAP net income per share

$       0.88


$0.81


$       1.82


$1.49









Shares used in calculation

154,861


154,536


154,754


154,921


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