MOUNTAIN VIEW, Calif., Feb. 20 /PRNewswire-FirstCall/ -- Synopsys, Inc. (NASDAQ: SNPS), a world leader in software and IP for semiconductor design and manufacturing, today reported results for its first quarter ended January 31, 2008.
For the first quarter, Synopsys reported revenue of $315.5 million, a 5.1 percent increase compared to $300.2 million for the first quarter of fiscal 2007.
"We exit the first quarter with our year solidly on track in terms of revenue and earnings growth, operating margin expansion, an excellent balance sheet, and advanced technology," said Aart de Geus, chairman and CEO of Synopsys. "And with more than 90 percent of our revenue under time-based licenses, we adhered strongly to our predictable business model."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2008 was $46.4 million, or $0.31 per share, compared to $23.4 million, or $0.16 per share, for the first quarter of fiscal 2007.
Non-GAAP Results
On a non-GAAP basis, net income for the first quarter of fiscal 2008 was $66.0 million, or $0.44 per share, compared to non-GAAP net income of $44.0 million, or $0.30 per share, for the first quarter of fiscal 2007.
Non-GAAP net income consists of GAAP net income excluding employee share-based compensation expense calculated in accordance with FAS 123® and, to the extent incurred in a particular quarter or period, amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges, and other significant items which, in the opinion of management, are infrequent or non-recurring. See "GAAP Reconciliation" below.
Financial Targets
Synopsys also provided its operating model targets for the second quarter and full fiscal year 2008. 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.
Second Quarter of Fiscal Year 2008 Targets: * Revenue: $317 million - $325 million * GAAP expenses: $269 million - $283 million * Non-GAAP expenses: $242 million - $252 million * Other income and expense: $0 - $4 million * Tax rate applied in non-GAAP net income calculations: 26 - 27 percent * Fully diluted outstanding shares: 145 million - 150 million * GAAP earnings per share: $0.22 - $0.26 * Non-GAAP earnings per share: $0.37 - $0.39 * Revenue from backlog: greater than 90 percent Full Fiscal Year 2008 Targets: * Revenue: $1.300 billion - $1.315 billion * Tax rate applied in non-GAAP net income calculations: 26 - 27 percent * Fully diluted outstanding shares: 145 million - 150 million * GAAP earnings per share: $1.03 - $1.12 * Non-GAAP earnings per share: $1.56 - $1.61 * Cash flow from operations: greater than $325 million GAAP Reconciliation
Synopsys' management evaluates and makes decisions about the Company's business operations primarily based on the bookings, revenue, and direct, ongoing and recurring costs of those operations. Management does not believe amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges and other significant infrequent items are ongoing and recurring operating costs of its core software, intellectual property and service business operations. In addition, while employee share-based compensation expense calculated in accordance with FAS 123® and change in the fair value of the Company's non-qualified deferred compensation plan obligations constitute ongoing and recurring expenses of the Company, such expenses are excluded from non-GAAP results because they are not expenses that require cash settlement by the Company and because such expenses are not used by management to assess the core performance of the Company's business operations. Therefore, management excludes such costs, to the extent incurred in a particular quarter, from the following historical and targeted GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income, income before provision (benefit) for income taxes, provision (benefit) for income taxes, net income and net income per share.
For each such measure, excluding these costs provides management with more consistent, comparable information about the Company's core performance. For example, since the Company does not acquire businesses on a predictable cycle, management would have difficulty evaluating the Company's performance as measured by gross margin, operating margin, income before taxes and net income on a period-to-period basis unless it excluded acquisition-related charges. Similarly, the Company does not undertake significant restructuring or realignments on a regular basis, and, as a result, excludes associated charges in order to enable better and more consistent evaluations of the Company's operating expenses before and after such actions are taken. Management also uses these measures to help it make budgeting decisions, for example, as between product development expenses (which affect cost of revenue and gross margin) and research and development, sales and marketing and general and administrative expenses (which affect operating expenses and operating margin). Finally, the availability of such information helps management track performance to both internal and externally communicated financial targets and to its competitors' operating results.
Management recognizes that the use of these non-GAAP measures has certain limitations, including the fact that management must exercise judgment in determining whether certain types of charges, such as those relating to workforce reductions executed in the ordinary course, should be excluded from non-GAAP results. However, management believes that, although it is important for investors to understand GAAP measures, providing investors with these non-GAAP measures gives them additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.
Reconciliation of First Quarter Results
The following tables reconcile the specific items excluded from GAAP in the calculation of non-GAAP net income and earnings per share for periods indicated below:
GAAP to Non-GAAP Reconciliation of First Quarter Results
(unaudited, in thousands, except per share amounts)
Income Statement Reconciliation Three Months Ended
January 31,
2008 2007
GAAP net income $46,445 $23,357
Adjustments:
Amortization of intangible assets 11,624 13,353
Share-based compensation 15,644 16,215
Tax effect (7,697) (8,920)
Non-GAAP net income $66,016 $44,005
Three Months Ended
January 31,
2008 2007
GAAP earnings per share $0.31 $0.16
Adjustments:
Amortization of intangible assets 0.08 0.09
Share-based compensation 0.10 0.11
Tax effect (0.05) (0.06)
Non-GAAP earnings per share $0.44 $0.30
Shares used in calculation 150,683 148,113
Reconciliation of Target 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 Second Quarter Fiscal Year 2008 Targets
(in thousands, except per share amounts)
Range for Three Months
Ending April 30, 2008
Low High
Target GAAP expenses $269,000 $283,000
Adjustment:
Estimated impact of amortization of
intangible assets (11,000) (13,000)
Estimated impact of share-based compensation (16,000) (18,000)
Target non-GAAP expenses $242,000 $252,000
Range for Three Months
Ending April 30, 2008
Low High
Target GAAP earnings per share $0.22 $0.26
Adjustment:
Estimated impact of amortization of intangible
assets 0.09 0.07
Estimated impact of share-based compensation 0.12 0.11
Net non-GAAP tax effect (0.06) (0.05)
Target non-GAAP earnings per share $0.37 $0.39
Shares used in non-GAAP calculation (midpoint
of target range) 147,500 147,500
GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2008 Targets
Range for Fiscal Year
Ending October 31, 2008
Low High
Target GAAP earnings per share $1.03 $1.12
Adjustment:
Estimated impact of amortization of intangible
assets 0.28 0.26
Estimated impact of share-based compensation 0.47 0.44
Net non-GAAP tax effect (0.22) (0.21)
Target non-GAAP earnings per share $1.56 $1.61
Shares used in non-GAAP calculation
(midpoint of target range) 147,500 147,500
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 http://www.synopsys.com/corporate/invest/invest.html. A recording of the call will be available by calling +1-800-475-6701 (+1-320-365-3844 for international callers), access code 909867, beginning at 5:30 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 second quarter fiscal 2008 in May 2008. In addition, Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and chief executive officer, and Brian Beattie, chief financial officer, on its website following the call.
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 represent Synopsys' expectations and beliefs as of the date of this release only. Although this press release, copies of the prepared remarks of the 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 second quarter earnings call in May 2008, 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 second quarter of fiscal 2008 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 first quarter of fiscal 2008 in its quarterly report on Form 10-Q to be filed by March 13, 2008.
About Synopsys
Synopsys, Inc. (NASDAQ: SNPS) is a world leader in electronic design automation (EDA) software for semiconductor design. The Company delivers technology-leading system and semiconductor design and verification platforms, IC manufacturing and yield optimization solutions, semiconductor intellectual property and design services to the global electronics market. These solutions enable the development and production of complex integrated circuits and electronic systems. Through its comprehensive solutions, Synopsys addresses the key challenges designers and manufacturers face today, including power management, accelerated time to yield and system-to-silicon verification. Synopsys is headquartered in Mountain View, California, and has more than 60 offices located throughout North America, Europe, Japan and Asia. Visit Synopsys online 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 Operating Results" and 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:
* weakness or continued budgetary caution in the semiconductor or
electronics industries;
* lower-than-expected research and development spending by semiconductor
and electronic systems companies;
* competition in the market for Synopsys' products and services;
* lower-than-anticipated new IC design starts;
* lower-than-anticipated purchases or delays in purchases of software or
consulting services by Synopsys' customers, including delays in the
renewal, or non-renewal, of Synopsys' license arrangements with major
customers;
* failure of customers to pay license fees as scheduled;
* changes in the mix of time-based licenses and upfront licenses;
* lower-than-expected bookings;
* failure of Synopsys' cost control efforts, including recent efforts to
outsource certain internal functions, to result in the anticipated
savings;
* failure to successfully develop additional intellectual property blocks
for its IP business; and
* difficulties in the integration of the products and operations of
acquired companies or assets into Synopsys' products and operations.
In addition, Synopsys' actual expenses and earnings per share on a GAAP and non-GAAP basis for the fiscal quarter ending April 30, 2008 and actual expenses, earnings per share and operating cash flow on a GAAP and non-GAAP basis for fiscal year 2008 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (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 or new accounting interpretations such as FASB Interpretation No. 48, to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related expenses including amortization of additional intangible assets associated with future acquisitions, if any, (iv) changes in the anticipated amount of employee share-based compensation expense recognized on 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 pronouncements, and (viii) other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended October 31, 2007. Furthermore, Synopsys' actual tax rates applied to income for the second quarter and fiscal year 2008 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. Finally, Synopsys' targets for outstanding shares in the second quarter and fiscal year 2008 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.
Synopsys is a registered trademark of Synopsys, Inc. Any other trademarks mentioned in this release are the property of their respective owners.
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 Condensed Consolidated Statements of Operations (1)
(in thousands, except per share amounts)
Three Months Ended January 31,
2008 2007
Revenue:
Time-based license $267,860 $251,606
Upfront license 12,521 13,503
Maintenance and service 35,084 35,101
Total revenue 315,465 300,210
Cost of revenue:
License 40,398 35,520
Maintenance and service 15,879 16,146
Amortization of intangible assets 5,033 6,709
Total cost of revenue 61,310 58,375
Gross margin 254,155 241,835
Operating expenses:
Research and development 92,514 95,884
Sales and marketing 77,370 89,808
General and administrative 23,841 29,677
Amortization of intangible assets 6,591 6,644
Total operating expenses 200,316 222,013
Operating income 53,839 19,822
Other income, net 6,330 7,934
Income before income taxes 60,169 27,756
Provision for income taxes 13,724 4,399
Net income $46,445 $23,357
Net income per share:
Basic $0.32 $0.16
Diluted $0.31 $0.16
Shares used in computing per share amounts:
Basic 146,001 142,772
Diluted 150,683 148,113
(1) Synopsys' first quarter ends on February 2, 2008 and February 3,
2007, respectively. For presentation purposes, the Unaudited
Condensed Consolidated Statements of Operations refer to a calendar
month end.
SYNOPSYS, INC.
Unaudited Condensed Consolidated Balance Sheets (1)
(in thousands, except par value amounts)
January 31, 2008 October 31, 2007
ASSETS:
Current assets:
Cash and cash equivalents $428,055 $579,327
Short-term investments 432,260 405,126
Total cash, cash equivalents
and short-term investments 860,315 984,453
Accounts receivable, net 142,054 123,900
Deferred income taxes 126,262 123,165
Income taxes receivable 40,684 42,525
Prepaid expenses and other current
assets 52,187 53,496
Total current assets 1,221,502 1,327,539
Property and equipment, net 128,578 131,866
Goodwill 768,848 767,087
Intangible assets, net 67,173 78,792
Long-term deferred income taxes 181,404 216,642
Other assets 97,366 95,411
Total assets $2,464,871 $2,617,337
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued
liabilities $165,054 $246,209
Accrued income taxes 16,569 207,572
Deferred revenue 528,932 577,295
Total current liabilities 710,555 1,031,076
Deferred compensation and other
liabilities 88,324 84,648
Accrued income taxes 146,373 -
Long-term deferred revenue 79,693 65,220
Total liabilities 1,024,945 1,180,944
Stockholders' equity:
Preferred stock, $0.01 par value:
2,000 shares authorized; none
outstanding - -
Common stock, $0.01 par value:
400,000 shares authorized;
143,663 and 146,365 shares
outstanding, respectively 1,437 1,464
Capital in excess of par value 1,423,949 1,401,965
Retained earnings 313,413 263,977
Treasury stock, at cost: 10,867 and
16,619 shares, respectively (302,435) (234,918)
Accumulated other comprehensive
income (loss) 3,562 3,905
Total stockholders' equity 1,439,926 1,436,393
Total liabilities and
stockholders' equity $2,464,871 $2,617,337
(1) Synopsys' first quarter ends on February 2, 2008. For presentation
purposes, the Unaudited Condensed Consolidated Balance Sheets refer to
a calendar month end.
SYNOPSYS, INC.
Unaudited Condensed Consolidated Statements of Cash Flows (1)
(in thousands)
Three Months Ended January 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $46,445 $23,357
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Amortization and depreciation 25,333 27,179
Share-based compensation 15,644 16,215
Allowance for doubtful accounts - (130)
(Gain) loss on sale of investments 200 (3)
Deferred income taxes (1,858) 804
Net change in deferred gains and losses on
cash flow hedges 2,104 1,306
Net changes in operating assets and
liabilities, net of acquired assets and
liabilities:
Accounts receivable (17,077) (18,354)
Prepaid expenses and other current assets (1,185) (5,840)
Other assets (488) 217
Accounts payable and accrued liabilities (81,102) (66,075)
Accrued income taxes 2,754 (6,206)
Deferred revenue (42,969) 84,351
Deferred compensation and other
liabilities 1,018 (756)
Net cash (used in) provided by operating
activities (51,181) 56,065
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of
short-term investments 150,523 65,129
Purchases of short-term investments (173,675) (126,161)
Purchases of long-term investments (1,500) -
Purchases of property and equipment (9,726) (11,510)
Capitalization of software development costs (704) (783)
Net cash used in investing activities (35,082) (73,325)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuances of common stock 12,097 81,583
Purchases of common stock (82,865) (18,070)
Net cash (used in) provided by financing
activities (70,768) 63,513
Effect of exchange rate changes on cash and
cash equivalents 5,759 144
Net change in cash and cash equivalents (151,272) 46,397
Cash and cash equivalents, beginning of period 579,327 330,759
Cash and cash equivalents, end of period $428,055 $377,156
(1) Synopsys' first quarter ends on February 2, 2008 and February 3, 2007,
respectively. For presentation purposes, the Unaudited Condensed
Consolidated Statements of Cash Flows refer to a calendar month end.
SOURCE: Synopsys, Inc.
CONTACT: Investors, Lisa L. Ewbank, +1-650-584-1901, or Media, Yvette
Huygen, +1-650-584-4547, yvetteh@synopsys.com, both of Synopsys, Inc.
Web site: http://www.synopsys.com/