Press Releases

Synopsys Posts Financial Results for Third Quarter Fiscal Year 2007
PRNewswire-FirstCall
MOUNTAIN VIEW, Calif.
(NASDAQ:SNPS)

MOUNTAIN VIEW, Calif., Aug. 22 /PRNewswire-FirstCall/ -- Synopsys, Inc. (NASDAQ: SNPS), a world leader in semiconductor design software, today reported results for its third quarter ended July 31, 2007.

For the third quarter, Synopsys reported revenue of $304.1 million, a 10 percent increase compared to $277.2 million for the third quarter of fiscal 2006.

"In the third quarter we delivered strong earnings growth and cash flow, and entered into very important customer alliances," said Aart de Geus, chairman and CEO of Synopsys. "We are confident about our position, and look forward to ending the year strongly and well-positioned for 2008."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2007 was $24.9 million, or $0.17 per share, compared to $7.6 million, or $0.05 per share, for the third quarter of fiscal 2006.

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2007 was $47.7 million, or $0.32 per share, compared to non-GAAP net income of $30.1 million, or $0.21 per share, for the third quarter of fiscal 2006.

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 fourth quarter and full fiscal year 2007. 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 2007 Targets:

  * Revenue: $300 million - $310 million
  * GAAP expenses: $261 million - $277 million
  * Non-GAAP expenses: $236 million - $246 million
  * Other income and expense: $3 million - $6 million
  * Tax rate applied in non-GAAP net income calculations: 25 - 26 percent
  * Fully diluted outstanding shares: 146 million - 151 million
  * GAAP earnings per share: $0.18 - $0.26
  * Non-GAAP earnings per share: $0.34 - $0.37
  * Revenue from backlog: greater than 90 percent


  Full-Year Fiscal Year 2007 Targets

  * Revenue: $1.195 billion - $1.205 billion
  * Tax rate applied in non-GAAP net income calculations: approximately 25
    percent
  * Fully diluted outstanding shares: 146 million - 151 million
  * GAAP earnings per share: $0.78 - $0.86
  * Non-GAAP earnings per share: $1.31 - $1.34
  * 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 GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income (loss), income (loss) before provision (benefit) for income taxes, provision (benefit) for income taxes, net income (loss) and net income (loss) 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 Third 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 the third quarter 2007.

         GAAP to Non-GAAP Reconciliation of Third Quarter Results
           (unaudited, in thousands, except per share amounts)

  Income Statement Reconciliation      Three Months Ended  Nine Months Ended
                                            July 31,           July 31,
                                         2007     2006       2007     2006
  GAAP net income                       $24,855   $7,550   $89,477  $14,622
  Adjustments:
   Amortization of intangible assets     12,186   13,354    37,393   42,980
   Share-based compensation              16,110   15,601    46,674   47,932
   In-process research and development    2,100      -       2,100      800
   Litigation settlement                    -        -     (12,500)     -
   Facilities realignment charge            -        -        (645)     -
   Tax effect                            (7,552)  (6,359)  (17,634) (25,222)
  Non-GAAP net income                   $47,699  $30,146  $144,865  $81,112


                                       Three Months Ended  Nine Months Ended
                                               July 31,          July 31,
                                            2007     2006     2007     2006
  GAAP earnings per share                  $0.17    $0.05    $0.60    $0.10
  Adjustments:
   Amortization of intangible assets        0.08     0.09     0.25     0.29
   Share-based compensation                 0.11     0.11     0.32     0.33
   In-process research and development      0.01      -       0.01     0.01
   Litigation settlement                     -        -      (0.08)     -
   Facilities realignment charge             -        -      (0.01)     -
   Tax effect                              (0.05)   (0.04)   (0.12)   (0.17)
  Non-GAAP earnings per share              $0.32    $0.21    $0.97    $0.56

  Shares used in calculation             149,709  143,964  149,283  145,662



  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 Fourth Quarter Fiscal Year 2007 Targets
           (unaudited, in thousands, except per share amounts)

                                                  Range for Three Months
                                                  Ending October 31, 2007
                                                  Low               High
  Target GAAP expenses                          $261,000          $277,000
  Adjustment:
   Estimated impact of amortization of
    intangible assets                            (11,000)          (13,000)
   Estimated impact of share-based
    compensation                                 (14,000)          (18,000)
  Target non-GAAP expenses                      $236,000          $246,000


                                                   Range for Three Months
                                                   Ending October 31, 2007
                                                   Low               High
  Target GAAP earnings per share                   $0.18             $0.26
  Adjustment:
   Estimated impact of amortization of
    intangible assets                               0.09              0.07
   Estimated impact of share-based
    compensation                                    0.12              0.09
  Net non-GAAP tax effect                          (0.05)            (0.05)
  Target non-GAAP earnings per share               $0.34             $0.37

  Shares used in non-GAAP calculation
   (midpoint of target range)                    148,500           148,500



       GAAP to Non-GAAP Reconciliation of Fiscal Year 2007 Targets

                                                    Range for Fiscal Year
                                                   Ending October 31, 2007
                                                    Low               High
  Target GAAP earnings per share                   $0.78             $0.86
  Adjustment:
   Estimated impact of amortization of
    intangible assets                               0.34              0.33
   Estimated impact of share-based
    compensation                                    0.44              0.42
   In process research and development              0.01              0.01
   Litigation settlement and facilities
    realignment charge                             (0.09)            (0.09)
   Net non-GAAP tax effect                         (0.17)            (0.19)
  Target non-GAAP earnings per share               $1.31             $1.34

  Shares used in non-GAAP calculation
   (midpoint of target range)                    148,500           148,500



  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 883145, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available at http://www.synopsys.com/corporate/invest/invest.html from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the fourth quarter and full-year fiscal 2007 in December 2007. 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 fourth quarter earnings call in December 2007, 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 fourth quarter of fiscal 2007 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 third quarter of fiscal 2007 in its Quarterly Report on Form 10-Q to be filed in September 2007.

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 of licenses on which revenue is recognized
    upfront;
  * 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
    or to develop and integrate Synopsys' design for manufacturing and yield
    management products; 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 October 31, 2007 and actual earnings per share and operating cash flow on a GAAP and non-GAAP basis for fiscal year 2007 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including (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, 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, and (vii) charges driven by adoption of Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," which Synopsys is required to adopt during fiscal year 2007. Furthermore, Synopsys' actual tax rates applied to non-GAAP net income for the fourth quarter and full-year fiscal 2007 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 fourth quarter and full-year fiscal 2007 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances, 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.

                              SYNOPSYS, INC.
      Unaudited Condensed Consolidated Statements of Operations (1)
                 (in thousands, except per share amounts)

                                     Three Months Ended    Nine Months Ended
                                          July 31,              July 31,
                                       2007      2006      2007      2006
  Revenue:
    Time-based license               $251,389  $224,782  $746,091  $645,309
    Upfront license                    18,981    14,418    47,108    48,744
    Maintenance and service            33,728    38,008   104,037   118,123
       Total revenue                  304,098   277,208   897,236   812,176
  Cost of revenue:
    License                            37,092    32,665   107,269    95,304
    Maintenance and service            15,763    16,201    47,459    49,678
    Amortization of intangible assets   5,536     6,579    17,455    21,733
       Total cost of revenue           58,391    55,445   172,183   166,715
  Gross margin                        245,707   221,763   725,053   645,461
  Operating expenses:
    Research and development           94,365    93,972   282,205   275,111
    Sales and marketing                95,417    81,171   264,237   245,460
    General and administrative         24,177    26,692    76,405    84,845
    In-process research and
     development                        2,100       -       2,100       800
    Amortization of intangible assets   6,650     6,775    19,938    21,247
       Total operating expenses       222,709   208,610   644,885   627,463
  Operating income                     22,998    13,153    80,168    17,998
  Other income, net                    10,829     2,421    38,431     9,745
  Income before income taxes           33,827    15,574   118,599    27,743
  Provision for income taxes            8,972     8,024    29,122    13,121
  Net income                          $24,855    $7,550   $89,477   $14,622

  Net income per share:
    Basic                               $0.17     $0.05     $0.62     $0.10
    Diluted                             $0.17     $0.05     $0.60     $0.10

  Shares used in computing per share
   amounts:
    Basic                             143,820   142,538   143,626   143,629
    Diluted                           149,709   143,964   149,283   145,662

  (1) Synopsys' third quarter ends on August 4, 2007 and July 29, 2006,
      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) (2)
                 (in thousands, except par value amounts)

                                            July 31, 2007   October 31, 2006
  ASSETS:
  Current assets:
    Cash and cash equivalents                   $435,854           $330,759
    Short-term investments                       358,368            241,963
    Total cash, cash equivalents and
     short-term investments                      794,222            572,722
    Accounts receivable, net                     204,787            122,584
    Deferred income taxes                        112,445            112,342
    Income taxes receivable                       43,665             42,538
    Prepaid expenses and other current assets     51,348             44,304
      Total current assets                     1,206,467            894,490
  Property and equipment, net                    128,739            140,660
  Goodwill                                       752,955            735,643
  Intangible assets, net                          79,807            106,144
  Long-term deferred income taxes                197,039            206,254
  Other assets                                    90,039             74,631
      Total assets                            $2,455,046         $2,157,822

  LIABILITIES AND STOCKHOLDERS' EQUITY:
  Current liabilities:
    Accounts payable and accrued liabilities    $232,014           $234,149
    Accrued income taxes                         188,164            191,349
    Deferred revenue                             568,838            445,598
      Total current liabilities                  989,016            871,096
  Deferred compensation and other liabilities     81,511             69,889
  Long-term deferred revenue                      66,564             53,670
      Total liabilities                        1,137,091            994,655
  Stockholders' equity:
    Preferred stock,  $0.01 par value:
     2,000 shares authorized; none
     outstanding                                     -                  -
    Common stock,  $0.01 par value:
     400,000 shares authorized;
     143,634 and 140,568 shares
     outstanding, respectively                     1,436              1,406
    Capital in excess of par value             1,363,458          1,316,252
    Retained earnings                            249,097            170,743
    Treasury stock, at cost: 13,589
     and 16,619 shares, respectively            (292,322)          (312,753)
    Accumulated other comprehensive loss          (3,714)           (12,481)
      Total stockholders' equity               1,317,955          1,163,167
      Total liabilities and stockholders'
       equity                                 $2,455,046         $2,157,822

  (1) Synopsys' third quarter ends on August 4, 2007 and July 29, 2006,
      respectively.  For presentation purposes, the Unaudited Condensed
      Consolidated Balance Sheets refer to a calendar month end.
  (2) The prior year tax provision and related balance sheet accounts (long-
      term deferred income taxes, capital in excess of par value and
      retained earnings accounts) have been revised to reflect immaterial
      adjustments originating in years prior to fiscal 2006.



                              SYNOPSYS, INC.
     Unaudited Condensed Consolidated Statement of Cash Flows (1) (2)
                              (in thousands)

                                                 Nine Months Ended July 31,
                                                   2007              2006
  CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                      $89,477           $14,622
  Adjustments to reconcile net income to net
   cash provided by operating activities:
   Amortization and depreciation                   77,844            85,546
   Share-based compensation                        46,674            47,935
   In-process research and development              2,100               800
   Deferred income taxes                           14,966             3,833
   Provision for doubtful accounts                   (330)             (125)
   Net change in deferred gains and
    losses on cash flow hedges                      1,661            (1,491)
   Write-down of long-term investments                -               1,336
   (Gain) on sale of land                          (4,284)              -
   Loss (gain) on sale of short and
    long-term investment                                8               (17)
   Net changes in operating assets and liabilities,
    net of acquired assets and liabilities:
    Accounts receivable                           (80,511)           (9,337)
    Prepaid expenses and other current assets     (11,555)           (4,473)
    Other assets                                      317                (3)
    Accounts payable and accrued liabilities       (8,255)          (41,685)
    Accrued income taxes                           (3,313)           (6,086)
    Deferred revenue                              135,279            15,027
    Deferred compensation and other liabilities       254               261
   Net cash provided by operating activities      260,332           106,143

  CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sales and maturities of
    short-term investments                        209,167           221,311
   Proceeds from sales of long-term
    investments                                       -                 248
   Purchases of short-term investments           (328,419)         (281,126)
   Purchases of long-term investments              (4,620)           (1,539)
   Purchases of property and equipment            (36,429)          (34,129)
   Cash paid for acquisitions and intangible
    assets, net of cash received                  (34,120)          (20,850)
   Proceeds from sale of land                      26,298               -
    Capitalization of software development costs   (2,106)           (2,342)
   Net cash used in investing activities         (170,229)         (118,427)

  CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuances of common stock                      151,653            43,139
   Repurchases of common stock                   (140,789)         (169,544)
   Net cash provided by (used in)
    financing activities                           10,864          (126,405)
  Effect of exchange rate changes on
   cash and cash equivalents                        4,128             3,970
  Net change in cash and cash equivalents         105,095          (134,719)
  Cash and cash equivalents, beginning of period  330,759           404,436
  Cash and cash equivalents, end of period       $435,854          $269,717

  (1) Synopsys' third quarter ends on August 4, 2007 and July 29, 2006,
      respectively.  For presentation purposes, the Unaudited Condensed
      Consolidated Balance Sheets refer to a calendar month end.
  (2) The prior year tax provision and related balance sheet accounts (long-
      term deferred income taxes, capital in excess of par value and
      retained earnings accounts) have been revised to reflect immaterial
      adjustments originating in years prior to fiscal 2006.

SOURCE: Synopsys, Inc.

CONTACT: INVESTOR, Lisa L. Ewbank, +1-650-584-1901, or EDITORIAL, Yvette
Huygen, +1-650-584-4547, yvetteh@synopsys.com, both of Synopsys, Inc.

Web site: http://www.synopsys.com/