Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2014

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 343554 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 first quarter fiscal 2015 in February 2015. Synopsys will post copies of the prepared remarks of Aart de Geus, chairman and co-chief executive officer, and Brian Beattie, chief financial officer, on its website following the call. In addition, Synopsys makes additional information available in a financial supplement and corporate overview presentation, 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 and corporate overview presentation (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 co-chief executive officer and chief financial officer made during the call, the financial supplement and corporate overview presentation will remain available on Synopsys' website through the date of the first quarter fiscal year 2015 earnings call in February 2015, 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 first quarter of fiscal 2015 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 fourth quarter and fiscal 2014 in its annual report on Form 10-K to be filed by December 31, 2014.

About Synopsys

Synopsys, Inc. (Nasdaq: SNPS) accelerates innovation in the global electronics market. As a leader in electronic design automation (EDA) and semiconductor IP, its software, IP and services help engineers address their design, verification, system and manufacturing challenges. Since 1986, engineers around the world have been using Synopsys technology to design and create billions of chips and systems. Learn more at http://www.synopsys.com.

Forward-Looking Statements

This press release and our upcoming earnings results conference call contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.  Any statements that are not statements of historical fact may be deemed to be forward-looking statements.  Forward-looking statements include but are not limited to: sections of this press release entitled "Financial Targets" and "Reconciliation of Target Non-GAAP Operating Results"; and statements regarding Synopsys' business, acquisitions, new products, technologies, business model, new markets, customer demand for our technology, and projected financial results and business objectives.  These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements to differ materially from those expressed or implied in our forward-looking statements.  Accordingly, we caution stockholders and prospective investors not to place undue reliance on these statements.  Such risks, uncertainties and factors include, but are not limited to:

  • continued uncertainty in the global economy and its potential impact on the semiconductor and electronics industries;
  • uncertainty in the growth of the semiconductor and electronics industry, and consolidation among our customers;
  • increased competition in the market for Synopsys' products and services including through consolidation in the industry;
  • changes in demand for Synopsys' products due to fluctuations in demand for its customers' products;
  • Synopsys' ability to realize the potential financial or strategic benefits of acquisitions it completes, including its recent acquisition of Coverity, Inc., and challenges in entering new markets in which Synopsys is not experienced and in the integration of the products and operations of acquired companies or assets into Synopsys' products and operations, including possible delays in customer orders, potential loss of customers, key employees, partners or vendors, customer demand and support obligations for product offerings, and disruption of ongoing business operations and diversion of management attention;
  • adverse changes in the relationships between Synopsys and key participants in the complex semiconductor ecosystem, including major foundries and intellectual property providers;
  • litigation;
  • lower-than-anticipated new IC design starts;
  • lower-than-anticipated purchases or delays in purchases of products or consulting services by Synopsys' customers, including delays in the renewal, or non-renewal, of Synopsys' license arrangements with major customers;
  • changes in accounting principles or standards or in the way they are applied;
  • changes in the mix of time-based licenses and upfront licenses;
  • variability in the timing of revenue recognition due to factors such as payment terms and the timing and value of contract renewals and professional services projects;
  • lower-than-expected orders; and
  • failure of customers to pay license fees as scheduled.

In addition, Synopsys' actual expenses, earnings per share and tax rate on a GAAP and non-GAAP basis for the fiscal quarter ending Jan. 31, 2015; actual expenses, earnings per share, tax rate, and other projections on a GAAP and non-GAAP basis for fiscal year 2015; and cash flow from operations on a GAAP basis for fiscal year 2015 could differ materially from the targets stated under "Financial Targets" above for a number of reasons, including, but not limited to, (i) integration and other acquisition-related costs, (ii) application of the actual consolidated GAAP and non-GAAP tax rates for such periods, or judgment by management, based upon the status of pending audits and settlements, to increase or decrease an income tax asset or liability, (iii) a determination by Synopsys that any portion of its goodwill or intangible assets has become impaired, (iv) changes in the anticipated amount of employee stock-based compensation expense recognized in Synopsys' financial statements, (v) actual change in the fair value of Synopsys' non-qualified deferred compensation plan obligations, (vi) increases or decreases to estimated capital expenditures, (vii) changes driven by new accounting rules, regulations, interpretations or guidance, (viii) fluctuations in foreign currency exchange rates, (ix) litigation, (x) general economic conditions, and (xi) other risks as detailed in Synopsys' SEC filings, including those described in the "Risk Factors" section in its latest Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2014. Furthermore, Synopsys' actual tax rates applied to income for the first quarter and fiscal year 2015 could differ from the targets given in this press release as a result of a number of factors, including the actual geographic mix of revenue during the quarter and year, and actions by the government. Finally, Synopsys' targets for outstanding shares in the first quarter and fiscal year 2015 could differ from the targets given in this press release as a result of higher than expected employee stock plan issuances or stock option exercises, acquisitions, and the extent of Synopsys' stock repurchase activity.

Synopsys is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements made in this earnings release, the conference call, the financial supplement, or the corporate overview presentation whether as a result of new information, future events or otherwise, unless otherwise required by law.

INVESTOR CONTACT:
Lisa L. Ewbank
Synopsys, Inc.
650-584-1901

EDITORIAL CONTACT:
Yvette Huygen
Synopsys, Inc.
650-584-4547
Email Contact

SYNOPSYS, INC.

Unaudited Consolidated Statements of Operations (1)

(in thousands, except per share amounts)


























  Three Months Ended October 31,


Twelve Months Ended October 31,


2014


2013


2014


2013

Revenue:








  Time-based license

$   443,620


$   412,926


$    1,699,135


$    1,599,464

  Upfront license

33,894


36,493


135,757


132,018

  Maintenance and service

61,498


55,456


222,580


230,732

      Total revenue

539,012


504,875


2,057,472


1,962,214

Cost of revenue:








  License

69,648


72,992


268,348


268,910

  Maintenance and service

25,161


21,264


87,226


80,338

  Amortization of intangible assets

26,612


24,853


101,311


104,304

     Total cost of revenue

121,421


119,109


456,885


453,552

Gross margin

417,591


385,766


1,600,587


1,508,662

Operating expenses:








  Research and development

190,373


175,057


718,768


669,197

  Sales and marketing

120,232


114,913


453,079


425,982

  General and administrative

42,969


39,089


155,215


143,791

  Amortization of intangible assets 

6,517


5,693


24,808


23,199

     Total operating expenses

360,091


334,752


1,351,870


1,262,169

Operating income

57,500


51,014


248,717


246,493

Other income (expense), net

4,628


8,043


23,425


29,173

Income before income taxes

62,128


59,057


272,142


275,666

Provision (benefit) for income taxes

(327)


2,167


13,018


27,866

Net income

$     62,455


$     56,890


$       259,124


$       247,800









Net income per share:








  Basic

$         0.40


$         0.37


$             1.67


$             1.62

  Diluted

$         0.39


$         0.36


$             1.64


$             1.58









Shares used in computing per share amounts:








  Basic

156,385


154,369


155,054


153,319

  Diluted

158,477


157,039


157,710


156,601









(1)  Synopsys' fourth quarter and fiscal year 2014 and 2013 ended on November 1, 2014 and November 2, 2013, respectively. For presentation purposes, we refer to periods ended October 31.  

SYNOPSYS, INC.

Unaudited Consolidated Balance Sheets (1)

(in thousands, except par value amounts)












October 31, 2014


October 31, 2013

ASSETS:







Current assets:







  Cash and cash equivalents




$             985,762


$          1,022,441

  Accounts receivable, net




326,727


256,026

  Deferred income taxes




111,449


92,058

  Income taxes receivable and prepaid taxes



26,496


18,277

  Prepaid and other current assets




54,301


59,175

          Total current assets




1,504,735


1,447,977

Property and equipment, net




249,098


197,600

Goodwill




2,255,708


1,975,971

Intangible assets, net




365,030


335,425

Long-term prepaid taxes




17,645


7,935

Long-term deferred income taxes




208,156


243,066

Other long-term assets




175,127


150,961

           Total assets




$          4,775,499


$          4,358,935








LIABILITIES AND STOCKHOLDERS' EQUITY:



Current liabilities:







  Accounts payable and accrued liabilities



$             397,113


$             358,197

  Accrued income taxes




31,404


7,168

  Deferred revenue




928,242


827,554

  Short-term debt




30,000


30,000

           Total current liabilities




1,386,759


1,222,919

Long-term accrued income taxes




50,952


53,064

Long-term deferred revenue




77,646


54,736

Long-term debt




45,000


75,000

Other long-term liabilities




158,972


164,939

           Total liabilities




1,719,329


1,570,658

Stockholders' equity:







  Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding


-


-

  Common stock, $0.01 par value: 400,000 shares authorized; 155,965 and 154,169 shares outstanding, respectively


1,560


1,542

  Capital in excess of par value




1,614,603


1,597,244

  Retained earnings




1,551,592


1,324,854

  Treasury stock, at cost:1,299 and 3,095 shares, respectively

(49,496)


(106,668)

  Accumulated other comprehensive loss 



(62,089)


(28,695)

           Total stockholders' equity




3,056,170


2,788,277

           Total liabilities and stockholders' equity


$          4,775,499


$          4,358,935








(1)  Synopsys' fiscal year 2014 and 2013 ended on November 1, 2014 and November 2, 2013, respectively. For presentation purposes, we refer to periods ended October 31.  

SYNOPSYS, INC.

Unaudited Consolidated Statements of Cash Flows (1)

(in thousands)






 Twelve Months Ended October 31, 


2014


2013

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income

$  259,124


$    247,800

Adjustments to reconcile net income to net cash provided by operating activities:







Amortization and depreciation

192,826


187,404

Stock compensation

79,440


67,511

Allowance for doubtful accounts 

(1,250)


102

Gain on sale of investments

(6,999)


(868)

Deferred income taxes

(17,100)


(676)

Net changes in operating assets and liabilities, net of 




acquired assets and liabilities:




Accounts receivable

(65,018)


37,590

Prepaid and other current assets

1,836


(12,063)

Other long-term assets

(23,270)


(27,468)

Accounts payable and other liabilities

40,645


(1,135)

Income taxes

(9,095)


(2,306)

Deferred revenue

99,814


814

Net cash provided by operating activities

550,953


496,705





CASH FLOWS FROM INVESTING ACTIVITIES:




Proceeds from sales of long-term investments

7,774


989

Purchases of property and equipment

(103,275)


(65,459)

Proceeds from sales of property and equipment

-


2,000

Cash paid for acquisitions and intangible assets, net of cash acquired

(394,623)


-

Capitalization of software development costs

(3,638)


(3,609)

Other

(3,488)


-

Net cash used in investing activities

(497,250)


(66,079)





CASH FLOWS FROM FINANCING ACTIVITIES:




Acquisition of non-controlling interest

-


(44,004)

Proceeds from credit facility

200,000


-

Repayment of debt

(230,968)


(30,712)

Issuances of common stock

82,083


131,914

Purchases of treasury stock

(119,747)


(145,016)

Other

(5,057)


(10,167)

Net cash used in financing activities

(73,689)


(97,985)

Effect of exchange rate changes on cash and cash equivalents

(16,693)


(10,582)

Net change in cash and cash equivalents

(36,679)


322,059

Cash and cash equivalents, beginning of the year

1,022,441


700,382

Cash and cash equivalents, end of the period

$  985,762


$ 1,022,441









(1)  Synopsys' fourth quarter of fiscal 2014 and 2013 ended on November 1, 2014 and November 2, 2013, respectively. For presentation purposes, we refer to periods ended October 31.  


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