SYNP Synplicity (MM)

Synplicity, Inc. (Nasdaq:SYNP), a leading supplier of software for the design and verification of semiconductors, today announced financial results for the year and quarter ended December 31, 2005. Highlights: -- 2005 revenue increased 9 percent over 2004 to a record $61.9 million -- Pro forma operating income grew to 10 percent of revenue in 2005 compared to 5 percent of revenue in 2004 -- 2005 GAAP net income was $6.6 million, or $0.23 per diluted share -- Fourth quarter revenue increased 8 percent over the same period in 2004 to a record $16.3 million -- Fourth quarter GAAP net income was $2.6 million, or $0.09 per diluted share For the year ended December 31, 2005, revenue was $61.9 million, a 9 percent increase from revenue of $57.0 million for the year ended December 31, 2004. For the year ended December 31, 2005, Synplicity had a generally accepted accounting principles ("GAAP") net income of $6.6 million, or $0.23 per diluted share, as compared to GAAP net income of $2.2 million, or $0.08 per diluted share, for the year ended December 31, 2004. Pro forma net income was $7.4 million, or $0.27 per diluted share, for the year ended December 31, 2005, compared to pro forma net income of $3.3 million, or $0.12 per diluted share, for the year ended December 31, 2004. Pro forma figures exclude the impact of amortization of intangible assets and stock-based compensation. A reconciliation of GAAP to pro forma net income is included with this press release. Additionally, cash and short-term investments increased to $57.1 million at December 31, 2005. Revenue for the quarter ended December 31, 2005 was $16.3 million, an 8 percent increase from revenue of $15.1 million for the quarter ended December 31, 2004 and 3 percent below prior guidance. On a GAAP basis, net income was $2.6 million, or $0.09 per diluted share, for the quarter ended December 31, 2005, as compared to GAAP net income of $803,000, or $0.03 per diluted share, for the quarter ended December 31, 2004. Pro forma net income was $2.8 million, or $0.10 per diluted share, for the quarter ended December 31, 2005, equal to prior guidance, compared to pro forma net income of $1.1 million or $0.04 per diluted share, for the quarter ended December 31, 2004. "2005 was a year of strong execution for Synplicity," said Gary Meyers, President and CEO. "We increased our share in our core market of FPGA synthesis once again, released numerous upgrades across our entire product line, including the highly acclaimed Synplify Premier tool and continued our history of industry leading customer service. We managed this impressive performance while growing our revenue at the high end of the industry, increasing backlog, adding over $8 million of cash and investments to our balance sheet and dramatically improving our operating income. In 2006, we look forward to continuing to increase shareholder value and offering the very best tools to our customers." Business Outlook The following statements are based on current expectations. We do not intend to update, confirm or change this guidance until our earnings conference call for the first quarter of 2006, although we will provide additional detail regarding our guidance on today's scheduled call. -- Revenue for 2006 is expected to be in the range of $66 to $68 million, weighted towards the second half of the year, in alignment with our product release schedule. -- GAAP net income per fully diluted share for 2006 is expected to be in the range of $0.09 to $0.11. GAAP net income is expected to include non-cash charges of approximately $3.6 million relating to stock compensation expense based on historical activity and $890,000 of amortization of intangible assets. Additionally, the Company is estimating that its income tax expense for 2006 will be approximately 25 percent of pretax income excluding the impact of stock-based compensation. -- Pro forma net income per share for 2006 is expected to be in the range of $0.25-$0.27. -- Revenue for the first quarter of 2006 is expected to be in the range of $14.6 to $15.1 million. -- GAAP net income (loss) per fully diluted share for the first quarter of 2006 is expected to be in the range of $(0.02) to $0.00. GAAP net income (loss) for the quarter is expected to include non-cash charges of approximately $900,000 relating to stock-based compensation based on historical activity and $223,000 of amortization of intangible assets. -- Pro forma net income per share for the first quarter of 2006 is expected to be in the range of $0.02 to $0.04. Audio Webcast Synplicity's earnings call will be webcast today at 1:30 p.m. Pacific, and may be accessed at http://investor.synplicity.com. Synplicity will discuss its fourth quarter and year 2005 results and the first quarter and year 2006 business outlook. Following completion of the call, a rebroadcast of the webcast will be available at http://investor.synplicity.com through March 31, 2006. For those without access to the Internet, a replay of the call will be available from 5:00 p.m. Pacific on February 1, 2006 through February 2, 2006. To listen to a replay, call (719) 457-0820, access code 1340139. Use of Non-GAAP Financial Measures This press release includes financial measures for net income and net income per share that exclude certain non-cash charges and that have not been calculated in accordance with GAAP. These measures differ from GAAP in that they exclude the amortization of intangible assets from acquisitions and stock-based compensation. Synplicity has previously provided these measurements in addition to GAAP financial results because it believes they provide a consistent basis for comparison between quarters that is not influenced by certain non-cash activity and therefore are helpful to understanding Synplicity's underlying operational results. Further, these non-GAAP measures are some of the primary measures Synplicity's management uses for planning and forecasting. These measures should not be considered an alternative to GAAP, and these non-GAAP measures may not be comparable to information provided by other companies. About Synplicity Synplicity(R), Inc. (Nasdaq:SYNP) is a leading supplier of innovative software solutions that enable the rapid and effective design of complex, high-performance semiconductors. Synplicity's tools provide outstanding performance, cost and time-to-market benefits by simplifying, improving and automating key design planning, logic synthesis, physical synthesis and verification functions for FPGA, DSP, ASIC prototyping, structured/platform ASIC and cell-based ASIC designers. Synplicity is the first company to deliver customized physical synthesis, analysis and floorplanning solutions for today's leading structured/platform ASICs. In addition, the company is the number one supplier of FPGA synthesis solutions and has been rated #1 in customer satisfaction in 2004 and 2005 in EE Times' Annual FPGA Customer Survey. Synplicity's products support industry-standard design languages (VHDL and Verilog) and run on popular platforms. The company employs over 300 people in over 20 facilities worldwide and is headquartered in Sunnyvale, California. For more information visit http://www.synplicity.com. Forward-Looking Statements This press release contains forward-looking statements including, but not limited to, statements regarding Synplicity's growth, market performance, standard of its products, and business outlook for increase in backlog, our product release schedule, revenue, stock-based compensation expense, amortization of intangible assets, income tax expense, net income and net income per share. These statements relate to future events and involve known and unknown risks, uncertainties and other factors that may cause Synplicity's actual financial results, levels of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In some cases, you will be able to identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. Forward-looking statements are only predictions and actual events or results may differ materially. Synplicity cannot provide any assurance that its future results will meet expectations. Synplicity's operating results could differ materially due to a number of factors, including the performance and quality of both its FPGA and ASIC software products relative to its competitors' products, the growth of structured/platform ASIC and FPGA markets and the growth of its ASIC synthesis business, and Synplicity's level of expenses. For additional information and considerations regarding the risks faced by Synplicity, see its annual report on Form 10-K for the year ended December 31, 2004 and quarterly report on Form 10-Q for the quarter ended September 30, 2005, each as filed with the Securities and Exchange Commission, as well as other periodic reports filed with the SEC from time to time. Although Synplicity believes that the expectations reflected in the forward-looking statements are reasonable, Synplicity cannot guarantee future results, levels of activity, performance or achievements. In addition, neither Synplicity nor any other person assumes responsibility for the accuracy or completeness of these forward-looking statements. Synplicity disclaims any obligation to update information contained in any forward-looking statement. Synplicity is a registered trademark of Synplicity, Inc. All other brands or products are the trademarks or registered trademarks of their owners. -0- *T SYNPLICITY, INC. CONSOLIDATED BALANCE SHEETS (in thousands) December 31, December 31, 2005 2004(1) ------------- ------------- (unaudited) Assets: Current assets: Cash, cash equivalents and short-term investments $57,099 $ 48,681 Accounts receivable, net 12,632 8,851 Other current assets 2,372 2,167 -------- --------- Total current assets 72,103 59,699 Property and equipment, net 2,631 2,989 Goodwill 1,272 1,272 Intangible assets, net 1,882 2,347 Other assets 749 780 -------- --------- Total assets $78,637 $ 67,087 ======== ========= Liabilities and Shareholders' Equity: Current liabilities: Accounts payable $ 944 $ 1,087 Accrued liabilities 1,461 1,398 Accrued compensation 4,031 3,797 Deferred revenue 18,355 15,957 -------- --------- Total current liabilities 24,791 22,239 Shareholders' equity: Common stock 58,257 56,107 Additional paid-in capital 3,368 3,452 Deferred stock-based compensation (8) (88) Accumulated deficit (7,430) (13,984) Accumulated other comprehensive loss (341) (639) -------- --------- Total shareholders' equity 53,846 44,848 -------- --------- Total liabilities and shareholders' equity $78,637 $ 67,087 ======== ========= (1)Derived from audited financial statements SYNPLICITY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Quarter Ended Year Ended December 31, December 31, ----------------- ---------------- 2005 2004 2005 2004(1) ------- ------- ------- ------- (unaudited) (unaudited) Revenue: License $ 8,931 $ 8,547 $34,133 $31,744 Maintenance 7,368 6,554 27,802 25,210 -------- -------- -------- -------- Total revenue 16,299 15,101 61,935 56,954 Cost of revenue: Cost of license 135 105 610 553 Cost of maintenance 427 634 1,775 2,450 Amortization of intangible assets from acquisitions 222 222 890 890 -------- -------- -------- -------- Total cost of revenue 784 961 3,275 3,893 -------- -------- -------- -------- Gross profit 15,515 14,140 58,660 53,061 Operating expenses: Research and development 6,079 6,039 24,332 23,495 Sales and marketing 5,754 6,011 22,786 21,945 General and administrative 1,612 1,452 6,354 5,593 Stock-based compensation (benefit) 5 29 (4) 186 -------- -------- -------- -------- Total operating expenses 13,450 13,531 53,468 51,219 -------- -------- -------- -------- Income from operations 2,065 609 5,192 1,842 Other income, net 499 194 1,549 604 -------- -------- -------- -------- Income before income taxes 2,564 803 6,741 2,446 Income tax provision (benefit) (54) - 187 232 -------- -------- -------- -------- Net income $ 2,618 $ 803 $ 6,554 $ 2,214 ======== ======== ======== ======== Net income per share: Basic net income per share: $ 0.10 $ 0.03 $ 0.25 $ 0.09 ======== ======== ======== ======== Shares used in basic per share calculation 26,882 26,071 26,480 26,013 ======== ======== ======== ======== Diluted net income per share: $ 0.09 $ 0.03 $ 0.23 $ 0.08 ======== ======== ======== ======== Shares used in diluted per share calculation 28,773 27,246 27,990 27,432 ======== ======== ======== ======== SYNPLICITY, INC. RECONCILIATION OF GAAP INCOME (LOSS) TO PRO FORMA INCOME (in thousands, except per share data) (unaudited) Net Income Quarter Ended Year Ended ------------------- --------------------- December 31, December 31, ------------------- --------------------- 2005 2004 2005 2004 ---------- ------- ----------- -------- GAAP net income $ 2,618 $ 803 $ 6,554 $ 2,214 Amortization of intangible assets from acquisitions 222 222 890 890 Stock-based compensation (benefit) 5 29 (4) 186 -------- -------- -------- --------- Pro forma net income $ 2,845 $ 1,054 $ 7,440 $ 3,290 ======== ======== ======== ========= Pro forma net income per share: Pro forma net income per common share $ 0.10 $ 0.04 $ 0.27 $ 0.12 ======== ======== ======== ========= Shares used in pro forma per share calculation 28,773 27,246 27,990 27,432 ======== ======== ======== ========= Operating Income (as a percentage of revenue) Year Ended December 31, 2005 2004 ----- ----- GAAP operating income 8% 3% Amortization of intangible assets from acquisitions 2% 2% Stock-based compensation 0% 0% ----- ----- Pro forma operating income 10% 5% ===== ===== Forward-Looking Net Income (loss) per Share Quarter Ending Year Ending March 31, December 31, 2006 2006 -------------- ------------ GAAP net income (loss) per share $(0.02)-$0.00 $0.09-$0.11 Amortization of intangible assets from acquisitions $ 0.01 $ 0.04 Stock-based compensation $ 0.03 $ 0.12 -------------- ------------ Pro forma net income per share $ 0.02-$0.04 $0.25-$0.27 ============== ============ *T