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Synopsys Posts Financial Results for Third Quarter Fiscal Year 2015

Q3 2015 Financial Highlights

(PRNewswire) —  Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter of fiscal year 2015.

For the third quarter of fiscal year 2015, Synopsys reported revenue of $555.8 million, compared to $521.8 million for the third quarter of fiscal 2014, an increase of 6.5 percent.  

"Synopsys delivered strong third quarter results, and expects to exit the year with approximately 10% non-GAAP earnings per share growth," said Aart de Geus, chairman and co-CEO of Synopsys.  "Our new products are driving excellent customer design success and adoption momentum. In addition, we closed several acquisitions, further strengthening our IP portfolio and expanding our presence in the higher-growth software quality and security market."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2015 was $55.4 million, or $0.35 per share, compared to $65.7 million, or $0.42 per share, for the third quarter of fiscal 2014.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2015 was $99.7 million, or $0.63 per share, compared to non-GAAP net income of $103.2 million, or $0.65 per share, for the third quarter of fiscal 2014.  Reconciliation between GAAP and non-GAAP results is provided below. 

Financial Targets

Synopsys also provided its financial targets for the fourth quarter and full fiscal year 2015.  These targets do not include any impact of future acquisition-related activities or costs that may be incurred in the remainder of fiscal year 2015.  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. 

Fourth Quarter of Fiscal Year 2015 Targets:

Full Fiscal Year 2015 Targets:

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,  (iv) other significant items, including restructuring charges and certain accruals for legal and tax matters, and (v) the income tax effect of 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. 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 Third Quarter Fiscal Year 2015 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 Third Quarter Fiscal Year 2015 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Nine Months Ended


July 31,


July 31,


2015


2014


2015


2014

GAAP net income

$ 55,387


$   65,656


$ 176,172


$ 196,669

Adjustments:








Amortization of intangible assets

32,892


32,809


97,248


92,990

Stock compensation

23,905


21,399


64,769


58,340

Acquisition-related costs

4,431


36


8,615


5,484

Restructuring charges

(248)


-


15,088


-

Legal and tax matters

(10,270)


(2,981)


(11,789)


(15,288)

Tax adjustments

(6,419)


(13,768)


(17,195)


(40,262)

Non-GAAP net income 

$ 99,678


$ 103,151


$ 332,908


$ 297,933


























Three Months Ended


Nine Months Ended


July 31,


July 31,


2015


2014


2015


2014

GAAP net income per share

$     0.35


$       0.42


$       1.12


$       1.25

Adjustments:








Amortization of intangible assets

0.21


0.21


0.62


0.59

Stock compensation

0.14


0.14


0.40


0.37

Acquisition-related costs

0.03


0.00


0.05


0.04

Restructuring charges

-


-


0.10


-

Legal and tax matters

(0.06)


(0.03)


(0.07)


(0.10)

Tax adjustments

(0.04)


(0.09)


(0.11)


(0.26)

Non-GAAP net income per share

$     0.63


$       0.65


$       2.11


$       1.89









Shares used in calculation

158,584


157,622


157,850


157,253

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 Fourth Quarter Fiscal Year 2015 Targets

(in thousands, except per share amounts)






 Range for Three Months 


Ending October 31, 2015 (1)


Low


High

Target GAAP expenses

$   503,000


$   521,000

Adjustments:




      Estimated impact of amortization of intangible assets

(33,000)


(36,000)

      Estimated impact of stock compensation

(20,000)


(25,000)

Target non-GAAP expenses

$   450,000


$   460,000










Range for Three Months


Ending October 31, 2015 (1)


Low


High

Target GAAP earnings per share

$         0.31


$         0.38

Adjustments:




Estimated impact of amortization of intangible assets

0.23


0.21

Estimated impact of stock compensation

0.16


0.13

Estimated impact of tax adjustments

(0.05)


(0.05)

Target non-GAAP earnings per share

$         0.65


$         0.67





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

157,000


157,000









GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2015 Targets






Range for Fiscal Year


Ending October 31, 2015 (1)


Low


High

Target GAAP earnings per share

$         1.43


$         1.50

Adjustments:




Estimated impact of amortization of intangible assets

0.85


0.83

Estimated impact of stock compensation

0.57


0.54

Acquisition-related costs

0.05


0.05

Restructuring charges

0.10


0.10

Legal and tax matters

(0.07)


(0.07)

Estimated net non-GAAP tax adjustments

(0.17)


(0.17)

Target non-GAAP earnings per share

$         2.76


$         2.78





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

157,000


157,000


(1) Synopsys' fourth quarter and fiscal year end on October 31, 2015.

 

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 366153, beginning at 4:00 p.m. Pacific Time today.  A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the fourth quarter and fiscal year 2015 in December 2015.  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 fourth quarter and fiscal year 2015 earnings call in December 2015, 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 fourth quarter of fiscal year 2015 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 third quarter fiscal 2015 in its quarterly report on Form 10-Q to be filed by Sept. 10, 2015.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) is the Silicon to Softwareâ„¢ 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 quality and security solutions. Whether you're a system-on-chip (SoC) designer creating advanced semiconductors, or a software developer writing applications that require the highest quality and security, Synopsys has the solutions needed to deliver innovative, high-quality, secure products. Learn more at www.synopsys.com.  

Forward-Looking Statements

This press release and our upcoming earnings results conference call contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.  Any statements that are not statements of historical fact may be deemed to be forward-looking statements.  Forward-looking statements include but are not limited to: sections of this press release entitled "Financial Targets" and "Reconciliation of Target Non-GAAP Operating Results"; and statements regarding Synopsys' business, acquisitions, products, technologies, business model, new markets, customer demand for our technology, and projected financial results and business objectives.  These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements 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:

In addition, Synopsys' actual expenses, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending Oct. 31, 2015; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2015; and cash flow from operations on a GAAP basis for fiscal year 2015 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) integration and other acquisition-related costs, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits and settlements, to increase or decrease an income tax asset or liability, (iii) a determination by Synopsys that any portion of its goodwill or intangible assets has become impaired, (iv) changes in the anticipated amount of employee stock-based compensation expense recognized in Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or guidance, (viii) fluctuations in foreign currency exchange rates, (ix) litigation, (x) general economic conditions, and (xi) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in its latest Quarterly Report on Form 10-Q. Furthermore, Synopsys' actual tax rates applied to income for the fourth quarter and fiscal year 2015 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, tax law changes, and actions by government authorities. Finally, Synopsys' targets for outstanding shares in the fourth quarter and fiscal year 2015 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions, and the extent of Synopsys' stock repurchase activity.

Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call, the financial supplement, or the corporate overview presentation, whether as a result of new information, future events or otherwise, unless otherwise required by law.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)


















Three Months Ended 


Nine Months Ended


July 31,


July 31,


2015


2014


2015


2014

Revenue:








  Time-based license

$   445,807


$   431,184


$    1,324,677


$    1,255,515

  Upfront license

48,878


31,594


139,671


101,863

  Maintenance and service

61,120


59,034


190,704


161,082

      Total revenue

555,805


521,812


1,655,052


1,518,460

Cost of revenue:








  License

77,516


68,573


218,650


198,700

  Maintenance and service

25,251


20,685


82,244


62,065

  Amortization of intangible assets

26,704


26,272


78,182


74,699

     Total cost of revenue

129,471


115,530


379,076


335,464

Gross margin

426,334


406,282


1,275,976


1,182,996

Operating expenses:








  Research and development

197,999


182,809


567,924


528,395

  Sales and marketing

116,988


112,271


343,736


332,847

  General and administrative

43,925


37,438


121,254


112,246

  Amortization of intangible assets 

6,188


6,537


19,066


18,291

  Restructuring charges

(248)


-


15,088


-

     Total operating expenses

364,852


339,055


1,067,068


991,779

Operating income

61,482


67,227


208,908


191,217

Other income (expense), net

3,711


3,544


16,784


18,797

Income before income taxes

65,193


70,771


225,692


210,014

Provision (benefit) for income taxes

9,806


5,115


49,520


13,345

Net income

$     55,387


$     65,656


$       176,172


$       196,669









Net income per share:








  Basic

$         0.36


$         0.42


$             1.14


$             1.27

  Diluted

$         0.35


$         0.42


$             1.12


$             1.25









Shares used in computing per share amounts:








  Basic

155,533


155,194


154,835


154,611

  Diluted

158,584


157,622


157,850


157,253


 

(1) Synopsys' third quarter for fiscal year 2015 and 2014 ended on August 1, 2015 and August 2, 2014, respectively. For presentation purposes, we refer to closest calendar month end.

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)






July 31, 2015


October 31, 2014

ASSETS:




Current assets:




  Cash and cash equivalents

$         986,423


$                985,762

  Short-term investments

136,496


-

          Total cash, cash equivalents and short-term investments

1,122,919


985,762

  Accounts receivable, net

307,825


326,727

  Deferred income taxes

75,939


111,449

  Income taxes receivable and prepaid taxes

36,344


26,496

  Prepaid and other current assets

84,510


54,301

          Total current assets

1,627,537


1,504,735

Property and equipment, net

260,667


249,098

Goodwill

2,335,816


2,255,708

Intangible assets, net

318,499


365,030

Long-term prepaid taxes

13,800


17,645

Long-term deferred income taxes

211,733


208,156

Other long-term assets

185,920


175,127

           Total assets

$      4,953,972


$             4,775,499





LIABILITIES AND STOCKHOLDERS' EQUITY:




Current liabilities:




  Accounts payable and accrued liabilities

$         330,825


$                397,113

  Accrued income taxes

25,750


31,404

  Deferred revenue

912,768


928,242

  Short-term debt

190,000


30,000

           Total current liabilities

1,459,343


1,386,759

Long-term accrued income taxes

39,207


50,952

Long-term deferred revenue

90,569


77,646

Long-term debt

22,500


45,000

Other long-term liabilities

204,105


158,972

           Total liabilities

1,815,724


1,719,329

Stockholders' equity:




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

-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 155,929 and 155,965 shares outstanding, respectively

1,559


1,560

  Capital in excess of par value

1,604,994


1,614,603

  Retained earnings

1,688,764


1,551,592

  Treasury stock, at cost: 1,336 and 1,299 shares, respectively

(61,204)


(49,496)

  Accumulated other comprehensive income (loss) 

(95,865)


(62,089)

           Total stockholders' equity

3,138,248


3,056,170

           Total liabilities and stockholders' equity

$      4,953,972


$             4,775,499


(1) Synopsys' third quarter for fiscal year 2015 ended on August 1, 2015. Fiscal year 2014 ended on November 1, 2014. For presentation purposes, we refer to the closest calendar month end.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






 Nine Months Ended July 31, 


2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$176,172


$ 196,669

Adjustments to reconcile net income to net cash provided by operating




    activities:




Amortization and depreciation

154,535


140,750

Stock compensation

63,463


58,341

Allowance for doubtful accounts 

1,100


(750)

(Gain) loss on sale of investments

(22)


(6,538)

Deferred income taxes

24,134


7,459

Net changes in operating assets and liabilities, net of 




acquired assets and liabilities:




Accounts receivable

16,976


24,834

Prepaid and other current assets

(35,836)


982

Other long-term assets

(16,141)


(18,847)

Accounts payable and accrued liabilities

(25,512)


(28,270)

Income taxes

(20,633)


(18,950)

Deferred revenue

4,507


22,361

Net cash provided by operating activities

342,743


378,041





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales and maturities of short-term investments

48,155


-

Purchases of short-term investments

(185,402)


-

Proceeds from sales of long-term investments

-


7,313

Purchases of property and equipment

(67,708)


(58,085)

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

(126,883)


(373,513)

Capitalization of software development costs

(2,798)


(2,812)

Other

900


(3,000)

Net cash used in investing activities

(333,736)


(430,097)





CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from credit facility

410,000


200,000

Repayment of debt

(272,924)


(223,239)

Issuances of common stock

56,414


45,336

Purchases of treasury stock

(180,000)


(79,747)

Other

(116)


(5,008)

Net cash provided by (used in) financing activities

13,374


(62,658)

Effect of exchange rate changes on cash and cash equivalents

(21,720)


(4,681)

Net change in cash and cash equivalents

661


(119,395)

Cash and cash equivalents, beginning of the year

985,762


1,022,441

Cash and cash equivalents, end of the period

$986,423


$ 903,046


(1) Synopsys' third quarter for fiscal year 2015 and 2014 ended on August 1, 2015 and August 2, 2014, respectively. For presentation purposes, we refer to closest calendar month end.

 

INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901
Email Contact

EDITORIAL CONTACT:
Yvette Huygen
Synopsys, Inc.
650-584-4547
Email Contact

 

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SOURCE Synopsys, Inc.

Contact:
Synopsys, Inc.
Web: http://www.synopsys.com