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Synopsys (SNPS)

Q1 2012 Earnings Call

February 22, 2012 5:00 pm ET


Lisa Ewbank -

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

Brian M. Beattie - Chief Financial Officer


Richard Valera - Needham & Company, LLC, Research Division

Sterling P. Auty - JP Morgan Chase & Co, Research Division

Thomas Yeh - BofA Merrill Lynch, Research Division

Thomas Diffely - D.A. Davidson & Co., Research Division

Raj Seth - Cowen and Company, LLC, Research Division

Mahesh Sanganeria - RBC Capital Markets, LLC, Research Division

Jay Vleeschhouwer - Griffin Securities, Inc., Research Division


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Ladies and gentlemen, thank you for standing by. Welcome to the Synopsys Earning Conference Call for the First Quarter Fiscal Year 2012. [Operator Instructions] Today's call will last one hour. 5 minutes prior to the end of the call, we will announce the amount of time remaining in the conference. As a reminder, today's call is being recorded. I would now like to turn the conference over to Lisa Ewbank, Vice President of Investor Relations. Please go ahead.

Lisa Ewbank

Thank you, Tricia. Good afternoon, everyone. With us on the call today are Aart de Geus, Chairman and CEO of Synopsys; and Brian Beattie, Chief Financial Officer. Today's conference call will include commentary regarding our Q1 results and also the closing of the acquisition of Magma Design Automation, which we announced this morning.

Before we begin, I'd like to remind everyone that 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, and about the potential benefits of the combination. 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 results 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 annual report on Form 10-Q for the year ended October 31, 2011, our earnings release for the first quarter of fiscal year 2012 and our press release announcing the closing of the Magma acquisition issued this morning.

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 first 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 J. de Geus

Good afternoon, and thank you for joining us. Today, I'm happy to report excellent Q1 results and raised guidance for FY 2012, as well as the closing of the acquisition of Magma Design Automation, announced this morning.

Let me begin with the summary of our results. Our business in Q1 was strong across the board. We met or beat every target we communicated last quarter, including revenue of $425.5 million and non-GAAP earnings per share of $0.56. We are well on track to meeting our non-GAAP operating margin and cash flow targets for the year.

As a result, we're raising our outlook for the year, independent of the Magma acquisition, to a new earnings per share guidance range of $1.97 to $2.03. Brian will provide more financial detail in just a minute.

Regarding Magma Design Automation, we have much work to do as the acquisition literally closed a few hours ago. We're enthusiastic about the prospects for the joint company, as the merger will allow us to accelerate delivery of technology to customers at a time of very rapid system and silicon evolution.

As we work through the detailed planning and integration, our priorities are the following: first and foremost, maintain complete focus on the continued success of our joint customers and their in-progress designs; second, immediate consultation with our joint customers, as we evolve and/or revise our technology and product roadmaps. We plan to take the next 90 days for this effort, which we'll communicate further details.

And third, rationalize the 2 organizations. Our intent is to move quickly and diligently to optimally integrate the companies with the clear objectives of: one, customer success; two, technology acceleration; and three, continuity in delivering high-value solutions, while achieving economic efficiency.

Rajeev Madhavan, Magma CEO, will not join Synopsys, but has graciously agreed to be available to advise us as we transition the company. We thank him for his efforts to date towards making this merger a success.

Roy Jewell, Magma's President and COO, will work with Synopsys management team to ensure a successful integration. From a financial perspective and based on our initial view, we reiterate that we expect the acquisition to be modestly accretive to our 2012 non-GAAP earnings per share.

Due to antitrust-related restrictions in effect until this morning, we have only just begun the detailed planning and integration process, and we expect to provide specific guidance related to the impact of the Magma acquisition when we report Q2 earnings in May.

Moving to the overall market picture. Semiconductor and systems companies are very aggressively developing and producing advanced new products, particularly in the mobile, cloud infrastructure and 'Smart Everything' market segments. The great potential of these end markets has driven a renewed emphasis on technology, visible from the rapid adoption of the 28- and 20-nanometer silicon nodes, to the focus on new transistor structures such as FinFETs, all the way to system design with an increased focus on broad verification strategies and system prototyping.

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