Synopsys Posts Financial Results for Second Quarter of Fiscal 2005

MOUNTAIN VIEW, Calif. May 18, 2005 – Synopsys, Inc. (Nasdaq: SNPS), a world leader in semiconductor design software, today reported results for its second quarter ended April 30, 2005.

For the second quarter of fiscal 2005, Synopsys reported revenue of $244.3 million, a 1% increase compared to the first quarter of fiscal 2005, and a 17% decrease from $294.6 million in the second quarter of fiscal 2004. For the six-month period ended April 30, 2005, revenue was $485.6 million, a decrease of 16% from revenue of $579.9 million for the same period in fiscal 2004. The year-over-year comparisons reflect the company’s shift to an almost-fully ratable license model initiated in the fourth quarter of fiscal 2004, under which most of the company’s license revenue is recognized over time rather than upfront in the quarter shipped. As a result, in the most recent quarter more than 90% of revenue came from backlog.

“Synopsys had another very solid quarter,” said Aart de Geus, CEO of Synopsys. “We are clearly on the offensive with strong technical momentum, and are making good progress on our growth objectives.”

GAAP Results

On a generally accepted accounting principles (GAAP) basis, for the second quarter of fiscal 2005 net loss was ($4.9) million, or ($0.03) per share, better than Synopsys internal targets and an improvement over the first quarter of fiscal 2005. In the second quarter of last year, net income was $28.7 million, or $0.18 per share.

GAAP net loss for the six-month period ended April 30, 2005 was ($19.3) million, or ($0.13) per share, compared to net income of $60.9 million, or $0.37 per share, for the same period in 2004.

Non-GAAP Results

On a non-GAAP basis, net income for the second quarter of fiscal 2005 was $12.7 million, or $0.09 per share, compared to non-GAAP net income of $57.1 million, or $0.35 per share, for the second quarter of fiscal 2004. Non-GAAP net income for the six-month period ended April 30, 2005 was $27.4 million, or $0.19 per share, compared to $111.4 million, or $0.68 per share, for the same period in 2004. Non-GAAP net income consists of GAAP net income excluding, to the extent incurred in a particular quarter or period, amortization of intangible assets and deferred stock compensation, in-process research and development charges, integration and other acquisition-related expenses and one-time items and facilities and workforce realignment charges.

The decreases in GAAP and non-GAAP net income for these periods were due primarily to the decrease in revenue caused by our shift to an almost-fully ratable license model in the fourth quarter of fiscal 2004.

Financial Targets

Synopsys also announced its operating model targets for the third quarter and full fiscal year 2005. These targets constitute forward-looking information and are based on current expectations. For a discussion of factors that could cause actual results to differ materially from these targets, see “Forward-Looking Statements” below.

Third Quarter of Fiscal 2005 Targets:

• Revenue: $243 million - $253 million
• GAAP expenses: $252 million - $263 million
• Non-GAAP expenses: $228 million - $238 million
• GAAP other income and expense: $30 million - $37 million (including preliminary estimate of valuation of Nassda litigation settlement)
• Non-GAAP other income and expense: $0 million – $4 million (excluding preliminary estimate of valuation of Nassda litigation settlement)
• Fully diluted outstanding shares: 142 million - 150 million
• Tax rate applied in Non-GAAP net income calculations: 28%
• GAAP earnings: $0.08 - $0.12 per share
• Non-GAAP earnings: $0.06 - $0.10 per share
• Revenue from backlog: more than 90% of revenue

Full-Year Fiscal Year 2005 Targets

• Revenue: $960 million - $990 million
• Fully diluted outstanding shares: 142 million - 150 million
• Tax rate applied in Non-GAAP net income calculations: 31%
• GAAP earnings: $(0.06) - $(0.01) per share
• Non-GAAP earnings: $0.31 - $0.39 per share

These targets supersede all fiscal 2005 financial targets previously published by Synopsys and include Synopsys’ current best estimate of the impact of the acquisition of Nassda Corporation, which Synopsys completed on May 11, 2005 on the results of the combined company.

Click here to read Additional Financial Information (pdf file)