Synopsys, Inc. F2Q08 (Qtr End 04/30/08) Earnings Call Transcript

Synopsys, Inc. (SNPS)

F2Q08 Earnings Call

May 21, 2008 5:00 pm ET

Executives

Lisa L. Ewbank – Vice President of Investor Relations

Aart J. de Geus – Chairman and Chief Executive Officer

Brian M. Beattie – Chief Financial Officer

Analysts

Raj Seth – Cowen & Company

Rich Valera – Needham & Company

Sterling Auty – JP Morgan

Terence Whalen – Citigroup

Jay Vleeschhouwer – Merrill Lynch

Matthew Petkun – D. A. Davidson & Co.

Mahesh Sanganeria – RBC Capital Markets

Presentation

Operator

Welcome to the Synopsys, Inc. earnings conference call for the second quarter fiscal year 2008. (Operator Instructions) At this time I would now like to turn the call over to Lisa Eubanks, Vice President of Investor Relations.

Lisa L. Ewbank

With us today are Aart de Geus, Chairman and CEO of Synopsys, and Brian Beattie, Chief Financial Officer.

During the course of this conference call may make forecasts, targets and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, the company’s actual results and performance are subject to significant risks and uncertainties that could cause actual results to differ materially from those that may be projected.


In addition to any risks that we highlight the call, important factors that may affect our future results are described in our quarterly report on Form 10-Q for the first quarter of fiscal 2008 and in our earnings release for the second quarter issued earlier today.

In addition, all financial information to be discussed on this conference call, as well as the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures can be found in our second quarter earnings release and financial supplement. All of these items are currently available on our website at www.synopsys.com.

With that, I will turn the call over to Aart de Geus.

Aart J. de Geus

I am happy to report a very full quarter for Synopsys. The revenue came in at $325 million, at the high end of our guidance range while maintaining our uniquely predictable business model with over 90% time-based license revenue. We are expansive within our guidance range and delivered above-target non-GAAP earnings growth of 17%, or $0.41 per share.

We completed the acquisition of Synplicity, a strong technology leader in FPGA designs and hardware-based rapid prototyping. We feel this strengthens our product offerings yielding very strong business levels that support our growth expectations for 2008 and 2009. And we are raising revenue and earnings guidance for the rest of this year.


As may of you have asked us why we are seeing a better environment than our competitors, let me address for a moment the customer landscape.

Fundamentally, things have not changed much from last quarter. The overall economy has been soft bringing some uncertainty to the semiconductor industry. On the positive side, even if mitigated a bit by continued AFP pressure, demand for electronics continues to grow. The main profitability [inaudible] areas are in the memory market, where a number of companies battle for share based on price and capacity. For the rest of the semiconductor industry, we see a number of innovations actions aimed at giving companies larger share and increased competitiveness in market sub-segments. A clear example of this trend is the recently announced wireless joint venture between SC and XB.

For Synopsys, there is little change in our customers’ behavior, including timing and closure rates of contracts. And although we have seen some aggressive pricing attempts by competitors trying to make their quarter-end numbers, Synopsys has fared well. In this environment customers are searching for optimal EDA partners and closer collaboration. Our leading technology, comprehensive solutions, conservative business model, and strong field support make us a preferred candidate for broader and closer relationships.

Indeed, just this week we announced that yet another leading semiconductor company, Matsushita, maker of the Panasonic brand, has selected Synopsys to be the primary EDA supplier. Their decision is supported by an expanded license and collaboration spanning design, digital AMF verification and manufacturing. This agreement indicates a further step towards delivering better productivity through more integrated solutions to our top customers….for more details visit http://seekingalpha.com/