Synopsys, Inc. (SNPS)

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Synopsys (SNPS)

Q3 2011 Earnings Call

August 17, 2011 5:00 pm ET


Aart de Geus - Co-Founder, Chairman and Chief Executive Officer

Lisa Ewbank - VP, IR

Brian Beattie - Chief Financial Officer


Paul Thomas - BofA Merrill Lynch

Sterling Auty - JP Morgan Chase & Co

Thomas Diffely - D.A. Davidson & Co.

Jay Vleeschhouwer - Griffin Securities, Inc.

Richard Valera - Needham & Company, LLC

Raj Seth - Cowen and Company, LLC

Mahesh Sanganeria - RBC Capital Markets, LLC



Ladies and gentlemen, thank you very much for standing by, and welcome to the Synopsys Earnings Conference Call for the Third Quarter of Fiscal Year 2011. [Operator Instructions] As a reminder, today's conference is being recorded. And at this time, I would like to turn the conference over to Lisa Ewbank, Vice President of Investor Relations. Please go ahead, ma'am.

Lisa Ewbank

Thank you, Dave. Good afternoon, everyone. On the call today are Aart de Geus, Chairman and CEO of Synopsys; and Brian Beattie, Chief Financial Officer.

During the course of this conference call, Synopsys will discuss forecasts and targets, and will make 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, our actual results and performance are subject to many risks and uncertainties that could cause actual result to differ materially from what we expect.

In addition to any risks that we highlight during this call, important factors that may affect our future results are described in our quarterly report on Form 10-Q for the quarter ended April 30, 2011, and in our earnings release for the third quarter of fiscal year 2011 issued earlier today.

In addition, all financial information to be discussed on this conference call, the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures, and supplemental financial information, can be found in the current report on Form 8-K that we filed today, our third quarter earnings release and our financial supplement. All of these items are currently available on our website at

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

Aart de Geus

Good afternoon. I'm happy to report that we had an excellent Q3. Combined with strong results in the first half and a solid outlook for Q4, we're confident that we will exit fiscal 2011 with a great deal of strength. Financially, in the quarter, we delivered revenue of $387 million and non-GAAP earnings per share of $0.46. Our orders for the year have been strong and the run rate of the business grew nicely this quarter. We are increasing our revenue, EPS and cash flow guidance for the year, and expect to deliver double-digit growth for both top and bottom line.

Now before commenting on our products and results, let me give you some color on the customer landscape. Notwithstanding the global economic worries and the high volatility in the stock market, design activity continues unabated in pursuit of 3 markets: Mobile devices, the cloud infrastructure and smart everything. In the mobile market, semiconductor companies are grappling with the technical challenge of increasing speed without increasing power. These highly competitive customers are racing to meet market windows, while, of course, also aiming at the lowest possible production costs.

The cloud is a system of massive data centers running very high-performance servers, offloading compute and storage-intensive tap for the portable devices. The technical need here is symmetric: decrease power while delivering the highest possible performance. The rest of the electronics industry, be it in the automotive, industrial or consumer segment, is seeing significant growth in silicon content through an explosion of embedded smart everything chip.

To give a sense of proportion, of the top 50 electronic design software spenders in the world, 36 are mobile providers and 9 are providers of cloud hardware. We are the largest supplier in almost every case. In Asia Pacific, which dominates in the development of consumer devices, we are strong as well, with on top of our Tools business already 60% of the leading semiconductor companies embedding our IP blocks. So regardless where the market goes over the next few months, we expect Synopsys to be in a cornerstone position. We have a compelling combination of global scale, complete solutions, product excellence and outstanding support. Our financial strength allows us to continually invest in technology and help our customers safely streamline the number of vendors. This makes us an ideal partner in any phase of the business cycle.

So how are we impacting the mobile cloud and smart-everything markets? The customers' challenges are easily summarized in 3 words: better, sooner, cheaper. Better means more compute performance and less power utilization. Sooner means higher design productivity and scheduled predictability. Cheaper means best silicon utilization with highest yields. While easy to state, delivering on these expectations demands advanced silicon technology, state-of-the-art integrated tools and flows and very sophisticated IP.

Let me highlight what progress was made in a number of areas in this past quarter. Our core solutions are doing very well in terms of business level, technology advances and customer adoption. For example, for the mobile market, achieving a lower power consumption implies continually migrating to smaller geometries. Synopsys has a well-earned reputation for being the key enabler of the most advanced designs. This quarter, both STMicroelectronics and Samsung taped out their first 20-nanometer test chips with our Galaxy implementation flow. To achieve this, we collaborated with foundry partners and customers to support these very complex geometries.

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