Synopsys Posts Financial Results for First Quarter Fiscal Year 2016

MOUNTAIN VIEW, Calif., Feb. 17, 2016 -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its first quarter of fiscal year 2016.

For the first quarter of fiscal year 2016, Synopsys reported revenue of $568.6 million, compared to $542.0 million for the first quarter of fiscal 2015, an increase of approximately 5 percent.

"The fiscal first quarter was a very good start to the year, and we are well on-track to meeting our annual financial targets," said Aart de Geus, chairman and co-CEO of Synopsys. "Our business is strong, even in the context of the challenging macro environment, and customers continue to count on us for their most critical projects. As the market and technology leader in EDA, the second largest IP provider in the world, and the emerging front-runner in addressing the critical new software quality and security space, our vision and investments align well with robust current and future opportunities."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2016 was $60.0 million, or $0.39 per share, compared to $65.2 million, or $0.41 per share, for the first quarter of fiscal 2015.

Non-GAAP Results

On a non-GAAP basis, net income for the first quarter of fiscal 2016 was $105.9 million, or $0.68 per share, compared to non-GAAP net income of $125.7 million, or $0.80 per share, for the first quarter of fiscal 2015.

Fiscal first quarter 2015 earnings reflected the reinstatement of the federal R&D tax credit for 2014, including both a retroactive benefit for fiscal 2014 and a partial year impact to fiscal 2015. Fiscal first quarter 2016 reflects a permanent reinstatement of the federal R&D tax credit.

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 second quarter and full fiscal year 2016. These targets do not include any impact of future acquisition-related activities or costs that may be incurred in fiscal year 2016. Beginning in fiscal year 2016, Synopsys 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.

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.

Second Quarter of Fiscal Year 2016 Targets:

• Revenue: $595 million - $610 million
• GAAP expenses: $503 million - $522 million
• Non-GAAP expenses: $450 million - $460 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: 153 million - 156 million
• GAAP earnings per share: $0.38 - $0.47
• Non-GAAP earnings per share: $0.78 - $0.81

Full Fiscal Year 2016 Targets:

• Revenue: $2.350 billion - $2.390 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: 153 million - 156 million
• GAAP earnings per share: $1.64 - $1.79
• Non-GAAP earnings per share: $2.93 - $3.00
• Cash flow from operations: at least $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 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, and (iv) other significant items, including restructuring charges and, in fiscal 2015, certain accruals 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. Beginning 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 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.

Reconciliation of First Quarter 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 period indicated below.

GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2016 Results

(unaudited and in thousands, except per share amounts)

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

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 Second Quarter Fiscal Year 2016 Targets
(in thousands, except per share amounts)

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2016 Targets

(1) Synopsys' second quarter and fiscal year end on April 30, 2016 and October 29, 2016, respectively. For presentation purposes, we refer to the closest calendar month end.

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

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 385770, 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 second fiscal quarter in May 2016. 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 second quarter fiscal year 2016 earnings call in May 2016, 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 second quarter of fiscal year 2016 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 first quarter fiscal 2016 in its quarterly report on Form 10-Q to be filed by March 10, 2016.

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 16th 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.