This is the December 12, 2011 edition of the EDA WEEKLY entitled, “The EDA and MCAD/MCAE Almanac – Nominal Q3 2011.”
Over the years since 2003, Henke Associates has issued quarterly Commentaries and WEEKLIES that dealt with high tech software vendors in the fields of Electronic Design Automation (EDA), Electronics Intellectual Property (Electronics IP), and in the companion fields of mechanical computer aided design (MCAD) and mechanical computer aided engineering & analysis (MCAE).
Familiar vendor names have included Cadence, Mentor Graphics, Synopsys and others in EDA; ARM Holdings, Rambus and others in Electronics IP; and ANSYS, Autodesk, Dassault Systemes, PTC and others in MCAD/MCAE. The vast majority of these articles (now numbering well over 100) have been separately posted on either EDACafe.com or MCADCafe.com, both specialty electronic newsletters among others issued daily by International Business Systems (IBSystems) of Campbell CA. Commentaries tend to run daily for a full calendar quarter and EDA WEEKLIES for at least four weeks.
Beginning in 2011, the writer occasionally combined reports on EDA and on Electronics IP into single issues of EDA WEEKLY. Readers will recall for example the April 04, 2011 issue, entitled, “The EDA and the Electronics IP Almanac: Q4 2010.” The same EDA and Electronics IP combo also appeared on June 27, 2011 for Q1 2011 financials.
But as readers quickly observed in the August 22, 2011 EDA WEEKLY, the G5 Electronics IP financial results for Q2 2011 held the center stage alone, although recent gyrations of the worldwide economic environment also received its due in coverage. The same was true of the Q3 2011 G5 Electronics IP financial results posted November 14, 2011.
More rare have been occasions when one particular article appeared in both the EDACafe.com and MCADCafe.com newsletters, such as the article on ANSYS multi-physics of July 2010. This trend is likely to be repeated going forward as the fields of mechanical design automation & simulation merge more and more with electronics design & simulation.
Occasionally it will also become useful to combine the financial reports from EDA and MCAD/MCAE into single issues of EDA WEEKLY, when the stars line up schedule-wise. Such was the case here in September 2011, and it is again the case in the current December 12, 2011 EDA WEEKLY.
The December 2011 EDA WEEKLY
Accordingly, this issue of the EDA WEEKLY, which is entitled, “The EDA and MCAD/MCAE Almanac: Q3 2011,” first posted on December 12, 2011, will report on the financial results for nominal Q3 2011 of the following sets of vendors:
Selection History of Vendor Coverage Choices for EDA
For the quarterly EDA Industry Commentaries published in EDACafe.com starting in May 2003, Henke Associates chose nine (9) publicly-traded entities: Altium, Ansoft, Cadence, Magma, Mentor Graphics, Nassda, Synopsys, Synplicity and Verisity.
Subsequently, Verisity and Nassda were acquired by EDA vendors Cadence and Synopsys, respectively, and hence were dropped from independent coverage the quarterly EDA Commentaries. More recently, EDA vendor Synplicity was acquired by Synopsys, and EDA vendor Ansoft was acquired by MCAE vendor ANSYS. Consequently, both Synplicity and Ansoft no longer independently appeared in the EDA Industry reports. Finally, in May 2011, SpringSoft, Inc. replaced Altium Limited on our G5 EDA list.
Assuming as we do, that the Synopsys acquisition of MAGMA is fully consummated during the early part of 2012 and that MAGMA financials are subsumed by those of Synopsys, MAGMA will no longer be covered as a separate entity, and the EDA WEEKLY will once again be seeking a publicly-held fifth vendor to add to the Group to bring it back to Five. Readers’ suggestions are welcome; please send them to the writer via email along with the reasons why, to Email Contact by February 01, 2012.
Selection History of Vendor Coverage Choices for MCAD/MCAE
In the very first MCAD Industry Commentary published in May 2003 in MCADCafé.com, then-recent yearly and quarterly financial performances of a selected group of nine (9) public Mechanical Computer Aided Design (MCAD) and Mechanical Computer Aided Engineering (MCAE) vendor companies were analyzed and compared. The entities initially covered were ANSYS, Autodesk, Dassault Systèmes, UGS PLM, ESI Group, Moldflow, MSC.Software, PTC and Tecnomatix.
As a result of the acquisition of Tecnomatix by UGS that closed April 1, 2005, Tecnomatix was eliminated from coverage thereafter as a separate entity. On May 7, 2007 UGS announced the close of its acquisition by Siemens AG effective May 4, 2007. Thereafter, the business went to market as UGS PLM Software (and later as Siemens PLM Software), a global division of the Siemens Automation and Drives (A&D) Group. Over the years UGS itself had bounced back and forth between being a public company and a private company under different ownerships. Regrettably, we have been able to gain very little insight into UGS' financial performance itself from public Siemens' corporate reports after the Siemens acquisition. Occasionally we will include Siemens PLM Software news items that bear on the industry as a whole. Then, on June 25, 2008, Autodesk completed its acquisition of Moldflow Corporation, so thereafter Moldflow was eliminated from separate coverage.
On July 07, 2009 MSC.Software announced that it had entered into a definitive agreement with affiliates of Symphony Technology Group (STG) under which a company controlled by STG would acquire all of MSC's outstanding shares in a one-step cash merger transaction. This acquisition of MSC.Software by STG was finally consummated on October 14, 2009. No financial results for MSC.Software were published for Q3 2009, and none since. Unless and until such data are subsequently made available, MSC.Software has been dropped from financial reporting coverage herein, although occasionally MSC.Software news items that bear on the industry as a whole will be mentioned. Readers may be interested to see the recent MCAD/MCAE Commentary about a late August 2011 interview with CEO Dominic Gallello of MSC.Software at this URL:
Henke Associates recognizes that some MCAD/PLM/MCAE vendors have expanded their offerings into the world of “multi-physics” by moving beyond pure MCAD into other disciplines, such as fluid dynamics and electronic analysis (e.g. ANSYS). These Commentaries will also report on these new areas as appropriate. (The EDA WEEKLY article posted on EDACafe.com on July 19, 2010, entitled, “ANSYS turns 40!” dealt with ANSYS multi-physics, and it is available in the EDACafe.com EDA WEEKLY archives). And of course Dassault Systemes just added certain EDA capabilities to its repertoire with the acquisition of ELSYS.
Structure of the Presentation in this December 12, 2011 Issue
The two Groups of vendors, five in EDA and five in MCAD/MCAE, will be reported separately herein. Each group report will end with summary charts of revenues and earnings, preceded by individual financial summaries on each vendor in turn. Recent stock performances in the form of recent Yahoo charts will also be included. A new feature added here for EDA and MCAD/MCAE vendors, as they were for IP suppliers recently, are Google P&L graphs for the last five years for most vendors. The current turmoil in the US and worldwide economies will also be mentioned when relevant using individual vendor stock charts, if time permits.
Indeed, the Q3 2011 financial results posted here in early December and their quarterly Q2 2011 predecessors on September 19, 2011, are occurring in a period of unusual economic volatility that was initially precipitated by the debt ceiling debate in Washington DC and subsequent reduction of the USA’s credit rating by S&P from AAA to AA+.
The aforementioned continuing volatility in the economy is visible to anyone looking at the stock markets’ performances. Below is a graph of the last six months of the NASDAQ Composite, for example. Please note: (a) the relative stability at just above the 2800 level for the initial months shown, relative stability that prevailed till late July 2011; (b) the steep plunge to below 2400 by mid-August; (c) the relatively wild oscillations since, and (d) never closing at 2800-or-above since.
Now, to honor the MCAD/MCAE vendors who completed and published their nominal Q3 2011 financial reports a number of days earlier than their EDA brethren, we present the MCAD/MCAE G5 individual reports first, followed by the by now familiar Summary Tables of MCAD/MCAE Group Revenue and Earnings.
Then the EDA G5 get their turns. The last two vendors to report (Synopsys and MAGMA) initially appeared to be competing to see which one could be last. But they ended up being scheduled for November 30 and December 01, respectively, which left only 4 short days before the current issue of the EDA WEELY had to be put to bed. All those issues became petty fare, however, once the two former rivals announced on November 30, their surprise pending merger of the EDA year!
So Enjoy! ... and, by the way, “Happy Holidays to ALL!”
On November 03, 2011 ANSYS, Inc. (NASDAQ: ANSS) announced its third quarter 2011 results.
- Closed Apache Acquisition
- GAAP revenue of $172.9 million
- GAAP diluted earnings per share of $0.48
- Operating cash flows of $66.3 million
- GAAP operating profit margin of 37.8%
- Increased 2011 Guidance and Preliminary 2012 Outlook
Commenting on the Company's third quarter 2011 performance, Jim Cashman, ANSYS president & CEO, stated, "The third quarter was another important milestone in our long history as we completed the acquisition of Apache Design Solutions. Our Q3 performance, which includes two months of Apache operations as part of the combined company, reflects our relevancy to customers, despite uncertainty that exists in today's global economy. It is also reflective of our longstanding, demonstrated ability to successfully acquire and assimilate new companies into the ANSYS family. We have a strong balance sheet, strong cash flows, solid fundamentals and a disciplined team that continues to execute."
Cashman continued, "Our operating performance is a testimony to our belief that engineering simulation solutions remain a high priority for our expanding customer base. The business pressures on our customers to deliver innovative, high-quality products to market, with fewer resources, have never been greater. With the upcoming release of ANSYS® 14.0, our complete product portfolio is robust and we believe we are well-positioned to deliver long-term value to our customers and stockholders."
ANSYS' third quarter and year-to-date 2011 financial results are presented below.
These GAAP results reflect:
- Total GAAP revenue of $172.935 million in the third quarter of 2011 as compared to $139.842 million in the third quarter of 2010 [Guidance three months ago was for $166 to $174 million for Q3 2011 revenue]. GAAP revenue in sequential Q2 2011 was $162.258 million; total GAAP revenue was $493.2 million in the first nine months of 2011 as compared to $413.7 million in the first nine months of 2010.
- A GAAP operating profit margin of 37.8% in the third quarter of 2011 as compared to 37.1% in the third quarter of 2010; a GAAP operating profit margin of 39.0% in the first nine months of 2011 as compared to 37.2% in the first nine months of 2010.
- GAAP net income of $45.546 million in the third quarter of 2011 as compared to $36.130 million in the third quarter of 2010; GAAP net income $45.431 million in sequential Q2 2011; GAAP net income of $133.2 million in the first nine months of 2011 as compared to $104.0 million in the first nine months of 2010.
- GAAP diluted earnings per share of $0.48 in the third quarter of 2011 [Q3 2011 guidance provided three months ago was for EPS of $0.40 to $0.47] as compared to $0.39 in the third quarter of 2010; GAAP diluted earnings per share of $1.41 in the first nine months of 2011 as compared to $1.12 in the first nine months of 2010.
- Operating cash flows of $66.3 million in the third quarter of 2011 as compared to $72.3 million in the third quarter of 2010; operating cash flows of $230.0 million in the first nine months of 2011 as compared to operating cash flows of $192.1 million in the first nine months of 2010.
The Company's GAAP results reflect stock-based compensation charges of approximately $6.1 million ($4.8 million after tax) or $0.05 diluted earnings per share for the third quarter of 2011 and approximately $16.6 million ($12.8 million after tax) or $0.14 diluted earnings per share for the first nine months of 2011.
Management's Remaining 2011 & Preliminary 2012 Outlook
The Company is providing its 2011 revenue and earnings per share guidance below, as well as its preliminary outlook for 2012. The earnings per share guidance is provided on a GAAP basis.
Fourth Quarter 2011 Guidance
The Company currently expects the following for the quarter ending December 31, 2011:
- GAAP Revenue in the range of $189.3 - $195.3 million
- GAAP diluted earnings per share of $0.50 - $0.53
Fiscal Year 2011 Guidance
The Company currently expects the following for the fiscal year ending December 31, 2011:
- GAAP Revenue in the range of $814.6 - $836.6 million
- GAAP diluted earnings per share of $1.91 - $1.95
These statements are forward-looking and actual results may differ materially.
ANSYS is unable to predict the likely duration and severity of the current disruptions in the domestic and global economies. [NOTE: Some aspects of such economic disruptions are reviewed by the EDA and MCAD/MCAE writer both herein and in other EDA WEEKLY publications]. Should these economic conditions continue to deteriorate, it could result in ANSYS not meeting the guidance provided above and ANSYS' operating results and financial performance could be adversely affected.
ANSYS, Inc. self description
ANSYS brings clarity and insight to customers' most complex design challenges through fast, accurate and reliable engineering simulation. Our technology enables organizations -- no matter their industry -- to predict with confidence that their products will thrive in the real world. Customers trust our software to help ensure product integrity and drive business success through innovation. Founded in 1970, ANSYS employs more than 2,000 professionals, many of them experts in engineering fields such as finite element analysis, computational fluid dynamics, electronics, electromagnetics, and design optimization. Headquartered south of Pittsburgh, Pennsylvania, U.S.A., ANSYS has more than 60 strategic sales locations throughout the world with a network of channel partners in 40+ countries. Visit www.ansys.com for more information.
On November 15, 2011 Autodesk, Inc. (NASDAQ: ADSK) reported financial results for the third quarter of its fiscal year 2012, which corresponds to our nominal Q3 2011.
Highlights for nominal Q3 2011
- Total Worldwide Revenue was $548.6 million, an increase of 15.08% compared to $476.7 million for the nominal third quarter of 2010, and a slight increase of 0.42% for Q3 2011 compared to the just prior nominal Q2 2011 revenue of $546.3 million.
- Revenue guidance for nominal Q3 2011 provided three months ago was a range of $535 million to $550 million.
- GAAP operating margin was 16%, compared to 15% in the third quarter of 2010.
- GAAP net income was $72.8 million, up 35.82% compared to $53.6 million for nominal Q3 2010, and up 2.25% compared to $71.2 million for sequential nominal Q2 2011.
- GAAP diluted earnings per share for nominal Q3 2011 were $0.32, compared to $0.23 in the nominal third quarter of 2010.
- GAAP diluted earnings per share guidance for nominal Q3 2011 provided three months ago was a range of $0.25 to $0.29.
- Cash flow from operating activities was $138 million, up 21.05% compared to $114 million in the third quarter of 2010.
“Our business grew 15% in the third quarter as more and more people turned to Autodesk to help solve their most pressing design and engineering challenges,” said Carl Bass, Autodesk president and CEO.
“Our strong revenue gains coupled with continued cost controls resulted in a healthy improvement in profitability and cash flow from operations. We experienced double-digit growth across all geographies, with particular strength in Asia Pacific. All of our businesses performed well, driven by continued adoption of our suites,” Bass concluded.
Autodesk Third Quarter Operational Overview
EMEA (Europe, Middle East, Asia) revenue was $202 million, an increase of 10% compared to the third quarter last year as reported and 8% on a constant currency basis. Revenue in the Americas was $200 million, an increase of 12% compared to the third quarter last year. Revenue in Asia Pacific was $146 million, an increase of 28% compared to the third quarter last year as reported and 19% on a constant currency basis. Revenue from emerging economies was $87 million, an increase of 15% compared to the third quarter last year as reported and 11% on a constant currency basis. Revenue from emerging economies represented 16% of total revenue in the third quarter.
NOTE: All constant currency calculations are said to remove the impact of foreign currency fluctuations and any hedge gains or losses recorded to revenue within the current and prior period as a result of Autodesk’s hedging program.
Revenue from the Platform Solutions and Emerging Business segment was $210 million, an increase of 21% compared to the third quarter last year. Revenue from the Architecture, Engineering and Construction business segment was $152 million, an increase of 12% compared to the third quarter last year. Revenue from the Manufacturing business segment was $134 million, an increase of 14% compared to the third quarter last year. Revenue from the Media and Entertainment business segment was $53 million, an increase of 6% compared to the third quarter last year.
“We continue to advance on our plan of driving revenue growth and expanding our operating margin, controlling our costs, and making appropriate investments in the future of our business,” said Mark Hawkins, Autodesk Executive Vice President, Chief Financial Officer.
“Our cash flow from operating activities remained strong, growing 20%, and helped fund a number of small, but important, business and technology acquisitions and strategic investments during the quarter. Our balance sheet remains solid with over $1.5 billion in cash and marketable securities and no debt,” concluded Hawkins.
Autodesk Business Outlook
The following statements are forward-looking statements that are based on current expectations and assumptions, and involve risks and uncertainties some of which are set forth below.
Nominal Fourth Quarter 2011
Full Year Nominal 2011
Full Year Nominal 2012 (Ending January 31, 2013)
Autodesk’s Nominal 2012 guidance assumes a continuation of the current economic environment and foreign exchange currency rate environment.
Net revenue next year is expected to increase by at least 10% compared to this year. Autodesk anticipates next year's GAAP operating margin to increase by approximately 150 basis points compared to this year.
Earnings Conference Call and Webcast
Autodesk hosted its third quarter conference call on November 15, 2011 at 5:00 p.m. ET. The live broadcast was recorded and can be accessed at http://www.autodesk.com/investors. Supplemental financial information and prepared remarks for the conference call were posted to the investor relations section of Autodesk’s website simultaneously with Autodesk financials.
NOTE: The prepared remarks were not read on the conference call. The conference call included only brief remarks followed by questions and answers.
A broadcast replay is available http://www.autodesk.com/investors. This replay is maintained on Autodesk’s website for at least a year.
Autodesk self description
Autodesk, Inc., is a leader in 3D design, engineering and entertainment software. Customers across the manufacturing, architecture, building, construction, and media and entertainment industries – including the last 16 Academy Award winners for Best Visual Effects – use Autodesk software to design, visualize, and simulate their ideas. Since its introduction of AutoCAD software in 1982, Autodesk continues to develop the broadest portfolio of state-of-the-art software for global markets. For additional information about Autodesk, visit www.autodesk.com.
On October 27, 2011 Dassault Systèmes (Euronext Paris: #13065, DSY.PA) reported IFRS unaudited financial results for the third quarter and nine months ended September 30, 2011, their third quarter corresponding to our nominal Q3 2011.
- Revenue, operating margin and earnings per share above Company’s objectives
- EPS up 34.8% (IFRS)
- Increasing 2011 financial objectives as result of nominal Q3 outperformance
- Setting a high operating margin objective for 2011
Bernard Charlès, Dassault Systèmes President and Chief Executive Officer, commented, “We are pleased with our third quarter financial performance. Our increased revenue in constant currencies, was particularly gratifying given the very high year-ago comparison base. The quarter’s performance was driven by solid demand from customers and the benefits we are deriving from our addressable market expansion. With a dynamic first half and third quarter above our expectations, we are increasing our full year financial objectives.”
“The third quarter’s sales growth benefited from favorable dynamics across our three sales channels. In Enterprise direct sales, the value of V6 as an open integration platform was demonstrated by leading companies’ engagements in the automotive, high tech, energy and industrial equipment sectors as well as a number of mid-sized transactions. In addition to new V6 clients, several large customers have moved into the deployment phase with V6. Along with our direct sales channel, our SMB sales channels have been experiencing good demand, driven by the value of supply chain integration and this quarter was no different.”
Third Quarter 2011 Financial Review
- IFRS total revenue increased 11% YOY in constant currencies and 7% euro to euro, reflecting growth in both software and services and other revenue. IFRS software revenue increased 11%. Services and other revenue increased 8%. (All figures in constant currencies.)
- By region, revenue growth was highest in Europe during the third quarter reflecting several multi-brand transactions in the automotive, high tech, energy and industrial equipment sectors.
- New licenses revenue increased 7% (IFRS) in constant currencies and reflected a strong comparison base to the year-ago period where new licenses revenue increased 54% in constant currencies.
- Recurring software revenue rose 12% (IFRS) in constant currencies reflecting growth in maintenance from higher new licensing activity and strong maintenance renewals and rental licensing.
- IFRS PLM software revenue increased 11% in constant currencies. PLM software revenue increased 9% with CATIA software revenue higher by 7%, ENOVIA by 10% and Other PLM by 16% which includes SIMULIA and DELMIA as the largest components. (All growth comparisons in constant currencies.)
- SolidWorks (Mainstream 3D) software revenue increased 11% in constant currencies. New SolidWorks commercial seats licensed in the third quarter increased 11% to 11,748 seats.
- Earnings per diluted share and operating margin increased significantly, reflecting principally revenue growth and operating margin expansion. IFRS earnings per diluted share increased 34.78% to €0.62, from €0.46 in Q3 2010.
Net Income grew from €55.4 million to €76.4 million YOY, or 37.91%.
Cash Flow and Other Financial Highlights
IFRS net operating cash flow increased to €101.1 million for the 2011 third quarter, compared to €51.1 million in the year-ago period. During the 2011 third quarter, the Company received cash of €19.9 million for stock options exercised and completed share repurchases in the amount of €54.4 million to offset share dilution from the exercise of options in connection with the 2011 expiration of several major ten-year stock option programs.
The Company’s net financial position, comprised of cash, cash equivalents and short-term investments less long-term debt, was €1.04 billion at September 30, 2011, compared to a net financial position of €845.7 million at December 31, 2010. The Company’s cash, cash equivalents and short-term investments totaled €1.33 billion and long-term debt was €289.2 million at September 30, 2011 compared to €1.14 billion and €293.4 million, respectively at December 31, 2010.
Summary of Business, Technology and Corporate Highlights
International Fashion Company, s.Oliver, Improves Collaboration and Increases Efficiency in the Garment Manufacturing Process with Dassault Systèmes. s.Oliver has selected Dassault Systèmes’ Version 6 PLM solution as its global platform for design and development, to ensure constant availability of all the up-to-date information required to create and manufacture new collections. s.Oliver is using ENOVIA Version 6 to streamline product line complexities, achieve lead-time reduction, and enhance global collaboration. The ENOVIA Apparel Accelerator for Design & Development provides deep, domain-specific apparel design and production capabilities to meet fashion industry needs.
First Online, Co-Created Military Vehicle Delivered Through Collaboration of Local Motors, Dassault Systèmes and Over 12,000 Community Members. Dassault Systèmes has teamed with Local Motors to deliver the first co-created military vehicle. Local Motors’ community was asked to develop a vehicle body design that could support two types of missions – Combat Reconnaissance and Combat Delivery & Evacuation. Thanks to Dassault Systèmes’ Version 6 platform and Local Motors’ expertise in crowd-based design and manufacturing, the winning vehicle went from concept to working prototype in less than six months.
SolidWorks 2012 Delivers Design Solutions to Drive Business and Design Team Productivity. Dassault Systèmes SolidWorks unveiled SolidWorks 2012, a comprehensive 3D design solution that enables users to work more efficiently and access the data they need to make better design decisions throughout the product development process. Benefits take shape throughout SolidWorks 2012 with a variety of improvements in areas such as assembly and drawing capabilities, built-in simulation, design costing, routing, image and animation creation and product data management that will positively impact design teams each and every day.
Dassault Systèmes Reinforces Electrical Strategy with Acquisition of Elsys. As detailed further in a separate section below, Dassault Systèmes has acquired Elsys, a privately-held company based in Brussels and Lyon providing electrical engineering PLM solutions. With this acquisition, DS states that the CATIA Version 6 portfolio is extended with the capability to address “all aspects of the electrical Logical and Manufacturing definitions to meet today’s compelling need for an end-to-end, fully integrated, electrical design to manufacturing solution.” ELSYS has been selected by major international companies from aerospace, automotive and shipbuilding industries as their preferred solution to cover their electrical engineering needs.
Dassault Systèmes at the Forefront of Next-Generation PLM Composites Solutions. As previously disclosed, on October 4th, Dassault Systèmes acquired Simulayt Limited, a composites simulation and advanced draping simulation technology provider. Dassault Systèmes says that this acquisition reinforces its longstanding leadership in providing PLM composites solutions for sustainable innovation, addressing a key challenge facing manufacturers in industries ranging from aerospace and automotive to consumer goods and energy ─ how to predict and optimize the behavior of materials, minimizing their weight while increasing their performance.
Launched “Staying Alive” - Teaching People How to Administer First Aid Using 3D Online Experience Platform. Developed in partnership with iLUMENS, a medical laboratory from Paris Descartes University, this project uses simulation technologies for medical training and demonstrates Dassault Systèmes commitment to combating the issue of heart attacks, one of the public health sector’s biggest concerns, and it also explores new horizons for its digital solutions.
Dassault Systèmes will hold its US Customer Conference 2011 November 8-10th. This year’s theme is “Innovation in Life” and is dedicated to revealing how industry and technology leaders are using Dassault Systèmes’ software solutions, including Dassault Systèmes groundbreaking Version 6 technology, in order to innovate and develop new ideas, products and experiences in an immersive lifelike environment. Conference keynote speakers will include Bell Helicopter, Johnson and Johnson’s Medical Devices and Diagnostics Sector, Local Motors and KLA-Tencor.
DS Business Outlook
Thibault de Tersant, Senior Executive Vice President and CFO, commented, “Broad customer demand for our software products drove third quarter results, with revenue, operating margin and EPS coming in above the high end of our objectives. All of the revenue upside came through to earnings contributing to non-IFRS EPS growth of 18.5% and a non-IFRS operating margin of 32% in the third quarter, well ahead of our goals.”
“We are increasing our 2011 financial objectives to incorporate the third quarter revenue over-performance leading to a 2011 non-IFRS total revenue growth outlook of 12% to 13% in constant currencies and non-IFRS earnings per share growth of about 14% to 16%."
“Thanks to our top-line dynamic in tandem with our work in leveraging the Company’s infrastructure, we are well positioned to reach our 30% non-IFRS operating margin goal this year, substantially in advance of our plans. Importantly, this approach has enabled us to increase staffing by 7% over the last 12 months to drive forward our customer, technology and market initiatives.”
The Company’s current objectives are as follows:
- Fourth quarter 2011 non-IFRS total revenue objective of about €455 to €465 million, non-IFRS operating margin of about 33% and non-IFRS EPS of about €0.80 to €0.85;
- Upgrading 2011 non-IFRS revenue growth objective range to 12% to 13% in constant currencies from 11% to 12% previously; (increasing the reported revenue range to €1.725 to €1.735 billion from €1.70 to €1.72 billion previously);
- Increasing 2011 non-IFRS operating margin to 30% from slightly in excess of 29%;
- Upgrading 2011 non-IFRS EPS range to €2.85 to €2.90 from €2.69 to €2.80 previously; representing growth of about 14% to 16% from 8% to 12%, previously;
- Objectives are based upon exchange rate assumptions for the 2011 fourth quarter of US$1.45 per €1.00 and JPY120 per €1.00 and a full year average of US$1.42 per €1.00 and JPY115 per €1.00.
The Company’s objectives are prepared and communicated only on a non-IFRS basis and are subject to the cautionary statement set forth below.
The non-IFRS objectives set forth above are estimated based upon the 2011 currency exchange rates above and do not take into account the following accounting elements: deferred revenue write-downs estimated at approximately €1 million for 2011; share-based compensation expense estimated at approximately €21 million for 2011 and amortization of acquired intangibles estimated at approximately €82 million for 2011. The objectives outlined above do not include any impact from other operating income and expense, net principally comprised of acquisition, integration, restructuring and relocation expenses and certain one-time gains in financial revenue and other, net. These estimates do not include any new stock option or share grants, or any new acquisitions or restructurings occurring after October 27, 2011.
NOTE: For purposes of our Tables 1 and 2 below, we will use DS non-IFRS financials:
DS self description
As a world leader in 3D and Product Lifecycle Management (PLM) solutions, Dassault Systèmes brings value to more than 130,000 customers in 80 countries. A pioneer in the 3D software market since 1981, Dassault Systèmes applications provide a 3D vision of the entire lifecycle of products from conception to maintenance to recycling. The Dassault Systèmes portfolio consists of CATIA for designing the virtual product - SolidWorks for 3D mechanical design - DELMIA for virtual production - SIMULIA for virtual testing - ENOVIA for global collaborative lifecycle management, EXALEAD for search-based applications and 3DVIA for online 3D lifelike experiences. For more information, visit http://www.3ds.com.
CATIA, DELMIA, ENOVIA, EXALEAD, SIMULIA, SolidWorks and 3D VIA are registered trademarks of Dassault Systèmes or its subsidiaries in the US and/or other countries.
On September 15, 2011, the ESI GROUP (Compartment C of NYSE Euronext Paris) reported financial results for its first half year, the six month period ending July 31, 2011:
While the current half year and the year-ago half year were both in the red, the writer acknowledges the improvement in profitability for the most recent half year, and also he remembers ESI's own admonition to readers:
Reminder: the seasonal nature of ESI Group's License sales, usually translates into a larger proportion of full-year revenues being recorded over the last quarter of the fiscal year.
Alain de Rouvray, ESI Group’s Chairman and CEO, commented on this report when it was issued, “We have recorded a good first half-year, and achievements are well aligned with our expectations. The growth of our activity was amplified with a substantial improvement in our half-year results. Furthermore, our financial position remains very solid and with a particularly low level of debt. These fine results reflect the efficacy of our business model that combines repeat Licenses and innovative Services in diversified industrial sectors. It also testifies to efficient cost control. We are thus entering the second half of the year with good perspectives of growth and profitability improvement for the full year.”
It has been the practice of the writer of the MCAD/MCAE Commentary and EDA WEEKLY to call the ESI Group’s “Quarter N”, as our nominal “Quarter N+1”. Thus the ESI Group’s fiscal Q2 ending July 31, 2011 is treated as our nominal Q3 2011 for consistent reporting purposes.
Since the six month report above showed 36.6 million euros for ESI sales, we need only subtract the known figure of 17.4 million euros sales for the first half of the six month period (our nominal Q2 2011) leaving a figure of 19.2 million euros for ESI sales for our nominal Q3 2011, up 10.34% over the just prior quarter, but nominal Q3 2011 was even with nominal Q3 2010 sales of 17.4 million euros.
At the fx rate appropriate for the quarter in question (1.44 US$ per euro), this makes the Q3 2011 19.2 million euros revenue for ESI the equivalent of US$27.65 million.
Since the six month period report is more detailed, the September 15, 2011 ESI report provided the following insight into ESI's recent first half (6 month period ended July 31, 2011) operations:
First-half sales up +10%
As announced on September 15, 2011, first-half revenue totaled 36.6 million euros, an increase of +10.0% over the same period last year in real terms and +11.0% at constant currency.
Key indicators were positive over the most recent half:
- License revenue was up +9.1%, at 24.9 million euros.
- The License installed base grew by +4.2%.
- License repeat business remained at a high level, at 82%.
- License New Business recorded an increase of +26.4%.
- Services activity increased by +12.0%, totaling 11.7 million euros.
Improvement in Gross Margin
Gross Margin came to 65.3% of revenue, versus 64.9% over the first half of 2010/11 and 61.6% over the first half of 2009/2010.
Operating Cost Structure
Research and Development costs were lower by 11.8% and totaled 6.5 million euros over the first half. This visible trend masks the stable high level of software investments (33% of Licenses revenues). It can be explained by a combination of factors: a decrease in net investments using resources in co-financed projects, positive currency effects, higher capitalization of Research & Development costs and some increase in Research Tax Credit.
Sales & Marketing costs totaled 13.5 million euros, up 12.2% on the previous year, and represented 36.9% of revenue compared to 36.1% over the same period last year. This evolution reflects reclassification and seasonal effects.
General and Administrative costs totaled 5.7 million euros, versus 5.0 million euros over the first half of 2010/11(base and seasonal effects).
In summary, operating costs remained contained and increased only 5.2% over the half, compared to a 10% increase in revenue.
Improvement in EBITDA in Operational Results (EBIT)
Mirroring the small but definite improvement in the Group’s economic performance, the EBITDA margin was up by +2.2 percentage points at -4.6%, compared to -6.8% over the first half of the previous year and -8.4% over the first half of 2009/2010.
The EBIT was -1.8 million euros, an improvement of +1.0 million euros, or an increase of 36.6% compared to the first half of last year.
Improvement in Net Profitability
The half-year's net profit, despite some currency losses, was -0.8 million euros over the half, compared to -0.7 million euros the previous year.
Once this financial result, an income tax credit of 0.9 million euros, and the EBIT improvement are taken into account, the Group’s attributable net loss was -1.6 million euros over the half, compared to -2.6 million euros over the first half of last year, i.e. an improvement of 36.5%.
The Group had 12.5 million euros in available cash at July 31, 2011, versus 10.6 million euros at July 31, 2010 and 6.8 million euros at January 31, 2011. After reimbursement of various debts (1.8 million € over the half), the Group’s financial position strengthened, with a low debt ratio (long-term debt divided by shareholders’ equity) of 4.6% at July 31, 2011, compared to 11.5% at July 31, 2010 and 6.5% at January 31, 2011.
Validation of Growth and Profitability Leverage
License activity recorded a reasonably good performance over the first half of the year, traditionally not as robust a period as the second half.
Licensing saw a high level of repeat business from the installed base, reflecting clients’ increasing desire to apply ESI’s virtual prototyping solutions which can spur industrial innovation during a period of economic mutations.
New Business also recorded gains as forecast by ESI Group’s business model. Often ESI solutions are initially adopted by the sector’s key accounts, and then are gradually adopted by the main suppliers and sub-contractors. This increase in New Business also contributes to industry sector diversification, with the first half seeing a much-improved performance in terms of orders taken for the Aeronautical (+43%), Energy (+29%) and Education (+42%) sectors, which are particularly affected (1) by the need to innovate and (2) by international competitive pressures.
Services activity also recorded good growth in terms of both revenue (+12%) and gross margin (+27%), reinforcing the notion of offering services both upstream and downstream of software solutions.
Because of its continuous focus on innovation over the last 30 years, its technological knowhow, its global sales network and partnerships, its recurrent business model with high gross margin, and its development in near-shore and offshore zones, the ESI Group arguably offers substantial profitability leverage.
Edited ESI description
ESI is a pioneer in virtual prototyping that takes into account the physics of materials. ESI has developed a suite of coherent, industry-oriented applications that, used properly, can simulate a product’s behavior during testing, fine-tune manufacturing processes in accordance with desired product performance, and evaluate the environment’s impact on product performance. By offering Simulation-Based Design, virtual prototypes can be improved in a continuous and collaborative manner while minimizing and in some cases eliminating the need for physical prototypes during product development. Present in over 30 countries, ESI employs some 850 specialists throughout its worldwide network. ESI Group is listed on compartment C of NYSE Euronext Paris. For further information, go to www.esi-group.com
On October 26, 2011 PTC (NASDAQ: PMTC), sporting the tag line "The Product Development Company(R), reported results for its fourth fiscal quarter, which corresponds to our nominal Q3 2011.
- Nominal Q3 2011 Results:
- GAAP revenue of $339.425 million, GAAP net income $37.621 million and GAAP EPS of $0.31; vs. last year Q3 2010 $268.066 million, (13.215 million), and ($0.11); and vs. sequential Q2 2011 $291.783 million, $15.526 million, and $0.13.
- Nominal Q3 Guidance three months ago was GAAP revenue of $318 to $328 million and GAAP EPS of $0.25 to $0.29
- Q3 2011 Revenue contribution from MKS, which PTC acquired in May 2011 and 4CS Solutions, which PTC acquired on September 2011, was $20.8 million on a GAAP basis
- Q3 2011 GAAP operating margin of 15.1%
- PTC FY'11 Results (year ending September 30, 2011):
- GAAP revenue of $1,167 million and GAAP EPS of $0.71
- GAAP operating margin of 10.0%
- Nominal Q4 2011 Guidance:
- GAAP revenue of $303 to $318 million and GAAP EPS of $0.14 to $0.18
- Assumes $1.40 USD / EURO, down from previous assumption of $1.45
- Revenue guidance assumes approximately $20 million contribution from MKS and 4CS
- TARGETS FOR NEXT FOUR QUARTERS:
- GAAP revenue of $1,327 to $1,337 million and GAAP EPS of $0.94 to $0.98; GAAP operating margin of approximately 11.5%
- Revenue guidance assumes approximately $90 to $100 million contribution from MKS and 4CS.
- Assumes $1.40 USD / EURO, down from previous rate of $1.45 - negatively impacting annual revenue guidance by $15 million
PTC Nominal Q3 2011 Results Commentary
James Heppelmann, president and chief executive officer, commented, "PTC had a very strong finish to its fiscal year, which helped create record nominal Q3 2011 non-GAAP revenue and non-GAAP EPS both exceeding the high-end of our guidance range. Our license revenue of $111.0 million was up 25% on a year-over-year basis, driven by solid organic growth of 15% and better-than-expected performance from Integrity (MKS). In addition to continued momentum in our Desktop (MCAD) business, which experienced 17% year-over-year revenue growth, our Enterprise (PLM) business delivered very strong results. We also continue to see robust adoption of our PLM solutions, as is reflected in our 20% and 30% year-over-year increases in organic maintenance and services revenue, respectively. "On a constant currency basis, total non-GAAP revenue growth for nominal Q3 2011 was 20% and license revenue growth was 18% when compared to nominal Q3 2010.
"Our momentum in the PLM market continued with the addition of 3 new strategically important 'domino' accounts during the past quarter," Heppelmann continued. "Since 2009, we have won 30 domino accounts, meeting the target we had set at the beginning of the year. Dominoes represent the largest of many competitive displacement opportunities, and we believe they demonstrate that PTC is gaining share and becoming recognized as the industry leader for both our technology and product development process expertise."
Heppelmann added, "We had 30 large deals (recognized license + services revenue of more than $1 million) in nominal Q3 2010, capping off a strong fiscal year (Oct -Sept) in which we had 103 large deals, up from 70 in FY'10. We believe this is an indicator of the strength of our pipeline for business opportunities with new and existing customers. During the quarter we recognized revenue from leading organizations such as Asustek Computer, Caterpillar, Doosan Infracore America, SMS Siemag, Webasto and ZF Friedrichshafen."
Jeff Glidden, chief financial officer, commented, "From a profitability standpoint we had a very strong quarter; we delivered $0.47 non-GAAP EPS, this despite a $0.02 headwind due to a higher-than-expected tax rate, other expense items and currency effects. Non-GAAP EPS was up 47% from $0.32 non-GAAP EPS in Q4'10. We ended Q4 with $168 million of cash down from $261 million at the end of Q3, reflecting in part $50 million used to repay our revolving credit facility, $15 million for stock repurchases, and $15 million for the acquisition of 4CS."
PTC Outlook Commentary
"Based on the market momentum we are seeing, the strength of our pipeline, our increasing sales capacity, major product releases in our core markets, as well as the significant interest we are seeing in our other products, such as Abortext and Integrity, we continue to be excited about our long-term growth opportunity," said Heppelmann. "While we acknowledge that there continues to be uncertainty about the strength of the global economy, we remain committed to achieving our goal of 20% non-GAAP EPS CAGR through 2014."
Glidden commented, "For nominal Q4 2011, we are providing guidance of $305 to $320 million in revenue, which includes approximately $20 million in revenue from the MKS and 4CS businesses, including $2 million in non-GAAP revenue. We are expecting non-GAAP EPS of $0.28 to $0.32, which at the mid-point is an increase of 36% from $0.22 non-GAAP EPS in Q1'11, reflecting our commitment to driving operating leverage in our model. From a revenue perspective, we are expecting approximately $80 to $95 million in license revenue in nominal Q4 2011, with combined services and non-GAAP maintenance revenue of approximately $225 million, resulting in approximately 14% to 20% year-over-year growth in total non-GAAP revenue." For nominal Q4 2011, the GAAP revenue target is $303 to $318 million and the GAAP EPS target is $0.14 to $0.18.
The Q1 guidance assumes a non-GAAP tax rate of 24%, a GAAP tax rate of 20% and 121 million diluted shares outstanding. The Q1 non-GAAP guidance excludes approximately $2 million for the effect of purchase accounting on acquired MKS deferred maintenance revenue, $13 million of stock-based compensation expense, $9 million of acquisition-related intangible asset amortization expense, any acquisition-related expenses, and their related income tax effects.
Glidden concluded, "Looking to the full year FY'12, we are targeting non-GAAP revenue growth of 14% to 15%. We expect MKS and 4CS to contribute approximately $90 to $100 million in revenue for the full year, including $3 million in non-GAAP revenue. We expect MKS and 4CS to be slightly accretive to FY'12 non-GAAP EPS. We are expecting license revenue growth of approximately 20%, services revenue growth of 14% and non-GAAP maintenance revenue growth of 11%. Our FY'12 non-GAAP EPS target of $1.48 to $1.52 reflects incremental sales expense as we continue to ramp sales capacity. We will continue to balance investments to support future growth with our commitment to 20% non-GAAP EPS growth." For FY'12, the GAAP EPS target is $0.94 to $0.98.
The FY'12 targets assume a non-GAAP tax rate of 24%, a GAAP tax rate of 20% and 121 million diluted shares outstanding. The FY'12 non-GAAP guidance excludes approximately $3 million for the effect of purchase accounting on acquired MKS deferred maintenance revenue, $51 million of stock-based compensation expense, $37 million of acquisition-related intangible asset amortization, any acquisition-related expenses, and their related income tax effects.
PTC self description
PTC (NASDAQ: PMTC) provides discrete manufacturers with software and services to meet the globalization, time-to-market and operational efficiency objectives of product development. Using the company's PLM and CAD and related solutions, organizations in the Industrial, High-Tech, Aerospace/Defense, Automotive, Retail/Consumer and Life Sciences industries are able to support key business objectives such as reducing costs and shortening lead times while creating innovative products that meet customer needs and comply with industry regulations. ( http://www.ptc.com)
MCAD/MCAE Vendors' Summary Financials Q3 2011
Measured in $US except where indicated, Table 1 below reveals that the combined total revenue of the G5 MCAD/MCAE Vendors was US$1716.2 million in nominal Q3 2011, up 4.5% from the $1642.5 million total in the just prior Q2 2011, and a robust 20.22% above the total year-over-year figure of $1427.6 million for Q3 2010. That’s two quarters in a row that the G5 MCAD/MCAE vendors’ total revenue exceeded twenty percent sequential growth!
Indeed, the G5’s total US revenue after three quarters YTD 2011 is already within $802 million of exceeding the total achieved in all of 2008. Thus for the first time in three years, the G5 will in 2011 easily eclipse 2008 in revenue, a feat which both 2009 and 2010 failed to accomplish.
Table 1 further reveals that every member of the MCAD/MCAE G5 experienced an excellent nominal Q3 2011 revenue increase relative to the previous year’s counterpart, with each vendor scoring at least a double digit year-over-year (YOY) percentage increases in revenues, led in this third quarter by PTC’s 27.68% YOY revenue increase.
1 Notice that these Table 1 columns calculate the percentage of one quarter over the other, as labeled, whereas in Table 2 below, the relevant columns provide the numerical dollar differences in earnings between two different quarters as labeled.
2 In Table 2, FX rates used for ESI Group were the same FX rates used for Dassault Systemes.
Turning to earnings in Table 2 below, we see that the total MCAD/MCAE G4 earnings in nominal Q3 2011 were far larger than the total Q2 2011 sequential total, with all four reporting vendors well ahead (except ANSYS and Autodesk were only narrowly ahead). Of course, all four of the group’s vendors reporting earnings were well ahead of their year over year (YOY) counterparts in Q3 11, with PTC easily winning the YOY improvement sweepstakes with a $50.8 million earnings increment compared to the runner up DS’ $41 million difference.
3 Notice that these Table 2 columns calculate the numerical dollar differences in earnings between two different quarters as labeled, whereas in Table 1, the relevant columns provide the percentage of one quarter over the other, as labeled.
On October 26, 2011 Cadence Design Systems, Inc. (NASDAQ: CDNS) announced its financial results for the third quarter of its fiscal year 2011 ending October 1, 2011, a quarter which corresponds to our nominal Q3 2011.
Cadence reported third quarter 2011 revenue of $292.457 million, compared to revenue of $237.934 million reported for the same period in 2010. Sequential Q2 2011 revenue was $283.270 million.
For the third quarter of 2011, three months ago the company expected total revenue to be in the range of $280 million to $290 million.
On a GAAP basis, Cadence recognized net income of $28.106 million, or $0.10 per share on a diluted basis in the third quarter of 2011, compared to net income of $126.753 million, or $0.48 per share on a diluted basis in the same period in 2010. Sequential Q2 2011 net income was $28.908 million, also $0.10 per share on a diluted basis.
Recall that three months ago, third quarter 2011 GAAP net income per diluted share was expected to be in the range of $0.04 to $0.06.
(Recall also that GAAP net income for the third quarter of 2010 included the effect of $148 million in income tax benefit related to the settlement of an Internal Revenue Service examination of Cadence’s federal income tax returns for the tax years 2000 through 2002. Without the income tax benefit, Q3 2010 would have produced a net loss).
“Strong design activity in multiple market segments continues to drive demand for our products and solutions,” said Lip-Bu Tan, president and chief executive officer. “In response to customer requirements, we have established our readiness for 20-nanometer design and demonstrated product leadership for the design of SoCs using advanced multi-core processors.”
“Cadence again posted strong results as operating profitability continues to improve,” added Geoff Ribar, senior vice president and chief financial officer. “Given the risks in the world economy we looked at our prospective Q4 business very closely but still see good demand for products and services as reflected in our increased outlook.”
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Business Outlook Improved for the Year 2011
For the fourth quarter of 2011, the company expects total revenue in the range of $295 million to $305 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.08 to $0.10.
For the full year 2011, the company now expects total revenue in the range of $1,135 million to $1,145 million. On a GAAP basis, net income per diluted share for 2011 is expected to be in the range of $0.31 to $0.33.
As indicated, both full year revenue and EPS guidance now are higher than that given just three months ago. Back then, for the full year 2011, the company expected slightly lower total 2011 revenue in the range of $1,115 million to $1,135 million. On a GAAP basis, net income per diluted share for thr full fiscal year 2011 was also expected to be lower, in the range of $0.20 to $0.26.
In some auxiliary data published by Cadence, we note that the heretofore steady rise to 33% of total Q2 2011 revenue of the software related to IP, flattened off in Q3 to 30% of total revenue, still the largest % of any revenue category:
Revenue Mix by Product Group (% of Total Revenue)
Cadence self description
Cadence enables global electronic design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company and its products and services is available at www.cadence.com.
On December 1, 2011 MAGMA® Design Automation Inc. (NASDAQ:LAVA), a provider of chip design software, finally reported revenue of $38.28 million for its fiscal 2012 second quarter ended October 30, 2011, up 12.82% from the $33.93 million reported YOY in the corresponding 2010 quarter. MAGMA’s fiscal second quarter 2012 corresponds to the EDA WEEKLY’s nominal Q3 2011. As guidance three months ago, the company expected total nominal Q3 2011 revenue in the range of $37.5 million to $38.0 million. MAGMA booked $35.31 million in nominal Q2 2011.
The word finally used here carries at least two meanings; (1) MAGMA was the last of the EDA G5 to report its nominal Q3 2011 financials, and (2) depending on the speed of absorption, MAGMA as an entity will soon cease to exist on its own, as its people, products and financial numbers are swallowed up in the Synopsys acquisition.
"During the last quarter, MAGMA made great business and technical progress—adding a record number of new logos and generating positive cash flow for the 11th consecutive quarter," said Rajeev Madhavan, MAGMA chairman and chief executive.
"Our product portfolio is the strongest it's ever been, and as a result, the customer adoption rate is accelerating. The momentum of the Titan™ analog implementation and optimization system continues to grow with more than 30 customers now deploying it in their design flows. Our core Talus® implementation platform added 4 new logos and 8 existing customers extended their contracts. Our sign-off tools gained traction this quarter with Tekton™ now in use by more than 25 customers and QCP™ adding 10 new logos. The FineSim™ circuit simulator added 9 new logos,” Madhavan added.
Additional information about product enhancements and customer adoption is available in MAGMA's Second Quarter (nominal Q3 2011) Product Update on the MAGMA website at www.magma-da.com/2Q2012_Update.
Also on November 30, 2011, MAGMA simultaneously announced that the company had entered into a definitive agreement to be acquired by Synopsys (NASDAQ:SNPS), an icon and acknowledged leader in software and IP used in the design, verification and manufacture of electronic components and systems. The combination of the two companies' technologies, development capabilities, support teams and sales channels should provide chip designers with greater access to state-of-the art electronic design automation (EDA) solutions that enable more profitable silicon.
MAGMA Conference Call Canceled
Due to the acquisition announcement MAGMA did not hold a conference call to discuss fiscal second quarter results.
MAGMA GAAP Nominal Q3 2011 Net Income Results
In accordance with generally accepted accounting principles (GAAP), MAGMA reported net income of $3.0 million, or $0.04 per share (basic and diluted) for the second quarter (nominal Q3 2011), compared to a net loss of $(2.7) million, or $(0.04) per share (basic and diluted), for the year-ago second quarter.
In the second quarter (nominal Q3 2011), MAGMA generated cash flow from operations of approximately $2.4 million.
MAGMA Business Outlook
Due to the pendency of the acquisition of MAGMA by Synopsys announced on November 30, 2011, MAGMA is withdrawing all prior financial guidance and will no longer provide any new financial guidance.
Presentation and Disclosure of Revenue
For the second quarter of fiscal 2012 (a.k.a. nominal Q3 2011) revenue and cost of revenue is reported in MAGMA's Condensed Consolidated Statement of Operations in two categories: Licenses and Services. Previously, revenue and cost of revenue was reported in three categories: Licenses, Bundled licenses and services, and Services. MAGMA management has concluded that the results of the Bundled Licenses and Services category of revenue do not indicate a material trend in the historical or future performance of its operations. Bundled licenses and services revenue and cost of revenue are divided into their component parts and included with either Licenses or Services. Presentation of prior period revenue and cost of revenue has been adjusted to conform to the current period.
This press release contains forward-looking statements within the meaning of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements in quotations from MAGMA's management. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from MAGMA's current expectations. Factors that could cause or contribute to such differences include, but are not limited to: delays in or failure to satisfy required conditions to the closing of the proposed merger, including the receipt of required regulatory approvals with respect to the transaction and approval of the acquisition by MAGMA's stockholders; failure to consummate or delay in consummating the transaction for other reasons; the possibility that the expected benefits of the transaction may not materialize as expected; disruption from the transaction making it more difficult to maintain relationships with customers and employees; our reliance on a small number of customers for a significant portion of our revenue, which could cause our revenue to decline if these customers delay orders or fail to renew licenses or if we are unable to maintain or develop relationships with current or potential customers; the effect of restrictive covenants in our debt arrangements which could limit our ability to operate our business; the substantial amount of MAGMA's indebtedness, which could adversely affect our financial position; our ability to generate sufficient operating cash flow or alternatively obtain external financing; customer payment defaults that may cause us to be unable to recognize revenue from backlog, and changes in the type of orders comprising backlog that could affect the proportion of revenue recognized from backlog each quarter, which could have a material adverse effect on our financial condition and results of operations; actions by our competitors that hold a large share of the electronic design automation (EDA) market and increasing competition among EDA vendors as customers tightly control their EDA spending and use fewer vendors to meet their needs; weaker-than-anticipated sales of MAGMA's products and services; weakness in the semiconductor or electronic systems industries; a potential failure of customers to adopt, or to adopt at a sufficiently fast rate, 28-nanometer and smaller design geometries on a large scale; MAGMA's ability to integrate acquired businesses and technologies and keep pace with evolving technology standards; the possibility of litigation (including related to the proposed merger) and potentially higher-than-anticipated costs of litigation related to patent infringement and other intellectual property claims; potentially higher-than-anticipated costs of compliance with regulatory requirements, including those relating to internal control over financial reporting; the ability to manage expanding operations; the ability to attract and retain the key management and technical personnel needed to operate MAGMA successfully; the ability to continue to deliver competitive products to customers; and changes in accounting rules. Further discussion of these and other potential risk factors may be found in MAGMA's public filings with the Securities and Exchange Commission ( www.sec.gov), including its Form 10-Q for the fiscal quarter ended July 31, 2011. MAGMA undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
Additional Information and Where to Find It
In connection with the proposed merger, MAGMA will file a proxy statement and other relevant documents concerning the transaction with the Securities and Exchange Commission ("SEC"). The definitive proxy statement will be mailed to stockholders of MAGMA. Investors and stockholders of MAGMA are urged to read the definitive proxy statement and other relevant documents when they become available because they will contain important information about the transaction. Copies of these documents (when they become available) may be obtained free of charge by making a request to MAGMA's Investor Relations Department either in writing to MAGMA Design Automation, Inc., 1650 Technology Drive, San Jose, California 95110 or by telephone to (408) 565-7799. In addition, documents filed with the SEC by MAGMA may be obtained free of charge at the SEC's website at www.sec.gov or by clicking on "SEC Filings" in the "Investors" section of MAGMA's website at www.magma-da.com.
MAGMA, Synopsys and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from MAGMA's stockholders in connection with the proposed transaction. Information regarding MAGMA's directors and executive officers is contained in MAGMA's proxy statement for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on August 29, 2011. This document is available free of charge in the manner described above. Information about Synopsys' directors and executive officers is set forth in Synopsys' proxy statement for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on February 10, 2011, and its Annual Report on Form 10-K for the year ended October 31, 2010, which was filed with the SEC on December 17, 2010. These documents are available free of charge at the SEC's web site at www.sec.gov, and from Synopsys by contacting Investor Relations by mail at Synopsys, Inc., 700 East Middlefield Road, Mountain View, CA 94043, Attn: Investor Relations Department, or by going to Synopsys' Investor Relations page on its corporate web site at www.synopsys.com. Additional information regarding the interests of MAGMA's directors and executive officers who may be deemed to be participants in the solicitation of proxies in connection with the transaction, including their respective interest in the transaction by security holdings or otherwise, will be set forth in a definitive proxy statement that MAGMA intends to file with the SEC.
MAGMA self description
Leading semiconductor companies worldwide use MAGMA's electronic design automation (EDA) software to produce chips for a wide variety of vertical markets including tablet computing, mobile devices, electronic games, digital video, networking, military/aerospace and memory. Silicon One, MAGMA's technology solutions for emerging silicon, address time to market, product differentiation, cost and performance while making silicon more profitable. MAGMA products include software for digital design, analog implementation, mixed-signal design, physical verification, circuit simulation, characterization and yield management. The company maintains headquarters in San Jose, Calif., and offices throughout North America, Europe, Japan, Asia and India. MAGMA's stock trades on NASDAQ under the ticker symbol LAVA. Visit MAGMA Design Automation on the Web at www.magma-da.com.
MAGMA and Talus are registered trademarks and FineSim, QCP and Tekton are trademarks of MAGMA Design Automation Inc. All other product, company and institution names are trademarks or registered trademarks of their respective owners
On November 17, 2011 Mentor Graphics Corporation (NASDAQ: MENT) announced financial results for the company’s fiscal third quarter ended October 31, 2011. For purposes of consistency, the EDA WEEKLY treats this time period as nominal Q3 2011.
For nominal Q3 2011, the company reported revenues of $250.508 million, GAAP net income of $24.071 million, and GAAP earnings per share of $.22.
Guidance provided three months ago called for $245 million in Q3 2011 revenue and for GAAP earnings per share of $0.18.
The Q3 2011 results compare to Q3 2010 revenues of $238.937 million, $15.257 million in GAAP net income, and $0.14 in GAAP earnings per share.
In the just prior Q2 2011, the company had reported $213.740 million in revenues, $4.334 million in GAAP net income, and $0.04 in GAAP EPS.
“Bookings (quantity not provided) in Q3 2011 were again a record, up over 20% from the previous third quarter record, and for the second consecutive year our book-to-bill through the third quarter is positive,” said Dr. Walden C. Rhines, chairman and CEO of Mentor Graphics. “This quarter saw the beginning of the strength we predicted in our 'Design to Silicon' category for the second half, with bookings in the third quarter up year-on-year by over 55%, and by about 15% year to date. Looking forward, we expect the technical challenges of advanced nodes to drive significant opportunity for us.”
During the quarter, important accomplishments were many. (1) The company expanded its Valor® product line with a new business intelligence product. (2) The Mentor® Nucleus® real-time operating system was upgraded to include new power management technology, making it an even more compelling solution for mobile computing and telecommunication. (3) The company also advanced its embedded systems software suite for automobile 'infotainment' with a GENIVI compliant product and a partnership with Freescale Semiconductor. (4) ARM and Mentor announced a joint manufacturing test solution for ARM processor-based designs.
(5) NuFlare Technology and Mentor announced a partnership on advanced IC mask generation. (6) The company announced improvements to its design-for-test products that will allow these products to find new classes of chip defects. (7) GlobalFoundries and Mentor announced new support for GlobalFoundries’ third generation design sign-off for leading-edge IC manufacturing. (8) The Mentor transportation Capital® product suite won an “EDN Hot 100 products of 2011” award.
“Leading indicators for the business continued to be strong, with third quarter 'support declines' down and consulting and training bookings doubling. Annual fees for renewing contracts in the top ten transactions were up 40% over their prior annual fees. Base business, contracts below $1 million in value that booked and billed in the quarter, grew 15% over last year,” said Gregory K. Hinckley, president of Mentor Graphics. “The company’s earnings have historically been very back-end loaded with much of our business closing in the fourth quarter. For the last several years, we have been working with our customers to create more linearity in our financial results, and are pleased with the progress we have been showing. With our newly raised guidance, we now expect 48% of annual non-GAAP earnings to occur in the fourth quarter this fiscal year, compared to 69% in Fiscal 2011.”
For the fourth quarter, the company expects revenues of about $316 million and GAAP earnings per share of $.46.
For the full fiscal year, ending January 31, 2012, the company expects revenues of $1.01 billion and GAAP earnings per share of $.69.
Fiscal Year Definition
The Mentor Graphics fiscal year runs from February 1 to January 31. The fiscal year is dated by the calendar year in which the fiscal year ends. As a result, the first three fiscal quarters of any fiscal year will be dated with the next calendar year, rather than the current calendar year.
The entire EDA WEEKLY of July 25, 2011, entitled, “Back to the Future,” was devoted to a specific Division of MGC; here is the URL in case you missed that article:
Mentor Graphics self description
Mentor Graphics Corporation is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world’s most successful electronic, semiconductor and systems companies. Established in 1981, the company reported revenues in the last fiscal year of about $915 million. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.
(Mentor Graphics, Mentor, Nucleus and Capital are registered trademarks of Mentor Graphics Corporation. All other company and/or product names are the trademarks and/or registered trademarks of their respective owners.)
Statements in this press release regarding the company’s guidance for future periods constitute “forward-looking” statements based on current expectations within the meaning of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company or industry results to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements.
On October 20, 2011 SpringSoft, Inc. (TAIEX: 2473) announced consolidated revenue of NT$565.144 million, net income of NT$147.380 million, and earnings per share of NT$0.73 for the third quarter ended September 30, 2011. (NT$ = New Taiwan dollars).
In US dollars, these results correspond to Q3 2011 revenue of US$19.509 million, Q3 2011 net income of US$5.085 million, and Q3 2011 earnings per share of US$0.03.
In the prior sequential Q2 2011, consolidated revenue was
NT$561.083 million, net income of NT$134.453 million, and earnings per share of NT$0.65.
In US$, these results translate to Q2 2011 consolidated revenue of US$19.269 million, Q2 2011 net income of US$4.620 million, and Q2 2011 earnings per share of US$0.02.
In the year ago Q3 2010, consolidated revenue was US$17.09 million and net income was US$4.42 million.
Third‐quarter 2011 NT$ revenue increased 0.72% sequentially from the 2011 second quarter and 1.24% in US$. Third‐quarter 2011 NT$ revenue increased year‐over‐year 3.1% vs. Q3 2010, and 14.15% in US$.
Q3 2011 net income in NT$ increased 9.6% from the prior Q2 2011 and increased 4.2% in NT$ from the year‐ago Q3 2010 quarter.
Year‐over‐year, revenue for nine months ended September 30, 2011 increased 4.6% while net income increased 9.0%, in NT$. Accumulated EPS stands at NT$2.05 for nine months of 2011.
“We achieved our Q3 sales target for all product lines. Although we do have concerns about the global economic situation, we are still cautiously optimistic about the level of our Q4 business,” said Johnson Teng, COO of SpringSoft.
“In Q3 2011, we also successfully launched the 'Verdi Interoperability Apps (VIA)' program to the market. VIA provides the open architecture that makes interoperability possible for all Verdi users and application developers. This is a strategic move for SpringSoft and I believe it will provide great value to our customers as well as to all industrial partners,” concluded Teng.
SpringSoft self description
SpringSoft, Inc. is a global supplier of specialized automation technologies that accelerate engineers during the design, verification and debug of complex digital, analog and mixed‐signal ICs, ASICs, microprocessors, and SoCs. Its award‐winning product portfolio features the Novas™ Verification Enhancement and Laker Custom IC Design solutions used by more than 400 of today's leading IDM and fabless semiconductor companies, foundries, and electronic systems OEMs. Headquartered in Hsinchu, Taiwan, SpringSoft is the largest company in Asia specializing in IC design software and a recognized industry leader in customer service with more than 400 employees located in multiple R&D sites and local support offices around the world. For more information, visit www.springsoft.com.
On November 30, 2011 Synopsys, Inc. (NASDAQ: SNPS), a world leader in software and IP used in the design, verification and manufacture of electronic components and systems, reported results for its fourth quarter and fiscal year 2011. Synopsys' fourth fiscal quarter corresponds to nominal Q3 2011 used by the EDA WEEKLY.
For nominal Q3 2011, Synopsys reported revenue of $390.534 million, up 4.02% YOY compared to $375.459 million for nominal Q3 2011, and up 0.97 % compared to $386.795 million for sequential Q2 2011. Revenue guidance for nominal Q3 2011 provided 3 months ago was somewhere between $386 million and $392 million.
Revenue for Synopsys' fiscal year 2011 was $1.536 billion, an increase of 11.2% from $1.38 billion in fiscal 2010.
"Synopsys had an outstanding fiscal 2011, with double-digit revenue and non-GAAP earnings per share growth," said Dr. Aart de Geus, chairman and CEO of Synopsys. "Our customers continue to drive design aggressively, even in the context of economic uncertainty."
"Our combination of advanced technology and support expertise is helping to solve the most pressing technical challenges. Synopsys' financial strength and predictable business model support an objective of double-digit non-GAAP earnings per share growth in fiscal 2012," said de Geus.
On a generally accepted accounting principles (GAAP) basis, net income for Net Income for nominal Q3 2011 was $39.942 million, or $0.27 per share, up 57.24% compared to $25.401 million, or $0.17 per share, for nominal Q3 2010, but down 23.31% compared to $52.082 million and $0.35 per share in sequential Q2 2011. Earnings guidance provided 3 months ago for nominal Q3 2011 was for $0.26 to $0.31 per share.
GAAP net income for fiscal year 2011 was $221.4 million, or $1.47 per share, down 6.62% compared to $237.1 million, or $1.56 per share, for fiscal 2010.
EDA WEEKLY readers are reminded here, that during the past year Synopsys experienced one of those distortions due to a tax situation from another period, albeit a positive distortion: Synopsys’ net income for nominal Q1 2011 included a one-time $32.8 million, or $0.21 per share, tax benefit associated with a settlement with the IRS for audits for fiscal years 2006 through 2009.
Synopsys also provided its financial targets for nominal Q4 2011. These targets do not include any impact of future acquisition-related activities such as the acquisition of MAGMA announced November 30, 2011. The following 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.
Nominal Q4 2011 Targets:
- Revenue: $412 million - $420 million
- GAAP expenses: $340 million - $357 million
- Other income and expense: $0 - $2 million
- Fully diluted outstanding shares: 145 million - 149 million
- GAAP earnings per share: $0.33 - $0.38
- Revenue from backlog: greater than 90%
Note: Nominal Q4 2011 includes an extra week.
Synopsys Full Fiscal Year 2012 Targets:
- Revenue: $1.640 billion - $1.665 billion
- Other income and expense: $0 million - $4 million
- Fully diluted outstanding shares: 145 million - 149 million
- GAAP earnings per share: $1.28 - $1.44
- Cash flow from operations: approximately $300 million
- Revenue from backlog: greater than 80%
Breaking News November 30, 2011
Synopsys, Inc. has signed a definitive agreement to acquire Magma® Design Automation Inc., the provider of chip design software headquartered in San Jose, California and fellow member of the EDA WEEKLY Group of Five (G5). Synopsys believes that bringing together complementary technology, development and support capabilities will enable the combined company to more rapidly meet customer requirements linked to chip designs at both leading-edge and mature process nodes.
Under the terms of the merger agreement, Synopsys will acquire Magma for $7.35 per Magma share in cash, resulting in a transaction value of approximately $507 million net of cash and debt acquired. The boards of directors of both companies have unanimously approved the transaction.
The closing of the merger is subject to customary conditions, including approval by the stockholders of Magma as well as U.S. regulators. In the event the merger closes as expected in the second calendar quarter of 2012, Synopsys anticipates it to be modestly accretive to
non-GAAP earnings per share in its fiscal 2012. Synopsys plans to fund the acquisition with a combination of cash and debt, with the specifics to be determined at the time of close.
"The dramatic rise in complexity of today's semiconductor designs for all process nodes requires an equally dramatic increase in designer productivity. Customers are either dealing with the very complex physics of 20-nanometer design or they are squeezing the last bit of performance and cost from designs at mature, high-value nodes. To achieve success, our customers are asking for more new EDA capabilities than ever before," said Aart de Geus , chairman and CEO at Synopsys. "This acquisition will enable Synopsys to accelerate the delivery of the technology our customers need to keep the overall cost of design in check."
There is more on this acquisition in the MAGMA section of this issue of EDA WEEKLY.
Synopsys self description
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 approximately 70 offices located throughout North America, Europe, Japan, Asia and India. Visit Synopsys online at http://www.synopsys.com/.
EDA G5 Vendors’ Summary Results Nominal Q3 2011
We end our EDA review by looking at the Summary Revenue List of the most-recently-reported quarter; this time it’s the nominal Q3 2011 EDA G5 vendor performances (Table 3) below. Note that SpringSoft has been added to the EDA revenue Table for the third consecutive quarter, together with its revenue history stated in $US; for the third consecutive quarter, Altium has been removed from the G5 list for the time being; and all group totals have long since been updated accordingly.
WHEREAS only two of the G5 EDA vendors (Cadence and SpringSoft) enjoyed nominal Q2 2011 sequential revenue totals greater than their respective Q1 2011 revenue totals, “all five of the five” sported nominal Q3 2011 revenue that exceeded their respective nominal Q2 2011 revenue number.
Indeed, IN NOMINAL Q3 2011, the EDA G5’s COMBINED REVENUE CAME WITHIN A SINGLE PERCENTAGE POINT OF REACHING THE BILLION DOLLAR PER QUARTER REVENUE THRESHOLD.
Finally, this may be the last time that data on MAGMA appear in either Table 3 or Table 4 as separate entities, unless the acquisition by Synopsys does not get done in the next quarter.
1 Notice that these Table 1 columns above calculate the percentages of one quarter over the other, as labeled, whereas in Table 2 below, the relevant columns provide the numerical dollar differences in earnings between two different quarters as labeled.
Turning to earnings in Table 4, we observe that all five of the currently-chosen EDA vendors were in black ink for nominal Q3 2011, the first instance of that occurring in the last five quarters at least.
Also, Table 4 still contains two specific instances when a vendor’s earnings were distorted by tax credits from another period. Looking closely, one can spot the $126.75 million in Cadence earnings in nominal Q3 2010; also, while less grotesque, one can see the $81.11 million in Synopsys’ nominal Q1 2011 column.
Finally we also observe from Tables 1 and 3 that the G5 EDA vendors’ collective revenue is only 58% of the G5 MCAD/MCAE vendors’ revenue, and further, Tables 2 and 4 reveal that the EDA G5 ROS is an adequate 10.1%, whereas the G5 MCAD/MCAE vendors achieved a very handsome 15.8% ROS in nominal Q3 2011 on a much larger revenue base.
Miscellaneous News Items
Unemployment Dealt a Blow in November 2011
The opposition party in Washington is thwarting President Obama at every turn with the explicit goal of denying him a second term. This the opposition has stated repeatedly. They do not seem to care that the country and its people are harmed in the process. They refuse to consider raising taxes on the rich. They would like to kill the new US Health Plan, slash Medicare, reduce or end Social Security, end student loans, etc. etc.
But the Labor Department's November Jobs Report issued on Friday December 2nd might suggest that the opposition party may not be able to hold all their members and supporters in lock step after all. According to the December 2nd report, the American unemployment rate unexpectedly dropped last month to 8.6%, its lowest level in two and a half years! The report also said that the nation’s employers added 120,000 jobs in November 2011 and that job growth for the previous two months was better than initially reported.
Companies have apparently been taking on more and more temporary workers, suggesting that even more permanent hiring may be coming. Help-wanted advertising, retail sales and auto sales have risen; jobless claims have fallen; and businesses seem to be getting loans more easily. Perhaps most encouraging was a recent survey of small businesses that found hiring intentions to be at their highest level since before Bush 43's second recession was in full swing in 2007-8.
There are apparently some renegades these days among the opposition party members in Washington, renegades who are having second thoughts when their leaders want to kill the current payroll tax cut. The current payroll tax cut will expire on December 31, 2011 without explicit action by the US Senate. If it's not renewed, over 160 million middle class Americans will suddenly be paying up to $1000 more in taxes. These aforementioned renegades may feel that that blow might induce permanent damage. But the sense of urgency is still not evident on Capitol Hill, according to David Firestone in a December 2nd piece in the New York Times: "Both the Democratic and Republican proposals to extend the payroll tax cut were recently blocked in the Senate. Republicans killed President Obama’s plan to pay for the cut with a surtax on millionaires. What was really surprising was that a majority of Republicans didn’t support their own party’s bill, which would pay for the tax cut largely by extending the freeze on federal workers’ salaries and reducing the federal workforce by 10%! That suggests that most Republican senators just don’t want to cut the payroll tax, no matter how it is paid for. The prospect of giving President Obama something he asked for — and keeping the economy from sinking further — may be too much for many of them to bear."
For his part, President Obama finally left no doubt where he stood on these economic issues, in a speech he gave in Kansas on December 6, 2011. Those interested can read the full text of the speech at this URL:
About the writer:
Since 1996, Dr. Russ Henke has been active as president of HENKE ASSOCIATES, a San Francisco Bay Area high-tech business & management consulting firm. The number of client companies served by Henke Associates during those years now numbers close to fifty. Engagement lengths have varied from a few weeks up to ten years and beyond.
During his previous corporate career, Henke operated sequentially on "both sides" of MCAE/MCAD and EDA, as a user and as a vendor. He's a veteran corporate executive from Cincinnati Milacron (Research Scientist), SDRC (President & COO), Schlumberger Applicon (Executive VP), Gould Electronics (President & General Manager), ATP (Chairman and CEO), and Mentor Graphics (VP & General Manager).
Henke is a Fellow of the Society of Manufacturing Engineers (SME) and served on the SME International Board of Directors. Henke was also a board member of SDRC, PDA, ATP, and the MacNeal Schwendler Corporation, and he currently serves on the board of Stottler Henke Associates, Inc.
Henke is also a member of the IEEE and a Life Fellow of ASME International. In April 2006, Dr. Henke received the 2006 Lifetime Achievement Award from the CAD Society, presented by CAD Society president Jeff Rowe at COFES2006 in Scottsdale, AZ. In February 2007, Henke became affiliated with Cyon Research's select group of experts on business and technology issues as a Senior Analyst. This Cyon Research connection aids and supplements Henke's ongoing, independent consulting practice (HENKE ASSOCIATES). Dr. Henke is also a contributing editor of the EDACafé EDA WEEKLY, and he has published EDA WEEKLY articles every four weeks since November 2009; URL's available.
Since May 2003 HENKE ASSOCIATES has also published more than 100 independent COMMENTARY articles on MCAD, PLM, EDA and Electronics IP on IBSystems' MCADCafé and EDACafé.
Further information on HENKE ASSOCIATES, and URL's for past Commentaries, are available at http://www.henkeassociates.net.
March 31, 2012 will mark the 16th Anniversary of the founding of HENKE ASSOCIATES.