What are the main reasons Synopsys uses non-GAAP financial measures?

Synopsys uses non-GAAP financial measures primarily to provide supplemental information that management believes is valuable in analyzing their core operational performance. These measures exclude items like amortization of acquired intangibles, stock compensation, acquisition-related costs, and restructuring charges, which are considered not to directly reflect ongoing business operations or are non-cash in nature. The company believes these measures offer a better understanding of core profitability, aid in internal comparisons to historical results and forecasts, and facilitate comparisons with competitors.

How has U.S. tax reform affected Synopsys's financial reporting in this filing?

The U.S. tax reform enacted in December 2017, which lowered the U.S. federal statutory tax rate, led Synopsys to adjust its normalized annual non-GAAP tax rate from 19% to 13% for fiscal year 2018. The filing also notes a $73 million tax expense for a one-time transition tax on deemed repatriation of foreign earnings and a $46 million tax expense for the write-down of certain deferred tax assets, both treated as separate from the normalized non-GAAP tax rate due to their unusual and infrequent nature.

Are the non-GAAP measures presented in this filing considered the primary financial results?

No, the non-GAAP financial measures are presented as supplemental information and are not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Synopsys emphasizes that these non-GAAP measures should be viewed in conjunction with the corresponding GAAP measures to provide a complete understanding of the company's financial condition and results of operations.

What specific items are excluded from Synopsys's non-GAAP calculations, and why?

Synopsys excludes several items: (i) amortization of acquired intangibles (non-cash, relates to acquisitions); (ii) stock compensation impact (non-cash, not used to assess core profitability); (iii) acquisition-related costs (specific to business combinations, not core operations); (iv) restructuring charges (non-recurring, not part of core operations); (v) legal matters (unpredictable, not core operations); and (vi)-(vii) impacts of U.S. tax reform (unusual and infrequent). They also adjust for (viii) the income tax effect of these non-GAAP pre-tax adjustments using a normalized tax rate.

SNPS 8-K: Earnings & Results

Summary

This 8-K filing by Synopsys, Inc. (SNPS) on May 23, 2018, primarily announces their financial results for the second fiscal quarter ended April 30, 2018, as detailed in an attached press release (Exhibit 99.1). The filing emphasizes the use of non-GAAP financial measures, explaining their methodology and the rationale behind excluding certain items such as amortization of acquired intangibles, stock compensation, acquisition-related costs, restructuring charges, legal matters, and the impact of U.S. tax reform. This focus on non-GAAP metrics is presented as a way to provide investors with a clearer view of the company's core operational performance and to facilitate comparisons with historical results and competitors. The company also details adjustments to their normalized annual non-GAAP tax rate, reducing it from 19% to 13% for fiscal year 2018 due to the U.S. tax reform enacted in December 2017. This adjustment aims to provide better consistency and align the tax rate with the expected geographic earnings mix. Investors should note that these non-GAAP measures are supplemental and should be viewed alongside GAAP measures for a complete financial picture.

Key Highlights

1Synopsys, Inc. announced its financial results for the second fiscal quarter ended April 30, 2018, via an 8-K filing.
2The filing heavily relies on and explains the use of non-GAAP financial measures to present core operational performance.
3Key exclusions from non-GAAP measures include amortization of acquired intangibles, stock compensation, acquisition-related costs, and restructuring charges.
4The company has adjusted its normalized annual non-GAAP tax rate from 19% to 13% for fiscal year 2018, reflecting the impact of U.S. tax reform.
5The rationale for using non-GAAP measures is to provide a better understanding of core operations, facilitate comparisons, and aid in investment and budgeting decisions.
6The filing clarifies that non-GAAP information is supplemental and should be considered alongside GAAP results.
7An attached press release (Exhibit 99.1) contains the detailed financial results for the quarter.

SYNOPSYS INC 8-K Report, Financial Results (May 23, 2018)

Summary

Key Highlights

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