Synopsys Posts Financial Results for Second Quarter Fiscal Year 2016

Q2 2016 Financial Highlights

(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.


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