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Synopsys (SNPS)

Q2 2011 Earnings Call

May 18, 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 - Roth Capital Partners LLC

Sterling Auty - JP Morgan Chase & Co

Thomas Diffely - D.A. Davidson & Co.

Raj Seth - Cowen and Company, LLC

Unknown Analyst -



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Ladies and gentlemen, thank you for standing by, and welcome to the Synopsys earnings conference call for the second quarter of fiscal year 2011. [Operator Instructions] As a reminder, today's call is being recorded.

At this time, I would now like to turn the conference over to Lisa Ewbank, Vice President of Investor Relations. Please go ahead.

Lisa Ewbank

Thank you, Beth. Good afternoon, everyone. 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, 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 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 quarterly report on Form 10-Q for the quarter ended January 31, 2011, and in our earnings release for the second quarter of fiscal year 2011 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 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 de Geus

Good afternoon. I'm pleased to report that we had a strong second quarter, keeping us well on track towards meeting our objectives for the year. Against the backdrop of a healthy electronics and semiconductor market, Synopsys is well-positioned as yet another wave of eagerly awaited electronic products and advanced technologies are heading to market. Our strength is supported by our clear industry leadership position, our unwavering commitment to state-of-the-art technology and support in traditional EDA and our continued drive towards high-growth adjacencies such as IP.

Financially, in the quarter, we delivered revenue of $394 million and non-GAAP earnings per share of $0.45. Supported by strong orders in the quarter, the run rate of the business grew and the outlook for the second half is solid. Looking forward, we are best well on track towards our earnings per share objective for the year.

Before commenting on our products, let me give some color on the customer landscape. Overall, the electronics industry remains healthy, and demand for new product is high. After an extremely strong 2010 recovery year, the outlook for semiconductors is solid with expectations of upper-single-digit growth this year. Simultaneously, that very recovery in worldwide economic stability are bringing challenges to our customers. First, time-to-market pressure is back. With the rapid growth in the mobile and consumer markets, the race is on to deliver complex products, often using the most advanced technologies. Notably, we are seeing accelerated adoption of the 28/32 and even the 20/22 nanometer nodes. Thanks to our investments and relationships, Synopsys is well-placed to effectively serve these customers.

Second, the features of these new end products are taxing every aspect of electronic design, ranging from the integration of hardware and software, to the reuse of sophisticated IP blocks, to the detailed physics impacting power consumption and manufacturing yield. The interaction of these effects is precisely one of the driving reasons for customers to select Synopsys as a key partner.

And third, with the economic recovery, the employment market has become more competitive as well. And while business is strong, many customers are very focused on how to improve their productivity to make up for increasing compensation costs.

These challenges and opportunities have recently led to several notable consolidations in the semiconductor industry, which we believe will continue to be a trend in the foreseeable future.

Looking at our products, we see continued strong interest in the rapid adoption of leading-edge solutions. This was quite visible at our users group meeting in March. We had record attendance, with over 2,300 attendees from more than 200 companies. Not surprisingly, popular themes were the ongoing quest for faster turnaround time in every aspect of the design flow and the never-ending push for performance while reducing powerful mobility in battery-operated devices. There was also particularly strong interest in our sessions on reusable IP, which incidentally, registered the highest rating in the history of the conference.

Let me focus for a moment on our implementation tools. At the conference, we introduced DC Explorer, a breakthrough in logic design that enables much faster chip completion. It's great benefit is that it correlates well with the downstream physical implementation and allows engineers to find and correct issues much earlier.

We're also seeing strong momentum with our In-Design physical verification solution, IC Validator. This quarter, 2 Top 20 semiconductor companies have started to standardize on Synopsys through final signoff, thus no longer needing a separate physical verification tool.

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