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Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2013

Q4 2013 Financial Highlights

- Revenue: $504.9 million

- GAAP earnings per share: $0.36

- Non-GAAP earnings per share: $0.56

FY 2013 Financial Highlights

- Revenue: $1.962 billion

- GAAP earnings per share: $1.58

- Non-GAAP earnings per share: $2.44

- Cash flow from operations: $496.7 million

- Ending cash balance: $1.022 billion

MOUNTAIN VIEW, Calif., Dec. 4, 2013 /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 fourth quarter and fiscal year 2013.

For the fourth quarter of fiscal 2013, Synopsys reported revenue of $504.9 million, compared to $454.2 million for the fourth quarter of fiscal 2012. Revenue for fiscal year 2013 was $1.962 billion, an increase of 11.7 percent from $1.756 billion in fiscal 2012.

"Synopsys achieved excellent results in fiscal year 2013, and we are seeing strong product and customer momentum," said Aart de Geus, chairman and co-CEO of Synopsys. "Amid a landscape characterized by a mix of economic uncertainty and aggressive investment in designs, Synopsys is in a very strong competitive position, as many key customers rely on us to accelerate their differentiation and speed their time to market."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2013 was $56.9 million, or $0.36 per share, compared to $29.1 million, or $0.19 per share, for the fourth quarter of fiscal 2012. GAAP net income for fiscal year 2013 was $247.8 million, or $1.58 per share, compared to $182.4 million, or $1.21 per share, for fiscal 2012.

Non-GAAP Results

On a non-GAAP basis, net income for the fourth quarter of fiscal 2013 was $88.3 million, or $0.56 per share, compared to non-GAAP net income of $72.4 million, or $0.47 per share, for the fourth quarter of fiscal 2012. Non-GAAP net income for fiscal 2013 was $381.4 million, or $2.44 per share, compared to non-GAAP net income of $315.5 million, or $2.10 per share, for fiscal 2012. Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

Financial Targets

Synopsys also provided its financial targets for the first quarter and full fiscal year 2014. These targets do not include any future acquisition costs that may be incurred in fiscal year 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.

First Quarter of Fiscal Year 2014 Targets:

  • Revenue: $475 million - $485 million
  • GAAP expenses: $422 million - $444 million
  • Non-GAAP expenses: $377 million - $387 million
  • Other income and expense: $6 million - $8 million
  • Tax rate applied in non-GAAP net income calculations: approximately 24 percent
  • Fully diluted outstanding shares: 154 million - 158 million
  • GAAP earnings per share: $0.30 - $0.38
  • Non-GAAP earnings per share: $0.51 - $0.53

Full Fiscal Year 2014 Targets:

  • Revenue: $2.06 billion - $2.085 billion
  • Other income and expense: $7 million - $10 million
  • Tax rate applied in non-GAAP net income calculations: approximately 24 percent
  • Fully diluted outstanding shares: 154 million - 158 million
  • GAAP earnings per share: $1.69 - $1.82
  • Non-GAAP earnings per share: $2.55 - $2.60
  • Cash flow from operations: $425 million - $450 million
  • Revenue from beginning of year backlog: approximately 75 percent

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 and the effect of tax settlements with tax authorities, 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 Fourth Quarter and Fiscal Year 2013 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 Fourth Quarter and Fiscal Year 2013 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Twelve Months Ended


October 31,


October 31,


2013


2012


2013


2012

GAAP net income

$    56,890


$    29,081


$    247,800


$    182,402

Adjustments:








Amortization of intangible assets

30,546


28,355


127,503


99,859

Stock compensation

17,791


17,336


67,511


71,414

Acquisition-related costs

1,286


7,861


5,276


43,600

Inventory fair value adjustment

2,720


919


6,432


919

Facility restructuring charges

31


-


(178)


470

Tax settlement impacts

1,581


-


(1,130)


(36,882)

Tax adjustments

(22,557)


(11,187)


(71,797)


(46,255)

Non-GAAP net income 

$    88,288


$    72,365


$    381,417


$    315,527


























Three Months Ended


Twelve Months Ended


October 31,


October 31,


2013


2012


2013


2012

GAAP net income per share

$        0.36


$        0.19


$          1.58


$          1.21

Adjustments:








Amortization of intangible assets

0.19


0.18


0.81


0.66

Stock compensation

0.11


0.11


0.43


0.48

Acquisition-related costs

0.01


0.05


0.04


0.30

Inventory fair value adjustment

0.02


0.01


0.04


0.01

Facility restructuring charges

0.00


-


(0.00)


0.00

Tax settlement impacts

0.01


-


(0.01)


(0.25)

Tax adjustments

(0.14)


(0.07)


(0.45)


(0.31)

Non-GAAP net income per share

$        0.56


$        0.47


$          2.44


$          2.10









Shares used in calculation

157,039


153,271


156,601


150,280

Reconciliation of Target Non-GAAP Operating Results

The following tables reconcile the specific items excluded from GAAP in the calculation of target non-GAAP operating results for the periods indicated below.


GAAP to Non-GAAP Reconciliation of First Quarter Fiscal Year 2014 Targets

(in thousands, except per share amounts)






 Range for Three Months 


Ending January 31, 2014 (1)


Low


High

Target GAAP expenses

$   422,000


$   444,000

Adjustments:




       Estimated impact of amortization of intangible assets

(27,000)


(35,000)

       Estimated impact of stock compensation

(18,000)


(22,000)

Target non-GAAP expenses

$   377,000


$   387,000










Range for Three Months


Ending January 31, 2014 (1)


Low


High

Target GAAP earnings per share

$         0.30


$         0.38

Adjustments:




  Estimated impact of amortization of intangible assets

0.22


0.17

  Estimated impact of stock compensation

0.14


0.12

       Estimated impact of tax settlement 

(0.06)


(0.06)

 Net non-GAAP tax adjustments

(0.09)


(0.08)

Target non-GAAP earnings per share

$         0.51


$         0.53





Shares used in non-GAAP calculation (midpoint of target range)

156,000


156,000









GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2014 Targets






Range for Fiscal Year


Ending October 31, 2014 (1)


Low


High

Target GAAP earnings per share

$         1.69


$         1.82

Adjustments:




 Estimated impact of amortization of intangible assets

0.74


0.69

 Estimated impact of stock compensation

0.53


0.48

 Acquisition-related costs

-


-

 Inventory fair value adjustment

-


-

 Facility restructuring charges

-


-

      Estimated impact of tax settlement

(0.06)


(0.06)

 Net non-GAAP tax adjustments

(0.35)


(0.33)

Target non-GAAP earnings per share

$         2.55


$         2.60





Shares used in non-GAAP calculation (midpoint of target range)

156,000


156,000


(1) Synopsys' first quarter and fiscal year end on February 1, and November 1, 2014, respectively.  For presentation purposes, the periods refer to the closest calendar month end.

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 at 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 308548 beginning at 4:00 p.m. Pacific Time today. 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 fiscal 2014 in February 2014. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Brian Beattie, chief financial officer, on its website following the call. In addition, Synopsys makes additional financial information available in a financial supplement also posted on the corporate website.

Effectiveness of Information

The targets included in this release, the statements made during the earnings conference call and the information contained in the financial supplement (available in the Investor Relations section of Synopsys' 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 and the financial supplement will remain available on Synopsys' website through the date of the first quarter fiscal year 2014 earnings call in February 2014, 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 2014 or comment to analysts or investors on, or otherwise update, the targets given in this earnings release.

Availability of Final Financial Statements

Synopsys will include final financial statements for the fourth quarter and fiscal 2013 in its annual report on Form 10-K to be filed by January 2, 2014.

About Synopsys

Synopsys, Inc. (Nasdaq:SNPS) accelerates innovation in the global electronics market. As a leader in electronic design automation (EDA) and semiconductor IP, its software, IP and services help engineers address their design, verification, system and manufacturing challenges. Since 1986, engineers around the world have been using Synopsys technology to design and create billions of chips and systems. Learn more at http://www.synopsys.com.

Forward-Looking Statements

The statements made in this press release regarding projected financial results in the sections entitled "Financial Targets," and "Reconciliation of Target Non-GAAP Operating Results," and certain other statements, including statements regarding customer demand for our technology and predictable business model, are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. In addition, certain statements made in the earnings conference call are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those described by these statements due to a number of uncertainties, including, but not limited to:

  • continued uncertainty in the global economy and its potential impact on the semiconductor and electronics industries;
  • uncertainty in the growth of the semiconductor and electronics industry;
  • increased competition in the market for Synopsys' products and services including through consolidation in the industry and among our customers;
  • changes in demand for Synopsys' products due to fluctuations in demand for its customers' products;
  • Synopsys' ability to realize the potential financial or strategic benefits of acquisitions it completes and the difficulties in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations, including delays in customer orders, potential loss of customers, key employees, partners or vendors, customer demand and support obligations for product offerings, and disruption of ongoing business operations and diversion of management attention;
  • adverse changes in the relationships between Synopsys and key participants in the complex semiconductor ecosystem, including major foundries and intellectual property providers;
  • litigation;
  • lower-than-anticipated new IC design starts;
  • lower-than-anticipated purchases or delays in purchases of products or consulting services by Synopsys' customers, including delays in the renewal, or non-renewal, of Synopsys' license arrangements with major customers;
  • changes in the mix of time-based licenses and upfront licenses;
  • lower-than-expected orders; and
  • failure of customers to pay license fees as scheduled.

In addition, Synopsys' actual expenses, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending January 31, 2014; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2014; and cash flow from operations on a GAAP basis for fiscal year 2014 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) integration and other acquisition-related costs, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits and settlements to increase or decrease an income tax asset or liability, (iii) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (iv) changes in the anticipated amount of employee stock-based compensation expense recognized in Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or guidance, (viii) fluctuations in foreign currency exchange rates, (ix) general economic conditions, and (x) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in its latest Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2013. Furthermore, Synopsys' actual tax rates applied to income for the first quarter and fiscal year 2014 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, and actions by the government.

Finally, Synopsys' targets for outstanding shares in the first quarter and fiscal year 2014 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions, and the extent of Synopsys' stock repurchase activity.

Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the financial supplement whether as a result of new information, future events or otherwise, unless otherwise required by law.

INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901

EDITORIAL CONTACT:
Yvette Huygen
Synopsys, Inc.
650-584-4547
yvetteh@synopsys.com 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)


















Three Months Ended

October 31,


Twelve Months Ended

October 31,


2013


2012


2013


2012

Revenue:








   Time-based license

$ 412,926


$ 367,038


$ 1,599,464


$ 1,449,300

   Upfront

36,493


28,869


132,018


105,137

   Maintenance and service

55,456


58,306


230,732


201,580

      Total revenue

504,875


454,213


1,962,214


1,756,017

Cost of revenue:








   License

72,992


60,082


268,910


232,811

   Maintenance and service

21,264


19,430


80,338


78,607

   Amortization of intangible assets

24,853


23,012


104,304


81,255

      Total cost of revenue

119,109


102,524


453,552


392,673

Gross margin

385,766


351,689


1,508,662


1,363,344

Operating expenses:








   Research and development

175,057


153,568


669,197


581,628

   Sales and marketing

114,913


111,385


425,982


415,629

   General and administrative

39,089


41,903


143,791


157,459

   Amortization of intangible assets

5,693


5,343


23,199


18,604

      Total operating expenses

334,752


312,199


1,262,169


1,173,320

Operating income

51,014


39,490


246,493


190,024

Other income, net

8,043


3,242


29,173


11,111

Income before income taxes

59,057


42,732


275,666


201,135

Provision for income taxes

2,167


13,651


27,866


18,733

Net income

$ 56,890


$ 29,081


$ 247,800


$ 182,402









Net income per share:








   Basic

$ 0.37


$ 0.19


$ 1.62


$ 1.24

   Diluted

$ 0.36


$ 0.19


$ 1.58


$ 1.21









Shares used in computing per share amounts:








   Basic

154,369


150,149


153,319


146,887

   Diluted

157,039


153,271


156,601


150,280


(1) Synopsys' fourth quarter of fiscal 2013 and 2012 ended on November 2, 2013 and November 3, 2012, respectively. For presentation purposes, we refer to periods ended October 31. Synopsys' first quarter of fiscal 2012 included an extra week; its fiscal 2013 and fiscal 2012 were 52-week and 53-week years, respectively.  

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)








October 31, 2013


October 31, 2012

ASSETS:










  Cash and cash equivalents


$              1,022,441


$                 700,382

  Accounts receivable, net


256,026


292,668

  Deferred income taxes


92,058


74,712

  Income taxes receivable and prepaid taxes


18,277


17,267

  Prepaid and other current assets


59,175


55,627

          Total current assets


1,447,977


1,140,656

Property and equipment, net


197,600


191,243

Goodwill


1,975,971


1,976,987

Intangible assets, net


335,425


466,322

Long-term prepaid taxes


7,935


9,429

Long-term deferred income taxes


243,066


239,412

Other long-term assets


150,961


123,607

           Total assets


$              4,358,935


$              4,147,656






LIABILITIES AND STOCKHOLDERS' EQUITY:





Current liabilities:





  Accounts payable and accrued liabilities


$                 358,197


$                 383,093

  Accrued income taxes


7,168


4,682

  Deferred revenue


827,554


834,864

  Short-term debt


30,000


30,000

           Total current liabilities


1,222,919


1,252,639

Long-term accrued income taxes


53,064


52,645

Long-term deferred revenue


54,736


67,184

Long-term debt


75,000


105,000

Other long-term liabilities


164,939


126,217

           Total liabilities


1,570,658


1,603,685

Stockholders' equity:





  Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding


-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 154,169 and 150,899 shares outstanding, respectively


1,542


1,509

  Capital in excess of par value


1,597,244


1,585,034

  Retained earnings


1,324,854


1,098,694

  Treasury stock, at cost: 3,095 and 6,365 shares, respectively


(106,668)


(168,090)

  Accumulated other comprehensive loss 


(28,695)


(15,461)

           Total stockholders' equity excluding non-controlling interest


2,788,277


2,501,686

Non-controlling interest


-


42,285

           Total liabilities and stockholders' equity


$              4,358,935


$              4,147,656


(1) Synopsys' fourth quarter of fiscal 2013 and 2012 ended on November 2, 2013 and November 3, 2012, respectively. For presentation purposes, we refer to periods ended October 31. Synopsys' first quarter of fiscal 2012 included an extra week; its fiscal 2013 and fiscal 2012 were 52-week and 53-week years, respectively.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






 Twelve Months Ended October 31,


2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$      247,800


$  182,402

Adjustments to reconcile net income to net cash provided by operating activities:








   Amortization and depreciation

187,404


156,840

   Stock compensation

67,511


71,414

   Allowance for doubtful accounts

102


3,754

   Write-down of long-term investments

-


452

   Gain on sale of investments

(868)


(650)

   Deferred income taxes

(676)


12,850

   Net changes in operating assets and liabilities, net of




   acquired assets and liabilities:




      Accounts receivable

37,590


(53,395)

      Prepaid and other current assets

(12,063)


15,199

      Other long-term assets

(27,468)


(10,231)

      Accounts payable and other liabilities

(1,135)


42,960

      Income taxes

(2,306)


(43,113)

      Deferred revenue

814


107,586

   Net cash provided by operating activities

496,705


486,068





CASH FLOWS FROM INVESTING ACTIVITIES:




   Proceeds from sales and maturities of short-term investments

-


166,132

   Purchases of short-term investments

-


(18,179)

   Proceeds from sales of long-term investments

989


506

   Proceeds from sale of property and equipment

2,000


-

   Purchases of property and equipment

(65,459)


(54,191)

   Cash paid for acquisitions, net of cash acquired

-


(970,089)

   Capitalization of software development costs

(3,609)


(3,302)

   Net cash used in investing activities

(66,079)


(879,123)





CASH FLOWS FROM FINANCING ACTIVITIES:




   Principal payments on capital leases

(3,913)


(6,252)

   Proceeds from credit facility and term loan

-


250,000

   Acquisition of non-controlling interest

(44,004)


-

   Repayment of debts

(30,712)


(136,156)

   Issuances of common stock

131,914


175,896

   Purchases of treasury stock

(145,017)


(40,000)

   Other

(6,253)


-

   Net cash (used in) provided by financing activities

(97,985)


243,488

Effect of exchange rate changes on cash and cash equivalents

(10,582)


(5,128)

Net change in cash and cash equivalents

322,059


(154,695)

Cash and cash equivalents, beginning of the year

700,382


855,077

Cash and cash equivalents, end of the period

$ 1,022,441


$ 700,382


(1)  Synopsys' fourth quarter of fiscal 2013 and 2012 ended on November 2, 2013 and November 3, 2012, respectively.  For presentation purposes, we refer to periods ended October 31.  Synopsys' first quarter of fiscal 2012 included an extra week; its fiscal 2013 and fiscal 2012 were 52-week and 53-week years, respectively.

 

SOURCE Synopsys, Inc.


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