Synplicity Announces Fourth Quarter and 2005 Results
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Synplicity Announces Fourth Quarter and 2005 Results

SUNNYVALE, Calif.—(BUSINESS WIRE)—Feb. 1, 2006— Synplicity, Inc. (Nasdaq: SYNP), a leading supplier of software for the design and verification of semiconductors, today announced financial results for the year and quarter ended December 31, 2005.

Highlights:

-- 2005 revenue increased 9 percent over 2004 to a record $61.9 million

-- Pro forma operating income grew to 10 percent of revenue in 2005 compared to 5 percent of revenue in 2004

-- 2005 GAAP net income was $6.6 million, or $0.23 per diluted share

-- Fourth quarter revenue increased 8 percent over the same period in 2004 to a record $16.3 million

-- Fourth quarter GAAP net income was $2.6 million, or $0.09 per diluted share

For the year ended December 31, 2005, revenue was $61.9 million, a 9 percent increase from revenue of $57.0 million for the year ended December 31, 2004. For the year ended December 31, 2005, Synplicity had a generally accepted accounting principles ("GAAP") net income of $6.6 million, or $0.23 per diluted share, as compared to GAAP net income of $2.2 million, or $0.08 per diluted share, for the year ended December 31, 2004. Pro forma net income was $7.4 million, or $0.27 per diluted share, for the year ended December 31, 2005, compared to pro forma net income of $3.3 million, or $0.12 per diluted share, for the year ended December 31, 2004. Pro forma figures exclude the impact of amortization of intangible assets and stock-based compensation. A reconciliation of GAAP to pro forma net income is included with this press release. Additionally, cash and short-term investments increased to $57.1 million at December 31, 2005.

Revenue for the quarter ended December 31, 2005 was $16.3 million, an 8 percent increase from revenue of $15.1 million for the quarter ended December 31, 2004 and 3 percent below prior guidance. On a GAAP basis, net income was $2.6 million, or $0.09 per diluted share, for the quarter ended December 31, 2005, as compared to GAAP net income of $803,000, or $0.03 per diluted share, for the quarter ended December 31, 2004. Pro forma net income was $2.8 million, or $0.10 per diluted share, for the quarter ended December 31, 2005, equal to prior guidance, compared to pro forma net income of $1.1 million or $0.04 per diluted share, for the quarter ended December 31, 2004.

"2005 was a year of strong execution for Synplicity," said Gary Meyers, President and CEO. "We increased our share in our core market of FPGA synthesis once again, released numerous upgrades across our entire product line, including the highly acclaimed Synplify Premier tool and continued our history of industry leading customer service. We managed this impressive performance while growing our revenue at the high end of the industry, increasing backlog, adding over $8 million of cash and investments to our balance sheet and dramatically improving our operating income. In 2006, we look forward to continuing to increase shareholder value and offering the very best tools to our customers."

Business Outlook

The following statements are based on current expectations. We do not intend to update, confirm or change this guidance until our earnings conference call for the first quarter of 2006, although we will provide additional detail regarding our guidance on today's scheduled call.

-- Revenue for 2006 is expected to be in the range of $66 to $68 million, weighted towards the second half of the year, in alignment with our product release schedule.

-- GAAP net income per fully diluted share for 2006 is expected to be in the range of $0.09 to $0.11. GAAP net income is expected to include non-cash charges of approximately $3.6 million relating to stock compensation expense based on historical activity and $890,000 of amortization of intangible assets. Additionally, the Company is estimating that its income tax expense for 2006 will be approximately 25 percent of pretax income excluding the impact of stock-based compensation.

-- Pro forma net income per share for 2006 is expected to be in the range of $0.25-$0.27.

-- Revenue for the first quarter of 2006 is expected to be in the range of $14.6 to $15.1 million.

-- GAAP net income (loss) per fully diluted share for the first quarter of 2006 is expected to be in the range of $(0.02) to $0.00. GAAP net income (loss) for the quarter is expected to include non-cash charges of approximately $900,000 relating to stock-based compensation based on historical activity and $223,000 of amortization of intangible assets.

-- Pro forma net income per share for the first quarter of 2006 is expected to be in the range of $0.02 to $0.04.

Audio Webcast

Synplicity's earnings call will be webcast today at 1:30 p.m. Pacific, and may be accessed at http://investor.synplicity.com. Synplicity will discuss its fourth quarter and year 2005 results and the first quarter and year 2006 business outlook. Following completion of the call, a rebroadcast of the webcast will be available at http://investor.synplicity.com through March 31, 2006. For those without access to the Internet, a replay of the call will be available from 5:00 p.m. Pacific on February 1, 2006 through February 2, 2006. To listen to a replay, call (719) 457-0820, access code 1340139.

Use of Non-GAAP Financial Measures

This press release includes financial measures for net income and net income per share that exclude certain non-cash charges and that have not been calculated in accordance with GAAP. These measures differ from GAAP in that they exclude the amortization of intangible assets from acquisitions and stock-based compensation. Synplicity has previously provided these measurements in addition to GAAP financial results because it believes they provide a consistent basis for comparison between quarters that is not influenced by certain non-cash activity and therefore are helpful to understanding Synplicity's underlying operational results. Further, these non-GAAP measures are some of the primary measures Synplicity's management uses for planning and forecasting. These measures should not be considered an alternative to GAAP, and these non-GAAP measures may not be comparable to information provided by other companies.

About Synplicity

Synplicity(R), Inc. (Nasdaq: SYNP) is a leading supplier of innovative software solutions that enable the rapid and effective design of complex, high-performance semiconductors. Synplicity's tools provide outstanding performance, cost and time-to-market benefits by simplifying, improving and automating key design planning, logic synthesis, physical synthesis and verification functions for FPGA, DSP, ASIC prototyping, structured/platform ASIC and cell-based ASIC designers. Synplicity is the first company to deliver customized physical synthesis, analysis and floorplanning solutions for today's leading structured/platform ASICs. In addition, the company is the number one supplier of FPGA synthesis solutions and has been rated #1 in customer satisfaction in 2004 and 2005 in EE Times' Annual FPGA Customer Survey. Synplicity's products support industry-standard design languages (VHDL and Verilog) and run on popular platforms. The company employs over 300 people in over 20 facilities worldwide and is headquartered in Sunnyvale, California.

For more information visit http://www.synplicity.com.

Forward-Looking Statements

This press release contains forward-looking statements including, but not limited to, statements regarding Synplicity's growth, market performance, standard of its products, and business outlook for increase in backlog, our product release schedule, revenue, stock-based compensation expense, amortization of intangible assets, income tax expense, net income and net income per share. These statements relate to future events and involve known and unknown risks, uncertainties and other factors that may cause Synplicity's actual financial results, levels of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In some cases, you will be able to identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. Forward-looking statements are only predictions and actual events or results may differ materially. Synplicity cannot provide any assurance that its future results will meet expectations. Synplicity's operating results could differ materially due to a number of factors, including the performance and quality of both its FPGA and ASIC software products relative to its competitors' products, the growth of structured/platform ASIC and FPGA markets and the growth of its ASIC synthesis business, and Synplicity's level of expenses. For additional information and considerations regarding the risks faced by Synplicity, see its annual report on Form 10-K for the year ended December 31, 2004 and quarterly report on Form 10-Q for the quarter ended September 30, 2005, each as filed with the Securities and Exchange Commission, as well as other periodic reports filed with the SEC from time to time. Although Synplicity believes that the expectations reflected in the forward-looking statements are reasonable, Synplicity cannot guarantee future results, levels of activity, performance or achievements. In addition, neither Synplicity nor any other person assumes responsibility for the accuracy or completeness of these forward-looking statements. Synplicity disclaims any obligation to update information contained in any forward-looking statement.

Synplicity is a registered trademark of Synplicity, Inc. All other brands or products are the trademarks or registered trademarks of their owners.

                           SYNPLICITY, INC.
                      CONSOLIDATED BALANCE SHEETS
                            (in thousands)



                                           December 31,  December 31,
                                               2005          2004(1)
                                          -------------  -------------
                                           (unaudited)
Assets:
Current assets:
    Cash, cash equivalents and short-term
     investments                               $57,099       $ 48,681
    Accounts receivable, net                    12,632          8,851
    Other current assets                         2,372          2,167
                                               --------      ---------
        Total current assets                    72,103         59,699
    Property and equipment, net                  2,631          2,989
    Goodwill                                     1,272          1,272
    Intangible assets, net                       1,882          2,347
    Other assets                                   749            780
                                               --------      ---------
            Total assets                       $78,637       $ 67,087
                                               ========      =========

Liabilities and Shareholders' Equity:
Current liabilities:
    Accounts payable                           $   944       $  1,087
    Accrued liabilities                          1,461          1,398
    Accrued compensation                         4,031          3,797
    Deferred revenue                            18,355         15,957
                                               --------      ---------
        Total current liabilities               24,791         22,239
Shareholders' equity:
    Common stock                                58,257         56,107
    Additional paid-in capital                   3,368          3,452
    Deferred stock-based compensation               (8)           (88)
    Accumulated deficit                         (7,430)       (13,984)
    Accumulated other comprehensive loss          (341)          (639)
                                               --------      ---------
        Total shareholders' equity              53,846         44,848
                                               --------      ---------
            Total liabilities and
             shareholders' equity              $78,637       $ 67,087
                                               ========      =========

(1)Derived from audited financial statements



                           SYNPLICITY, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)


                                     Quarter Ended      Year Ended
                                      December 31,      December 31,
                                   -----------------  ----------------
                                      2005    2004     2005    2004(1)
                                    -------  -------  -------  -------
                                       (unaudited)  (unaudited)
Revenue:
License                            $ 8,931  $ 8,547  $34,133  $31,744
Maintenance                          7,368    6,554   27,802   25,210
                                   -------- -------- -------- --------
   Total revenue                    16,299   15,101   61,935   56,954
Cost of revenue:
Cost of license                        135      105      610      553
Cost of maintenance                    427      634    1,775    2,450
Amortization of intangible assets
 from acquisitions                     222      222      890      890
                                   -------- -------- -------- --------
   Total cost of revenue               784      961    3,275    3,893
                                   -------- -------- -------- --------
Gross profit                        15,515   14,140   58,660   53,061
Operating expenses:
Research and development             6,079    6,039   24,332   23,495
Sales and marketing                  5,754    6,011   22,786   21,945
General and administrative           1,612    1,452    6,354    5,593
Stock-based compensation (benefit)       5       29       (4)     186
                                   -------- -------- -------- --------
   Total operating expenses         13,450   13,531   53,468   51,219
                                   -------- -------- -------- --------
Income from operations               2,065      609    5,192    1,842
Other income, net                      499      194    1,549      604
                                   -------- -------- -------- --------
Income before income taxes           2,564      803    6,741    2,446
Income tax provision (benefit)         (54)       -      187      232
                                   -------- -------- -------- --------
Net income                         $ 2,618  $   803  $ 6,554  $ 2,214
                                   ======== ======== ======== ========
Net income per share:
Basic net income per share:        $  0.10  $  0.03  $  0.25  $  0.09
                                   ======== ======== ======== ========
Shares used in basic per share
 calculation                        26,882   26,071   26,480   26,013
                                   ======== ======== ======== ========
Diluted net income per share:      $  0.09  $  0.03  $  0.23  $  0.08
                                   ======== ======== ======== ========
Shares used in diluted per share
 calculation                        28,773   27,246   27,990   27,432
                                   ======== ======== ======== ========



                           SYNPLICITY, INC.
       RECONCILIATION OF GAAP INCOME (LOSS) TO PRO FORMA INCOME
                 (in thousands, except per share data)
                              (unaudited)


Net Income

                                Quarter Ended         Year Ended
                             ------------------- ---------------------
                                December 31,         December 31,
                             ------------------- ---------------------
                                2005      2004      2005        2004
                             ----------  ------- -----------  --------
 GAAP net income               $ 2,618  $   803     $ 6,554  $  2,214
 Amortization of intangible
  assets from acquisitions         222      222         890       890
 Stock-based compensation
  (benefit)                          5       29          (4)      186
                               -------- --------    -------- ---------
 Pro forma net income          $ 2,845  $ 1,054     $ 7,440  $  3,290
                               ======== ========    ======== =========
 Pro forma net income per
  share:
 Pro forma net income per
  common share                 $  0.10  $  0.04     $  0.27  $   0.12
                               ======== ========    ======== =========
 Shares used in pro forma
  per share calculation         28,773   27,246      27,990    27,432
                               ======== ========    ======== =========


Operating Income (as a percentage of revenue)
 
                                               Year Ended December 31,
                                                     2005    2004
                                                     -----   -----
GAAP operating income                                   8%      3%
Amortization of intangible assets from acquisitions     2%      2%
Stock-based compensation                                0%      0%
                                                     -----   -----
Pro forma operating income                             10%      5%
                                                     =====   =====


Forward-Looking Net Income (loss) per Share

                                           Quarter Ending Year Ending
                                              March 31,   December 31,
                                                2006          2006
                                           -------------- ------------
GAAP net income (loss) per share           $(0.02)-$0.00  $0.09-$0.11
Amortization of intangible assets from
 acquisitions                              $        0.01  $      0.04
Stock-based compensation                   $        0.03  $      0.12
                                           -------------- ------------
Pro forma net income per share             $  0.02-$0.04  $0.25-$0.27
                                           ============== ============




Contact:
Synplicity, Inc.
John J. Hanlon, 408-215-6000 (Investor Relations)

Email Contact
or
Porter Novelli
Steve Gabriel, 408-369-4600 ext. 627 (Public Relations)

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