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Synopsys Posts Financial Results for Second Quarter Fiscal Year 2013

Q2 2013 Financial Highlights

- Revenue: $499.3 million

- GAAP earnings per share: $0.44

- Non-GAAP earnings per share: $0.66

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MOUNTAIN VIEW, Calif., May 22, 2013 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS), a global leader providing software, IP and services used to accelerate innovation in chips and electronic systems, today reported results for its second quarter of fiscal year 2013.

For the second quarter of fiscal year 2013, Synopsys reported revenue of $499.3 million, compared to $432.6 million for the second quarter of fiscal 2012, an increase of 15 percent.  

"Synopsys again delivered strong results in Q2, and as a result we are raising our operating cash flow and non-GAAP earnings per share targets for the year," said Aart de Geus, chairman and co-CEO of Synopsys. "The latest silicon technologies offer high value but also great technical challenges. Because of this, more and more customer executives are sharing with us where they are heading and how Synopsys can help them succeed, leading to robust demand and market momentum."

GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2013 was $68.7 million, or $0.44 per share, compared to $21.0 million, or $0.14 per share, for the second quarter of fiscal 2012. Net income for the second quarter of fiscal 2012 included $30.2 million of costs associated with the acquisition of Magma Design Automation.

Non-GAAP Results
On a non-GAAP basis, net income for the second quarter of fiscal 2013 was $103.7 million, or $0.66 per share, compared to non-GAAP net income of $78.5 million, or $0.53 per share, for the second quarter of fiscal 2012. 

Financial Targets
Synopsys also provided its financial targets for the third quarter and full fiscal year 2013.  These targets do not include any future acquisition-related expenses that may be incurred in fiscal 2013.  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 2013 Targets:

  • Revenue: $475 million - $485 million
  • GAAP expenses: $411 million - $428 million
  • Non-GAAP expenses: $365 million - $375 million
  • Other income and expense: ($1) million - $1 million
  • Tax rate applied in non-GAAP net income calculations: 24-25 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $0.28 - $0.34
  • Non-GAAP earnings per share: $0.53 - $0.55
  • Revenue from backlog: approximately 90 percent

Full Fiscal Year 2013 Targets:

  • Revenue: $1.955 billion - $1.975 billion
  • Other income and expense: $5 - $9 million
  • Tax rate applied in non-GAAP net income calculations: approximately 23 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $1.48 - $1.56
  • Non-GAAP earnings per share: $2.37 - $2.42
  • Cash flow from operations: $375 million - $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, including inventory fair value adjustments, (iv) other significant items, including facilities restructuring, 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 Second Quarter Fiscal Year 2013 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 2013 Results

(Unaudited and in thousands, except per share amounts)






Three Months Ended


Six Months Ended


April 30,


April 30,


2013


2012


2013


2012

GAAP net income

$   68,691


$ 20,971


$ 138,613


$   77,665

Adjustments:








Amortization of intangible assets

32,273


28,604


64,676


45,513

Stock compensation

15,529


20,602


33,229


36,851

Acquisition-related costs

1,992


30,853


3,828


32,088

Inventory fair value adjustment

-


-


1,809


-

Facility restructuring charges

302


-


30


470

Tax adjustments

(15,123)


(22,532)


(35,554)


(31,759)

Non-GAAP net income 

$ 103,664


$ 78,498


$ 206,631


$ 160,828


























Three Months Ended


Six Months Ended


April 30,


April 30,


2013


2012


2013


2012

GAAP net income per share

$       0.44


$     0.14


$       0.89


$       0.52

Adjustments:








Amortization of intangible assets

0.21


0.19


0.42


0.31

Stock compensation

0.10


0.14


0.22


0.25

Acquisition-related costs

0.01


0.21


0.02


0.22

Inventory fair value adjustment

-


-


0.01


-

Facility restructuring charges

0.00


-


0.00


0.00

Tax adjustments

(0.10)


(0.15)


(0.23)


(0.22)

Non-GAAP net income per share

$       0.66


$     0.53


$       1.33


$       1.08









Shares used in calculation

156,606


149,297


155,662


148,259

 

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 2013 Targets

(in thousands, except per share amounts)






 Range for Three Months 


Ending July 31, 2013 (1)


Low


High

Target GAAP expenses

$    411,000


$    428,000

Adjustments:




       Estimated impact of amortization of intangible assets

(30,000)


(34,000)

       Estimated impact of stock compensation

(16,000)


(19,000)

Target non-GAAP expenses

$    365,000


$    375,000










Range for Three Months


Ending July 31, 2013 (1)


Low


High

Target GAAP earnings per share

$          0.28


$          0.34

Adjustments:




Estimated impact of amortization of intangible assets

0.22


0.19

Estimated impact of stock compensation

0.12


0.10

Net non-GAAP tax adjustments 

(0.09)


(0.08)

Target non-GAAP earnings per share

$          0.53


$          0.55





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

157,000


157,000









GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2013 Targets






Range for Fiscal Year


Ending October 31, 2013 (1)


Low


High

Target GAAP earnings per share

$          1.48


$          1.56

Adjustments:




Estimated impact of amortization of intangible assets

0.84


0.80

Estimated impact of stock compensation

0.45


0.42

Acquisition-related costs

0.02


0.02

Inventory fair value adjustment

0.01


0.01

Facility restructuring charges

0.00


0.00

Net non-GAAP tax adjustments

(0.43)


(0.39)

Target non-GAAP earnings per share

$          2.37


$          2.42





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

157,000


157,000





(1) Synopsys' third quarter and fiscal year end on August 3, and November 2, 2013, respectively.  For presentation purposes, the periods refer to the closest calendar month end.

 

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 293128, 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 2013 in August 2013.  Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-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 co-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 2013 earnings call in August 2013, 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 2013 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 2013 in its quarterly report on Form 10-Q to be filed by June 13, 2013.

About Synopsys
Synopsys, Inc. (Nasdaq: SNPS) accelerates innovation in the global electronics market. As a leader in electronic design automation (EDA) and semiconductor IP, its software, IP and services help engineers address their design, verification, system and manufacturing challenges. Since 1986, engineers around the world have been using Synopsys technology to design and create billions of chips and systems. Learn more 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," and certain other statements, including statements regarding customer demand for our technology and predictable business model, are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. In addition, 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 and its potential impact on the semiconductor and electronics industries;
  • uncertainty in the growth of the semiconductor and electronics industry;
  • Synopsys' ability to realize the potential financial or strategic benefits of acquisitions it completes, including the recent acquisitions of  Magma Design Automation, SpringSoft and EVE, and the difficulties in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations, including delays in customer orders, potential loss of customers, key employees, partners or vendors, customer demand and support obligations for product offerings, and disruption of ongoing business operations and diversion of management attention;
  • increased competition in the market for Synopsys' products and services including through consolidation in the industry and among our customers;
  • changes in demand for Synopsys' products due to fluctuations in demand for its customers' products;
  • adverse changes in the relationships between Synopsys and key participants in the complex semiconductor ecosystem, including major foundries and intellectual property providers;
  • litigation;
  • 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, 2013; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2013; and cash flow from operations on a GAAP basis for fiscal year 2013 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) integration and other acquisition-related costs, (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) a determination by Synopsys that any portion of its goodwill or intangible assets have become impaired, (iv) changes in the anticipated amount of employee stock-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 guidance, (viii) fluctuations in foreign currency exchange rates,  (ix) general economic conditions, and (x) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in its latest Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2013. Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2013 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 2013 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances, acquisitions, and the extent of Synopsys' stock repurchase activity.

Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call or the financial supplement whether as a result of new information, future events or otherwise, unless otherwise required by law.

INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901
Synopsys-ir@synopsys.com

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,


2013


2012


2013


2012

Revenue:








  Time-based license

$    413,491


$    363,580


$ 799,450


$ 719,474

  Upfront

24,779


22,333


55,568


50,845

  Maintenance and service

60,987


46,648


119,376


87,738

      Total revenue

499,257


432,561


974,394


858,057

Cost of revenue:








  License

61,569


57,592


126,061


115,314

  Maintenance and service

19,766


19,215


39,821


37,959

  Amortization of intangible assets

26,398


23,699


52,914


37,087

     Total cost of revenue

107,733


100,506


218,796


190,360

Gross margin

391,524


332,055


755,598


667,697

Operating expenses:








  Research and development

169,962


151,230


327,472


284,105

  Sales and marketing

103,930


108,836


205,688


204,240

  General and administrative

32,254


49,948


70,192


83,787

  Amortization of intangible assets 

5,875


4,905


11,762


8,426

     Total operating expenses

312,021


314,919


615,114


580,558

Operating income

79,503


17,136


140,484


87,139

Other income (expense), net

7,204


6,353


17,953


10,179

Income before income taxes

86,707


23,489


158,437


97,318

Provision (benefit) for income taxes

18,016


2,518


19,824


19,653

Net income

$      68,691


$      20,971


$ 138,613


$   77,665









Net income per share:








  Basic

$          0.45


$          0.14


$       0.91


$       0.54

  Diluted

$          0.44


$          0.14


$       0.89


$       0.52









Shares used in computing per share amounts:








  Basic

153,515


145,948


152,496


144,877

  Diluted

156,606


149,297


155,662


148,259









(1)  Synopsys' second quarter of fiscal 2013 ended on May 4, 2013.  For presentation purposes, we refer to a calendar month ending April 30.  Synopsys' first quarter of fiscal 2012 includes an extra week.

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)






April 30, 2013


October 31, 2012

ASSETS:








  Cash and cash equivalents

$       681,018


$             700,382

  Accounts receivable, net

251,682


292,668

  Deferred income taxes

74,558


74,712

  Income taxes receivable and prepaid taxes

20,178


17,267

  Prepaid and other current assets

78,933


55,627

          Total current assets

1,106,369


1,140,656

Property and equipment, net

195,315


191,243

Goodwill

1,980,012


1,976,987

Intangible assets, net

397,219


466,322

Long-term prepaid taxes

9,702


9,429

Long-term deferred income taxes

270,037


239,412

Other long-term assets

140,234


123,607

           Total assets

$    4,098,888


$          4,147,656





LIABILITIES AND STOCKHOLDERS' EQUITY:




Current liabilities:




  Accounts payable and accrued liabilities

$       277,114


$             383,093

  Accrued income taxes

13,926


4,682

  Deferred revenue

691,882


834,864

  Short-term debt

30,000


30,000

           Total current liabilities

1,012,922


1,252,639

Long-term accrued income taxes

57,468


52,645

Long-term deferred revenue

62,840


67,184

Long-term debt

90,000


105,000

Other long-term liabilities

176,726


126,217

           Total liabilities

1,399,956


1,603,685

Stockholders' equity:




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

-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 153,605 and 150,899 shares outstanding, respectively

1,535


1,509

  Capital in excess of par value

1,599,164


1,585,034

  Retained earnings

1,231,378


1,098,694

  Treasury stock, at cost: 3,659 and 6,365 shares, respectively

(105,138)


(168,090)

  Accumulated other comprehensive loss 

(28,007)


(15,461)

           Total stockholders' equity excluding non-controlling interest

2,698,932


2,501,686

Non-controlling interest

-


42,285

           Total liabilities and stockholders' equity

$    4,098,888


$          4,147,656





(1)  Synopsys' second quarter of fiscal 2013 ended on May 4, 2013.  For presentation purposes, we refer to a calendar month ending April 30.  Synopsys' first quarter of fiscal 2012 includes an extra week.

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






 Six Months Ended April 30,


2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$ 138,613


$   77,665

Adjustments to reconcile net income to net cash provided by operating activities:




     Amortization and depreciation

94,154


74,862

     Stock compensation

33,229


36,855

     Allowance for doubtful accounts

901


452

     Gain on sale of investments

(101)


(349)

     Deferred income taxes

8,225


10,033

     Net changes in operating assets and liabilities, net of acquired assets and liabilities:




          Accounts receivable

39,287


(11,516)

          Prepaid and other current assets

(27,502)


(3,442)

          Other long-term assets

(16,524)


(8,128)

          Accounts payable and other liabilities

(97,569)


(48,393)

          Income taxes

(2,574)


(8,436)

          Deferred revenue

(127,847)


(32,147)

     Net cash provided by operating activities

42,292


87,456





CASH FLOWS FROM INVESTING ACTIVITIES:




     Proceeds from sales and maturities of short-term investments

-


166,132

     Purchases of short-term investments

-


(18,179)

     Proceeds from sales of long-term investments

222


-

     Purchases of property and equipment

(29,426)


(19,585)

     Proceeds from sale of property and equipment

2,000


-

     Cash paid for acquisitions, net of cash acquired

-


(564,528)

     Capitalization of software development costs

(1,787)


(1,539)

     Net cash used in investing activities

(28,991)


(437,699)





CASH FLOWS FROM FINANCING ACTIVITIES:




     Principal payments on capital leases

(784)


(1,888)

     Proceeds from credit facility and term loan

-


250,000

     Acquisition of non-controlling interest

(44,004)


-

     Repayment of debts

(15,237)


(21,156)

     Issuances of common stock

75,193


111,180

     Purchases of treasury stock

(34,998)


(40,000)

     Other

(1,130)


-

     Net cash (used in) provided by financing activities

(20,960)


298,136

Effect of exchange rate changes on cash and cash equivalents

(11,705)


(6,376)

Net change in cash and cash equivalents

(19,364)


(58,483)

Cash and cash equivalents, beginning of the year

700,382


855,077

Cash and cash equivalents, end of the period

$ 681,018


$ 796,594









(1)  Synopsys' second quarter of fiscal 2013 ended on May 4, 2013.  For presentation purposes, we refer to a calendar month ending April 30.  Synopsys' first quarter of fiscal 2012 includes an extra week.

SOURCE Synopsys, Inc.



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http://www.synopsys.com

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