) reported earnings per share (EPS) of 43 cents in the second
quarter of 2012, missing the Zacks Consensus Estimate of 45 cents
Revenue in the second quarter stood at $432.6 million, up 9.9%
from $393.7 million in the year-ago period. The company witnessed
revenue growth across all its product groups, and also exceeded the
company's guidance. Revenue contribution from Magma was modest at
Around 90% of the second quarter revenue arrived from the
backlog at the beginning of the quarter, whereas upfront revenue
constituted around 5% of total. Moreover, the average length of the
renewable customer license was around 2.7 years, while the average
duration of the backlog was about 2.8 years.
(including time-based and upfront) were $385.9 million, up 4.4%
from $343.8 million in the year-ago quarter. Upfront revenue was
5.2% of the total revenue and was well within the company's
targeted range of less than 10.0%.
Maintenance and service revenues
were $46.6 million, down from $49.8 million in the prior-year
Gross profit in the second quarter was $332.1 million (76.8% of
the total revenue), up 7.9% from $307.6 million (78.1% of revenues)
in the year-ago quarter. Gross margin improved marginally as the
company was able to control its cost of production.
Total operating expense in the quarter was $314.9 million, up
23.0% from $256.0million in the year-ago quarter. Research &
Development, Sales & Marketing, General & Administrative
(G&A) expenses also increased considerably in the quarter.
Operating margin for the quarter was 3.96% versus 13.1% in the year
GAAP net income in the reported quarter was $21.0 million or 14
cents per share compared with $81.1 million or 53 cents per share
in the year-ago quarter. Excluding special items like amortization,
acquisition-related costs, facility restructuring charge, facility
restructuring charges, non-GAAP net income in the second quarter
was 43 cents per share compared with 10 cents in the year-ago
Synopsys has a decent cash position. As of April 30, 2012, cash
and cash equivalents were $796.6 million compared with $811.4
million at the end of the previous quarter. Capital expenditures
were $9.0 million for the quarter. Out of the total capital
expenditure limit, approximately $272.0 million remains in the
company's share repurchase authorization.
For the third quarter of 2012, the company expects revenue to be
in the range of $440 million - $448 million. GAAP expenses are
expected to be in the range of $371.0 million - $387.0 million,
whereas non-GAAP expenses are expected to be in the range of $333.0
million - $343.0 million. GAAP earnings per share are projected in
the 29 cents to 34 cents range while non-GAAP earnings per
share are forecasted in the range of 49 cents - 51 cents.
Again for the fiscal year 2012, revenue is expected to be in the
range of $1.740 billion - $1.760 billion, while other income and
expense are expected in the range of $0 - $3 million. GAAP earnings
per share are expected around $1.04 - $1.16, while non-GAAP
earnings per share in the range of $2.03 - $2.07
Synopsys delivered modest second quarter 2012 results, with
revenue improving on a year-over-year basis, while earnings were
lower than expected. On the other hand, the company's operating
performance was weak as the company was unable to control its
operating expense, which increased meaningfully.
Moreover, the third quarter and fiscal year 2012 guidance are
encouraging. Although Synopsys is gaining traction from new
products and acquisitions, we believe these will take some time to
produce favorable results. Besides, the company is also facing
competition from Cadence Design Systems.
The company has a short-term Zacks #3 Rank (implying a Hold
SYNOPSYS INC (SNPS): Free Stock Analysis Report
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