CIMdata PLM Industry Summary Online Archive
18 May 2005
Financial News
Synopsys Posts Financial Results for Second Quarter of Fiscal 2005
Synopsys, Inc. reported results for its second quarter ended April 30, 2005.
For the second quarter of fiscal 2005, Synopsys reported revenue of $244.3 million, a 1% increase compared to the first quarter of fiscal 2005, and a 17% decrease from $294.6 million in the second quarter of fiscal 2004. For the six-month period ended April 30, 2005, revenue was $485.6 million, a decrease of 16% from revenue of $579.9 million for the same period in fiscal 2004. The year-over-year comparisons reflect the company's shift to an almost-fully ratable license model initiated in the fourth quarter of fiscal 2004, under which most of the company's license revenue is recognized over time rather than upfront in the quarter shipped. As a result, in the most recent quarter more than 90% of revenue came from backlog.
"Synopsys had another very solid quarter," said Aart de Geus, CEO of Synopsys. "We are clearly on the offensive with strong technical momentum, and are making good progress on our growth objectives."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, for the second quarter of fiscal 2005 net loss was ($4.9) million, or ($0.03) per share, better than Synopsys internal targets and an improvement over the first quarter of fiscal 2005. In the second quarter of last year, net income was $28.7 million, or $0.18 per share. GAAP net loss for the six-month period ended April 30, 2005 was ($19.3) million, or ($0.13) per share, compared to net income of $60.9 million, or $0.37 per share, for the same period in 2004.
Non-GAAP Results
On a non-GAAP basis, net income for the second quarter of fiscal 2005 was $12.7 million, or $0.09 per share, compared to non-GAAP net income of $57.1 million, or $0.35 per share, for the second quarter of fiscal 2004. Non-GAAP net income for the six-month period ended April 30, 2005 was $27.4 million, or $0.19 per share, compared to $111.4 million, or $0.68 per share, for the same period in 2004. Non-GAAP net income consists of GAAP net income excluding, to the extent incurred in a particular quarter or period, amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and one-time items and facilities and workforce realignment charges. The decreases in GAAP and non-GAAP net income for these periods were due primarily to the decrease in revenue caused by our shift to an almost-fully ratable license model in the fourth quarter of fiscal 2004.
Financial Targets
Synopsys also announced its operating model targets for the third quarter and full fiscal year 2005. These targets constitute forward-looking information and are based on current expectations.
Third Quarter of Fiscal 2005 Targets:
• Revenue: $243 million-$253 million
• GAAP expenses: $252 million-$263 million
• Non-GAAP expenses: $228 million-$238 million
• GAAP other income and expense: $30 million-$37 million (including preliminary estimate of valuation of Nassda litigation settlement)
• Non-GAAP other income and expense: $0 million - $4 million (excluding preliminary estimate of valuation of Nassda litigation settlement)
• Fully diluted outstanding shares: 142 million-150 million
• Tax rate applied in Non-GAAP net income calculations: 28%
• GAAP earnings: $0.08-$0.12 per share
• Non-GAAP earnings: $0.06-$0.10 per share
• Revenue from backlog: more than 90% of revenue
Full-Year Fiscal Year 2005 Targets
• Revenue: $960 million-$990 million
• Fully diluted outstanding shares: 142 million-150 million
• Tax rate applied in Non-GAAP net income calculations: 31%
• GAAP earnings: $(0.06)-$(0.01) per share
• Non-GAAP earnings: $0.31-$0.39 per share
These targets supersede all fiscal 2005 financial targets previously published by Synopsys and include Synopsys' current best estimate of the impact of the acquisition of Nassda Corporation, which Synopsys completed on May 11, 2005 on the results of the combined company.
GAAP Reconciliation
Non-GAAP net income consists of GAAP net income excluding, to the extent incurred in a particular period, amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and one-time items and facilities and workforce realignment charges. Intangible assets consist primarily of purchased technology, contract rights intangible, customer-installed base/relationships, trademarks and trade names, covenants not to compete, customer backlog and other intangibles. Non-GAAP net income is reduced by the amount of additional taxes that Synopsys would accrue if it used non-GAAP results instead of GAAP results to calculate Synopsys' tax liability.
Synopsys' management evaluates and makes operating decisions primarily based on the bookings and revenues of its core software and services business operations, the direct, ongoing and recurring costs of those operations such as cost of revenues and operating expenses, and gross margin and operating income. Management does not believe amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and one-time items and facilities and workforce realignment charges are ordinary, ongoing and recurring operating costs of core software and services business operations. Therefore, management calculates the non-GAAP financial measures provided in this earnings release excluding these costs and uses these non-GAAP financial measures to enable it to analyze further and more consistently the period-to-period financial performance of its core business operations. Management believes that, although it is important for investors to understand GAAP measures, providing investors with these non-GAAP measures gives them additional important information to enable them to assess, in a way management assesses, Synopsys' current and future continuing operations.
Additional Financial Information Available on Synopsys Website
In connection with this earnings release, Synopsys is making available to investors supplemental financial information, which can be found on Synopsys' website at http://www.synopsys.com/corporate/invest/finsupp/q205.pdf . Synopsys currently intends to provide this information on a quarterly basis.
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 recording of the call will be available by calling 1-888-428-4470 (612-332-0530 for international callers), access code 781006, beginning at 5:30 p.m. Pacific Time today. A webcast replay will also be available at http://www.synopsys.com/corporate/invest/invest.html from approximately 5:30 p.m. Pacific Time today through the time of the announcement of Synopsys' results for the third quarter of fiscal 2005 in August 2005. In addition, Synopsys will post copies of the prepared remarks of Aart de Geus, Chairman and Chief Executive Officer, and Steve Shevick, Chief Financial Officer, on its website at http://www.synopsys.com/corporate/invest/invest.html following the call.
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