Synopsys Posts Financial Results for First Quarter Fiscal Year 2019

MOUNTAIN VIEW, Calif. -- Feb. 20, 2019 -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its first quarter of fiscal year 2019. Revenue for the first quarter of fiscal 2019 was $820.4 million, compared to $769.4 million for the first quarter of fiscal 2018, an increase of approximately 6.6 percent.

"Our first quarter was a strong start to fiscal year 2019. We delivered excellent financial results and are reaffirming our outlook for the year," said Aart de Geus, chairman and co-CEO. "Even with some caution around global markets, electronics companies continue to invest in critical chip and system designs, as well as substantially growing amounts of sophisticated software. Synopsys is uniquely positioned to enable these designs, and our leadership is evident in both of our operating segments: Semiconductor & System Design and Software Integrity. We are well on-track towards our long-term growth and margin expansion targets."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income (loss) for the first quarter of fiscal 2019 was $153.5 million, or $1.01 per share, compared to $(3.7) million, or $(0.02) per share, for the first quarter of fiscal 2018. First quarter fiscal 2018 results included one-time tax expenses of approximately $119 million associated with the Tax Cuts and Jobs Act of 2017 ("tax reform").

Non-GAAP Results

On a non-GAAP basis, net income for the first quarter of fiscal 2019 was $164.9 million, or $1.08 per share, compared to non-GAAP net income of $169.6 million, or $1.10 per share, for the first quarter of fiscal 2018.

For a reconciliation between GAAP and non-GAAP results, see "GAAP to Non-GAAP Reconciliation" and the accompanying tables below.

Business Segments

Effective in fiscal year 2019, Synopsys realigned its business to evaluate the results of its Software Integrity business separate from Synopsys' traditional electronic design automation (EDA) and semiconductor IP business. Therefore, Synopsys began reporting revenue and operating income in two segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and associated services, and (2) Software Integrity, which includes security and quality solutions for software development across many industries. Further information regarding these segments is provided at the end of this press release.

Financial Targets

Synopsys also provided its consolidated financial targets for the second quarter and full fiscal year 2019, 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.

Synopsys adopted new revenue recognition requirements under ASC 606, "Revenue from Contracts with Customers," in the first fiscal quarter of 2019 under the modified retrospective method. The cumulative effect of initially applying the new recognition standards is recognized at the date of the adoption. Revenue during the fiscal 2019 transition year is estimated to be approximately $40 million lower under ASC 606 than it would be under ASC 605, "Revenue Recognition," and the impact is expected to decline to roughly neutral within two years. Throughout fiscal 2019 transition year, actual results will be presented under both ASC 606 and ASC 605 revenue recognition rules. Synopsys is providing full year targets under ASC 606 together with comparable numbers under ASC 605 for ease of comparison to prior periods. Additional details are available in the financial supplement on Synopsys' corporate website.

Second Quarter and Fiscal Year 2019 Financial Targets - ASC 606
(in millions except per share amounts)

(1) Applied in non-GAAP net income calculations

For reference, here are key fiscal year 2019 comparative amounts under ASC 605 prior year revenue recognition guidance.

Revenue: $3.34 billion - $3.37 billion
GAAP EPS: $3.39 - $3.52
Non-GAAP EPS: $4.40 - $4.47

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 on 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 463842, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on February 27, 2019. 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 second quarter of fiscal year 2019 in May 2019. 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 press 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' corporate 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 the corporate overview presentation will remain available on Synopsys' website through the date of the second quarter of fiscal year 2019 earnings call in May 2019, 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 2019 or comment to analysts or investors on, or otherwise update, the targets given in this release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the first quarter of fiscal year 2019 in its quarterly report on Form 10-Q to be filed by March 14, 2019.

Financial Tables

To read financial tables, click here

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.