News Releases

Synopsys Posts Financial Results for Third Quarter Fiscal Year 2011

MOUNTAIN VIEW, Calif., Aug. 17, 2011 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its third quarter of fiscal year 2011.

For the third quarter of fiscal year 2011, Synopsys reported revenue of $386.8 million, compared to $336.9 million for the third quarter of fiscal 2010, an increase of 14.8%.  

"Synopsys delivered strong revenue, earnings per share, and cash flow in the third quarter, and we are confident that we will exit fiscal 2011 with a great deal of strength," said Aart de Geus, chairman and CEO of Synopsys.  "Design activity continues unabated, driven by demand for mobile devices, cloud infrastructure, and electronics content in many every-day products.  Synopsys is integral to the success of these end markets."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2011 was $52.1 million, or $0.35 per share, compared to $39.3 million, or $0.26 per share, for the third quarter of fiscal 2010.  

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2011 was $68.1 million, or $0.46 per share, compared to non-GAAP net income of $58.2 million, or $0.39 per share, for the third 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 fourth 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.  

Fourth Quarter of Fiscal Year 2011 Targets:

  • Revenue: $386 million - $392 million
  • GAAP expenses: $329 million - $341 million
  • Non-GAAP expenses: $300 million - $305 million
  • Other income and expense: $0 - $1 million
  • Tax rate applied in non-GAAP net income calculations: 24 - 25 percent
  • Fully diluted outstanding shares: 146 million - 150 million
  • GAAP earnings per share: $0.26 - $0.31
  • Non-GAAP earnings per share: $0.44 - $0.46
  • Revenue from backlog: greater than 90 percent

 

Full Fiscal Year 2011 Targets:

 

  • Revenue: $1.531 billion - $1.537 billion
  • Other income and expense: $3 million - $4 million
  • Tax rate applied in non-GAAP net income calculations: 22 - 23 percent
  • Fully diluted outstanding shares: 148 million - 152 million
  • GAAP earnings per share: $1.46 - $1.51
  • Non-GAAP earnings per share: $1.79 - $1.81
  • Cash flow from operations: greater than $400 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 as well as unusual or infrequent tax adjustments; and the non-GAAP measures that exclude such information in order to assess the performance of Synopsys' business and for planning and forecasting in subsequent periods.  Whenever Synopsys uses a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed below.

Reconciliation of Third 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 Third Quarter Fiscal Year 2011 Results

 

(unaudited and in thousands, except per share amounts)

 
                 
 

Three Months Ended

 

Nine Months Ended

 
 

July 31,

 

July 31,

 
 

2011

 

2010

 

2011

 

2010

 

GAAP net income

$ 52,082

 

$ 39,327

 

$ 181,422

 

$ 211,662

 

Adjustments:

               

Amortization of intangible assets

16,921

 

10,611

 

52,568

 

33,075

 

Stock compensation

13,515

 

14,514

 

41,430

 

45,214

 

Acquisition-related costs

(198)

(1)

2,670

 

268

(1)

9,836

 

Facility restructuring charge

-

 

1,115

 

-

 

1,115

 

Tax benefit from IRS settlement

-

 

(2,695)

 

(32,782)

 

(94,344)

 

Tax adjustments

(14,226)

 

(7,359)

 

(37,960)

 

(24,023)

 

Non-GAAP net income

$ 68,094

 

$ 58,183

 

$ 204,946

 

$ 182,535

 
                 
                 
                 
 

Three Months Ended

 

Nine Months Ended

 
 

July 31,

 

July 31,

 
 

2011

 

2010

 

2011

 

2010

 

GAAP net income per share

$     0.35

 

$     0.26

 

$       1.20

 

$       1.40

 

Adjustments:

               

Amortization of intangible assets

0.11

 

0.07

 

0.35

 

0.22

 

Stock compensation

0.09

 

0.10

 

0.27

 

0.30

 

Acquisition-related costs

(0.00)

(1)

0.02

 

0.00

(1)

0.07

 

Facility restructuring charge

-

 

0.01

 

-

 

0.01

 

Tax benefit from IRS settlement

-

 

(0.02)

 

(0.22)

 

(0.62)

 

Tax adjustments

(0.09)

 

(0.05)

 

(0.25)

 

(0.17)

 

Non-GAAP net income per share

$     0.46

 

$     0.39

 

$       1.35

 

$       1.21

 
                 

Shares used in calculation

148,045

 

151,106

 

151,598

 

151,459

 
                 

(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 Fourth Quarter Fiscal Year 2011 Targets

 

(in thousands, except per share amounts)

 
   
 

Range for Three Months

 
 

Ending October 31, 2011

 
 

Low

 

High

 

Target GAAP expenses

$ 329,000

 

$ 341,000

 

Adjustments:

       

      Estimated impact of amortization of intangible assets

(15,000)

 

(18,000)

 

      Estimated impact of stock compensation

(14,000)

 

(18,000)

 

Target non-GAAP expenses

$ 300,000

 

$ 305,000

 
         
         
 

Range for Three Months

 
 

Ending October 31, 2011

 
 

Low

 

High

 

Target GAAP earnings per share

$       0.26

 

$       0.31

 

Adjustments:

       

Estimated impact of amortization of intangible assets

0.12

 

0.10

 

Estimated impact of stock compensation

0.12

 

0.09

 

Net non-GAAP tax adjustments

(0.06)

 

(0.04)

 

Target non-GAAP earnings per share

$       0.44

 

$       0.46

 
         

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

148,000

 

148,000

 
         
         

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

$       1.46

 

$       1.51

 

Adjustments:

       

Estimated impact of amortization of intangible assets

0.47

 

0.45

 

Estimated impact of stock compensation

0.39

 

0.36

 

Acquisition-related costs (1)

0.00

 

0.00

 

Tax benefit from IRS settlement

(0.22)

 

(0.22)

 

Net non-GAAP tax adjustments

(0.31)

 

(0.29)

 

Target non-GAAP earnings per share

$       1.79

 

$       1.81

 
         

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

150,000

 

150,000

 
         

(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 212367, 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 fourth quarter and fiscal year 2011 in November 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 fourth quarter and fiscal year 2011 earnings call in November 2011, their continued availability through such date does not mean that Synopsys is reaffirming or confirming their continued validity.  

Availability of Final Financial Statements

Synopsys will include final financial statements for the third quarter fiscal 2011 in its quarterly report on Form 10-Q to be filed by September 8, 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 October 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 second fiscal quarter ended April 30, 2011.  Furthermore, Synopsys' actual tax rates applied to income for the fourth 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 fourth 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 July 31,

 

Nine Months Ended July 31,

 
 

2011

 

2010

 

2011

 

2010

 

Revenue:

               

 Time-based license

$ 322,147

 

$ 286,563

 

$  936,518

 

$  847,710

 

 Upfront license

19,013

 

14,650

 

70,562

 

47,811

 

 Maintenance and service

45,635

 

35,716

 

138,029

 

109,681

 

     Total revenue

386,795

 

336,929

 

1,145,109

 

1,005,202

 

Cost of revenue:

               

 License

52,089

 

43,996

 

153,758

 

130,140

 

 Maintenance and service

19,275

 

14,697

 

59,796

 

46,475

 

 Amortization of intangible assets

13,368

 

8,050

 

41,511

 

24,736

 

    Total cost of revenue

84,732

 

66,743

 

255,065

 

201,351

 

Gross margin

302,063

 

270,186

 

890,044

 

803,851

 

Operating expenses:

               

 Research and development

122,547

 

105,649

 

366,456

 

319,931

 

 Sales and marketing

90,732

 

83,812

 

269,618

 

242,791

 

 General and administrative

27,052

 

27,371

 

86,387

 

81,937

 

 Amortization of intangible assets

3,553

 

2,561

 

11,057

 

8,339

 

    Total operating expenses

243,884

 

219,393

 

733,518

 

652,998

 

Operating income

58,179

 

50,793

 

156,526

 

150,853

 

Other (expense) income, net

(2,212)

 

(3,046)

 

9,032

 

8,109

 

Income before income taxes

55,967

 

47,747

 

165,558

 

158,962

 

Provision (benefit) for income taxes

3,885

 

8,420

 

(15,864)

 

(52,700)

 

Net income

$   52,082

 

$   39,327

 

$  181,422

 

$  211,662

 
                 

Net income per share:

               

 Basic

$       0.36

 

$       0.27

 

$        1.23

 

$        1.43

 

 Diluted

$       0.35

 

$       0.26

 

$        1.20

 

$        1.40

 
                 

Shares used in computing per share amounts:

               

 Basic

144,960

 

148,006

 

147,479

 

147,909

 

 Diluted

148,045

 

151,106

 

151,598

 

151,459

 
                 

(1)  Synopsys' third quarter ended on the Saturday nearest July 31.  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)

 
           
   

July 31, 2011

 

October 31, 2010

 

ASSETS:

         

Current assets:

         

 Cash and cash equivalents

 

$      889,886

 

$             775,407

 

 Short-term investments

 

148,395

 

163,154

 

          Total cash, cash equivalents and short-term investments

 

1,038,281

 

938,561

 

 Accounts receivable, net

 

175,386

 

181,102

 

 Deferred income taxes

 

73,604

 

73,465

 

 Income taxes receivable

 

21,477

 

18,425

 

 Prepaid and other current assets

 

53,548

 

36,202

 

         Total current assets

 

1,362,296

 

1,247,755

 

Property and equipment, net

 

159,059

 

148,580

 

Goodwill

 

1,258,286

 

1,265,843

 

Intangible assets, net

 

203,739

 

249,656

 

Long-term deferred income taxes

 

278,203

 

268,759

 

Other long-term assets

 

107,055

 

105,948

 

          Total assets

 

$   3,368,638

 

$          3,286,541

 
           

LIABILITIES AND STOCKHOLDERS' EQUITY:

         

Current liabilities:

         

 Accounts payable and accrued liabilities

 

$      284,463

 

$             312,850

 

 Accrued income taxes

 

3,091

 

8,349

 

 Deferred revenue

 

694,536

 

600,569

 

          Total current liabilities

 

982,090

 

921,768

 

Long-term accrued income taxes

 

98,049

 

128,603

 

Other long-term liabilities

 

107,849

 

101,885

 

Long-term deferred revenue

 

59,143

 

34,103

 

          Total liabilities

 

1,247,131

 

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; 143,666 and

         

     148,479 shares outstanding, respectively

 

1,437

 

1,485

 

 Capital in excess of par value

 

1,542,225

 

1,541,383

 

 Retained earnings

 

931,281

 

770,674

 

 Treasury stock, at cost: 13,599 and 8,786 shares, respectively

 

(351,896)

 

(197,586)

 

 Accumulated other comprehensive loss

 

(1,540)

 

(15,774)

 

          Total stockholders' equity

 

2,121,507

 

2,100,182

 

          Total liabilities and stockholders' equity

 

$   3,368,638

 

$          3,286,541

 
           

(1)  Synopsys' third quarter ended on the Saturday nearest July 31.  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)

 
         
 

Nine Months Ended July 31,

 
 

2011

 

2010

 

CASH FLOWS FROM OPERATING ACTIVITIES:

       

Net income

$181,422

 

$211,662

 

Adjustments to reconcile net income to net cash provided by operating

       

   activities:

       

Amortization and depreciation

96,959

 

71,772

 

Stock compensation

41,430

 

45,214

 

Allowance for doubtful accounts

910

 

(851)

 

Write-down of long-term investments

999

 

468

 

Gain on sale of investments

(829)

 

(3,114)

 

Deferred income taxes

(4,891)

 

(31,297)

 

Net changes in operating assets and liabilities, net of

       

acquired assets and liabilities:

       

Accounts receivable

6,780

 

(19,181)

 

Prepaid and other current assets

(7,560)

 

(7,497)

 

Other long-term assets

(7,681)

 

(2,470)

 

Accounts payable and other liabilities

(17,285)

 

(21,270)

 

Income taxes

(38,998)

 

(31,445)

 

Deferred revenue

116,034

 

32,153

 

Net cash provided by operating activities

367,290

 

244,144

 
         

CASH FLOWS FROM INVESTING ACTIVITIES:

       

Proceeds from sales and maturities of short-term investments

104,013

 

352,124

 

Purchases of short-term investments

(92,611)

 

(209,564)

 

Purchases of property and equipment

(42,836)

 

(27,593)

 

Cash paid for acquisitions, net of cash acquired

(5,382)

 

(137,681)

 

Capitalization of software development costs

(2,269)

 

(2,116)

 

Net cash used in investing activities

(39,085)

 

(24,830)

 
         

CASH FLOWS FROM FINANCING ACTIVITIES:

       

Principal payments on capital leases

(4,592)

 

(3,609)

 

Issuances of common stock

119,826

 

87,241

 

Purchases of treasury stock

(334,985)

 

(125,257)

 

Net cash used in financing activities

(219,751)

 

(41,625)

 

Effect of exchange rate changes on cash and cash equivalents

6,025

 

4,139

 

Net change in cash and cash equivalents

114,479

 

181,828

 

Cash and cash equivalents, beginning of period

775,407

 

701,613

 

Cash and cash equivalents, end of period

$889,886

 

$883,441

 
         

(1)  Synopsys' third quarter ended on the Saturday nearest July 31.  For presentation purposes, the Unaudited Consolidated Statements of Cash Flows refer to a calendar month end.

 
       

 

SOURCE Synopsys, Inc.