SYNOPSYS INC. 
By MOUNTAIN VIEW, Calif., Feb. 19, 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 first quarter of fiscal year 2014.
For the first quarter of fiscal year 2014, Synopsys reported revenue of $479.0 million, compared to $475.1 million for the first quarter of fiscal 2013, an increase of approximately 1 percent.
"Synopsys began the year with a strong first quarter, featuring continued customer successes and excellent progress preparing for a number of upcoming product announcements," said Aart de Geus, chairman and co-CEO of Synopsys. "While customers are cautious in their spending, technology demands continue unabated, making great EDA and IP solutions essential for their success."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the first quarter of fiscal 2014 was $67.7 million, or $0.43 per share, compared to $69.9 million, or $0.45 per share, for the first quarter of fiscal 2013.
Non-GAAP Results
On a non-GAAP basis, net income for the first quarter of fiscal 2014 was $93.1 million, or $0.59 per share, compared to non-GAAP net income of $103.0 million, or $0.67 per share, for the first quarter of fiscal 2013. Reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
Fiscal first quarter 2013 GAAP and non-GAAP results included the impact of the reinstatement of the federal R&D tax credit for 2012 and 2013.
Financial Targets
Synopsys also provided its financial targets for the second quarter and full fiscal year 2014. These targets do not include any impact of future acquisition-related activities or costs that may be incurred in fiscal year 2014. These targets constitute forward-looking statements 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.
Second Quarter of Fiscal Year 2014 Targets:
-- Revenue: $505 million - $515 million
-- GAAP expenses: $422 million - $444 million
-- Non-GAAP expenses: $377 million - $387 million
-- Other income and expense: $0 - $1 million
-- Tax rate applied in non-GAAP net income calculations: approximately 24
percent
-- Fully diluted outstanding shares: 155 million - 159 million
-- GAAP earnings per share: $0.33- $0.41
-- Non-GAAP earnings per share: $0.60 - $0.62
Full Fiscal Year 2014 Targets:
-- Revenue: $2.03 billion - $2.065 billion
-- Other income and expense: $8 million - $11 million
-- Tax rate applied in non-GAAP net income calculations: approximately 24
percent
-- Fully diluted outstanding shares: 155 million - 159 million
-- GAAP earnings per share: $1.72 - $1.83
-- Non-GAAP earnings per share: $2.55 - $2.60
-- Cash flow from operations: $425 million - $450 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 the effect of tax settlements with tax authorities, 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 First 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 First Quarter Fiscal Year 2014 Results
(unaudited and in thousands, except per share amounts)
Three Months Ended
January 31,
-----------
2014 2013
---- ----
GAAP net income $67,696 $69,922
Adjustments:
Amortization of intangible assets 28,131 32,403
Stock compensation 18,118 17,701
Acquisition-related costs 1,074 1,836
Inventory fair value adjustment - 1,809
Facility restructuring charges - (272)
Tax settlement impacts (10,267) -
Tax adjustments (11,665) (20,432)
------- -------
Non-GAAP net income $93,087 $102,967
======= ========
Three Months Ended
January 31,
-----------
2014 2013
---- ----
GAAP net income per share $0.43 $0.45
Adjustments:
Amortization of intangible assets 0.18 0.21
Stock compensation 0.12 0.12
Acquisition-related costs 0.01 0.01
Inventory fair value adjustment - 0.01
Facility restructuring charges - (0.00)
Tax settlement impacts (0.07) -
Tax adjustments (0.08) (0.13)
Non-GAAP net income per share $0.59 $0.67
===== =====
Shares used in calculation 156,756 154,531
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 Second Quarter Fiscal
Year 2014 Targets
(in thousands, except per share data)
Range for
Three Months
Ending April
30, 2014 (1)
Low High
--- ----
Target GAAP expenses $422,000 $444,000
Adjustment:
Estimated impact of
amortization of
intangible assets (27,000) (35,000)
Estimated impact of
stock compensation
expense (18,000) (22,000)
Target non-GAAP
expenses $377,000 $387,000
======== ========
Range for
Three Months
Ending April
30, 2014 (1)
Low High
--- ----
Target GAAP earnings
(loss) per share $0.33 $0.41
Adjustment:
Estimated impact of
amortization of
intangible assets 0.22 0.17
Estimated impact of
stock-based
compensation 0.14 0.11
Net non-GAAP tax
effect (0.09) (0.07)
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 $1.72 $1.83
Adjustment:
Estimated impact of
amortization of
intangible assets 0.74 0.69
Estimated impact of
stock-based
compensation 0.52 0.48
Estimated Impact of
tax settlement (0.07) (0.07)
Tax effect (0.36) (0.33)
Target non-GAAP
earnings per share $2.55 $2.60
===== =====
Shares used in non-
GAAP calculation
(midpoint of target
range) 157,000 157,000
(1) Synopsys' second
quarter and fiscal year
end on May 3, 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 318297, beginning at 4:00 p.m. Pacific Time today. A webcast replay will also be available on the website from approximately 4:30 p.m. Pacific Time today through the time Synopsys announces its results for the second fiscal quarter in May 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 second quarter fiscal year 2014 earnings call in May 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 second quarter of fiscal year 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 first quarter fiscal 2014 in its quarterly report on Form 10-Q to be filed by March 13, 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 and 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;
-- 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 April 30, 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) general economic conditions, and (x) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in its latest Annual Report on Form 10-K for the fiscal year ended Oct. 31, 2013. Furthermore, Synopsys' actual tax rates applied to income for the second 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 second 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 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.
INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901
Synopsys-ir@synopsys.com
EDITORIAL CONTACT:
Sheryl Gulizia
Synopsys, Inc.
650-584-8635
sgulizia@synopsys.com
SYNOPSYS, INC.
Unaudited Consolidated Statements of Operations (1)
(in thousands, except per share amounts)
Three Months
Ended
January 31,
-------------
2014 2013
---- ----
Revenue:
Time-based license $400,146 $385,959
Upfront license 33,972 30,789
Maintenance and service 44,833 58,389
------ ------
Total revenue 478,951 475,137
Cost of revenue:
License 62,825 64,492
Maintenance and service 20,271 20,055
Amortization of intangible
assets 22,753 26,516
Total cost of revenue 105,849 111,063
Gross margin 373,102 364,074
Operating expenses:
Research and development 167,543 157,510
Sales and marketing 105,792 101,758
General and administrative 34,233 37,938
Amortization of intangible
assets 5,378 5,887
Total operating expenses 312,946 303,093
Operating income 60,156 60,981
Other income (expense), net 11,028 10,749
------ ------
Income before income taxes 71,184 71,730
Provision (benefit) for
income taxes 3,488 1,808
Net income $67,696 $69,922
======= =======
Net income per share:
Basic $0.44 $0.46
Diluted $0.43 $0.45
Shares used in computing per share amounts:
Basic 154,066 151,477
======= =======
Diluted 156,756 154,531
======= =======
(1) Synopsys' first quarter of fiscal 2014 and 2013 ended on
February 1, 2014 and February 2, 2013, respectively. For
presentation purposes, we refer to periods ended January 31.
SYNOPSYS, INC.
Unaudited Consolidated Balance Sheets (1)
(in thousands, except par value amounts)
January 31, 2014 October 31, 2013
---------------- ----------------
ASSETS:
Cash and cash
equivalents $893,053 $1,022,441
Accounts receivable,
net 246,774 256,026
Deferred income taxes 93,409 92,058
Income taxes
receivable and
prepaid taxes 19,142 18,277
Prepaid and other
current assets 68,487 59,175
------ ------
Total current assets 1,320,865 1,447,977
Property and
equipment, net 197,335 197,600
Goodwill 1,966,819 1,975,971
Intangible assets, net 307,912 335,425
Long-term prepaid
taxes 7,119 7,935
Long-term deferred
income taxes 235,460 243,066
Other long-term assets 156,646 150,961
Total assets $4,192,156 $4,358,935
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and
accrued liabilities $217,404 $358,197
Accrued income taxes 11,217 7,168
Deferred revenue 778,082 827,554
Short-term debt 30,000 30,000
------ ------
Total current
liabilities 1,036,703 1,222,919
Long-term accrued
income taxes 50,630 53,064
Long-term deferred
revenue 54,743 54,736
Long-term debt 67,500 75,000
Other long-term
liabilities 159,365 164,939
------- -------
Total liabilities 1,368,941 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;
154,053 and
154,169 shares
outstanding,
respectively 1,541 1,542
Capital in excess of
par value 1,601,935 1,597,244
Retained earnings 1,382,199 1,324,854
Treasury stock, at
cost: 3,211 and 3,095
shares, respectively (116,035) (106,668)
Accumulated other
comprehensive loss (46,425) (28,695)
------- -------
Total stockholders'
equity 2,823,215 2,788,277
Total liabilities and
stockholders' equity $4,192,156 $4,358,935
========== ==========
(1) Synopsys' first
quarter of fiscal 2014
ended on February 1,
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)
Three Months Ended January
31,
---------------------------
2014 2013
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net
income $67,696 $69,922
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization
and
depreciation 43,714 47,064
Stock
compensation 18,118 17,700
Allowance
for
doubtful
accounts (400) 2,083
Gain
on
sale
of
investments (6,529) -
Deferred
income
taxes 5,891 (4,900)
Net changes in operating assets and
liabilities, net of
acquired assets and liabilities:
Accounts
receivable 7,910 20,341
Prepaid
and
other
current
assets (13,635) (23,329)
Other
long-
term
assets (6,695) (10,484)
Accounts
payable
and
other
liabilities (134,902) (152,207)
Income
taxes (10,068) (1,597)
Deferred
revenue (44,992) (56,031)
------- -------
Net
cash
used
in
operating
activities (73,892) (91,438)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds
from
sales
of
long-
term
investments 6,791 -
Purchases
of
property
and
equipment (14,353) (13,980)
Cash
paid
for
acquisitions,
net
of
cash
acquired (900) -
Capitalization
of
software
development
costs (902) (825)
Net
cash
used
in
investing
activities (9,364) (14,805)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal
payments
on
capital
leases (111) (409)
Acquisition
of
non-
controlling
interest - (44,004)
Repayment
of
acquired
debt (7,748) (7,619)
Issuances
of
common
stock 21,581 15,615
Purchases
of
treasury
stock (54,747) -
Net
cash
(used
in)
provided
by
financing
activities (41,025) (36,417)
Effect
of
exchange
rate
changes
on
cash
and
cash
equivalents (5,107) (7,357)
Net
change
in
cash
and
cash
equivalents (129,388) (150,017)
Cash
and
cash
equivalents,
beginning
of
the
year 1,022,441 700,382
Cash
and
cash
equivalents,
end
of
the
period $893,053 $550,365
======== ========
(1) Synopsys' first
quarter of fiscal 2014
and 2013 ended on
February 1, 2014 and
February 2, 2013,
respectively. For
presentation purposes,
we refer to periods
ended January 31.
SOURCE Synopsys, Inc.
