Synopsys Posts Financial Results for Second Quarter Fiscal Year 2019

MOUNTAIN VIEW, Calif., May 22, 2019 -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2019. Revenue for the second quarter of fiscal 2019 was $836.2 million, compared to $776.8 million for the second quarter of fiscal 2018, an increase of approximately 7.6 percent.

"Synopsys delivered an excellent second fiscal quarter, with record revenue and strength across both operating segments. We also continued returning capital to shareholders through an accelerated share repurchase," said Aart de Geus, chairman and co-CEO. "Whereas geopolitical tension has escalated, the overall customer environment for us is quite solid. Investments in sophisticated electronic content and the growing impact of AI in today's connected world are leading to an ever-increasing need for the Silicon to Software solutions that we provide. As a result of our strong first half execution, we are raising the top end of our annual revenue and non-GAAP earnings guidance for the year."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2019 was $118.2 million, or $0.77 per share, compared to $102.5 million, or $0.67 per share, for the second quarter of fiscal 2018.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2019 was $178.1 million, or $1.16 per share, compared to non-GAAP net income of $165.0 million, or $1.08 per share, for the second 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 reports 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 provides its consolidated financial targets for the third 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.

Our expanded full-year revenue and earnings per share guidance ranges are a result of the recent government action to place certain entities on the "Entity List," restricting the sale of U.S. technology to the named entities. As a result of this government action, we are not able to book new business with one of our customers and its affiliates, and revenue associated with contracts currently in place has been put on hold until either the contract expires, or the restriction is lifted.

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 was 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.

Third 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, key fiscal year 2019 comparative amounts under ASC 605 prior year revenue recognition guidance are:

• Revenue: $3.34 billion - $3.38 billion
• GAAP EPS: $3.05 - $3.47
• Non-GAAP EPS: $4.44 - $4.60

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 466921, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on May 29, 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 third quarter of fiscal year 2019 in August 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 third quarter of fiscal year 2019 earnings call in August 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 third 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 second quarter of fiscal year 2019 in its quarterly report on Form 10-Q to be filed by June 13, 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.