Attached files

file filename
EX-10.1 - EX-10.1 - SYNOPSYS INCd294334dex101.htm
8-K - FORM 8-K - SYNOPSYS INCd294334d8k.htm

Exhibit 99.1

PRESS RELEASE

INVESTOR CONTACT:

Lisa L. Ewbank

Synopsys, Inc.

650-584-1901

Synopsys-ir@synopsys.com

EDITORIAL CONTACT:

Carole Murchison

Synopsys, Inc.

650-584-4632

carolem@synopsys.com

Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2016

Q4 2016 Financial Highlights

 

  Revenue: $633.7 million

 

  GAAP earnings per share: $0.47

 

  Non-GAAP earnings per share: $0.77

FY 2016 Financial Highlights

 

  Revenue: $2.42 billion

 

  GAAP earnings per share: $1.73

 

  Non-GAAP earnings per share: $3.02

 

  Cash flow from operations: $586.6 million

 

  Cash and short-term investments: $1.12 billion

MOUNTAIN VIEW, Calif. Nov. 30, 2016 – 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

 

1


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

 

2


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

 

3


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 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.

Reconciliation of Fourth Quarter and 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 periods indicated below.

GAAP to Non-GAAP Reconciliation of Fourth Quarter and Fiscal Year 2016 Results

(Unaudited and in thousands, except per share amounts)

 

     Three Months Ended      Twelve Months Ended  
     October 31,      October 31,  
     2016      2015      2016      2015  

GAAP net income

   $ 72,697       $ 49,762       $ 266,826       $ 225,934   

Adjustments:

           

Amortization of intangible assets

     29,067         38,801         129,625         136,049   

Stock compensation

     25,540         22,936         97,583         86,400   

Acquisition-related costs

     2,981         7,074         9,949         16,994   

Restructuring charges

     6,646         —           9,633         15,088   

Legal and tax matters

     —           5,103         —           (6,686

Tax adjustments (1)

     (17,872      (18,155      (46,781      (35,350
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income

   $ 119,059       $ 105,521       $ 466,835       $ 438,429   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Three Months Ended      Twelve Months Ended  
     October 31,      October 31,  
     2016      2015      2016      2015  

GAAP net income per share

   $ 0.47       $ 0.31       $ 1.73       $ 1.43   

Adjustments:

           

Amortization of intangible assets

     0.19         0.25         0.84         0.86   

Stock compensation

     0.17         0.15         0.63         0.54   

Acquisition-related costs

     0.02         0.04         0.07         0.10   

Restructuring charges

     0.04         —           0.06         0.10   

Legal and tax matters

     —           0.03         —           (0.04

Tax adjustments (1)

     (0.12      (0.11      (0.31      (0.22
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income per share

   $ 0.77       $ 0.67       $ 3.02       $ 2.77   
  

 

 

    

 

 

    

 

 

    

 

 

 

Shares used in calculation

     154,331         158,121         154,721         158,065   

 

(1) Fiscal 2016 tax adjustments reflect the application of our normalized annual non-GAAP tax rate to non-GAAP pre-tax income.

 

4


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 First Quarter Fiscal Year 2017 Targets

(in thousands, except per share amounts)

 

     Range for Three Months  
     Ending January 31, 2017 (1)  
     Low      High  

Target GAAP expenses

   $ 540,000       $ 558,000   

Adjustments:

     

Estimated impact of amortization of intangible assets

     (30,000      (34,000

Estimated impact of stock compensation

     (25,000      (29,000
  

 

 

    

 

 

 

Target non-GAAP expenses

   $ 485,000       $ 495,000   
  

 

 

    

 

 

 
     Range for Three Months  
     Ending January 31, 2017 (1)  
     Low      High  

Target GAAP earnings per share

   $ 0.43       $ 0.50   

Adjustments:

     

Estimated impact of amortization of intangible assets

     0.22         0.20   

Estimated impact of stock compensation

     0.19         0.16   

Estimated impact of tax adjustments (2)

     (0.07      (0.06
  

 

 

    

 

 

 

Target non-GAAP earnings per share

   $ 0.77       $ 0.80   
  

 

 

    

 

 

 

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

     153,500         153,500   

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2017 Targets

 

     Range for Fiscal Year  
     Ending October 31, 2017 (1)  
     Low      High  

Target GAAP earnings per share

   $ 1.92       $ 2.06   

Adjustments:

     

Estimated impact of amortization of intangible assets

     0.77         0.74   

Estimated impact of stock compensation

     0.76         0.70   

Estimated impact of tax adjustments (2)

     (0.29      (0.27
  

 

 

    

 

 

 

Target non-GAAP earnings per share

   $ 3.16       $ 3.23   
  

 

 

    

 

 

 

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

     153,500         153,500   

 

(1) Synopsys’ first quarter and fiscal year end on January 28, 2017 and October 28, 2017, respectively. For presentation purposes, we refer to the closest calendar month end.
(2) Fiscal 2017 tax adjustments reflect the application of our normalized annual non-GAAP tax rate to non-GAAP pre-tax income.

 

5


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 405842, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on Dec. 7, 2016. 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 first quarter fiscal year 2017 in February 2017. 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 today’s 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 first quarter fiscal year 2017 earnings call in February 2017, 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 first quarter of fiscal year 2017 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 fiscal year 2016 in its annual report on Form 10-K to be filed by December 28, 2016.

 

6


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 growing its leadership in software security and quality solutions. Whether you’re a system-on-chip (SoC) designer creating advanced semiconductors, or a software developer writing applications that require the highest security and quality, Synopsys has the solutions needed to deliver innovative, high-quality, secure products. Learn more at www.synopsys.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including, but not limited to, information in the sections entitled “Financial Targets” and “Reconciliation of Target Non-GAAP Operating Results.” These statements involve known and unknown risks, uncertainties and other factors that could cause actual results 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: uncertainty in the growth of the semiconductor and electronics industry; consolidation among our customers; continued uncertainty in the global economy; our ability to realize the potential financial or strategic benefits of acquisitions we complete; changes in accounting principles or standards; fluctuation of our operating results; our highly competitive industries and our ability to meet our customers’ demand for innovative technology at lower costs; our ability to protect our proprietary technology; application of the actual consolidated GAAP tax rate, or our decision to change our non-GAAP normalized tax rate, as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, tax law changes, actions by government authorities, or judgment by management, based upon the status of pending audits and settlements, to increase or decrease an income tax asset or liability; investments of more resources in research and development than anticipated; risks and compliance obligations relating to the global nature of our operations; cybersecurity threats or other security breaches;

 

7


liquidity requirements in our U.S. operations; claims that our products infringe on third-party intellectual property rights; product errors or defects; litigation; the ability to obtain licenses to third-party software and intellectual property on reasonable terms or at all; the ability to timely recruit and retain senior management and key employees; evolving corporate governance and public disclosure regulations; the inherent limitations on the effectiveness of our controls and compliance programs; the impairment of our investment portfolio by the deterioration of capital markets and the change in the fair value of our non-qualified deferred compensation plan obligations; the accuracy of certain assumptions, judgments and estimates that affect amounts reported in our financial statements; and the impact of catastrophic events. More information on potential risks, uncertainties and other factors that could affect Synopsys’ results is included in filings it makes with the Securities and Exchange Commission from time to time, including in the sections entitled “Risk Factors” in its Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2016 and in its Annual Report on Form 10-K for the fiscal year ended October 31, 2016 to be filed with the SEC. The information provided herein is as of November 30, 2016. Synopsys undertakes no duty, and does not intend, to update any forward-looking statement, whether as a result of new information, future events or otherwise, unless required by law.

###

 

8


SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)

 

     Three Months Ended
October 31,
    Twelve Months Ended
October 31,
 
     2016     2015     2016      2015  

Revenue:

         

Time-based products

   $ 483,162      $ 467,535      $ 1,910,902       $ 1,792,212   

Upfront products

     79,652        57,654        248,137         197,325   

Maintenance and service

     70,905        61,970        263,493         252,674   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total revenue

     633,719        587,159        2,422,532         2,242,211   

Cost of revenue:

         

Products

     92,946        84,983        346,825         303,633   

Maintenance and service

     26,691        22,998        94,019         105,242   

Amortization of intangible assets

     22,574        31,863        102,118         110,045   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total cost of revenue

     142,211        139,844        542,962         518,920   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross margin

     491,508        447,315        1,879,570         1,723,291   

Operating expenses:

         

Research and development

     221,954        208,305        856,705         776,229   

Sales and marketing

     131,494        130,671        502,368         474,407   

General and administrative

     42,164        43,843        165,962         165,097   

Amortization of intangible assets

     6,493        6,938        27,507         26,004   

Restructuring charges

     6,646        —          9,633         15,088   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total operating expenses

     408,751        389,757        1,562,175         1,456,825   
  

 

 

   

 

 

   

 

 

    

 

 

 

Operating income

     82,757        57,558        317,395         266,466   

Other income (expense), net

     (5     (1,640     12,153         15,144   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     82,752        55,918        329,548         281,610   

Provision (benefit) for income taxes

     10,055        6,156        62,722         55,676   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income

   $ 72,697      $ 49,762      $ 266,826       $ 225,934   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income per share:

         

Basic

   $ 0.48      $ 0.32      $ 1.76       $ 1.46   

Diluted

   $ 0.47      $ 0.31      $ 1.73       $ 1.43   

Shares used in computing per share amounts:

         

Basic

     151,681        155,322        152,017         154,957   
  

 

 

   

 

 

   

 

 

    

 

 

 

Diluted

     154,331        158,121        154,721         158,065   
  

 

 

   

 

 

   

 

 

    

 

 

 

 

(1) Synopsys’ fourth quarter of fiscal year 2016 and 2015 ended on October 29, 2016 and October 31, 2015, respectively. For presentation purposes, we refer to the closest calendar month end.

 

9


SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)

 

     October 31, 2016     October 31, 2015  

ASSETS:

    

Current assets:

    

Cash and cash equivalents

   $ 976,620      $ 836,188   

Short-term investments

     140,695        128,747   
  

 

 

   

 

 

 

Total cash, cash equivalents and short-term investments

     1,117,315        964,935   

Accounts receivable, net

     438,873        385,694   

Income taxes receivable and prepaid taxes

     56,091        46,732   

Prepaid and other current assets

     104,659        71,446   
  

 

 

   

 

 

 

Total current assets

     1,716,938        1,468,807   

Property and equipment, net

     257,035        263,077   

Goodwill

     2,518,245        2,471,241   

Intangible assets, net

     266,661        363,659   

Long-term prepaid taxes

     13,991        18,736   

Long-term deferred income taxes

     281,926        273,909   

Other long-term assets

     185,569        186,310   
  

 

 

   

 

 

 

Total assets

   $ 5,240,365      $ 5,045,739   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

    

Current liabilities:

    

Accounts payable and accrued liabilities

   $ 401,451      $ 385,542   

Accrued income taxes

     22,693        19,565   

Deferred revenue

     1,085,802        968,246   

Short-term debt

     205,000        205,000   
  

 

 

   

 

 

 

Total current liabilities

     1,714,946        1,578,353   

Long-term accrued income taxes

     39,562        37,763   

Long-term deferred revenue

     79,856        93,613   

Other long-term liabilities

     210,855        202,021   
  

 

 

   

 

 

 

Total liabilities

     2,045,219        1,911,750   

Stockholders’ equity:

    

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

     —          —     

Common stock, $0.01 par value: 400,000 shares authorized; 151,454 and 155,157 shares outstanding, respectively

     1,515        1,552   

Capital in excess of par value

     1,644,675        1,610,460   

Retained earnings

     1,947,585        1,725,727   

Treasury stock, at cost: 5,811 and 2,107 shares, respectively

     (294,052     (98,375

Accumulated other comprehensive income (loss)

     (104,577     (105,375
  

 

 

   

 

 

 

Total stockholders’ equity

     3,195,146        3,133,989   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 5,240,365      $ 5,045,739   
  

 

 

   

 

 

 

 

(1) Synopsys’ fiscal year 2016 and 2015 ended on October 29, 2016 and October 31, 2015, respectively. For presentation purposes, we refer to the closest calendar month end.

 

10


SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)

 

     Twelve Months Ended October 31,  
     2016     2015  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 266,826      $ 225,934   

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

    

Amortization and depreciation

     207,032        211,821   

Stock compensation

     97,583        86,400   

Allowance for doubtful accounts

     950        1,300   

(Gain) loss on sale of investments

     (18     (109

Excess tax benefits on stock-based awards

     2,718        (4,245

Deferred income taxes

     (14,037     36,883   

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

    

Accounts receivable

     (43,269     (56,533

Prepaid and other current assets

     (37,641     (23,106

Other long-term assets

     (3,770     (16,259

Accounts payable and accrued liabilities

     18,977        27,568   

Income taxes

     4,380        (44,633

Deferred revenue

     86,904        50,139   
  

 

 

   

 

 

 

Net cash provided by operating activities

     586,635        495,160   

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Proceeds from sales and maturities of short-term investments

     156,350        109,173   

Purchases of short-term investments

     (168,712     (238,902

Proceeds from sales of long-term investments

     1,785        —     

Purchases of long-term investments

     (1,002     —     

Purchases of property and equipment

     (66,909     (86,965

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

     (60,056     (340,153

Capitalization of software development costs

     (4,131     (3,682

Other

     —          900   
  

 

 

   

 

 

 

Net cash used in investing activities

     (142,675     (559,629

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from credit facility

     185,000        460,000   

Repayment of debt

     (185,000     (330,425

Issuances of common stock

     125,283        109,764   

Payments for taxes related to net share settlement of equity awards

     (26,562     (24,860

Purchase of equity forward contract

     —          (20,000

Purchases of treasury stock

     (400,000     (260,000

Excess tax benefits on stock-based awards

     (2,718     4,245   

Other

     (2,940     (794
  

 

 

   

 

 

 

Net cash used in financing activities

     (306,937     (62,070

Effect of exchange rate changes on cash and cash equivalents

     3,409        (23,035
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     140,432        (149,574

Cash and cash equivalents, beginning of the year

     836,188        985,762   
  

 

 

   

 

 

 

Cash and cash equivalents, end of the period

   $ 976,620      $ 836,188   
  

 

 

   

 

 

 

 

(1) Synopsys’ fiscal year 2016 and 2015 ended on October 29, 2016 and October 31, 2015, respectively. For presentation purposes, we refer to the closest calendar month end.

 

11