) reported earnings per share (EPS) of 38 cents in the fourth
quarter of 2012, in line with the Zacks Consensus Estimate.
Revenue in the fourth quarter stood at $454.2 million, up
16.3% from $390.5 million in the year-ago period. For fiscal
2012, revenue increased 14.3% from fiscal 2011 to $1.756
The quarterly revenue includes $9 million contribution from
acquired SpringSoft (December 2012) and EVE. The yearly revenues
include $60 million contribution from Magma, which was acquired
in Feb 2012. Organic business was strong during the quarter.
(including time-based and upfront) were $395.9 million, up 15.1%
from $343.8 million in the year-ago quarter. Upfront revenue was
6.3% of the total revenue and was well within the company's
targeted range of less than 10.0%.
Maintenance and service revenues
were $58.3 million, up 24.7% from $46.7 million in the prior-year
Gross profit in the fourth quarter was $351.7 million (77.4%
of the total revenue), up 15.2% from $305.1 million (78.1% of
revenues) in the year-ago quarter. Gross margin declined by 70
basis points, as the growth in cost of production slightly
exceeded the growth in revenue.
Total operating expense in the quarter was $312.2 million, up
25.5% from $248.8 million in the year-ago quarter. Research &
Development (R&D), Sales & Marketing (S&M), General
& Administrative (G&A) expenses also increased
considerably in the quarter. Operating margin for the quarter was
8.7% versus 14.4% in the year-ago quarter.
GAAP net income in the reported quarter was $29.1 million or
19 cents per share, down from $39.9 million or 27 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 quarter was 38 cents per share, inching up from 37 cents in
the year-ago quarter.
Synopsys has a decent cash position. As of October 31, 2012,
cash and cash equivalents were $700.4 million compared with
$963.8 million at the end of the previous quarter.
For the first quarter of 2013 the company expects revenue to
be in the range of $468.0 million - $478.0 million, while GAAP
expenses are expected to be in the range of $403 million - $419
million. Moreover, non-GAAP expenses are expected to be between
$356 million - $366 million. GAAP earnings per share are expected
between 30 cents and 35 cents, while non-GAAP earnings per share
are expected to range 54 cents - 56 cents.
For full year 2013, the company expects revenue to be in the
range of $1.955 billion - $1.975 billion. GAAP earnings per share
are estimated to be $1.32 - $1.46, while non-GAAP earnings per
share are projected in the range of $2.26 - $2.31. Cash flow from
operations is expected to be $350 million
Synopsys delivered modest fourth quarter 2012 results, with
revenue improving substantially but operating margin taking a
beating compared with the year-ago period. Inability to tackle
the surge in operating expenses led to the decline in operating
Going forward, Synopsys' financial strength, technology
leadership and global support would drive the innovation process.
Synopsys is encouraged to boost its innovation process due to the
increasing [popularity of the automation and IP industries.
Synopsys' healthy cash balance will allow the necessary fund
for further acquisitions. Also, Synopsys' product innovation
strategy, the popularity of its time-based license model and its
Advanced Micro Devices Inc.
) encourage us. However, stiff competition from
Cadence Design Systems
), a challenging technology spending environment and uncertainty
regarding proper time to realize acquisition synergies keep us on
Currently, Synopsys has a Zacks Rank #3 (Hold).
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