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Continuing its earnings streak for the sixth consecutive quarter, Synopsys Inc. (SNPS - Free Report) , yesterday, delivered splendid third-quarter fiscal 2017 results, wherein the top and bottom lines both came ahead of the respective Zacks Consensus Estimate and also marked year-over-year improvement.
The company reported adjusted earnings per share (excluding all one-time items but including stock-based compensation expenses) of 84 cents, which came in 37.7% higher than the year-ago quarter’s adjusted earnings of 61 cents. On a non-GAAP basis (excluding all one-time items), earnings came in at 92 cents per share, up from 76 cents posted in third-quarter fiscal 2016. The Zacks Consensus Estimate for the quarter was pegged at 69 cents.
The robust year-over-year bottom-line performance was mainly driven by strong revenue growth and efficient cost management. The company’s third-quarter revenues jumped 13% year over year to $695.4 million and came toward the higher-end of the previously guided range of $685-$700 million (mid-point $692.5 million).
Reported revenues also surpassed the Zacks Consensus Estimate of $690 million. On a year-over-year basis, revenues were positively impacted by higher adoption of Synopsys’ products, and strength in IP and hardware products. About 90% of the revenues came from the backlog in the beginning of the quarter and the remaining 10% was contributed by a customer.
Despite reporting strong quarterly results, shares of Synopsys were down as much as 3.3% during yesterday’s after-hour trade, before settling down at 1.4%. This may be due to the fact that the company’s non-GAAP earnings came in toward the lower-end of the previously provided guidance range of 91-94 cents.
Nonetheless, Synopsys stock has gained 34.4% year to date, substantially outperforming the 22.6% rally of the industry it belongs to.
Quarter in Detail
Segment wise, License revenues (including time-based and upfront) were $603.8 million, up nearly 10.5% from the year-ago quarter. Maintenance and service revenues surged 32.7% year over year to $91.6 million.
Non-GAAP gross profit was $544.4 million, up approximately 8.9% from the year-ago period. However, as a percentage of revenues, it contracted 300 basis points (bps) from the prior-year quarter to 78.3%.
Non-GAAP operating expenses increased 3.3% on a year-over-year basis to $377 million. However, as a percentage of revenues, the same descended 510 bps from the year-earlier quarter to 54.2%.
Synopsys’ non-GAAP operating income was up 24.1% on a year-over-year basis and came in at $167.4 million. Operating margin expanded 220 bps on a year-over-year basis to 24.1%.
The company’s non-GAAP net income for the quarter came in at $141.6 million, marking year-over-year growth of 21.9%.
Synopsys exited the quarter with cash, cash equivalents and short-term investments of $1.302 billion million compared with $1.131 million at the end of the previous quarter. Accounts receivables were $411.3 million compared with $373.8 million in the last quarter.
During the first three quarters, the company generated $449.7 million of cash flow from operational activities. The company repurchased $300 million worth of its common stock during the first nine months of fiscal 2017. The company has remaining $500 million for its current authorization.
Guidance
Buoyed by better-than-expected fiscal third-quarter results, Synopsys raised its fiscal 2017 outlook. The company now expects fiscal 2017 revenues to be in the range of $2.670-$2.685 billion (previous guidance $2.650–$2.670 billion). The Zacks Consensus Estimate for revenues is pegged at $2.67 billion.
Non-GAAP earnings per share are now projected between $3.29 and $3.32 (previously $3.24 and $3.29). GAAP earnings are projected between $1.92 per share and $1.99 per share, up from $1.84-$1.97 guided earlier. However, operating cash flow is still expected to come in the range of $580-$600 million.
Apart from this, the company initiated guidance for the fiscal fourth quarter. The company expects revenues in the range of $642-$657 million (mid-point $649.5 million). The Zacks Consensus Estimate for revenues is pegged at $643.29 million. The company expects non-GAAP expenses within $535-$545 million. Management expects non-GAAP earnings per share in the range of 55-58 cents, while GAAP earnings are projected between 26 cents and 33 cents.
Our Take
Synopsys posted impressive fiscal third-quarter results. Revenues as well as earnings improved year over year, mainly due to strength in hardware and IP products. Additionally, the company’s fourth-quarter and upbeat fiscal 2017 guidance are encouraging.
Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. We believe the company’s recent product launches, acquisitions and deal wins will boost results, going ahead. Furthermore, unique intellectual properties and global support provided by the company will likely drive its near-term performance. Additionally, the acquisition of Cigital and Codiscope will enable Synopsys to offer a comprehensive software security signoff solution to its customers.
However, competition from Cadence Design Systems Inc. (CDNS - Free Report) and Mentor Graphics Corp., a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies keep us on the sidelines.
Red Hat and Adobe Systems have long-term expected EPS growth rates of 14.4% and 16.6%, respectively.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
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Synopsys (SNPS) Tops Q3 Earnings & Revenues, Lifts FY17 View
Continuing its earnings streak for the sixth consecutive quarter, Synopsys Inc. (SNPS - Free Report) , yesterday, delivered splendid third-quarter fiscal 2017 results, wherein the top and bottom lines both came ahead of the respective Zacks Consensus Estimate and also marked year-over-year improvement.
The company reported adjusted earnings per share (excluding all one-time items but including stock-based compensation expenses) of 84 cents, which came in 37.7% higher than the year-ago quarter’s adjusted earnings of 61 cents. On a non-GAAP basis (excluding all one-time items), earnings came in at 92 cents per share, up from 76 cents posted in third-quarter fiscal 2016. The Zacks Consensus Estimate for the quarter was pegged at 69 cents.
The robust year-over-year bottom-line performance was mainly driven by strong revenue growth and efficient cost management. The company’s third-quarter revenues jumped 13% year over year to $695.4 million and came toward the higher-end of the previously guided range of $685-$700 million (mid-point $692.5 million).
Reported revenues also surpassed the Zacks Consensus Estimate of $690 million. On a year-over-year basis, revenues were positively impacted by higher adoption of Synopsys’ products, and strength in IP and hardware products. About 90% of the revenues came from the backlog in the beginning of the quarter and the remaining 10% was contributed by a customer.
Despite reporting strong quarterly results, shares of Synopsys were down as much as 3.3% during yesterday’s after-hour trade, before settling down at 1.4%. This may be due to the fact that the company’s non-GAAP earnings came in toward the lower-end of the previously provided guidance range of 91-94 cents.
Nonetheless, Synopsys stock has gained 34.4% year to date, substantially outperforming the 22.6% rally of the industry it belongs to.
Quarter in Detail
Segment wise, License revenues (including time-based and upfront) were $603.8 million, up nearly 10.5% from the year-ago quarter. Maintenance and service revenues surged 32.7% year over year to $91.6 million.
Non-GAAP gross profit was $544.4 million, up approximately 8.9% from the year-ago period. However, as a percentage of revenues, it contracted 300 basis points (bps) from the prior-year quarter to 78.3%.
Non-GAAP operating expenses increased 3.3% on a year-over-year basis to $377 million. However, as a percentage of revenues, the same descended 510 bps from the year-earlier quarter to 54.2%.
Synopsys’ non-GAAP operating income was up 24.1% on a year-over-year basis and came in at $167.4 million. Operating margin expanded 220 bps on a year-over-year basis to 24.1%.
The company’s non-GAAP net income for the quarter came in at $141.6 million, marking year-over-year growth of 21.9%.
Synopsys, Inc. Price, Consensus and EPS Surprise
Synopsys, Inc. Price, Consensus and EPS Surprise | Synopsys, Inc. Quote
Balance Sheet & Cash Flow
Synopsys exited the quarter with cash, cash equivalents and short-term investments of $1.302 billion million compared with $1.131 million at the end of the previous quarter. Accounts receivables were $411.3 million compared with $373.8 million in the last quarter.
During the first three quarters, the company generated $449.7 million of cash flow from operational activities. The company repurchased $300 million worth of its common stock during the first nine months of fiscal 2017. The company has remaining $500 million for its current authorization.
Guidance
Buoyed by better-than-expected fiscal third-quarter results, Synopsys raised its fiscal 2017 outlook. The company now expects fiscal 2017 revenues to be in the range of $2.670-$2.685 billion (previous guidance $2.650–$2.670 billion). The Zacks Consensus Estimate for revenues is pegged at $2.67 billion.
Non-GAAP earnings per share are now projected between $3.29 and $3.32 (previously $3.24 and $3.29). GAAP earnings are projected between $1.92 per share and $1.99 per share, up from $1.84-$1.97 guided earlier. However, operating cash flow is still expected to come in the range of $580-$600 million.
Apart from this, the company initiated guidance for the fiscal fourth quarter. The company expects revenues in the range of $642-$657 million (mid-point $649.5 million). The Zacks Consensus Estimate for revenues is pegged at $643.29 million. The company expects non-GAAP expenses within $535-$545 million. Management expects non-GAAP earnings per share in the range of 55-58 cents, while GAAP earnings are projected between 26 cents and 33 cents.
Our Take
Synopsys posted impressive fiscal third-quarter results. Revenues as well as earnings improved year over year, mainly due to strength in hardware and IP products. Additionally, the company’s fourth-quarter and upbeat fiscal 2017 guidance are encouraging.
Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. We believe the company’s recent product launches, acquisitions and deal wins will boost results, going ahead. Furthermore, unique intellectual properties and global support provided by the company will likely drive its near-term performance. Additionally, the acquisition of Cigital and Codiscope will enable Synopsys to offer a comprehensive software security signoff solution to its customers.
However, competition from Cadence Design Systems Inc. (CDNS - Free Report) and Mentor Graphics Corp., a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies keep us on the sidelines.
Currently, Synopsys has a Zacks Rank #3 (Hold).
Couple of better-ranked stocks in the same industry space are Red Hat, Inc. and Adobe Systems Incorporated (ADBE - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Red Hat and Adobe Systems have long-term expected EPS growth rates of 14.4% and 16.6%, respectively.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>