Synopsys Posts Financial Results for Third Quarter Fiscal Year 2014

Q3 2014 Financial Highlights

(PRNewswire) —  Synopsys, Inc. (Nasdaq: SNPS), a global leader providing software, IP and services used to accelerate innovation in chips and electronic systems, today reported results for its third quarter of fiscal year 2014.

For the third quarter of fiscal year 2014, Synopsys reported revenue of $521.8 million, compared to $482.9 million for the third quarter of fiscal 2013, an increase of 8.0 percent.  

"Synopsys delivered an excellent fiscal third quarter, solidifying the year's financial outlook," said Aart de Geus, chairman and co-CEO of Synopsys.  "We shipped game-changing new products that are generating intense customer interest and high-impact results, and have already started a multi-year upgrade cycle. We also achieved encouraging results through Coverity, the recent acquisition that expands our total addressable market into the software quality, test and security space."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2014 was $65.7 million, or $0.42 per share, compared to $52.3 million, or $0.33 per share, for the third quarter of fiscal 2013.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2014 was $103.2 million, or $0.65 per share, compared to non-GAAP net income of $86.5 million, or $0.55 per share, for the third quarter of fiscal 2013. 

Financial Targets

Synopsys also provided its financial targets for the fourth quarter and full fiscal year 2014.  These targets do not include any future acquisition-related expenses that may be incurred in fiscal 2014.  These targets constitute forward-looking information 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 2014 Targets:

  • Revenue: $537 million - $547 million
  • GAAP expenses: $462 million - $479 million
  • Non-GAAP expenses: $410 million - $420 million
  • Other income and expense: ($1) million - $1 million
  • Tax rate applied in non-GAAP net income calculations: approximately 22 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $0.32 - $0.38
  • Non-GAAP earnings per share: $0.59 - $0.61

Full Fiscal Year 2014 Targets:

  • Revenue: $2.055 billion - $2.065 billion
  • Other income and expense: $10 million - $12 million
  • Tax rate applied in non-GAAP net income calculations: approximately 20 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $1.57 - $1.63
  • Non-GAAP earnings per share: $2.48 - $2.50
  • 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, including inventory fair value adjustments, (iv) other significant items, including facilities restructuring charges and the effect of tax and legal settlements, and (v) the income tax effect of 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. 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 Third Quarter Fiscal Year 2014 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 2014 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Nine Months Ended


July 31,


July 31,


2014


2013


2014


2013

GAAP net income

$   65,656


$ 52,297


$ 196,669


$ 190,910

Adjustments:








Amortization of intangible assets

32,809


32,281


92,990


96,957

Stock compensation

21,399


16,490


58,340


49,719

Acquisition-related costs

36


162


5,484


3,990

Inventory fair value adjustment

-


1,903


-


3,712

Facility restructuring charges

-


(239)


-


(209)

Tax and other settlements

(2,981)


(2,711)


(15,288)


(2,711)

Tax adjustments

(13,768)


(13,685)


(40,262)


(49,239)

Non-GAAP net income 

$ 103,151


$ 86,498


$ 297,933


$ 293,129


























Three Months Ended


Nine Months Ended


July 31,


July 31,


2014


2013


2014


2013

GAAP net income per share

$       0.42


$     0.33


$       1.25


$       1.22

Adjustments:








Amortization of intangible assets

0.21


0.21


0.59


0.62

Stock compensation

0.14


0.10


0.37


0.32

Acquisition-related costs

0.00


0.00


0.04


0.03

Inventory fair value adjustment

-


0.01


-


0.02

Facility restructuring charges

-


(0.00)


-


(0.00)

Tax and other settlements

(0.03)


(0.02)


(0.10)


(0.02)

Tax adjustments

(0.09)


(0.08)


(0.26)


(0.31)

Non-GAAP net income per share

$       0.65


$     0.55


$       1.89


$       1.88









Shares used in calculation

157,622


157,056


157,253


156,215


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