MOUNTAIN VIEW, Calif., May 20 /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 ended April 30, 2009.
For the second quarter of fiscal 2009, Synopsys reported revenue of $336.8 million, a 3.8 percent increase compared to $324.6 million for the second quarter of fiscal 2008.
"Synopsys continues to execute well in an environment that still shows signs of economic stress," said Aart de Geus, chairman and CEO of Synopsys. "Customers are choosing Synopsys for its strong technology, global support, continued investment in the future, and financial strength."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2009 was $48.3 million, or $0.33 per share, compared to $39.4 million, or $0.27 per share, for the second quarter of fiscal 2008.
Non-GAAP Results
On a non-GAAP basis, net income for the second quarter of fiscal 2009 was $65.9 million, or $0.45 per share, compared to non-GAAP net income of $59.7 million, or $0.41 per share, for the second quarter of fiscal 2008. 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 2009. 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 2009 Targets:
-- Revenue: $342 million - $350 million
-- GAAP expenses: $284.5 million - $300 million
-- Non-GAAP expenses: $261 million - $271 million
-- Other income and expense: $0 - $3 million
-- Tax rate applied in non-GAAP net income calculations: approximately 27
percent
-- Fully diluted outstanding shares: 144 million - 149 million
-- GAAP earnings per share: $0.26 - $0.31
-- Non-GAAP earnings per share: $0.40 - $0.42
-- Revenue from backlog: greater than 90 percent
Full-Year Fiscal Year 2009 Targets:
-- Revenue: approximately $1.35 billion - $1.38 billion
-- Other income and expense: $14 million - $18 million
-- Tax rate applied in non-GAAP net income calculations: approximately 27
percent
-- Fully diluted outstanding shares: 144 million - 149 million
-- GAAP earnings per share: $1.11 - $1.26
-- Non-GAAP earnings per share: $1.62 - $1.72
-- Cash flow from operations: $170 million - $190 million (excludes
potential impact of a tentative settlement with the Internal Revenue
Service, described below)
In the second quarter, the Company reached a tentative settlement with the IRS that would resolve a dispute regarding its 2002-2004 returns, primarily associated with the acquisition of Avant!. The tentative settlement is subject to further approval by the government. If approved, we do not expect a material impact to the Company's income statement. However, we do expect it to result in a cash payment to the IRS of approximately $50 million, most likely within the next 12 months. If the tentative settlement is approved, this payment would be fully offset by tax reductions in future years.
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) share-based compensation; (ii) the amortization of acquired intangible assets and in-process research and development charges; and (iii) the income tax effect of the 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 2009 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 Results
(Unaudited and in thousands, except per share amounts)
Three Months Ended Six Months Ended
April 30, April 30,
--------- ---------
2009 2008 2009 2008
---- ---- ---- ----
GAAP net income $48,288 $39,387 $100,717 $85,832
Adjustments:
Amortization of
intangible assets 10,620 12,407 22,428 24,031
Share-based
compensation 14,661 17,841 28,804 33,485
In-process research and
development - - 600 -
Tax effect (7,666) (9,975) (15,050) (17,672)
------ ------ ------- -------
Non-GAAP net income $65,903 $59,660 $137,499 $125,676
======= ======= ======== ========
Three Months Ended Six Months Ended
April 30, April 30,
------------- --------------
2009 2008 2009 2008
---- ---- ---- ----
GAAP earnings
per share $0.33 $0.27 $0.70 $0.58
Adjustments:
Amortization of
intangible assets 0.07 0.09 0.16 0.16
Share-based
compensation 0.10 0.12 0.19 0.23
In-process research and
development - - 0.01 -
Tax effect (0.05) (0.07) (0.11) (0.12)
----- ----- ----- -----
Non-GAAP earnings
per share $0.45 $0.41 $0.95 $0.85
===== ===== ===== =====
Shares used in calculation 145,421 145,271 144,024 147,801
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 2009 Targets
(in thousands, except per share amounts)
Range for Three
Months
Ending July 31,
2009
------------------
Low High
-------- --------
Target GAAP expenses $284,500 $300,000
Adjustment:
Estimated impact of amortization of
intangible assets (10,500) (14,000)
Estimated impact of share-based
compensation (13,000) (15,000)
------- -------
Target non-GAAP expenses $261,000 $271,000
======== ========
Range for Three
Months
Ending July 31,
2009
-----------------
Low High
------ -------
Target GAAP earnings per share $0.26 $0.31
Adjustment:
Estimated impact of amortization of
intangible assets 0.10 0.07
Estimated impact of share-based compensation 0.10 0.09
Net non-GAAP tax effect (0.06) (0.05)
----- -----
Target non-GAAP earnings per share $0.40 $0.42
===== =====
Shares used in non-GAAP calculation (midpoint of
target range) 146,500 146,500
GAAP to Non-GAAP Reconciliation of Fiscal Year 2009 Targets
Range for Fiscal Year
Ending October 31, 2009
-----------------------
Low High
--- ----
Target GAAP earnings per share $1.11 $1.26
Adjustment:
Estimated impact of amortization of intangible
assets 0.32 0.28
Estimated impact of share-based compensation 0.41 0.39
In-process research and development 0.01 0.01
Net non-GAAP tax effect (0.23) (0.22)
----- -----
Target non-GAAP earnings per share $1.62 $1.72
===== =====
Shares used in non-GAAP calculation (midpoint of
target range) 146,500 146,500
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/. A recording of the call will be available by calling +1-800-475-6701 (+1-320-365-3844 for international callers), access code 999158, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available on the website from approximately 5:30 p.m. Pacific Time today through the time Synopsys announces its results for the third quarter fiscal 2009 in August 2009. 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 earnings call in August 2009, 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 2009 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 in its Quarterly Report on Form 10-Q to be filed by June 11, 2009.
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 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 60 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 downturn and 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;
-- the terms of a final settlement, if any, with the IRS regarding the
2002-2004 returns, 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, 2009 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 2009 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 expenses including amortization of intangible assets associated with future acquisitions, if any, (iv) changes in the anticipated amount of employee share-based compensation expense recognized on Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or pronouncements, (viii) general economic conditions, and (ix) other risks as detailed in our SEC filings, including those described in the "Risk Factors" section in our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2009. Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2009 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 2009 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 Six Months Ended
April 30, April 30,
----------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue:
Time-based license $283,996 $278,220 $569,048 $546,080
Upfront license 15,994 12,214 34,321 24,735
Maintenance and service 36,845 34,119 73,221 69,203
------ ------ ------ ------
Total revenue 336,835 324,553 676,590 640,018
Cost of revenue:
License 42,292 41,709 84,115 82,107
Maintenance and service 15,048 16,167 30,627 32,046
Amortization of
intangible assets 7,679 5,816 15,701 10,849
----- ----- ------ ------
Total cost of revenue 65,019 63,692 130,443 125,002
------ ------ ------- -------
Gross margin 271,816 260,861 546,147 515,016
Operating expenses:
Research and development 102,996 95,275 200,803 187,789
Sales and marketing 82,520 82,887 159,904 160,257
General and
administrative 28,691 26,171 55,873 50,012
In-process research and
development - - 600 -
Amortization of
intangible assets 2,941 6,591 6,727 13,182
----- ----- ----- ------
Total operating
expenses 217,148 210,924 423,907 411,240
------- ------- ------- -------
Operating income 54,668 49,937 122,240 103,776
Other income, net 10,445 151 12,544 6,481
------ --- ------ -----
Income before income taxes 65,113 50,088 134,784 110,257
Provision for income taxes 16,825 10,701 34,067 24,425
------ ------ ------ ------
Net income $48,288 $39,387 $100,717 $85,832
======= ======= ======== =======
Net income per share:
Basic $0.34 $0.28 $0.71 $0.60
===== ===== ===== =====
Diluted $0.33 $0.27 $0.70 $0.58
===== ===== ===== =====
Shares used in computing per
share amounts:
Basic 143,275 141,844 142,562 143,926
======= ======= ======= =======
Diluted 145,421 145,271 144,024 147,801
======= ======= ======= =======
(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, 2009 October 31, 2008
-------------- ----------------
ASSETS:
Current assets:
Cash and cash equivalents $506,399 $577,632
Short-term investments 370,448 373,669
------- -------
Total cash, cash
equivalents and
short-term
investments 876,847 951,301
Accounts receivable, net 189,115 147,365
Deferred income taxes 131,290 133,609
Income taxes receivable 47,651 49,859
Other current assets 50,094 40,156
------ ------
Total current
assets 1,294,997 1,322,290
Property and equipment, net 136,799 145,087
Goodwill 917,287 899,640
Intangible assets, net 99,343 114,760
Long-term deferred
income taxes 165,600 177,386
Other long-term assets 82,025 83,315
------ ------
Total assets $2,696,051 $2,742,478
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and
accrued liabilities $176,233 $289,769
Accrued income taxes 9,256 14,496
Deferred revenue 540,609 604,718
------- -------
Total current
liabilities 726,098 908,983
Long-term accrued
income taxes 151,816 152,745
Deferred compensation and
other liabilities 76,335 76,970
Long-term deferred revenue 47,856 75,409
------ ------
Total liabilities 1,002,105 1,214,107
Stockholders' equity:
Preferred stock, $0.01
par value: 2,000 shares
authorized; none
outstanding - -
Common stock, $0.01 par
value: 400,000 shares
authorized; 144,122 and
141,786 shares
outstanding,
respectively 1,441 1,418
Capital in excess of
par value 1,487,096 1,471,031
Retained earnings 522,129 434,057
Treasury stock, at cost:
13,149 and 15,485 shares,
respectively (291,129) (342,856)
Accumulated other
comprehensive income
(loss) (25,591) (35,279)
------- -------
Total
stockholders'
equity 1,693,946 1,528,371
--------- ---------
Total liabilities and
stockholders' equity $2,696,051 $2,742,478
========== ==========
(1) Synopsys' second and fourth quarter ended on the Saturday nearest
April 30 and October 31, respectively. 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,
------------------
2009 2008
------- -------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $100,717 $85,832
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization and depreciation 49,728 50,244
Share-based compensation 28,803 33,486
Allowance for doubtful accounts 2,723 429
Write-down of long-term investments 2,960 394
(Gain) loss on sale of investments (324) (1,192)
Deferred income taxes 7,612 3,523
Net change in deferred gains and
losses on cash flow hedges 2,664 7,495
In-process research and development 600 -
Net changes in operating assets and
liabilities, net of
acquired assets and liabilities:
Accounts receivable (46,707) (46,982)
Prepaid and other current assets (7,521) (10,300)
Other long-term assets 248 (368)
Accounts payable and accrued
liabilities (104,225) (69,502)
Accrued income taxes (5,959) (2,873)
Deferred revenue (88,065) (67,309)
Deferred compensation and other
liabilities (469) 980
---- ---
Net cash (used in) operating
activities (57,215) (16,143)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and
maturities of short-term
investments 123,041 419,181
Purchases of short-term investments (119,227) (253,699)
Proceeds from sales of long-term
investments - 77
Purchases of long-term investments - (6,694)
Purchases of property and equipment (14,734) (19,498)
Cash paid for acquisitions (27,333) -
Capitalization of software
development costs (1,485) (1,408)
------ ------
Net cash (used in) provided by
investing activities (39,738) 137,959
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital leases (984) (1,452)
Issuances of common stock 26,652 36,949
Purchases of treasury stock - (170,052)
--- --------
Net cash provided by (used in)
financing activities 25,668 (134,555)
Effect of exchange rate changes
on cash and cash equivalents 52 8,301
--- -----
Net change in cash and cash
equivalents (71,233) (4,438)
Cash and cash equivalents,
beginning of period 577,632 579,327
------- -------
Cash and cash equivalents, end of
period $506,399 $574,889
======== ========
(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.
Web site: http://www.synopsys.com/