CIMdata PLM Industry Summary Online Archive
16 February 2005
Financial News
Synopsys Posts Financial Results for First Quarter of Fiscal 2005
Synopsys, Inc. reported results for the first quarter ended January 31, 2005.
For the quarter, Synopsys reported revenue of $241.3 million, a 15% decrease compared to revenue of $285.3 million for the first quarter of fiscal 2004, but in line with the Company's targets. The decrease was expected, and is due primarily to a lower percentage of upfront license revenue, driven by the shift in the fourth quarter of fiscal 2004 in Synopsys' license mix away from software licenses on which revenue is recognized when the product is shipped toward licenses on which revenue is recognized over the term of the license.
GAAP Results
On a generally accepted accounting principles (GAAP) basis, for the first quarter of fiscal 2005, net loss was ($14.6) million, or ($0.10) per share, compared to net income of $32.2 million, or $0.19 per share, for the first quarter of fiscal 2004.
Non-GAAP Results
On a non-GAAP basis, for the first quarter of fiscal 2005, net income was $14.4 million, or $0.10 per share, compared to non-GAAP net income of $54.3 million, or $0.33 per share, for the first quarter of fiscal 2004.
The year-over-year decrease in GAAP and Non-GAAP net income was due primarily to lower revenue due to the license mix shift, increased compensation costs as a result of additional headcount added in fiscal 2004 primarily due to acquisitions, and, in the case of GAAP net income, in-process research and development charges related to the first quarter acquisition of ISE Integrated Systems Engineering AG.
Other income for the first quarter of fiscal 2005 was approximately $4.7 million, higher than expected due primarily to a one-time recognition of $3.9 million of cumulative and current quarter gains on the Company's yen-dollar hedges, based on a reevaluation of the application of SFAS 133 on the Company's hedging activity.
See the full press release for a description of the items excluded from non-GAAP results and a reconciliation of GAAP and non-GAAP results as well as full financial details.
"Q1 was a very good quarter. I am excited to see the pieces coming together on a vision we have been pursuing for several years," said Aart de Geus, chairman and chief executive officer. "Across the board, our latest technology advances are showing success and the anticipation of new technology in 2005 is contributing to the momentum we see. We are also expanding our addressable market beyond the traditional bounds of EDA and adding significantly to Synopsys' competitive differentiation."
Fiscal 2005 Financial Targets
Second Quarter of Fiscal 2005 Targets
• Revenue: $238 million-$248 million
• Non-GAAP expenses: $222 million-$232 million
• GAAP expenses: $258 million-$268 million
• Other income and expense: $(2) million-$2 million
• Fully diluted outstanding shares: 142 million-150 million
• Tax rate applied in net income calculations: 28%
• Non-GAAP earnings: $0.06-$0.10 per share
• GAAP earnings: $(0.12)-$(0.08) per share
• Revenue from backlog: > 90% of revenue
Fiscal Year 2005 Targets
• Revenue: $940 million-$980 million
• Fully diluted outstanding shares: 142 million-150 million
• Tax rate applied in net income calculations: 31%
• Non-GAAP earnings: $0.26-$0.36 per share
• GAAP earnings: $(0.29)-$(0.19) per share
These targets supersede all fiscal 2005 financial targets previously given by Synopsys. The full-year fiscal 2005 GAAP earnings targets above do not include the impact of new accounting rules requiring the expensing of stock options which take effect during Synopsys' fourth quarter of fiscal 2005.
GAAP Reconciliation
Non-GAAP net income consists of GAAP net income excluding, to the extent incurred in a particular quarter or fiscal year, amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and facilities and workforce realignment charges. Intangible assets consist primarily of purchased technology, contract rights intangible, customer-installed base/relationships, trademarks and tradenames, 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 and the direct, ongoing and recurring costs of those operations such as cost of revenues and research and development, sales and marketing and general and administrative expenses. 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 facilities and workforce realignment charges are ordinary, ongoing and recurring operating charges for Synopsys' core software and services business operations. Therefore, management calculates the non-GAAP financial measures used in this earnings release excluding these charges 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.
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/q105.pdf . Synopsys currently intends to provide this information on a quarterly basis.
Synopsys will hold a conference call for financial analysts and investors today at 2:00 p.m., Pacific Time. 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 second quarter of fiscal 2005 in May 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.
Synopsys will include final financial statements for the first quarter of fiscal 2005 in its Quarterly Report on Form 10-Q to be filed in March 2005. For further discussion of these and other factors that may cause results to differ from those projected in this release, readers are referred to the reports which Synopsys has filed with the Securities and Exchange Commission, and which are available at http://www.sec.gov , specifically contained in Part II, Item 7 of Synopsys' Annual Report on Form 10-K for the fiscal year ended October 31, 2004 filed with the SEC on January 12, 2005 entitled "Factors That May Affect Future Results." Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter these forward-looking statements whether as a result of new information, future events or otherwise.
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