PRESS RELEASE
INVESTOR CONTACT:
Jessica Kourakos
Synopsys, Inc.
650-584-4289
EDITORIAL CONTACT:
Craig Cochran
Synopsys, Inc.
650-584-4230
Synopsys Posts Financial Results for
Fiscal Second Quarter 2003
MOUNTAIN VIEW, Calif. May 21, 2003 - Synopsys Inc., (Nasdaq: SNPS), the
world leader in integrated circuit (IC) design software, today reported its
second quarter results for the period that ended May 3, 2003.
For the second quarter of fiscal 2003, Synopsys reported revenue of $292.0
million, a 57% increase over revenue of $185.6 million in the second quarter of
fiscal 2002. Net income on an earnings before goodwill (EBG) basis was $61.2
million, a 144% increase over EBG net income of $25.1 million in the second
quarter of fiscal 2002. EBG per share was $0.80, a 105% increase over EBG per
share of $0.39 in the second quarter of fiscal 2002. EBG represents earnings on
a fully-diluted basis excluding, to the extent incurred in any particular
quarter, amortization of intangible assets and deferred compensation, in-process
research and development expenses and one-time or extraordinary expenses
relating to acquisitions, such as integration expenses.
1
On a generally accepted accounting principles (GAAP) basis, for the second
quarter of fiscal 2003, net income was $22.3 million, or $0.29 per share,
compared to net income of $21.4 million, or $0.33 per share, for the second
quarter of fiscal 2002. The difference between net income on an EBG basis and on
a GAAP basis for the second quarter of fiscal 2003 was primarily due to charges
relating to the acquisition of Numerical Technologies, Inc. which was completed
during the quarter, and the amortization of intangibles related to prior
acquisitions.
"Despite a tough economic backdrop, our second quarter was the largest orders
quarter in Synopsys' history," said Aart de Geus, chairman and CEO of Synopsys.
"We are pleased with the Company's current momentum and look forward to
achieving strong financial results during the remainder of fiscal 2003."
Outlook
Synopsys also announced its operating model targets for the third quarter
of fiscal year 2003 and for full year fiscal 2003.
Third quarter of fiscal year 2003 targets (EBG basis):
- -----------------------------------------------------
o Revenue: $288 - $303 million;
o Total expenses: $207 - $214 million;
o Other income: $6 - $9 million;
o Fully diluted outstanding shares: 75 - 79 million;
o Pro forma tax rate: 32.5%;
o Earnings per share: $0.77 - $0.82;
o Perpetual licenses as a percentage of product bookings: 20% - 25%; and
o Average length of ratable licenses: 3.3 - 3.6 years.
2
Fiscal year 2003 targets (EBG basis):
- ------------------------------------
o Revenue: between $1.130 - $1.180 billion;
o Earnings per share: $2.95 - $3.10;
o Perpetual licenses as a percentage of product bookings: 20%-25%;
o Average length of ratable licenses: 3.0 - 3.5 years.
Effectiveness of Guidance
The targets set forth above represent the Company's expectations only as of the
date of this release and should not be viewed as a statement about the Company's
expectations after this date. Although this release will remain available on the
Company's website, its continued availability does not indicate that the Company
is reaffirming or confirming its continued validity. The Company will not report
on its progress during the third fiscal quarter or comment to analysts or
investors on, or otherwise update, such targets until it releases its quarterly
results in August 2003.
GAAP Reconciliation
This earnings release contains financial information presented on both an EBG
and GAAP basis. EBG is a non-GAAP financial measure under Section 244.101 of
Regulation G. EBG represents earnings on a fully-diluted basis, excluding, to
the extent incurred in any particular quarter, amortization of intangible assets
and deferred compensation, in-process research and development expenses and
one-time or extraordinary expenses relating to acquisitions, such as integration
expenses. Intangible assets consist primarily of purchased technology, contract
rights intangible, customer installed base/relationships, trademarks and
tradenames, covenants not to compete and customer backlog. EBG is reduced by the
amount of additional taxes that would be required to be accrued if EBG results
were used instead of GAAP results to calculate the Company's tax liability.
The Company believes that providing financial information on an EBG basis, in
addition to a GAAP basis, allows investors a useful way to compare the results
of multiple fiscal periods. The Company believes it is appropriate to
exclude the items described in the preceding paragraph from its EBG financial
measures because such items do not constitute direct and ongoing costs of
3
Synopsys' business operations, such as cost of revenues or research and
development, sales and marketing and general and administrative expenses.
Excluding such non-cash, one-time or extraordinary expenses from the Company's
EBG financial measures also makes it easier for investors to evaluate the
ongoing operating results of the Company's business.
The specific items excluded from GAAP in calculating EBG for the periods given
in this press release are shown in the table below:
Three Months and Six Months ended April 30, 2003
Three Months Ended Six Months Ended
April 30 April 30
<s> <c> <c> <c> <c>
(in thousands, except per share data) 2003 2002 2003 2002
----------------------------------------------------
Net income on a GAAP basis $22,289 $21,380 $56,674 $35,432
Amortization of intangible assets and deferred compensation 33,478 4,356 62,261 8,400
In-process research and development 18,250 --- 18,250 ---
Tax effect (12,826) (660) (23,527) (1,437)
----------------------------------------------------
Net income on an EBG basis $61,191 $25,076 $113,658 $42,395
Diluted earnings per share on a GAAP basis $0.29 $0.33 $0.74 $0.55
Amortization of intangible assets and deferred
compensation per share $0.44 $0.07 $0.81 $0.12
In-process research and development per share $0.24 $--- $0.24 $---
Tax effect per share $(0.17) $(0.01) $(0.31) $(0.02)
Earnings per share on an EBG basis $0.80 $0.39 $1.48 $0.65
Third Quarter and Full Year Fiscal 2003 Targets
Range for Three Months Ending July 31, 2003
Low High
(in thousands, except per share data) --- ----
Total target expenses on a GAAP basis $238,000 $248,000
Estimated amortization of intangible assets and
deferred compensation 31,000 34,000
- ------------------------------------------------------------------------------------------------------------------
Target expenses on an EBG basis $207,000 $214,000
4
Range for Three Months Range for Fiscal Year Ending
Ending July 31, 2003 October 31, 2003
Low High Low High
--- ---- --- ----
<s> <c> <c> <c> <c>
Target earnings per share on a GAAP basis $0.52 $0.56 $1.68 $1.83
Estimated amortization of intangible assets and
deferred compensation per share $0.25 $0.26 $1.27 $1.27
-----------------------------------------------------------
Target earnings per share on an EBG basis $0.77 $0.82 $2.95 $3.10
Unaudited Financial Statements
The financial statements presented with this release are unaudited, preliminary
and subject to review and adjustment in the ordinary course of the Company's
quarterly review process. Final unaudited financial statements will be published
with the Company's quarterly report on Form 10-Q.
Additional Financial Information Available on Synopsys Website
In connection with the issuance of this earnings release, Synopsys is making
available to investors certain current and historical information regarding its
performance in geographic markets and product categories. The information can be
found at http://www.synopsys.com/corporate/invest/invest.html. 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 live Webcast of the call will be available
at Synopsys'corporate website at
http://www.synopsys.com/corporate/invest/invest.html. A recording of the call
will be available by calling 1-800-659-1025 (904-779-4707 for international
callers), access code 16360633, 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 the
Company's third quarter earnings results in August. Following the call, copies
of the prepared remarks of Aart de Geus, chairman and chief executive officer of
Synopsys, and Steve Shevick, chief financial officer, will be posted on
Synopsys' corporate website at
http://www.synopsys.com/corporate/invest/invest.html.
5
About Synopsys
Synopsys, Inc. (Nasdaq:SNPS) is the world leader in electronic design automation
(EDA) software for integrated circuit (IC) design. The Company delivers
technology-leading IC design and verification platforms to the global
electronics market, enabling the development of complex systems-on-chips (SoCs).
Synopsys also provides intellectual property and design services to simplify the
design process and accelerate time-to-market for its customers. Synopsys is
headquartered in Mountain View, California, and has more than 60 offices located
throughout North America, Europe, Japan and Asia. Visit Synopsys online at
http://www.synopsys.com.
Forward Looking Statements
The fourth paragraph of this earnings release and the sections entitled
"Outlook" and "GAAP Reconciliation" contain forward-looking statements within
the meaning of the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
described by these statements due to a number of factors, including: lower than
expected research and development spending by semiconductor and electronic
systems companies; continued or increased weakness in the semiconductor or
electronic systems industries; difficulties encountered in the continued
integration of the products and operations of Avant! and Numerical into
Synopsys' products and operations; the possibility that the Company may sell
fewer perpetual licenses than expected; a lower-than-anticipated level of
purchases of software or consulting services by the Company's customers; the
effect of international political conflict or hostilities on customer purchases;
the effect of the outbreak of Severe Acute Respiratory Syndrome on sales of the
Company's products and services; fluctuations in foreign currency exchange
rates; and increasing competition in the market for the Company's products and
services. For further discussion of these and other factors that may cause
results to differ from those projected in this release, readers are referred to
documents filed by Synopsys with the Securities and Exchange Commission,
specifically Synopsys' report on Form 10-Q filed with the SEC on March 18, 2003
(pp. 35-39). 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.
6
In addition, the Company's actual expenses and earnings per share on a GAAP
basis for the fiscal quarter ending August 2, 2003, and earnings per share on a
GAAP basis for the fiscal year ending November 1, 2003, could differ materially
from the targets stated under "Outlook" above for a number of reasons, including
a determination by the Company that any portion of its intangible assets have
become impaired, changes in deferred compensation expenses caused by employee
terminations and one-time expenses and the amortization of additional intangible
assets and deferred compensation associated with future acquisitions, if any.
###
Synopsys is a registered trademark of Synopsys, Inc. All other trademarks
mentioned in this release are the intellectual property of their respective
owners.
7
SYNOPSYS, INC.
Unaudited Condensed Consolidated Statements of Income (1)
(in thousands, except per share data)
Three Months Ended April 30, Six Months Ended April 30,
<s> <c> <c> <c> <c>
2003 2002 2003 2002
Revenue:
Product $ 82,000 $ 52,293 $ 136,520 $ 91,848
Service 61,967 65,765 134,354 134,858
Ratable license 148,061 67,580 289,290 134,477
Total revenue 292,028 185,638 560,164 361,183
Cost of revenue:
Product 3,845 3,221 7,598 7,287
Service 17,750 17,391 39,770 38,075
Ratable license 13,472 13,780 26,258 24,220
Amortization of intangible assets and deferred
Stock compensation 20,491 ---- 40,394 ----
Total cost of revenue 55,558 34,392 114,020 69,582
Gross margin 236,470 151,246 446,144 291,601
Operating expenses:
Research and development 68,612 46,649 135,881 95,355
Sales and marketing 80,970 63,201 152,208 123,000
General and administrative 24,240 17,537 46,791 36,245
In-process research and development 18,250 --- 18,250 ---
Amortization of intangible assets and deferred
Stock compensation 12,987 4,356 21,867 8,400
Total operating expenses 205,059 131,743 374,997 263,000
Operating income 31,411 19,503 71,147 28,601
Other income, net 7,515 11,213 16,725 22,294
Income before provision for income taxes 38,926 30,716 87,872 50,895
Provision for income taxes 16,637 9,336 31,198 15,463
Net income $ 22,289 $ 21,380 $ 56,674 $ 35,432
Basic earnings per share:
Net income $ 0.30 $ 0.35 $ 0.76 $ 0.58
Weighted average common shares 74,351 61,232 74,220 60,670
Diluted earnings per share:
Net income $ 0.29 $ 0.33 $ 0.74 $ 0.55
Weighted average common shares and equivalents 76,517 64,934 76,551 64,956
(1) The company's fiscal year and second quarter ends on the Saturday nearest
to October 31 and to April 30, respectively. For presentation purposes,
the condensed consolidated financial statements refer to a calendar month
end.
8
SYNOPSYS, INC.
Condensed Consolidated Balance Sheets (1)
(in thousands, except par value per share amounts)
April 30, 2003 October 31, 2002
---------------------------------
(unaudited)
<s> <c> <c>
ASSETS
Current assets:
Cash and cash equivalents $ 268,822 $ 312,580
Short-term investments 123,277 102,153
Cash, cash equivalents and short-term investments 392,099 414,733
Accounts receivable, net of allowances of $10,760 and $11,565, respectively 246,006 207,206
Deferred taxes 270,058 282,867
Prepaid expenses and other 22,202 24,509
Total current assets 930,365 929,315
Property and equipment, net 180,122 185,040
Long-term investments 25,567 39,386
Goodwill, net 548,746 434,554
Intangible assets, net 345,403 355,334
Long-term deferred taxes and other assets 34,149 35,085
-------------- -------------
Total assets $ 2,064,352 $ 1,978,714
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 168,516 $ 246,789
Current portion of long-term debt 28 1,423
Accrued income taxes 153,780 169,912
Deferred revenue 445,189 359,245
Total current liabilities 767,513 777,369
Deferred compensation and other long-term liabilities 65,946 36,387
Long-term deferred revenue 32,053 51,477
Stockholders' equity
Commonstock, $.01 par value; 400,000 shares authorized;
73,967 and 73,562 shares outstanding respectively 740 735
Additional paid-in capital 1,063,828 1,039,386
Retained earnings 236,114 198,863
Treasury stock, at cost (101,573) (116,499)
Deferred stock compensation (10,844) (8,858)
Accumulated other comprehensive (loss) income 10,575 (146)
Total stockholders' equity $ 1,198,840 $ 1,113,481
-------------- --------------
Total liabilities and stockholders' equity $ 2,064,352 $ 1,978,714
(1) The company's fiscal year and second quarter ends on the Saturday nearest
to October 31 and to April 30, respectively. For presentation purposes,
the condensed consolidated financial statements refer to a
calendar month end.
9
SYNOPSYS, INC.
Unaudited Pro Forma Condensed Consolidated Statements of Income (1) (2)
(in thousands, except per share data)
<s> <c> <c> <c> <c>
Three Months Ended April 30 Six Months Ended April 30
------------------------------------------------------------------
2003 2002 2003 2002
Revenue:
Product $ 82,000 $ 52,293 $ 136,520 $ 91,848
Service 61,967 65,765 134,354 134,858
Ratable license 148,061 67,580 289,290 134,477
Total revenue 292,028 185,638 560,164 361,183
Cost of revenue:
Product 3,845 3,221 7,598 7,287
Service 17,750 17,391 39,770 38,075
Ratable license 13,472 13,780 26,258 24,220
Total cost of revenue 35,067 34,392 73,626 69,582
Gross margin 256,961 151,246 486,538 291,601
Operating expenses:
Research and development 68,612 46,649 135,881 95,355
Sales and marketing 80,970 63,201 152,208 123,000
General and administrative 24,240 17,537 46,791 36,245
Total operating expenses 173,822 127,387 334,880 254,600
Operating income 83,139 23,859 151,658 37,001
Other income, net 7,515 11,213 16,725 22,294
Income before provision for income taxes 90,654 35,072 168,383 59,295
Provision for income taxes 29,463 9,996 54,725 16,900
Net income $ 61,191 $ 25,076 $ 113,658 $ 42,395
Basic earnings per share:
Net income $ 0.82 $ 0.41 $ 1.53 $ 0.70
Weighted average common shares 74,351 61,232 74,220 60,670
Diluted earnings per share:
Net income $ 0.80 $ 0.39 $ 1.48 $ 0.65
--------- ----------- ----------- ------------
Weighted average common shares and equivalents 76,517 64,394 76,551 64,956
(1) The company's fiscal year and second quarter ends on the Saturday nearest
to October 31 and to April 30, respectively. For presentation purposes,
the condensed consolidated financial statements refer to a calendar month
end.
(2) Amounts and per share data for the periods presented exclude amortization
of intangible assets.
10