Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2018

MOUNTAIN VIEW, Calif., Dec. 5, 2018 -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its fourth quarter and fiscal year 2018. Revenue for the fourth quarter was $795.1 million, compared to $696.6 million for the fourth quarter of fiscal 2017. Revenue for fiscal year 2018 was $3.121 billion, an increase of 14.5 percent from $2.725 billion in fiscal year 2017.

"Fiscal 2018 was another excellent year for Synopsys. We delivered double-digit revenue and earnings growth, with strength across all product groups and all geographies," said Aart de Geus, chairman and co-CEO of Synopsys. "Notwithstanding expectations of more modest semiconductor industry growth in 2019, design activity across the Silicon to Software spectrum continues unabated. Over the past five years we've made significant investments in developing next-generation EDA platforms, elevating the impact of our IP portfolio, and diversifying into an exciting new software security and quality market. As we look to our next phase of growth to $4 billion in revenue and beyond, we are raising our long-term financial objectives. Our objective is to drive annual double-digit non-GAAP earnings per share growth, through a mix of continued solid revenue growth and expansion of non-GAAP operating margins to the high 20s over time, with a goal of ~26% in 2021."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2018 was $254.3 million, or $1.66 per share, compared to net loss of $120.1 million, or $(0.80) per share, for the fourth quarter of fiscal 2017. GAAP net income for fiscal year 2018 was $432.5 million, or $2.82 per share, compared to $136.6 million, or $0.88 per share, for fiscal year 2017.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2018 was $119.6 million, or $0.78 per share, compared to non-GAAP net income of $106.5 million, or $0.69 per share, for the fourth quarter of fiscal 2017. Non-GAAP net income for fiscal year 2018 was $599.7 million, or $3.91 per share, compared to non-GAAP net income of $529.1 million, or $3.42 per share, for fiscal year 2017. Reconciliation between GAAP and non-GAAP results is provided later in this press release.

Financial Targets

Synopsys also provided its financial targets for the first 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 will adopt new revenue recognition requirements under ASC 606, "Revenue from Contracts with Customers," in the first fiscal quarter of 2019. Using the modified retrospective method, the cumulative effect of initially applying the new recognition standards is recognized at the date of initial application. 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 the 2019 transition year, actual results will be presented under both ASC 606 and ASC 605 revenue recognition rules. Synopsys is providing both official targets under ASC 606 and comparable numbers under ASC 605 for ease of comparison to prior periods. Additional details are available in the financial supplement on Synopsys' corporate website.

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

	Q1'19	Q1'19	FY'19	FY'19
	Low	High	Low	High
Revenue	$ 775	$ 810	$ 3,290	$ 3,340
GAAP Expenses	$ 677	$ 693	$ 2,787	$ 2,817
Non-GAAP Expenses	$ 612	$ 622	$ 2,530	$ 2,550
Other Income or Expense	$ (5)	$ (3)	$ (14)	$ (10)
Normalized Annual Tax Rate (1)	16%	16%	16%	16%
Outstanding Shares (fully diluted)	153	156	153	156
GAAP EPS	$ 0.56	$ 0.64	$ 2.80	$ 2.90
Non-GAAP EPS	$ 0.95	$ 1.00	$ 4.20	$ 4.27
Operating Cash Flow			~ $700 million

(1) Applied in non-GAAP net income calculations

For reference, below are key comparative metrics under ASC 605 rules.

	Q1'19	FY'19
Revenue	$790 million - $820 million	$3.34 billion - $3.37 billion
GAAP EPS	$0.60 - $0.67	$3.01 - $3.11
Non-GAAP EPS	$0.99 - $1.03	$4.40 - $4.47

Financial tables

To read financial tables, click here

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 456657, beginning at 4:00 p.m. Pacific Time today, until 11:59 p.m. Pacific Time on December 12, 2018. 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 of fiscal year 2019 in February 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 first quarter of fiscal year 2019 earnings call in February 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 first 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 fiscal year 2018 in its annual report on Form 10-K to be filed by January 2, 2019.

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.