Synopsys Posts Financial Results for Second Quarter Fiscal Year 2018

Q2 2018 Financial Highlights

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.

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