Synopsys Posts Financial Results for Second Quarter Fiscal Year 2014 Q2 2014 Financial Highlights

- Revenue: $517.7 million

- GAAP earnings per share: $0.40

- Non-GAAP earnings per share: $0.65

MOUNTAIN VIEW, Calif., May 21, 2014 /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 2014.

For the second quarter of fiscal year 2014, Synopsys reported revenue of $517.7 million, compared to $499.3 million for the second quarter of fiscal 2013, an increase of 3.7 percent.  

"Our fiscal second quarter results were very strong, driven by robust business in all key areas," said Aart de Geus, chairman and co-CEO of Synopsys.  "In addition, we introduced several important new products, including IC Compiler II, a game-changer in digital design, and we completed the acquisition of Coverity, bringing us into the emerging market of software quality, test and security."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the second quarter of fiscal 2014 was $63.3 million, or $0.40 per share, compared to $68.7 million, or $0.44 per share, for the second quarter of fiscal 2013.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2014 was $101.7 million, or $0.65 per share, compared to non-GAAP net income of $103.7 million, or $0.66 per share, for the second quarter of fiscal 2013. 

Financial Targets

Synopsys also provided its financial targets for the third quarter and full fiscal year 2014.  These targets do not include any future acquisition-related expenses that may be incurred in fiscal 2014.  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 2014 Targets:

  • Revenue: $515 million - $525 million
  • GAAP expenses: $450.5 million - $471 million
  • Non-GAAP expenses: $400 million - $410 million
  • Other income and expense: ($1) million - $1 million
  • Tax rate applied in non-GAAP net income calculations: approximately 20 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $0.30 - $0.38
  • Non-GAAP earnings per share: $0.60 - $0.62

Full Fiscal Year 2014 Targets:

  • Revenue: $2.05 billion - $2.075 billion
  • Other income and expense: $10 million - $12 million
  • Tax rate applied in non-GAAP net income calculations: approximately 21 percent
  • Fully diluted outstanding shares: 155 million - 159 million
  • GAAP earnings per share: $1.55 - $1.68
  • Non-GAAP earnings per share: $2.45 - $2.50
  • Cash flow from operations: $450 million - $475 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 charges and the effect of tax and legal settlements, 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 2014 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 2014 Results

(unaudited and in thousands, except per share amounts)










Three Months Ended


Six Months Ended


April 30,


April 30,


2014


2013


2014


2013

GAAP net income

$   63,317


$   68,691


$ 131,013


$ 138,613

Adjustments:








Amortization of intangible assets

32,050


32,273


60,181


64,676

Stock compensation

18,824


15,529


36,941


33,229

Acquisition-related costs

4,374


1,992


5,449


3,828

Inventory fair value adjustment

-


-


-


1,809

Facility restructuring charges

-


302


-


30

Tax and other settlements

(2,040)


-


(12,307)


-

Tax adjustments

(14,830)


(15,123)


(26,495)


(35,554)

Non-GAAP net income 

$ 101,695


$ 103,664


$ 194,782


$ 206,631


























Three Months Ended


Six Months Ended


April 30,


April 30,


2014


2013


2014


2013

GAAP net income per share

$       0.40


$       0.44


$       0.83


$       0.89

Adjustments:








Amortization of intangible assets

0.20


0.21


0.38


0.42

Stock compensation

0.12


0.10


0.24


0.22

Acquisition-related costs

0.03


0.01


0.04


0.02

Inventory fair value adjustment

-


-


-


0.01

Facility restructuring charges

-


0.00


-


0.00

Tax and other settlements

(0.01)


-


(0.08)


-

Tax adjustments

(0.09)


(0.10)


(0.17)


(0.23)

Non-GAAP net income per share

$       0.65


$       0.66


$       1.24


$       1.33









Shares used in calculation

157,082


156,606


156,986


155,662

 

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 2014 Targets

(in thousands, except per share amounts)






 Range for Three Months 


Ending July 31, 2014 (1)


Low


High

Target GAAP expenses

$   450,500


$   471,000

Adjustments:




       Estimated impact of amortization of intangible assets

(32,000)


(39,000)

       Estimated impact of stock compensation

(18,500)


(22,000)

Target non-GAAP expenses

$   400,000


$   410,000










Range for Three Months


Ending July 31, 2014 (1)


Low


High

Target GAAP earnings per share

$         0.30


$         0.38

Adjustments:




Estimated impact of amortization of intangible assets

0.25


0.20

Estimated impact of stock compensation

0.14


0.12

Net non-GAAP tax adjustments 

(0.09)


(0.08)

Target non-GAAP earnings per share

$         0.60


$         0.62





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

157,000


157,000









GAAP to Non-GAAP Reconciliation of Full Fiscal Year 2014 Targets






Range for Fiscal Year


Ending October 31, 2014 (1)


Low


High

Target GAAP earnings per share

$         1.55


$         1.68

Adjustments:




Estimated impact of amortization of intangible assets

0.83


0.78

Estimated impact of stock compensation

0.54


0.50

Acquisition-related costs

0.04


0.04

    Tax and other settlements

(0.08)


(0.08)

Net non-GAAP tax adjustments

(0.43)


(0.42)

Target non-GAAP earnings per share

$         2.45


$         2.50





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

157,000


157,000





(1) Synopsys' third quarter and fiscal year end on August 2, and November 1, 2014, 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 326039, 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 2014 in August 2014.  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 2014 earnings call in August 2014, 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 2014 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 2014 in its quarterly report on Form 10-Q to be filed by June 12, 2014.

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

This press release and our upcoming earnings results conference call contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.  Any statements that are not statements of historical fact may be deemed to be forward-looking statements.  Forward-looking statements include but are not limited to: sections of this press release entitled "Financial Targets" and "Reconciliation of Target Non-GAAP Operating Results"; and statements regarding Synopsys' business, acquisitions, products, technologies, business model, customer demand for our technology, and projected financial results and business objectives.  These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements.  Accordingly, we caution stockholders and prospective investors not to place undue reliance on these statements.  Such risks, uncertainties and factors include, but are 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;
  • 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;
  • Synopsys' ability to realize the potential financial or strategic benefits of acquisitions it completes, including its recent acquisition of Coverity, Inc., and challenges in entering new markets in which Synopsys is not experienced and in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations, including possible 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;
  • 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 products 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;
  • variability in the timing of revenue recognition due to factors such as payment terms and the timing and value of contract renewals and professional services projects;
  • 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, 2014; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2014; and cash flow from operations on a GAAP basis for fiscal year 2014 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 in 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) litigation, (x) general economic conditions, and (xi) 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, 2014. Furthermore, Synopsys' actual tax rates applied to income for the third quarter and fiscal year 2014 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 2014 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances, 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.

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,


2014


2013


2014


2013

Revenue:








  Time-based license

$   424,185


$   413,491


$   824,331


$   799,450

  Upfront license

36,297


24,779


70,269


55,568

  Maintenance and service

57,215


60,987


102,048


119,376

      Total revenue

517,697


499,257


996,648


974,394

Cost of revenue:








  License

67,302


61,569


130,127


126,061

  Maintenance and service

21,109


19,766


41,380


39,821

  Amortization of intangible assets

25,674


26,398


48,427


52,914

     Total cost of revenue

114,085


107,733


219,934


218,796

Gross margin

403,612


391,524


776,714


755,598

Operating expenses:








  Research and development

178,043


169,962


345,586


327,472

  Sales and marketing

114,784


103,930


220,576


205,688

  General and administrative

40,575


32,254


74,808


70,192

  Amortization of intangible assets 

6,376


5,875


11,754


11,762

     Total operating expenses

339,778


312,021


652,724


615,114

Operating income

63,834


79,503


123,990


140,484

Other income (expense), net

4,225


7,204


15,253


17,953

Income before income taxes

68,059


86,707


139,243


158,437

Provision (benefit) for income taxes

4,742


18,016


8,230


19,824

Net income

$     63,317


$     68,691


$   131,013


$   138,613









Net income per share:








  Basic

$         0.41


$         0.45


$         0.85


$         0.91

  Diluted

$         0.40


$         0.44


$         0.83


$         0.89









Shares used in computing per share amounts:








  Basic

154,572


153,515


154,319


152,496

  Diluted

157,082


156,606


156,986


155,662









(1)  Synopsys' second quarter of fiscal 2014 and 2013 ended on May 3, 2014 and May 4, 2013, respectively. For presentation purposes, we refer to periods ended April 30.  

 

 

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)












April 30, 2014


October 31, 2013

ASSETS:







Current assets:







  Cash and cash equivalents




$       821,633


$          1,022,441

  Accounts receivable, net




322,606


256,026

  Deferred income taxes




99,385


92,058

  Income taxes receivable and prepaid taxes




18,241


18,277

  Prepaid and other current assets




66,406


59,175

          Total current assets




1,328,271


1,447,977

Property and equipment, net




202,860


197,600

Goodwill




2,254,454


1,975,971

Intangible assets, net




398,560


335,425

Long-term prepaid taxes




9,605


7,935

Long-term deferred income taxes




203,554


243,066

Other long-term assets




163,232


150,961

           Total assets




$    4,560,536


$          4,358,935








LIABILITIES AND STOCKHOLDERS' EQUITY:







Current liabilities:







  Accounts payable and accrued liabilities




$       275,611


$             358,197

  Accrued income taxes




17,847


7,168

  Deferred revenue




781,274


827,554

  Short-term debt




230,000


30,000

           Total current liabilities




1,304,732


1,222,919

Long-term accrued income taxes




42,943


53,064

Long-term deferred revenue




72,212


54,736

Long-term debt




60,000


75,000

Other long-term liabilities




161,530


164,939

           Total liabilities




1,641,417


1,570,658

Stockholders' equity:







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




-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 154,707 and







      154,169 shares outstanding, respectively




1,547


1,542

  Capital in excess of par value




1,614,838


1,597,244

  Retained earnings




1,437,246


1,324,854

  Treasury stock, at cost: 2,558 and 3,095 shares, respectively




(94,659)


(106,668)

  Accumulated other comprehensive loss 




(39,853)


(28,695)

           Total stockholders' equity




2,919,119


2,788,277

           Total liabilities and stockholders' equity




$    4,560,536


$          4,358,935








(1)  Synopsys' second quarter of fiscal 2014 ended on May 3, 2014, and its fourth quarter of fiscal 2013 ended on November 2, 2013. For presentation purposes, the periods refer to the closest calendar month end.

 

 

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






 Six Months Ended April 30, 


2014


2013

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$  131,013


$ 138,613

Adjustments to reconcile net income to net cash provided by operating




    activities:




Amortization and depreciation

91,585


94,154

Stock compensation

36,941


33,229

Allowance for doubtful accounts 

(250)


901

Gain on sale of investments

(6,529)


(101)

Deferred income taxes

9,266


8,225

Net changes in operating assets and liabilities, net of 




acquired assets and liabilities:




Accounts receivable

(59,577)


39,287

Prepaid and other current assets

(4,557)


(27,502)

Other long-term assets

(13,756)


(16,524)

Accounts payable and other liabilities

(83,135)


(97,569)

Income taxes

(15,021)


(2,574)

Deferred revenue

(48,069)


(127,847)

Net cash provided by operating activities

37,911


42,292





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales of long-term investments

7,304


222

Purchases of property and equipment

(29,901)


(29,426)

Proceeds from sales of property and equipment

-


2,000

Cash paid for acquisitions, net of cash acquired

(367,965)


-

Capitalization of software development costs

(1,875)


(1,787)

Net cash used in investing activities

(392,437)


(28,991)





CASH FLOWS FROM FINANCING ACTIVITIES:




Principal payments on capital leases

(206)


(784)

Proceeds from credit facility

200,000


-

Repayment of debt

(15,497)


(15,237)

Acquisition of non-controlling interest

-


(44,004)

Issuances of common stock

53,326


75,193

Purchases of treasury stock

(79,747)


(34,998)

Other

(500)


(1,130)

Net cash provided by (used in) financing activities

157,376


(20,960)

Effect of exchange rate changes on cash and cash equivalents

(3,658)


(11,705)

Net change in cash and cash equivalents

(200,808)


(19,364)

Cash and cash equivalents, beginning of the year

1,022,441


700,382

Cash and cash equivalents, end of the period

$  821,633


$ 681,018









(1)  Synopsys' second quarter of fiscal 2014 and 2013 ended on May 3, 2014 and May 4, 2013, respectively. For presentation purposes, we refer to periods ended April 30.  

 

SOURCE Synopsys, Inc.



RELATED LINKS
http://www.synopsys.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.