News Releases

Synopsys Posts Financial Results for Second Quarter Fiscal Year 2011

MOUNTAIN VIEW, Calif., May 18, 2011 /PRNewswire/ -- 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 2011.

For the second quarter of fiscal year 2011, Synopsys reported revenue of $393.7 million, compared to $338.1 million for the second quarter of fiscal 2010, an increase of 16.4%.  

"Synopsys delivered strong second quarter results as we continue to execute well," said Aart de Geus, chairman and CEO of Synopsys.  "Our technology pipeline, delivery and customer adoption remain strong, and we continue to see momentum in our IP and Systems products."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2011 was $81.1 million, or $0.53 per share, compared to $39.5 million, or $0.26 per share, for the second quarter of fiscal 2010.  Net income for the second quarter of fiscal 2011 includes a one-time $32.8 million, or $0.21 per share, tax benefit associated with a settlement with the IRS for audits for fiscal years 2006 through 2009.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2011 was $68.5 million, or $0.45 per share, compared to non-GAAP net income of $61.9 million, or $0.41 per share, for the second quarter of fiscal 2010.  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 third quarter and full fiscal year 2011.  These targets do not include future acquisition-related costs that may be incurred in fiscal 2011.  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 2011 Targets:

  • Revenue: $378 million - $386 million
  • GAAP expenses: $319 million - $337 million
  • Non-GAAP expenses: $292 million - $302 million
  • Other income and expense: $0 - $2 million
  • Tax rate applied in non-GAAP net income calculations: 24 - 25 percent
  • Fully diluted outstanding shares: 149 million - 153 million
  • GAAP earnings per share: $0.25 - $0.31
  • Non-GAAP earnings per share: $0.41 - $0.43
  • Revenue from backlog: greater than 90 percent

 

Full Fiscal Year 2011 Targets:

 

  • Revenue: $1.5 billion - $1.525 billion
  • Other income and expense: $1 million - $5 million
  • Tax rate applied in non-GAAP net income calculations: 24 - 25 percent
  • Fully diluted outstanding shares: 149 million - 153 million
  • GAAP earnings per share: $1.33 - $1.46
  • Non-GAAP earnings per share: $1.70 - $1.77
  • Cash flow from operations: approximately $300 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) acquisition-related costs, (iv) other significant items, including the effect of tax benefits from settlements with the Internal Revenue Service, and (v) 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 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 2011 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 2011 Results

 

(unaudited and in thousands, except per share amounts)

 
                 
 

Three Months Ended

 

Six Months Ended

 
 

April 30,

 

April 30,

 
 

2011

 

2010

 

2011

 

2010

 

GAAP net income

$ 81,114

 

$ 39,549

 

$ 129,340

 

$ 172,335

 

Adjustments:

               

Amortization of intangible assets

18,664

 

11,814

 

35,647

 

22,464

 

Stock compensation

12,666

 

13,466

 

27,914

 

30,700

 

Acquisition-related costs (1)

(1,616)

 

6,120

 

466

 

7,166

 

Tax benefit from IRS settlement

(32,782)

 

-

 

(32,782)

 

(91,649)

 

Tax effect

(9,511)

 

(9,015)

 

(23,733)

 

(16,663)

 

Non-GAAP net income

$ 68,535

 

$ 61,934

 

$ 136,852

 

$ 124,353

 
                 
                 
                 
 

Three Months Ended

 

Six Months Ended

 
 

April 30,

 

April 30,

 
 

2011

 

2010

 

2011

 

2010

 

GAAP net income per share

$     0.53

 

$     0.26

 

$       0.84

 

$       1.14

 

Adjustments:

               

Amortization of intangible assets

0.12

 

0.08

 

0.23

 

0.15

 

Stock compensation

0.08

 

0.09

 

0.18

 

0.20

 

Acquisition-related costs (1)

(0.01)

 

0.04

 

0.00

 

0.05

 

Tax benefit from IRS settlement

(0.21)

 

-

 

(0.21)

 

(0.61)

 

Tax effect

(0.06)

 

(0.06)

 

(0.15)

 

(0.11)

 

Non-GAAP net income per share

$     0.45

 

$     0.41

 

$       0.89

 

$       0.82

 
                 

Shares used in calculation

152,593

 

152,482

 

153,198

 

151,635

 
                 

(1) Included changes to the fair value of contingent consideration related to a prior year acquisition.

 
               

 

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 Third Quarter Fiscal Year 2011 Targets

 

(in thousands, except per share amounts)

 
   
 

Range for Three Months

 
 

Ending July 31, 2011

 
 

Low

 

High

 

Target GAAP expenses

$      319,000

 

$      337,000

 

Adjustment:

       

      Estimated impact of amortization of intangible assets

(15,000)

 

(18,000)

 

      Estimated impact of stock compensation

(12,000)

 

(17,000)

 

Target non-GAAP expenses

$      292,000

 

$      302,000

 
         
         
 

Range for Three Months

 
 

Ending July 31, 2011

 
 

Low

 

High

 

Target GAAP earnings per share

$            0.25

 

$            0.31

 

Adjustment:

       

Estimated impact of amortization of intangible assets

0.12

 

0.10

 

Estimated impact of stock compensation

0.11

 

0.08

 

Net non-GAAP tax effect

(0.07)

 

(0.06)

 

Target non-GAAP earnings per share

$            0.41

 

$            0.43

 
         

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

151,000

 

151,000

 
         
         

GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2011 Targets

 
     
 

Range for Fiscal Year

 
 

Ending October 31, 2011

 
 

Low

 

High

 

Target GAAP earnings per share

$            1.33

 

$            1.46

 

Adjustment:

       

Estimated impact of amortization of intangible assets

0.49

 

0.43

 

Estimated impact of stock compensation

0.38

 

0.34

 

Acquisition-related costs (1)

0.00

 

0.00

 

Tax benefit from IRS settlement

(0.21)

 

(0.21)

 

Net non-GAAP tax effect

(0.29)

 

(0.25)

 

Target non-GAAP earnings per share

$            1.70

 

$            1.77

 
         

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

151,000

 

151,000

 
         

(1) Included changes to the fair value of contingent consideration related to a prior year acquisition.

 
       

 

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 dialing +1-800-475-6701 (+1-320-365-3844 for international callers), access code 203338, 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 2011 in August 2011.  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 year 2011 earnings call in August 2011, 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 2011 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 2011 in its quarterly report on Form 10-Q to be filed by June 9, 2011.

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, system-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 approximately 70 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 Non-GAAP Operating Results," financial objectives, 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:

  • changes in demand for Synopsys' products due to fluctuations in demand for its customers' products;
  • uncertainty in the growth of the semiconductor and electronics industry;
  • Synopsys' ability to realize the potential financial or strategic benefits of the acquisitions it completes and the difficulties in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations;
  • continued uncertainty in the global economy and its potential impact on the semiconductor and electronics industries;
  • increased competition in the market for Synopsys' products and services including through  consolidation in the industry and among our customers;
  • 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
  • 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 July 31, 2011 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 2011 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, as well as changes in the fair value of contingent consideration related to prior acquisitions, (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 Synopsys' SEC filings, including those described in the "Risk Factors" section in the latest Quarterly Report on Form 10-Q for the first fiscal quarter ended January 31, 2011.  Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2011 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 2011 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 Consolidated Statements of Operations (1)

 

(in thousands, except per share amounts)

 
                 
                 
 

Three Months Ended April 30,

 

Six Months Ended April 30,

 
 

2011

 

2010

 

2011

 

2010

 

Revenue:

               

 Time-based license

$ 318,762

 

$ 288,672

 

$ 614,371

 

$ 561,147

 

 Upfront license

25,014

 

12,715

 

51,549

 

33,161

 

 Maintenance and service

49,894

 

36,719

 

92,394

 

73,965

 

     Total revenue

393,670

 

338,106

 

758,314

 

668,273

 

Cost of revenue:

               

 License

51,146

 

44,930

 

101,669

 

86,144

 

 Maintenance and service

19,974

 

15,268

 

40,521

 

31,778

 

 Amortization of intangible assets

14,908

 

8,829

 

28,143

 

16,686

 

    Total cost of revenue

86,028

 

69,027

 

170,333

 

134,608

 

Gross margin

307,642

 

269,079

 

587,981

 

533,665

 

Operating expenses:

               

 Research and development

123,169

 

113,050

 

243,909

 

214,282

 

 Sales and marketing

99,562

 

79,363

 

178,886

 

158,979

 

 General and administrative

29,470

 

28,713

 

59,335

 

54,566

 

 Amortization of intangible assets

3,756

 

2,985

 

7,504

 

5,778

 

    Total operating expenses

255,957

 

224,111

 

489,634

 

433,605

 

Operating income

51,685

 

44,968

 

98,347

 

100,060

 

Other income, net

5,574

 

8,905

 

11,244

 

11,155

 

Income before income taxes

57,259

 

53,873

 

109,591

 

111,215

 

(Benefit) provision for income taxes

(23,855)

 

14,324

 

(19,749)

 

(61,120)

 

Net income

$   81,114

 

$   39,549

 

$ 129,340

 

$ 172,335

 
                 

Net income per share:

               

 Basic

$       0.55

 

$       0.27

 

$       0.87

 

$       1.17

 

 Diluted

$       0.53

 

$       0.26

 

$       0.84

 

$       1.14

 
                 

Shares used in computing per share amounts:

               

 Basic

148,461

 

148,890

 

148,738

 

147,860

 

 Diluted

152,593

 

152,482

 

153,198

 

151,635

 
                 
               

 

(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.

 
   

 

SYNOPSYS, INC.

 

Unaudited Consolidated Balance Sheets (1)

 

(in thousands, except par value amounts)

 
           
   

April 30, 2011

 

October 31, 2010

 

ASSETS:

         

Current assets:

         

 Cash and cash equivalents

 

$       694,032

 

$             775,407

 

 Short-term investments

 

146,431

 

163,154

 

          Total cash, cash equivalents and short-term investments

 

840,463

 

938,561

 

 Accounts receivable, net

 

210,068

 

181,102

 

 Deferred income taxes

 

72,930

 

73,465

 

 Income taxes receivable

 

28,696

 

18,425

 

 Prepaid and other current assets

 

54,465

 

36,202

 

         Total current assets

 

1,206,622

 

1,247,755

 

Property and equipment, net

 

150,370

 

148,580

 

Goodwill

 

1,256,485

 

1,265,843

 

Intangible assets, net

 

220,610

 

249,656

 

Long-term deferred income taxes

 

262,173

 

268,759

 

Other long-term assets

 

113,209

 

105,948

 

          Total assets

 

$    3,209,469

 

$          3,286,541

 
           

LIABILITIES AND STOCKHOLDERS' EQUITY:

         

Current liabilities:

         

 Accounts payable and accrued liabilities

 

$       226,784

 

$             312,850

 

 Accrued income taxes

 

2,476

 

8,349

 

 Deferred revenue

 

578,576

 

600,569

 

          Total current liabilities

 

807,836

 

921,768

 

Long-term accrued income taxes

 

95,706

 

128,603

 

Other long-term liabilities

 

111,598

 

101,885

 

Long-term deferred revenue

 

46,931

 

34,103

 

          Total liabilities

 

1,062,071

 

1,186,359

 

Stockholders' equity:

         

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

 

-

 

-

 

 Common stock, $0.01 par value: 400,000 shares authorized; 146,485 and

         

     148,479 shares outstanding, respectively

 

1,465

 

1,485

 

 Capital in excess of par value

 

1,539,833

 

1,541,383

 

 Retained earnings

 

883,487

 

770,674

 

 Treasury stock, at cost: 10,779 and 8,786 shares, respectively

 

(278,016)

 

(197,586)

 

 Accumulated other comprehensive loss

 

629

 

(15,774)

 

          Total stockholders' equity

 

2,147,398

 

2,100,182

 

          Total liabilities and stockholders' equity

 

$    3,209,469

 

$          3,286,541

 
           
         

 

(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,

 
 

2011

 

2010

 

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net income

$129,340

 

$172,335

 

Adjustments to reconcile net income to net cash provided by operating

       

   activities:

       

Amortization and depreciation

64,998

 

50,218

 

Stock compensation

27,914

 

30,700

 

Allowance for doubtful accounts

723

 

(742)

 

Write-down of long-term investments

999

 

-

 

Gain on sale of investments

(50)

 

(2,420)

 

Deferred income taxes

(939)

 

(38,549)

 

Net changes in operating assets and liabilities, net of

       

acquired assets and liabilities:

       

Accounts receivable

(28,904)

 

(20,626)

 

Prepaid and other current assets

(8,848)

 

(7,139)

 

Other long-term assets

(11,658)

 

(3,997)

 

Accounts payable and other liabilities

(69,320)

 

(68,672)

 

Income taxes

(40,890)

 

(29,645)

 

Deferred revenue

(6,510)

 

(45,235)

 

Net cash provided by operating activities

56,855

 

36,228

 
         

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Proceeds from sales and maturities of short-term investments

63,648

 

188,650

 

Purchases of short-term investments

(49,435)

 

(131,748)

 

Purchases of property and equipment

(20,600)

 

(13,793)

 

Cash paid for acquisitions, net of cash acquired

(3,520)

 

(130,872)

 

Capitalization of software development costs

(1,512)

 

(1,410)

 

Net cash used in investing activities

(11,419)

 

(89,173)

 
         

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Principal payments on capital leases

(1,310)

 

(1,346)

 

Issuances of common stock

108,843

 

73,210

 

Purchases of treasury stock

(234,985)

 

(50,257)

 

Net cash (used in) provided by financing activities

(127,452)

 

21,607

 

Effect of exchange rate changes on cash and cash equivalents

641

 

(844)

 

Net change in cash and cash equivalents

(81,375)

 

(32,182)

 

Cash and cash equivalents, beginning of period

775,407

 

701,613

 

Cash and cash equivalents, end of period

$694,032

 

$669,431

 
         
       

 

(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.

 
   

 

SOURCE Synopsys, Inc.