Synopsys Posts Financial Results for Second Quarter Fiscal Year 2015
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Synopsys Posts Financial Results for Second Quarter Fiscal Year 2015

Q2 2015 Financial Highlights

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

For the second quarter of fiscal year 2015, Synopsys reported revenue of $557.2 million, compared to $517.7 million for the second quarter of fiscal 2014, an increase of approximately 7.6 percent.  

"Our fiscal second quarter results were very strong, and solidify our outlook for the full year," said Aart de Geus, chairman and co-CEO of Synopsys. "We see clear momentum with our new implementation and verification products in the early stages of a multi-year customer upgrade cycle. Our entry into the software quality and security space has opened up an opportunity to drive incremental growth in both familiar and new market segments and build on Synopsys' strengths."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2015 was $55.6 million, or $0.35 per share, compared to $63.3 million, or $0.40 per share, for the second quarter of fiscal 2014.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2015 was $107.6 million, or $0.68 per share, compared to non-GAAP net income of $101.7 million, or $0.65 per share, for the second quarter of fiscal 2014.  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 2015.  These targets do not include any impact of future acquisition-related activities or costs that may be incurred in 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.

Third 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 Second 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 Second Quarter Fiscal Year 2015 Results

(unaudited and in thousands, except per share amounts)



Three Months Ended


Six Months Ended


April 30,


April 30,


2015


2014


2015


2014

GAAP net income

$   55,596


$   63,317


$ 120,785


$ 131,013

Adjustments:








Amortization of intangible assets

32,048


32,050


64,356


60,181

Stock compensation

20,283


18,824


40,864


36,941

Acquisition-related costs

3,472


4,374


4,184


5,449

Restructuring charges

-


-


15,336


-

Legal and tax matters

-


(2,040)


(1,519)


(12,307)

Tax adjustments

(3,840)


(14,830)


(10,776)


(26,495)

Non-GAAP net income 

$ 107,559


$ 101,695


$ 233,230


$ 194,782


























Three Months Ended


Six Months Ended


April 30,


April 30,


2015


2014


2015


2014

GAAP net income per share

$       0.35


$       0.40


$       0.77


$       0.83

Adjustments:








Amortization of intangible assets

0.20


0.20


0.41


0.38

Stock compensation

0.13


0.12


0.26


0.24

Acquisition-related costs

0.02


0.03


0.03


0.04

Restructuring charges

-


-


0.10


-

Legal and tax matters

-


(0.01)


(0.01)


(0.08)

Tax adjustments

(0.02)


(0.09)


(0.08)


(0.17)

Non-GAAP net income per share

$       0.68


$       0.65


$       1.48


$       1.24









Shares used in calculation

157,483


157,082


157,409


156,986


 

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 Third Quarter Fiscal Year 2015 Targets

(in thousands, except per share amounts)






 Range for Three Months 


Ending July 31, 2015 (1)


Low


High

Target GAAP expenses

$   481,000


$   501,000

Adjustments:




      Estimated impact of amortization of intangible assets

(31,000)


(36,000)

      Estimated impact of stock compensation

(20,000)


(25,000)

Target non-GAAP expenses

$   430,000


$   440,000










Range for Three Months


Ending July 31, 2015 (1)


Low


High

Target GAAP earnings per share

$         0.23


$         0.30

Adjustments:




Estimated impact of amortization of intangible assets

0.23


0.20

Estimated impact of stock compensation

0.16


0.13

Estimated impact of tax adjustments

(0.04)


(0.03)

Target non-GAAP earnings per share

$         0.58


$         0.60





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

$         1.39


$         1.49

Adjustments:




Estimated impact of amortization of intangible assets

0.85


0.80

Estimated impact of stock compensation

0.59


0.54

Acquisition-related costs

0.03


0.03

Restructuring charges

0.10


0.10

Legal and tax matters

(0.01)


(0.01)

Estimated net non-GAAP tax adjustments

(0.19)


(0.14)

Target non-GAAP earnings per share

$         2.76


$         2.81





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

157,000


157,000


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


 

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 359327, beginning at 4:00 p.m. Pacific Time today.  A webcast replay will also be available on the website from approximately 4:30 p.m. Pacific Time today through the time Synopsys announces its results for the third fiscal quarter in August 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 third quarter fiscal year 2015 earnings call in August 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 third 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 second quarter fiscal 2015 in its quarterly report on Form 10-Q to be filed by June 11, 2015.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) is the Silicon to Software™ 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 a leader in software quality and security testing with its Coverity® 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 (including the expected closing of our pending acquisition of Codenomicon OY), 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 July 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 Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2015. Furthermore, Synopsys' actual tax rates applied to income for the third 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, and actions by the government. Finally, Synopsys' targets for outstanding shares in the third 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 


Six Months Ended


  April 30,


   April 30,


2015


2014


2015


2014

Revenue:








  Time-based license

$   447,844


$   424,185


$    878,870


$   824,331

  Upfront license

44,313


36,297


90,793


70,269

  Maintenance and service

65,047


57,215


129,584


102,048

      Total revenue

557,204


517,697


1,099,247


996,648

Cost of revenue:








  License

70,350


67,302


141,134


130,127

  Maintenance and service

29,010


21,109


56,993


41,380

  Amortization of intangible assets

25,612


25,674


51,478


48,427

     Total cost of revenue

124,972


114,085


249,605


219,934

Gross margin

432,232


403,612


849,642


776,714

Operating expenses:








  Research and development

188,315


178,043


369,925


345,586

  Sales and marketing

120,579


114,784


226,748


220,576

  General and administrative

40,975


40,575


77,329


74,808

  Amortization of intangible assets 

6,436


6,376


12,878


11,754

  Restructuring charges

-


-


15,336


-

     Total operating expenses

356,305


339,778


702,216


652,724

Operating income

75,927


63,834


147,426


123,990

Other income (expense), net

7,957


4,225


13,073


15,253

Income before income taxes

83,884


68,059


160,499


139,243

Provision (benefit) for income taxes

28,288


4,742


39,714


8,230

Net income

$     55,596


$     63,317


$    120,785


$   131,013









Net income per share:








  Basic

$         0.36


$         0.41


$          0.78


$         0.85

  Diluted

$         0.35


$         0.40


$          0.77


$         0.83









Shares used in computing per share amounts:








  Basic

154,515


154,572


154,486


154,319

  Diluted

157,483


157,082


157,409


156,986


(1)  Synopsys' second quarter for fiscal year 2015 and 2014 ended on May 2, 2015 and May 3, 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)








April 30, 2015


October 31, 2014

ASSETS:





Current assets:





  Cash and cash equivalents


$          868,845


$                985,762

  Short-term investments


136,579


-

          Total cash, cash equivalents and short-term investments


1,005,424


985,762

  Accounts receivable, net


338,407


326,727

  Deferred income taxes


81,303


111,449

  Income taxes receivable and prepaid taxes


33,004


26,496

  Prepaid and other current assets


86,837


54,301

          Total current assets


1,544,975


1,504,735

Property and equipment, net


258,199


249,098

Goodwill


2,251,845


2,255,708

Intangible assets, net


302,656


365,030

Long-term prepaid taxes


3,789


17,645

Long-term deferred income taxes


210,373


208,156

Other long-term assets


184,330


175,127

           Total assets


$       4,756,167


$             4,775,499






LIABILITIES AND STOCKHOLDERS' EQUITY:





Current liabilities:





  Accounts payable and accrued liabilities


$          301,101


$                397,113

  Accrued income taxes


6,361


31,404

  Deferred revenue


827,576


928,242

  Short-term debt


190,000


30,000

           Total current liabilities


1,325,038


1,386,759

Long-term accrued income taxes


39,796


50,952

Long-term deferred revenue


98,806


77,646

Long-term debt


30,000


45,000

Other long-term liabilities


197,529


158,972

           Total liabilities


1,691,169


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; 155,054 and 155,965 shares outstanding, respectively


1,551


1,560

  Capital in excess of par value


1,603,397


1,614,603

  Retained earnings


1,643,207


1,551,592

  Treasury stock, at cost: 2,210 and 1,299 shares, respectively


(94,627)


(49,496)

  Accumulated other comprehensive loss 


(88,530)


(62,089)

           Total stockholders' equity


3,064,998


3,056,170

           Total liabilities and stockholders' equity


$       4,756,167


$             4,775,499


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


  

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






 Six Months Ended April 30, 


2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$ 120,785


$  131,013

Adjustments to reconcile net income to net cash provided by operating activities:




Amortization and depreciation

102,051


91,585

Stock compensation

40,864


36,941

Allowance for doubtful accounts 

600


(250)

(Gain) loss on sale of investments

(17)


(6,529)

Deferred income taxes

27,636


9,266

Net changes in operating assets and liabilities, net of acquired assets and liabilities:




Accounts receivable

(16,491)


(59,577)

Prepaid and other current assets

(34,584)


(4,557)

Other long-term assets

(13,359)


(13,756)

Accounts payable and accrued liabilities

(62,142)


(83,135)

Income taxes

(27,077)


(15,021)

Deferred revenue

(70,530)


(48,069)

Net cash provided by operating activities

67,736


37,911





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales and maturities of short-term investments

17,721


-

Purchases of short-term investments

(154,744)


-

Proceeds from sales of long-term investments

-


7,304

Purchases of property and equipment

(43,979)


(29,901)

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

(2,303)


(367,965)

Capitalization of software development costs

(1,865)


(1,875)

Other

900


-

Net cash used in investing activities

(184,270)


(392,437)





CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from credit facility

250,000


200,000

Repayment of debt

(105,424)


(15,497)

Issuances of common stock

54,006


53,326

Purchase of equity forward contract

(36,000)


-

Purchases of treasury stock

(144,000)


(79,747)

Other

(116)


(706)

Net cash provided by financing activities

18,466


157,376

Effect of exchange rate changes on cash and cash equivalents

(18,849)


(3,658)

Net change in cash and cash equivalents

(116,917)


(200,808)

Cash and cash equivalents, beginning of the year

985,762


1,022,441

Cash and cash equivalents, end of the period

$ 868,845


$  821,633


(1)  Synopsys' second quarter for fiscal year 2015 and 2014 ended on May 2, 2015 and May 3, 2014, respectively. For presentation purposes, we refer to the 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