Synopsys Posts Financial Results for Third Quarter Fiscal Year 2010

MOUNTAIN VIEW, Calif., Aug. 18, 2010 -- Synopsys, Inc. (Nasdaq: SNPS), a world leader in software and IP for semiconductor design, verification and manufacturing, today reported results for its third quarter of fiscal year 2010.

For the third quarter of fiscal 2010, Synopsys reported revenue of $336.9 million, compared to $345.2 million for the third quarter of fiscal 2009.  

"Synopsys delivered strong results in Q3, and we are well on-track to meeting or beating the targets we set at the beginning of the year," said Aart de Geus, chairman and CEO of Synopsys.  "During the downturn over the past two years, we invested to strengthen our technology portfolio, gained customer momentum, and expanded our total addressable market through several acquisitions.  Looking forward, our objective is to sustainably grow earnings per share primarily by growing revenue, controlling expenses and focusing efforts on value-added projects."

GAAP Results

On a generally accepted accounting principles (GAAP) basis, net income for the third quarter of fiscal 2010 was $39.3 million, or $0.26 per share, compared to $47.4 million, or $0.32 per share, for the third quarter of fiscal 2009.  

Non-GAAP Results

On a non-GAAP basis, net income for the third quarter of fiscal 2010 was $58.2 million, or $0.39 per share, compared to non-GAAP net income of $68.3 million, or $0.47 per share, for the third quarter of fiscal 2009.

Financial Targets

Synopsys also provided its financial targets for the fourth quarter and full fiscal year 2010.  These targets do not include future acquisition-related expenses that may be incurred in fiscal 2010.  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.  

Fourth Quarter of Fiscal Year 2010 Targets:

• Revenue: $349 million - $357 million
• GAAP expenses: $291 million - $310 million
• Non-GAAP expenses: $267 million - $277 million
• Other income and expense: $0 - $3 million
• Tax rate applied in non-GAAP net income calculations: approximately 27 percent
• Fully diluted outstanding shares: 149 million - 153 million
• GAAP earnings per share: $0.21 - $0.27
• Non-GAAP earnings per share: $0.37 - $0.39
• Revenue from backlog: greater than 90 percent

Full-Year Fiscal Year 2010 Targets:

• Revenue: $1.354 billion - $1.362 billion
• Other income and expense: $4 million - $7 million
• Tax rate applied in non-GAAP net income calculations: approximately 27 percent
• Fully diluted outstanding shares: 149 million - 153 million
• GAAP earnings per share: $1.61 - $1.67
• Non-GAAP earnings per share: $1.58 - $1.60
• Cash flow from operations: approximately $300 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) in-process research and development expenses, (iv) acquisition-related costs; (v) other significant items, including the effect of a tax benefit from a settlement with the Internal Revenue Service and a facility restructuring charge, and (vi) the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes; 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 such 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 Third Quarter Fiscal Year 2010 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 Third Quarter Fiscal Year 2010 Results

(unaudited and in thousands, except per share amounts)

Reconciliation of Target 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 Fourth Quarter Fiscal Year 2010 Targets

(in thousands, except per share amounts)

GAAP to Non-GAAP Reconciliation of Fiscal Year 2010 Targets

Financial tables

To read financial tables, click here

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 166466, 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 fourth quarter and fiscal year 2010 in December 2010.  Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and 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 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 fourth quarter and fiscal year 2010 earnings call in December 2010, 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 fourth quarter of fiscal 2010 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 third quarter fiscal 2010 in its quarterly report on Form 10-Q to be filed by September 9, 2010.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) is a world leader in electronic design automation (EDA), supplying the global electronics market with the software, intellectual property (IP) and services used in semiconductor design, verification and manufacturing. Synopsys' comprehensive, integrated  portfolio of implementation, verification, IP, manufacturing and field-programmable gate array (FPGA) solutions helps address the key challenges designers and manufacturers face today, such as power and yield management, system-to-silicon verification and time-to-results. These technology-leading solutions help give Synopsys customers a competitive edge in bringing the best products to market quickly while reducing costs and schedule risk. Synopsys is headquartered in Mountain View, California, and has more than 65 offices located throughout North America, Europe, Japan, Asia and India. Visit Synopsys online at http://www.synopsys.com.