Press Releases

Synopsys Posts Financial Results for Second Quarter Fiscal Year 2010

MOUNTAIN VIEW, Calif., May 19 /PRNewswire-FirstCall/ -- Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its second quarter of fiscal year 2010.

For the second quarter of fiscal 2010, Synopsys reported revenue of $338.1 million compared to $336.8 million for the second quarter of fiscal 2009.  

"Synopsys again delivered solid results this quarter, " said Aart de Geus, chairman and CEO of Synopsys.  "While the customer backdrop remains cautious, we continue to execute well on our strategy to address customer needs ranging from mainstream to the most advanced silicon design flows, all the way to the rapidly growing IP and systems space.  This quarter we made particular progress in the latter, where we believe we have an especially promising outlook."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2010 was $39.5 million, or $0.26 per share, compared to $48.3 million, or $0.33 per share, for the second quarter of fiscal 2009.  

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2010 was $61.9 million, or $0.41 per share, compared to non-GAAP net income of $65.9 million, or $0.45 per share, for the second quarter of fiscal 2009.

Financial Targets

Synopsys also provided its financial targets for the third quarter and full fiscal year 2010.  These targets do not include future acquisition-related expenses that may be incurred in fiscal 2010.  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.  

Third Quarter of Fiscal Year 2010 Targets:

  • Revenue: $330 million - $338 million
  • GAAP expenses: $275 million - $292 million
  • Non-GAAP expenses: $251 million - $261 million
  • Other income and expense: $0 - $3 million
  • Tax rate applied in non-GAAP net income calculations: approximately 27 percent
  • Fully diluted outstanding shares: 149 million - 154 million
  • GAAP earnings per share: $0.21 - $0.27
  • Non-GAAP earnings per share: $0.36 - $0.38
  • Revenue from backlog: greater than 90 percent

 

Full-Year Fiscal Year 2010 Targets:

 

  • Revenue: $1.340 billion - $1.355 billion
  • Other income and expense: $4 million - $8 million
  • Tax rate applied in non-GAAP net income calculations: approximately 27 percent
  • Fully diluted outstanding shares: 149 million - 154 million
  • GAAP earnings per share: $1.56 - $1.75
  • Non-GAAP earnings per share: $1.52 - $1.62
  • Cash flow from operations: $205 million - $225 million

 

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) in-process research and development expenses, (iv) acquisition-related costs; (v) other significant items, including the effect of a tax benefit from a settlement with the Internal Revenue Service, and (vi) the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes; 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 such 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 Second Quarter Fiscal Year 2010 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 Second Quarter Fiscal Year 2010 Results

 

(unaudited and in thousands, except per share amounts)

 
                 
 

Three Months Ended

 

Six Months Ended

 
 

April 30,

 

April 30,

 
 

2010

 

2009

 

2010

 

2009

 

GAAP net income

$ 39,549

 

$ 48,288

 

$ 172,335

 

$ 100,717

 

Adjustments:

               

Amortization of intangible assets

11,814

 

10,620

 

22,464

 

22,428

 

Stock compensation

13,466

 

14,661

 

30,700

 

28,804

 

In-process research and development

-

 

-

 

-

 

600

 

Acquisition-related costs

6,120

 

-

 

7,166

 

-

 

Tax benefit from IRS settlement

-

 

-

 

(91,649)

 

-

 

Tax effect

(9,015)

 

(7,666)

 

(16,663)

 

(15,050)

 

Non-GAAP net income

$ 61,934

 

$ 65,903

 

$ 124,353

 

$ 137,499

 
                 
                 
                 
 

Three Months Ended

 

Six Months Ended

 
 

April 30,

 

April 30,

 
 

2010

 

2009

 

2010

 

2009

 

GAAP net income per share

$     0.26

 

$     0.33

 

$       1.14

 

$       0.70

 

Adjustments:

               

Amortization of intangible assets

0.08

 

0.07

 

0.15

 

0.16

 

Stock compensation

0.09

 

0.10

 

0.20

 

0.19

 

In-process research and development

-

 

-

 

-

 

0.01

 

Acquisition-related costs

0.04

 

-

 

0.05

 

-

 

Tax benefit from IRS settlement

-

 

-

 

(0.61)

 

-

 

Tax effect

(0.06)

 

(0.05)

 

(0.11)

 

(0.11)

 

Non-GAAP net income per share

$     0.41

 

$     0.45

 

$       0.82

 

$       0.95

 
                 

Shares used in calculation

152,482

 

145,421

 

151,635

 

144,024

 
               

 

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 Third Quarter Fiscal Year 2010 Targets

 

(in thousands, except per share amounts)

 
   
 

Range for Three Months

 
 

Ending July 31, 2010

 
 

Low

 

High

 

Target GAAP expenses

$ 275,000

 

$ 292,000

 

Adjustment:

       

      Estimated impact of amortization of intangible assets

(10,000)

 

(13,000)

 

      Estimated impact of stock compensation

(14,000)

 

(18,000)

 

Target non-GAAP expenses

$ 251,000

 

$ 261,000

 
         
         
         
 

Range for Three Months

 
 

Ending July 31, 2010

 
 

Low

 

High

 

Target GAAP earnings per share

$       0.21

 

$       0.27

 

Adjustment:

       

Estimated impact of amortization of intangible assets

0.09

 

0.06

 

Estimated impact of stock compensation

0.12

 

0.09

 

Net non-GAAP tax effect

(0.06)

 

(0.04)

 

Target non-GAAP earnings per share

$       0.36

 

$       0.38

 
         

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

151,500

 

151,500

 
         
         
         
         
         

GAAP to Non-GAAP Reconciliation of Fiscal Year 2010 Targets

 
   
 

Range for Fiscal Year

 
 

Ending October 31, 2010

 
 

Low

 

High

 

Target GAAP earnings per share

$       1.56

 

$       1.75

 

Adjustment:

       

Estimated impact of amortization of intangible assets

0.33

 

0.26

 

Estimated impact of stock compensation

0.40

 

0.35

 

Acquisition-related costs

0.05

 

0.05

 

Tax benefit from IRS settlement

(0.61)

 

(0.61)

 

Net non-GAAP tax effect

(0.21)

 

(0.18)

 

Target non-GAAP earnings per share

$       1.52

 

$       1.62

 
         

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

151,500

 

151,500

 
       

 

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 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 156545, 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 third quarter fiscal 2010 in August 2010.  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.  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 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 third quarter fiscal 2010 earnings call in August 2010, 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 third quarter of fiscal 2010 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 second quarter fiscal 2010 in its quarterly report on Form 10-Q to be filed by June 10, 2010.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design, verification and manufacturing. Synopsys' comprehensive, integrated  portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, software-to-silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has more than 65 offices located throughout North America, Europe, Japan, Asia and India. 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:

  • continued uncertainty in the global economy in general, and weakness in the semiconductor and electronics industries;
  • failure of customers to pay license fees as scheduled;
  • 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;
  • changes in the mix of time-based licenses and upfront licenses;  
  • lower-than-expected orders; 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, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending July 31, 2010 and actual expenses, earnings per share, tax rate, cash flow from operations and other projections on a GAAP and non-GAAP basis for fiscal year 2010 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 and settlements to increase or decrease an income tax asset or liability, (iii) integration and other acquisition-related costs including amortization of intangible assets and costs formerly capitalized but now expensed due to new accounting guidance related to business combinations, (iv) changes in the anticipated amount of employee stock 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 guidance, (viii) general economic conditions, and (ix) other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our latest Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2010.  Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2010 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 third quarter and fiscal year 2010 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.

SYNOPSYS, INC.

 

Unaudited Consolidated Statements of Operations (1)

 

(in thousands, except per share amounts)

 
                 
                 
 

Three Months Ended April 30,

 

Six Months Ended April 30,

 
 

2010

 

2009 (2)

 

2010

 

2009 (2)

 

Revenue:

               

 Time-based license

$ 288,672

 

$ 287,315

 

$ 561,147

 

$ 574,991

 

 Upfront license

12,715

 

12,675

 

33,161

 

28,378

 

 Maintenance and service

36,719

 

36,845

 

73,965

 

73,221

 

     Total revenue

338,106

 

336,835

 

668,273

 

676,590

 

Cost of revenue:

               

 License

44,930

 

42,292

 

86,144

 

84,115

 

 Maintenance and service

15,268

 

15,048

 

31,778

 

30,627

 

 Amortization of intangible assets

8,829

 

7,679

 

16,686

 

15,701

 

    Total cost of revenue

69,027

 

65,019

 

134,608

 

130,443

 

Gross margin

269,079

 

271,816

 

533,665

 

546,147

 

Operating expenses:

               

 Research and development

113,050

 

102,996

 

214,282

 

200,803

 

 Sales and marketing

79,363

 

82,520

 

158,979

 

159,904

 

 General and administrative

28,713

 

28,691

 

54,566

 

55,873

 

 In-process research and development

-

 

-

 

-

 

600

 

 Amortization of intangible assets

2,985

 

2,941

 

5,778

 

6,727

 

    Total operating expenses

224,111

 

217,148

 

433,605

 

423,907

 

Operating income

44,968

 

54,668

 

100,060

 

122,240

 

Other income, net

8,905

 

10,445

 

11,155

 

12,544

 

Income before income taxes

53,873

 

65,113

 

111,215

 

134,784

 

Provision (benefit) for income taxes

14,324

 

16,825

 

(61,120)

 

34,067

 

Net income

$   39,549

 

$   48,288

 

$ 172,335

 

$ 100,717

 
                 

Net income per share:

               

 Basic

$       0.27

 

$       0.34

 

$       1.17

 

$       0.71

 

 Diluted

$       0.26

 

$       0.33

 

$       1.14

 

$       0.70

 
                 

Shares used in computing per share amounts:

               

 Basic

148,890

 

143,275

 

147,860

 

142,562

 

 Diluted

152,482

 

145,421

 

151,635

 

144,024

 
                 

(1)  Synopsys' second quarter ended on the Saturday nearest April 30.  For presentation purposes,  the Unaudited Consolidated Statements of Operations refer to a  calendar month end.

 

(2)  For the three and six months ended April 30, 2009, Synopsys reclassifed $3.3 million and $5.9 million from upfront license to time-based licensed revenue to conform to the current year presentation which had no impact on total revenue.

 
               

 

SYNOPSYS, INC.

 

Unaudited Consolidated Balance Sheets (1)

 

(in thousands, except par value amounts)

 
         
 

April 30, 2010

 

October 31, 2009

 

ASSETS:

       

Current assets:

       

 Cash and cash equivalents

$       669,431

 

$             701,613

 

 Short-term investments

409,023

 

466,713

 

          Total cash, cash equivalents and short-term investments

1,078,454

 

1,168,326

 

 Accounts receivable, net

149,654

 

127,010

 

 Deferred income taxes

70,229

 

73,453

 

 Income taxes receivable

36,294

 

51,191

 

 Prepaid and other current assets

45,263

 

43,820

 

         Total current assets

1,379,894

 

1,463,800

 

Property and equipment, net

140,630

 

146,910

 

Goodwill

998,910

 

932,691

 

Intangible assets, net

119,806

 

96,810

 

Long-term deferred income taxes

270,365

 

205,396

 

Other long-term assets

95,731

 

93,247

 

          Total assets

$    3,005,336

 

$          2,938,854

 
         

LIABILITIES AND STOCKHOLDERS' EQUITY:

       

Current liabilities:

       

 Accounts payable and accrued liabilities

$       186,802

 

$             255,095

 

 Accrued income taxes

28,024

 

5,508

 

 Deferred revenue

505,771

 

553,990

 

          Total current liabilities

720,597

 

814,593

 

Long-term accrued income taxes

88,132

 

157,354

 

Other long-term liabilities

100,220

 

88,002

 

Long-term deferred revenue

38,226

 

34,739

 

          Total liabilities

947,175

 

1,094,688

 

Stockholders' equity:

       

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

-

 

-

 

 Common stock, $0.01 par value: 400,000 shares authorized; 149,802 and

       

     146,945 shares outstanding, respectively

1,498

 

1,469

 

 Capital in excess of par value

1,512,888

 

1,500,166

 

 Retained earnings

725,102

 

574,980

 

 Treasury stock, at cost: 7,463 and 10,326 shares, respectively

(165,266)

 

(228,618)

 

 Accumulated other comprehensive loss

(16,061)

 

(3,831)

 

          Total stockholders' equity

2,058,161

 

1,844,166

 

          Total liabilities and stockholders' equity

$    3,005,336

 

$          2,938,854

 
         

(1)  Synopsys' second quarter ended on the Saturday nearest April 30.  For presentation purposes, the Unaudited Consolidated Balance Sheets refer to a calendar month end.

 
       

 

SYNOPSYS, INC.

 

Unaudited Consolidated Statements of Cash Flows (1)

 

(in thousands)

 
         
 

Six Months Ended April 30,

 
 

2010

 

2009

 

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net income

$172,335

 

$100,717

 

Adjustments to reconcile net income to net cash provided by operating

       

   activities:

       

Amortization and depreciation

50,219

 

49,728

 

Stock compensation

30,704

 

28,803

 

Allowance for doubtful accounts

(742)

 

2,723

 

Write-down of long-term investments

-

 

2,960

 

Gain on sale of investments

(2,420)

 

(324)

 

Deferred income taxes

(38,549)

 

7,612

 

In-process research and development

-

 

600

 

Net changes in operating assets and liabilities, net of

       

acquired assets and liabilities:

       

Accounts receivable

(20,626)

 

(46,707)

 

Prepaid and other current assets

11,373

 

(3,047)

 

Other long-term assets

(3,997)

 

(617)

 

Accounts payable and other liabilities

(68,672)

 

(105,639)

 

Accrued income taxes

(48,157)

 

(5,959)

 

Deferred revenue

(45,235)

 

(88,065)

 

Net cash provided by (used in) operating activities

36,233

 

(57,215)

 
         

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Proceeds from sales and maturities of short-term investments

188,650

 

123,041

 

Purchases of short-term investments

(131,748)

 

(119,227)

 

Purchases of property and equipment

(13,793)

 

(14,734)

 

Cash paid for acquisitions, net of cash acquired

(130,872)

 

(27,333)

 

Capitalization of software development costs

(1,415)

 

(1,485)

 

Net cash used in investing activities

(89,178)

 

(39,738)

 
         

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Principal payments on capital leases

(1,346)

 

(984)

 

Issuances of common stock

73,210

 

26,652

 

Purchases of treasury stock

(50,257)

 

-

 

Net cash provided by financing activities

21,607

 

25,668

 

Effect of exchange rate changes on cash and cash equivalents

(844)

 

52

 

Net change in cash and cash equivalents

(32,182)

 

(71,233)

 

Cash and cash equivalents, beginning of period

701,613

 

577,632

 

Cash and cash equivalents, end of period

$669,431

 

$506,399

 
         

(1)  Synopsys' second quarter ended on the Saturday nearest April 30.  For presentation purposes, the Unaudited Consolidated Statements of Cash Flows refer to a calendar month end.

 
       

 

INVESTOR CONTACT:

 

Lisa L. Ewbank

 

Synopsys, Inc.

 

650-584-1901

 
   

EDITORIAL CONTACT:

 

Yvette Huygen

 

Synopsys, Inc.

 

650-584-4547

 

yvetteh@synopsys.com

 
 

 

SOURCE Synopsys, Inc.