Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2016

Q4 2016 Financial Highlights

(PRNewswire) — Synopsys, Inc. (Nasdaq: SNPS) today reported results for its fourth quarter and fiscal year 2016.

For the fourth quarter of fiscal 2016, Synopsys reported revenue of $633.7 million, compared to $587.2 million for the fourth quarter of fiscal 2015. Revenue for fiscal year 2016 was $2.42 billion, an increase of 8.0 percent from $2.24 billion in fiscal year 2015.  

"Synopsys reported a strong fourth quarter finish to an outstanding fiscal year 2016, in the context of a challenging semiconductor landscape.  We enter 2017 with a solid technical and economic foundation," said Aart de Geus, chairman and co-CEO of Synopsys. "During the year, we made very good progress with our design and verification products, delivered strong results in IP, and further scaled our software integrity solutions, including the acquisitions of Cigital and Codiscope, which closed today. To drive long-term shareholder value, we also continue to successfully balance our investment priorities, including $400 million in share repurchases during fiscal year 2016."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2016 was $72.7 million, or $0.47 per share, compared to $49.8 million, or $0.31 per share, for the fourth quarter of fiscal 2015. GAAP net income for fiscal year 2016 was $266.8 million, or $1.73 per share, compared to $225.9 million, or $1.43 per share, for fiscal year 2015.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2016 was $119.1 million, or $0.77 per share, compared to non-GAAP net income of $105.5 million, or $0.67 per share, for the fourth quarter of fiscal 2015. Non-GAAP net income for fiscal year 2016 was $466.8 million, or $3.02 per share, compared to non-GAAP net income of $438.4 million, or $2.77 per share, for fiscal year 2015. Reconciliation between GAAP and non-GAAP results is provided below.

Financial Targets

Synopsys also provided its financial targets for the first quarter and full fiscal year 2017.  These targets include the estimated impact of the acquisitions of Cigital and Codiscope, but do not include any impact of future acquisition-related activities or costs that may be incurred during the remainder of fiscal year 2017. 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. 

First Quarter of Fiscal Year 2017 Targets:

  • Revenue: $630 million - $645 million
  • GAAP expenses: $540 million - $558 million
  • Non-GAAP expenses: $485 million - $495 million
  • Other income and expense: $0 - $2 million
  • Normalized annual tax rate applied in non-GAAP net income calculations: 19 percent
  • Fully diluted outstanding shares: 152 million - 155 million
  • GAAP earnings per share: $0.43 - $0.50
  • Non-GAAP earnings per share: $0.77 - $0.80

Full Fiscal Year 2017 Targets:

  • Revenue: $2.57 billion - $2.60 billion
  • Other income and expense: $0 - $4 million
  • Normalized annual tax rate applied in non-GAAP net income calculations: 19 percent
  • Fully diluted outstanding shares: 152 million - 155 million
  • GAAP earnings per share: $1.92 - $2.06
  • Non-GAAP earnings per share: $3.16 - $3.23
  • Cash flow from operations: approximately $500 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, and (iv) other significant items, including restructuring charges and, in fiscal 2015, certain adjustments 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, as well as in Item 2.02 of the Current Report on Form 8-K filed on November 30, 2016 for additional information about the measures Synopsys uses to evaluate its core business operations.

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