UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 16, 2017
SYNOPSYS, INC.
(Exact name of Registrant as specified in charter)
Delaware | 000-19807 | 56-1546236 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
690 East Middlefield Road
Mountain View, California 94043
(Address of principal executive offices)
Registrants telephone number, including area code: (650) 584-5000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 | Results of Operations and Financial Condition. |
On August 16, 2017, Synopsys, Inc. (Synopsys) issued a press release announcing the financial results of its third fiscal quarter ended July 29, 2017. A copy of this press release is furnished and attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Current Report, including the exhibit hereto, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any registration statement or other document filed with the Securities and Exchange Commission by Synopsys whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
The attached press release includes measures that are not in accordance with, or an alternative for, U.S. generally accepted accounting principles (GAAP). The attached press release includes non-GAAP earnings per share, non-GAAP net income, targeted non-GAAP expenses, and targeted non-GAAP earnings per share.
These non-GAAP measures are not in accordance with, or an alternative for, GAAP measures and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles, and management exercises judgment in determining which items should be excluded in the calculation of non-GAAP measures. While we believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP, we believe that non-GAAP measures are valuable in analyzing our core operations. Management analyzes current and future results on a GAAP basis as well as a non-GAAP basis and also provides GAAP and non-GAAP measures in our earnings release. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. We believe that the presentation of non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to our financial condition and results of operations.
Synopsys management evaluates and makes decisions about our business operations primarily based on the income and costs that management believes are directly related to Synopsys core operations. For our internal budgeting and resource allocation process, and in reviewing our financial results, we use non-GAAP financial measures that exclude: (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; and (vi) 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, we began utilizing a normalized annual non-GAAP tax rate in calculating non-GAAP financial measures in order to provide better consistency across interim reporting periods by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency and not necessarily reflect our normal operations, and to more clearly align our tax rate with our expected geographic earnings mix. The normalized annual non-GAAP tax rate is 19% and is based on our projected annual tax rate through fiscal 2018. We 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.
We use these non-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding our core operational performance and give us a better understanding of how we should invest in research and development, as well as fund infrastructure and product and market strategies. We use these measures to help us make budgeting decisions, for example, among product development expenses and research and development, sales and
marketing, and general and administrative expenses. In addition, these non-GAAP financial measures facilitate our internal comparisons to our historical operating results, forecasted targets and comparisons to competitors operating results.
As described above, we exclude the following items from one or more of our non-GAAP measures:
(i) Amortization of acquired intangible assets. We incur expenses from amortization of acquired intangible assets, which include contract rights, core/developed technology, trademarks, trade names, customer relationships, covenants not to compete, and other intangibles related to acquisitions. We amortize the intangible assets over their economic lives. We exclude this item because the expense is non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding (a) our core operational performance and liquidity, and (b) our ability to invest in research and development and fund acquisitions and capital expenditures.
(ii) Stock compensation impact. While stock compensation expense constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. In addition, excluding this item from various non-GAAP measures facilitates comparisons to our competitors operating results.
(iii) Acquisition-related costs. In connection with our business combinations, we incur significant expenses which we would not have otherwise incurred as part of our business operations. These expenses include compensation expenses, professional fees and other direct expenses, and concurrent restructuring activities, including employee severance and other exit costs, as well as changes to the fair value of contingent consideration related to the acquired company. We exclude such expenses, which we would not have otherwise incurred, as they are related to acquisitions and have no direct correlation to the operation of our business.
(iv) Restructuring charges. We initiate restructuring activities in order to align our costs in connection with both our operating plans and our business strategies based on then-current economic conditions. The amounts of the restructuring activities and frequency of occurrence may vary from time to time. Restructuring costs generally include severance and other termination benefits related to voluntary retirement programs and involuntary headcount reductions as well as facilities closures. Such restructuring costs include elimination of operational redundancy and permanent reductions in workforce and facilities closures and, therefore, are not considered by us to be a part of the core operation of our business and not used by us when assessing the core profitability and performance of our business operations. Furthermore, excluding this item from various non-GAAP measures facilitates comparisons to our competitors and our past operating results.
(v) Legal matters. From time to time we are party to legal proceedings. Legal proceedings could result in an expense or benefit due to settlements, final judgments, or accruals for loss contingencies. We exclude these types of expenses or benefits because we do not believe they are reflective of the core operation of our business.
(vi) Income tax effect of non-GAAP pre-tax adjustments. Excluding the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effect on net income. In fiscal 2016, we began utilizing a normalized annual non-GAAP tax rate in calculating non-GAAP financial measures in order to provide better consistency across interim reporting periods by eliminating the effects of non-recurring and period-specific items, which can vary in size and frequency and not necessarily reflect our normal operations, and to more clearly align our tax rate with our expected geographic earnings mix. The normalized annual non-GAAP tax rate is 19% and is based on our projected annual 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. We 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.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
Exhibit |
Exhibit Title | |
99.1 | Press release dated August 16, 2017 containing Synopsys, Inc.s results of operations for its third fiscal quarter ended July 29, 2017. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
SYNOPSYS, INC. | ||||||
Dated: August 16, 2017 | By: | /S/ JOHN F. RUNKEL, JR. | ||||
John F. Runkel, Jr. | ||||||
General Counsel and Corporate Secretary |
INDEX TO EXHIBITS
Exhibit |
Exhibit Title | |
99.1 | Press release dated August 16, 2017 containing Synopsys, Inc.s results of operations for its third fiscal quarter ended July 29, 2017. |
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 Third Quarter Fiscal Year 2017
Q3 2017 Financial Highlights
| Revenue: $695.4 million |
| GAAP earnings per share: $0.75 |
| Non-GAAP earnings per share: $0.92 |
MOUNTAIN VIEW, Calif. Aug. 16, 2017 Synopsys, Inc. (Nasdaq: SNPS) today reported results for its third quarter of fiscal year 2017.
Synopsys reported revenue of $695.4 million, compared to $615.2 million for the third quarter of fiscal year 2016, an increase of 13.0 percent.
In our fiscal third quarter, we again delivered excellent results and are raising annual revenue and non-GAAP earnings per share targets, said Aart de Geus, chairman and co-CEO of Synopsys. Our strategy and investments are paying off. Demand for EDA and IP products is robust and growing, as semiconductor and systems companies tackle immense complexity in both chips and ever-increasing software content. We are making very good progress in the fast-growing software security and quality market, helping software developers from a wide range of industries navigate daunting security challenges. In addition, we continue to return capital to shareholders, repurchasing $100 million of our stock in the quarter, and $300 million so far this year.
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GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2017 was $116.8 million, or $0.75 per share, compared to $64.7 million, or $0.42 per share, for the third quarter of fiscal 2016.
Non-GAAP Results
On a non-GAAP basis, net income was $141.6 million, or $0.92 per share, compared to non-GAAP net income of $116.2 million, or $0.76 per share, for the third quarter of fiscal 2016.
A 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 fourth quarter and full fiscal year 2017, 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.
Fourth Quarter of Fiscal Year 2017 Targets:
| Revenue: $642 million - $657 million |
| GAAP expenses: $586 million - $602 million |
| Non-GAAP expenses: $535 million - $545 million |
| Other income and expense: ($1) million - $1 million |
| Normalized annual tax rate applied in non-GAAP net income calculations: 19 percent |
| Fully diluted outstanding shares: 153 million - 156 million |
| GAAP earnings per share: $0.26 - $0.33 |
| Non-GAAP earnings per share: $0.55 - $0.58 |
Full Fiscal Year 2017 Targets:
| Revenue: $2.670 billion - $2.685 billion |
| Other income and expense: $4 million - $6 million |
| Normalized annual tax rate applied in non-GAAP net income calculations: 19 percent |
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| Fully diluted outstanding shares: 153 million - 156 million |
| GAAP earnings per share: $1.92 - $1.99 |
| Non-GAAP earnings per share: $3.29 - $3.32 |
| Cash flow from operations: $580 million - $600 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, and (vi) 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 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 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
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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 August 16, 2017 for additional information about the measures Synopsys uses to evaluate its core business operations.
Reconciliation of Third Quarter Fiscal Year 2017 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 2017 Results
(unaudited and in thousands, except per share amounts)
Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
GAAP net income |
$ | 116,751 | $ | 64,718 | $ | 256,645 | $ | 194,129 | ||||||||
Adjustments: |
||||||||||||||||
Amortization of intangible assets |
26,520 | 31,518 | 83,526 | 100,558 | ||||||||||||
Stock compensation |
28,301 | 25,571 | 79,697 | 72,043 | ||||||||||||
Acquisition-related costs |
1,232 | 1,155 | 6,253 | 6,968 | ||||||||||||
Restructuring charges |
6,026 | | 31,038 | 2,987 | ||||||||||||
Legal matters |
| | 38,000 | | ||||||||||||
Tax adjustments |
(37,185 | ) | (6,747 | ) | (72,593 | ) | (28,909 | ) | ||||||||
|
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|
|
|
|
|
|
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Non-GAAP net income |
$ | 141,645 | $ | 116,215 | $ | 422,566 | $ | 347,776 | ||||||||
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|
|
|
|
|
|
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Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
GAAP net income per share |
$ | 0.75 | $ | 0.42 | $ | 1.66 | $ | 1.26 | ||||||||
Adjustments: |
||||||||||||||||
Amortization of intangible assets |
0.17 | 0.20 | 0.54 | 0.65 | ||||||||||||
Stock compensation |
0.18 | 0.17 | 0.51 | 0.47 | ||||||||||||
Acquisition-related costs |
0.01 | 0.01 | 0.04 | 0.05 | ||||||||||||
Restructuring charges |
0.04 | | 0.20 | 0.02 | ||||||||||||
Legal matters |
| | 0.25 | | ||||||||||||
Tax adjustments |
(0.23 | ) | (0.04 | ) | (0.47 | ) | (0.20 | ) | ||||||||
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Non-GAAP net income per share |
$ | 0.92 | $ | 0.76 | $ | 2.73 | $ | 2.25 | ||||||||
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|
|
|
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Shares used in calculation |
154,683 | 153,890 | 154,787 | 154,629 |
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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 2017 Targets
(in thousands, except per share amounts)
Range for Three Months Ending October 31, 2017 (1) |
||||||||
Low | High | |||||||
Target GAAP expenses |
$ | 586,000 | $ | 602,000 | ||||
Adjustments: |
||||||||
Estimated impact of amortization of intangible assets |
(23,000 | ) | (26,000 | ) | ||||
Estimated impact of stock compensation |
(28,000 | ) | (31,000 | ) | ||||
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|
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Target non-GAAP expenses |
$ | 535,000 | $ | 545,000 | ||||
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Range for Three Months Ending October 31, 2017 (1) |
||||||||
Low | High | |||||||
Target GAAP earnings per share |
$ | 0.26 | $ | 0.33 | ||||
Adjustments: |
||||||||
Estimated impact of amortization of intangible assets |
0.17 | 0.15 | ||||||
Estimated impact of stock compensation |
0.20 | 0.18 | ||||||
Estimated impact of tax adjustments |
(0.08 | ) | (0.08 | ) | ||||
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Target non-GAAP earnings per share |
$ | 0.55 | $ | 0.58 | ||||
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Shares used in non-GAAP calculation (midpoint of target range) |
154,500 | 154,500 |
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 | $ | 1.99 | ||||
Adjustments: |
||||||||
Estimated impact of amortization of intangible assets |
0.71 | 0.69 | ||||||
Estimated impact of stock compensation |
0.72 | 0.70 | ||||||
Estimated impact of acquisition-related costs |
0.04 | 0.04 | ||||||
Estimated impact of restructuring |
0.20 | 0.20 | ||||||
Estimated impact of legal matters |
0.25 | 0.25 | ||||||
Estimated impact of tax adjustments |
(0.55 | ) | (0.55 | ) | ||||
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Target non-GAAP earnings per share |
$ | 3.29 | $ | 3.32 | ||||
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Shares used in non-GAAP calculation (midpoint of target range) |
154,500 | 154,500 |
(1) | Synopsys fourth quarter and fiscal year end on October 28, 2017. For presentation purposes, we refer to the closest calendar month end. |
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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 428130, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on August 23, 2017. 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 fourth quarter and fiscal year in late November 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 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 2017 earnings call in November 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 fourth 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 the third quarter of fiscal year 2017 in its quarterly report on Form 10-Q to be filed by September 7, 2017.
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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 worlds 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 youre 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 as well as statements related to 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 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 and our dependence on a relatively small number of large customers; continued uncertainty in the global economy; our ability to realize the potential financial or strategic benefits of acquisitions we complete; 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 carry out our new product and technology initiatives; our ability to protect our proprietary technology; changes in accounting principles or standards; 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; changes in our GAAP or non-GAAP tax rate; liquidity requirements in our U.S. operations; claims that our products infringe on third-party intellectual property rights; litigation; product errors or defects; increased risks resulting from an increase in sales of our hardware products; 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
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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 Annual Report on Form 10-K for the fiscal year ended October 31, 2016, and in its Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2017, to be filed with the SEC. The information provided herein is as of August 16, 2017. 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.
###
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SYNOPSYS, INC.
Unaudited Consolidated Statements of Operations (1)
(in thousands, except per share amounts)
Three Months Ended July 31, |
Nine Months Ended July 31, |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue: |
||||||||||||||||
Time-based products |
$ | 503,530 | $ | 479,285 | $ | 1,493,991 | $ | 1,427,740 | ||||||||
Upfront products |
100,251 | 66,885 | 263,310 | 168,485 | ||||||||||||
Maintenance and service |
91,600 | 69,034 | 270,935 | 192,588 | ||||||||||||
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Total revenue |
695,381 | 615,204 | 2,028,236 | 1,788,813 | ||||||||||||
Cost of revenue: |
||||||||||||||||
Products |
107,104 | 92,042 | 304,982 | 253,879 | ||||||||||||
Maintenance and service |
43,828 | 23,172 | 122,618 | 67,328 | ||||||||||||
Amortization of intangible assets |
18,614 | 24,463 | 59,720 | 79,544 | ||||||||||||
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Total cost of revenue |
169,546 | 139,677 | 487,320 | 400,751 | ||||||||||||
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Gross margin |
525,835 | 475,527 | 1,540,916 | 1,388,062 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
228,663 | 221,874 | 664,326 | 634,751 | ||||||||||||
Sales and marketing |
131,520 | 127,328 | 395,242 | 370,874 | ||||||||||||
General and administrative |
46,350 | 42,548 | 170,654 | 123,798 | ||||||||||||
Amortization of intangible assets |
7,906 | 7,055 | 23,806 | 21,014 | ||||||||||||
Restructuring charges |
6,026 | | 31,038 | 2,987 | ||||||||||||
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Total operating expenses |
420,465 | 398,805 | 1,285,066 | 1,153,424 | ||||||||||||
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|
|||||||||
Operating income |
105,370 | 76,722 | 255,850 | 234,638 | ||||||||||||
Other income (expense), net |
7,421 | 8,509 | 27,322 | 12,158 | ||||||||||||
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Income before income taxes |
112,791 | 85,231 | 283,172 | 246,796 | ||||||||||||
Provision (benefit) for income taxes |
(3,960 | ) | 20,513 | 26,527 | 52,667 | |||||||||||
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Net income |
$ | 116,751 | $ | 64,718 | $ | 256,645 | $ | 194,129 | ||||||||
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Net income per share: |
||||||||||||||||
Basic |
$ | 0.78 | $ | 0.43 | $ | 1.71 | $ | 1.28 | ||||||||
Diluted |
$ | 0.75 | $ | 0.42 | $ | 1.66 | $ | 1.26 | ||||||||
Shares used in computing per share amounts: |
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Basic |
150,214 | 151,169 | 150,460 | 152,129 | ||||||||||||
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Diluted |
154,683 | 153,890 | 154,787 | 154,629 | ||||||||||||
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(1) | Synopsys third quarter of fiscal year 2017 and 2016 ended on July 29, 2017 and July 30, 2016, 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)
July 31, 2017 |
October 31, 2016 |
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ASSETS: |
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Current assets: |
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Cash and cash equivalents |
$ | 1,154,986 | $ | 976,620 | ||||
Short-term investments |
147,508 | 140,695 | ||||||
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|
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Total cash, cash equivalents and short-term investments |
1,302,494 | 1,117,315 | ||||||
Accounts receivable, net |
411,262 | 438,873 | ||||||
Income taxes receivable and prepaid taxes |
55,750 | 56,091 | ||||||
Prepaid and other current assets |
125,126 | 104,659 | ||||||
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|
|
|
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Total current assets |
1,894,632 | 1,716,938 | ||||||
Property and equipment, net |
262,025 | 257,035 | ||||||
Goodwill |
2,660,680 | 2,518,245 | ||||||
Intangible assets, net |
248,335 | 266,661 | ||||||
Long-term prepaid taxes |
15,706 | 13,991 | ||||||
Deferred income taxes |
382,495 | 281,926 | ||||||
Other long-term assets |
215,066 | 185,569 | ||||||
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|
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Total assets |
$ | 5,678,939 | $ | 5,240,365 | ||||
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LIABILITIES AND STOCKHOLDERS EQUITY: |
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Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 403,302 | $ | 401,451 | ||||
Accrued income taxes |
16,270 | 22,693 | ||||||
Deferred revenue |
1,046,801 | 1,085,802 | ||||||
Short-term debt |
298,025 | 205,000 | ||||||
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|
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Total current liabilities |
1,764,398 | 1,714,946 | ||||||
Long-term accrued income taxes |
23,545 | 39,562 | ||||||
Long-term deferred revenue |
83,001 | 79,856 | ||||||
Long-term debt |
137,813 | | ||||||
Other long-term liabilities |
247,014 | 210,855 | ||||||
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|
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Total liabilities |
2,255,771 | 2,045,219 | ||||||
Stockholders equity: |
||||||||
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding |
| | ||||||
Common stock, $0.01 par value: 400,000 shares authorized; 150,238 and 151,454 shares outstanding, respectively |
1,503 | 1,515 | ||||||
Capital in excess of par value |
1,631,200 | 1,644,675 | ||||||
Retained earnings |
2,277,499 | 1,947,585 | ||||||
Treasury stock, at cost: 7,024 and 5,811 shares, respectively |
(419,370 | ) | (294,052 | ) | ||||
Accumulated other comprehensive income (loss) |
(67,664 | ) | (104,577 | ) | ||||
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|
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Total stockholders equity |
3,423,168 | 3,195,146 | ||||||
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|
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Total liabilities and stockholders equity |
$ | 5,678,939 | $ | 5,240,365 | ||||
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(1) | Synopsys third quarter of fiscal 2017 ended on July 29, 2017, and its fiscal year 2016 ended on October 29, 2016. For presentation purposes, we refer to the closest calendar month end. |
10
SYNOPSYS, INC.
Unaudited Consolidated Statements of Cash Flows (1)
(in thousands)
Nine Months Ended July 31, |
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2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
$ | 256,645 | $ | 194,129 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Amortization and depreciation |
144,112 | 157,814 | ||||||
Stock compensation |
79,697 | 72,043 | ||||||
Allowance for doubtful accounts |
1,289 | 650 | ||||||
(Gain) loss on sale of investments |
(1 | ) | (15 | ) | ||||
Write-down of long-term investments |
1,300 | | ||||||
Deferred income taxes |
(10,960 | ) | 2,747 | |||||
Net changes in operating assets and liabilities, net of acquired assets and liabilities: |
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Accounts receivable |
42,413 | 77,532 | ||||||
Prepaid and other current assets |
(13,636 | ) | (22,941 | ) | ||||
Other long-term assets |
(33,416 | ) | (8,118 | ) | ||||
Accounts payable and accrued liabilities |
36,129 | (41,749 | ) | |||||
Income taxes |
(19,169 | ) | (3,314 | ) | ||||
Deferred revenue |
(34,692 | ) | 10,195 | |||||
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|
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Net cash provided by operating activities |
449,711 | 438,973 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Proceeds from sales and maturities of short-term investments |
130,529 | 111,078 | ||||||
Purchases of short-term investments |
(137,486 | ) | (126,216 | ) | ||||
Proceeds from sales of long-term investments |
839 | 1,785 | ||||||
Purchases of long-term investments |
| (1,002 | ) | |||||
Purchases of property and equipment |
(50,227 | ) | (48,249 | ) | ||||
Cash paid for acquisitions and intangible assets, net of cash acquired |
(187,624 | ) | (60,056 | ) | ||||
Capitalization of software development costs |
(3,130 | ) | (2,959 | ) | ||||
Other |
2,100 | | ||||||
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|
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Net cash used in investing activities |
(244,999 | ) | (125,619 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from credit facilities |
270,000 | 185,000 | ||||||
Repayment of debt |
(38,750 | ) | (112,500 | ) | ||||
Issuances of common stock |
78,718 | 69,884 | ||||||
Payments for taxes related to net share settlement of equity awards |
(35,376 | ) | (25,718 | ) | ||||
Purchase of equity forward contract |
| (25,000 | ) | |||||
Purchases of treasury stock |
(300,000 | ) | (300,000 | ) | ||||
Other |
(482 | ) | 2,713 | |||||
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|
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Net cash used in financing activities |
(25,890 | ) | (205,621 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
(456 | ) | 2,396 | |||||
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|
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Net change in cash and cash equivalents |
178,366 | 110,129 | ||||||
Cash and cash equivalents, beginning of the year |
976,620 | 836,188 | ||||||
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|
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Cash and cash equivalents, end of the period |
$ | 1,154,986 | $ | 946,317 | ||||
|
|
|
|
(1) | Synopsys third quarter of fiscal year 2017 and 2016 ended on July 29, 2017 and July 30, 2016, respectively. For presentation purposes, we refer to the closest calendar month end. |
11