CIMdata PLM Industry Summary Online Archive
6 December 2007
Financial News
Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2007
Synopsys, Inc. reported results for its fourth quarter and fiscal year ended October 31, 2007.
For the fourth quarter, Synopsys reported revenue of $315.2 million, an 11.2 percent increase compared to $283.4 million for the fourth quarter of fiscal 2006. Revenue for fiscal year 2007 was $1.212 billion, an increase of 10.7 percent from $1.096 billion in fiscal 2006.
"We finished out the fourth quarter and fiscal 2007 with very strong financial and operating results," said Aart de Geus, chairman and CEO of Synopsys. "With unparalleled revenue visibility in the industry, a promising technology pipeline of new products and capabilities, and a favorable customer landscape, we have a solid outlook for 2008."
GAAP Results
On a generally accepted accounting principles (GAAP) basis, net income for the fourth quarter of fiscal 2007 was $41.0 million, or $0.27 per share, compared to $10.1 million, or $0.07 per share, for the fourth quarter of fiscal 2006.
GAAP net income for fiscal year 2007 was $130.5 million, or $0.87 per share, compared to $24.7 million or $0.17 per share, for fiscal 2006.
Non-GAAP Results
On a non-GAAP basis, net income for the fourth quarter of fiscal 2007 was $60.0 million, or $0.40 per share, compared to non-GAAP net income of $30.7 million, or $0.22 per share, for the fourth quarter of fiscal 2006.
Non-GAAP net income for fiscal year 2007 was $204.9 million, or $1.37 per share, compared to non-GAAP net income of $111.8 million, or $0.77 per share, for fiscal 2006.
Non-GAAP net income consists of GAAP net income excluding employee share-based compensation expense calculated in accordance with FAS 123® and, to the extent incurred in a particular quarter or period, amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges, and other significant items which, in the opinion of management, are infrequent or non-recurring. See "GAAP Reconciliation" below.
Financial Targets
Synopsys also provided its operating model targets for the first quarter and full fiscal year 2008. 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.
First Quarter of Fiscal Year 2008 Targets:
• Revenue: $308 million - $316 million
• GAAP expenses: $262 million - $278 million
• Non-GAAP expenses: $236 million - $246 million
• Other income and expense: $3 million - $6 million
• Tax rate applied in non-GAAP net income calculations: 27 - 28 percent
• Fully diluted outstanding shares: 146 million - 151 million
• GAAP earnings per share: $0.20 - $0.28
• Non-GAAP earnings per share: $0.37 - $0.39
• Revenue from backlog: greater than 90 percent
Full-Year Fiscal Year 2008 Targets:
• Revenue: $1.300 billion - $1.315 billion
• Tax rate applied in non-GAAP net income calculations: 27 - 28 percent
• Fully diluted outstanding shares: 146 million - 151 million
• GAAP earnings per share: $0.94 - $1.11
• Non-GAAP earnings per share: $1.54 - $1.60
• Cash flow from operations: greater than $325 million
GAAP ReconciliationSynopsys' management evaluates and makes decisions about the Company's business operations primarily based on the bookings, revenue, and direct, ongoing and recurring costs of those operations. Management does not believe amortization of intangible assets, in-process research and development charges, integration and other acquisition-related expenses, facilities and workforce realignment charges and other significant infrequent items are ongoing and recurring operating costs of its core software, intellectual property and service business operations. In addition, while employee share-based compensation expense calculated in accordance with FAS 123® and change in the fair value of the Company's non-qualified deferred compensation plan obligations constitute ongoing and recurring expenses of the Company, such expenses are excluded from non-GAAP results because they are not expenses that require cash settlement by the Company and because such expenses are not used by management to assess the core performance of the Company's business operations. Therefore, management excludes such costs, to the extent incurred in a particular quarter, from the following historical and targeted GAAP financial measures included in this earnings release: total cost of revenue, gross margin, total operating expenses, operating income, income before provision (benefit) for income taxes, provision (benefit) for income taxes, net income and net income per share.
For each such measure, excluding these costs provides management with more consistent, comparable information about the Company's core performance. For example, since the Company does not acquire businesses on a predictable cycle, management would have difficulty evaluating the Company's performance as measured by gross margin, operating margin, income before taxes and net income on a period-to-period basis unless it excluded acquisition-related charges. Similarly, the Company does not undertake significant restructuring or realignments on a regular basis, and, as a result, excludes associated charges in order to enable better and more consistent evaluations of the Company's operating expenses before and after such actions are taken. Management also uses these measures to help it make budgeting decisions, for example, as between product development expenses (which affect cost of revenue and gross margin) and research and development, sales and marketing and general and administrative expenses (which affect operating expenses and operating margin). Finally, the availability of such information helps management track performance to both internal and externally communicated financial targets and to its competitors' operating results.
Management recognizes that the use of these non-GAAP measures has certain limitations, including the fact that management must exercise judgment in determining whether certain types of charges, such as those relating to workforce reductions executed in the ordinary course, should be excluded from non-GAAP results. However, 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.
Reconciliation of Fourth Quarter Results.
See the full press release at http://www.synopsys.com/news/announce/press2007/earnings/earnings_q407.pdf
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