Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced
results for the first quarter of 2021.
Cadence reported first quarter 2021 revenue of $736 million,
compared to revenue of $618 million for the same period in 2020. On
a GAAP basis, Cadence achieved operating margin of 28 percent and
recognized net income of $187 million, or $0.67 per share on a
diluted basis, in the first quarter of 2021, compared to operating
margin of 23 percent and net income of $124 million, or $0.44 per
share on a diluted basis for the same period in 2020.
Using the non-GAAP measure defined below, operating margin for
the first quarter of 2021 was 38 percent and net income was $231
million, or $0.83 per share on a diluted basis, compared to
operating margin of 32 percent and net income of $166 million, or
$0.60 per share on a diluted basis, for the same period in
2020.
“Cadence delivered excellent financial results for the first
quarter driven by strong execution and ongoing momentum in our core
business and accelerating growth in our systems businesses,” said
Lip-Bu Tan, chief executive officer. “Innovation is foundational to
our Intelligent System Design strategy and since the start of 2021
we introduced several exciting new products, including the
Palladium Z2 emulation platform, Protium X2 prototyping platform
and next-generation Sigrity X for systems analysis. We broadened
our systems analysis portfolio with the successful completion of
the NUMECA and Pointwise acquisitions, enabling us to provide more
capabilities and value to our customers while increasing our
TAM.”
“I am pleased to report that we exceeded all of our key
operating metrics for the quarter,” said John Wall, senior vice
president and chief financial officer. “We are raising our outlook
for revenue, non-GAAP operating margin and non-GAAP earnings for
the year while we continue to invest in our expanding multiphysics
platform.”
CFO Commentary
Commentary on the first quarter 2021 financial results by John
Wall, senior vice president and chief financial officer, is
available at www.cadence.com/cadence/investor_relations.
Business Outlook
For the second quarter of 2021, the company expects total
revenue in the range of $705 million to $725 million. Second
quarter GAAP operating margin is expected to be approximately 22
percent and GAAP net income per diluted share is expected to be in
the range of $0.44 to $0.48. Using the non-GAAP measure defined
below, operating margin is expected to be approximately 36 percent
and net income per diluted share is expected to be in the range of
$0.74 to $0.78.
For 2021, the company expects total revenue in the range of
$2.88 billion to $2.93 billion. On a GAAP basis, operating margin
is expected to be in the range of 23 percent to 24 percent and GAAP
net income per diluted share for 2021 is expected to be in the
range of $2.01 to $2.09. Using the non-GAAP measure defined below,
operating margin for 2021 is expected to be in the range of 35
percent to 36 percent and net income per diluted share for 2021 is
expected to be in the range of $2.99 to $3.07.
Our fiscal years are 52- or 53-week periods ending on the
Saturday closest to December 31. Fiscal 2021 will be a 52-week
fiscal year. Fiscal 2020 was a 53-week fiscal year, with an
additional week in our fourth quarter of 2020.
A schedule showing a reconciliation of the business outlook from
GAAP operating margin, GAAP net income and diluted net income per
share to non-GAAP operating margin and non-GAAP net income and
diluted net income per share is included in this release.
Audio Webcast Scheduled
Lip-Bu Tan, chief executive officer, Anirudh Devgan, president
and John Wall, senior vice president and chief financial officer,
will host the first quarter 2021 financial results audio webcast
today, April 26, 2021, at 2 p.m. (Pacific) / 5 p.m. (Eastern).
Attendees are asked to register at the website at least 10 minutes
prior to the scheduled webcast. An archive of the webcast will be
available starting April 26, 2021 at 5 p.m. (Pacific) and ending
June 18, 2021 at 5 p.m. (Pacific). Webcast access is available at
www.cadence.com/cadence/investor_relations.
About Cadence
Cadence is a pivotal leader in electronic design, building upon
more than 30 years of computational software expertise. The company
applies its underlying Intelligent System Design strategy to
deliver software, hardware and IP that turn design concepts into
reality. Cadence customers are the world’s most innovative
companies, delivering extraordinary electronic products from chips
to boards to systems for the most dynamic market applications,
including consumer, hyperscale computing, 5G communications,
automotive, mobile, aerospace, industrial and healthcare. For seven
years in a row, Fortune magazine has named Cadence one of the 100
Best Companies to Work For. Learn more at cadence.com.
© 2021 Cadence Design Systems, Inc. All rights reserved
worldwide. Cadence, the Cadence logo and the other Cadence marks
found at www.cadence.com/go/trademarks
are trademarks or registered trademarks of Cadence Design Systems,
Inc. All other trademarks are the property of their respective
owners.
This document includes forward-looking statements which are
based on current expectations and preliminary assumptions that are
subject to factors and uncertainties that could cause actual
results to differ materially from those described in the
forward-looking statements. These forward-looking statements are
subject to a number of risks, uncertainties and other factors, many
of which are outside Cadence’s control, including, among others:
(i) Cadence’s ability to compete successfully in the highly
competitive industries in which it operates; (ii) the success of
Cadence’s efforts to maintain and improve operational efficiency
and growth; (iii) the mix of products and services sold, the timing
of orders and the ability to develop, install or deliver Cadence’s
products or services; (iv) change in customer demands that could
result in delays in purchases, development, installations or
deliveries of Cadence's products or services, including those
resulting from consolidation, restructurings and other operational
efficiency improvements of Cadence’s customers; (v) economic and
industry conditions, including that of the semiconductor and
electronics industries, government regulations and trade
restrictions; (vi) capital expenditure requirements, legislative or
regulatory requirements, changes in tax laws, interest rates,
currency exchange rate fluctuations and Cadence’s ability to access
capital and debt markets; (vii) the acquisition of other companies
or technologies or the failure to successfully integrate and
operate them; (viii) events that affect cash flow, liquidity, or
reserves, or settlement assumptions Cadence may take from time to
time with respect to accounts receivable, taxes and tax
examinations, litigation or other matters; (ix) the effects of any
litigation or other proceedings to which Cadence is or may become a
party; and (x) the duration, severity and effects of the COVID-19
pandemic and containment measures on Cadence, its employees, and
its suppliers and customers, which may also have the effect of
heightening the other risks described in this paragraph. In
addition, the timing and amount of Cadence's repurchase of its
common stock under the authorizations will be subject to business
and market conditions, corporate and regulatory requirements, stock
price, acquisition opportunities and other factors.
For a detailed discussion of these and other cautionary
statements related to Cadence’s business, please refer to Cadence’s
filings with the U.S. Securities and Exchange Commission, which
include Cadence’s most recent reports on Form 10-K and Form 10-Q,
including Cadence’s future filings.
GAAP to Non-GAAP Reconciliation
Non-GAAP financial measures should not be considered as a
substitute for or superior to measures of financial performance
prepared in accordance with generally accepted accounting
principles, or GAAP. Investors are encouraged to review the
reconciliation of non-GAAP financial measures contained within this
press release with their most directly comparable GAAP financial
results. Investors are also encouraged to look at the GAAP results
as the best measure of financial performance.
To supplement Cadence’s financial results presented on a GAAP
basis, Cadence management uses non-GAAP measures that it believes
are helpful in understanding Cadence’s performance. One such
measure is non-GAAP net income, which is a financial measure not
calculated under GAAP. Non-GAAP net income is calculated by Cadence
management by taking GAAP net income and excluding, as applicable,
amortization of intangible assets, stock-based compensation
expense, acquisition and integration-related costs including
retention expenses, investment gains or losses, income or expenses
related to Cadence’s non-qualified deferred compensation plan,
restructuring, executive severance and other significant items not
directly related to Cadence’s core business operations, and the
income tax effect of non-GAAP pre-tax adjustments.
Cadence management uses non-GAAP net income because it excludes
items that are generally not directly related to the performance of
Cadence’s core business operations and therefore provides
supplemental information to Cadence management and investors
regarding the performance of the business operations, facilitates
comparisons to the historical operating results and allows the
review of Cadence's business from the same perspective as Cadence
management, including forecasting and budgeting.
The following tables reconcile the specific items excluded from
GAAP operating margin, GAAP net income and GAAP net income per
diluted share in the calculation of non-GAAP operating margin,
non-GAAP net income and non-GAAP net income per diluted share for
the periods shown below:
Operating Margin Reconciliation
Three Months Ended
April 3, 2021
March 28, 2020
(unaudited)
GAAP operating margin as a percent of
total revenue
28%
23%
Reconciling items to non-GAAP operating
margin as a percent of total revenue:
Stock-based compensation expense
7%
7%
Amortization of acquired intangibles
2%
2%
Acquisition and integration-related
costs
1%
1%
Restructuring and other credits
0%
0%
Non-qualified deferred compensation
expenses (credits)
0%
(1)%
Special charges
0%
0%
Non-GAAP operating margin as a percent of
total revenue
38%
32%
Net Income Reconciliation
Three Months Ended
April 3, 2021
March 28, 2020
(in thousands)
(unaudited)
Net income on a GAAP basis
$
187,169
$
123,988
Stock-based compensation expense
52,596
46,482
Amortization of acquired intangibles
16,399
15,066
Acquisition and integration-related
costs
5,510
3,970
Restructuring and other credits
(277
)
(1,067
)
Non-qualified deferred compensation
expenses (credits)
1,898
(4,796
)
Special charges
—
124
Other income or expense related to
investments and non-qualified deferred compensation plan
assets*
(3,332
)
8,011
Income tax effect of non-GAAP
adjustments
(28,782
)
(25,483
)
Net income on a non-GAAP basis
$
231,181
$
166,295
*
Includes, as applicable, equity in losses
or income from investments, write-down of investments, gains or
losses on investments and gains or losses on non-qualified deferred
compensation plan assets recorded in other income or expense.
Diluted Net Income Per Share
Reconciliation
Three Months Ended
April 3, 2021
March 28, 2020
(in thousands, except per share data)
(unaudited)
Diluted net income per share on a GAAP
basis
$
0.67
$
0.44
Stock-based compensation expense
0.19
0.17
Amortization of acquired intangibles
0.06
0.05
Acquisition and integration-related
costs
0.02
0.02
Restructuring and other credits
—
—
Non-qualified deferred compensation
expenses (credits)
—
(0.02
)
Special charges
—
—
Other income or expense related to
investments and non-qualified deferred compensation plan
assets*
(0.01
)
0.03
Income tax effect of non-GAAP
adjustments
(0.10
)
(0.09
)
Diluted net income per share on a non-GAAP
basis
$
0.83
$
0.60
Shares used in calculation of diluted net
income per share
280,140
279,265
*
Includes, as applicable, equity in losses
or income from investments, write-down of investments, gains or
losses on investments and gains or losses on non-qualified deferred
compensation plan assets recorded in other income or expense.
Cadence expects that its corporate representatives will meet
privately during the quarter with investors, the media, investment
analysts and others. At these meetings, Cadence may reiterate the
business outlook published in this press release. At the same time,
Cadence will keep this press release, including the business
outlook, publicly available on its website.
Prior to the start of the Quiet Period (described below), the
public may continue to rely on the business outlook contained
herein as still being Cadence’s current expectations on matters
covered unless Cadence publishes a notice stating otherwise.
Beginning June 18, 2021, Cadence will observe a Quiet Period
during which the business outlook as provided in this press release
and the most recent Annual Report on Form 10-K and Quarterly Report
on Form 10-Q no longer constitute Cadence’s current expectations.
During the Quiet Period, the business outlook in these documents
should be considered historical, speaking as of prior to the Quiet
Period only and not subject to any update by Cadence. During the
Quiet Period, Cadence’s representatives will not comment on
Cadence’s business outlook, financial results or expectations. The
Quiet Period will extend until Cadence’s second quarter 2021
earnings release is published, which is currently scheduled for
July 26, 2021.
Cadence Design Systems, Inc. Condensed Consolidated
Balance Sheets April 3, 2021 and January 2, 2021 (In
thousands) (Unaudited) April 3, 2021
January 2, 2021 Current assets: Cash and cash
equivalents
$
742,981
$
928,432
Receivables, net
388,666
338,487
Inventories
76,592
75,956
Prepaid expenses and other
141,490
135,712
Total current assets
1,349,729
1,478,587
Property, plant and equipment, net
305,089
311,125
Goodwill
912,603
782,087
Acquired intangibles, net
264,671
210,590
Deferred taxes
729,296
732,290
Other assets
437,571
436,106
Total assets
$
3,998,959
$
3,950,785
Current liabilities: Accounts payable and accrued
liabilities
$
271,241
$
349,951
Current portion of deferred revenue
521,100
446,857
Total current liabilities
792,341
796,808
Long-term liabilities: Long-term portion of deferred revenue
92,574
107,064
Long-term debt
346,988
346,793
Other long-term liabilities
224,624
207,102
Total long-term liabilities
664,186
660,959
Stockholders' equity
2,542,432
2,493,018
Total liabilities and stockholders' equity
$
3,998,959
$
3,950,785
Cadence Design Systems, Inc. Condensed Consolidated
Income Statements For the Three Months Ended April 3, 2021
and March 28, 2020 (In thousands, except per share
amounts) (Unaudited) Three Months
Ended April 3, 2021 March 28, 2020
Revenue: Product and maintenance
$
699,054
$
581,699
Services
36,974
36,258
Total revenue
736,028
617,957
Costs and expenses: Cost of product and maintenance
64,906
55,446
Cost of services
19,061
19,017
Marketing and sales
132,826
125,744
Research and development
270,992
241,668
General and administrative
39,952
33,592
Amortization of acquired intangibles
4,631
4,206
Restructuring and other credits
(277
)
(1,067
)
Total costs and expenses
532,091
478,606
Income from operations
203,937
139,351
Interest expense
(4,217
)
(4,637
)
Other income (expense), net
2,701
(4,534
)
Income before provision for income taxes
202,421
130,180
Provision for income taxes
15,252
6,192
Net income
$
187,169
$
123,988
Net income per share - basic
$
0.68
$
0.45
Net income per share - diluted
$
0.67
$
0.44
Weighted average common shares outstanding - basic
274,021
273,476
Weighted average common shares outstanding - diluted
280,140
279,265
Cadence Design Systems, Inc. Condensed Consolidated
Statements of Cash Flows For the Three Months Ended April 3,
2021 and March 28, 2020 (In thousands)
(Unaudited)
Three Months Ended
April 3,
March 28,
2021
2020
Cash and cash equivalents at beginning of period
$
928,432
$
705,210
Cash flows from operating activities: Net income
187,169
123,988
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
36,218
33,321
Amortization of debt discount and fees
264
254
Stock-based compensation
52,596
46,482
(Gain) loss on investments, net
(1,433
)
3,215
Deferred income taxes
2,710
3,904
Provisions for losses (recoveries) on receivables
77
(77
)
ROU asset amortization and change in operating lease liabilities
(2,136
)
706
Other non-cash items
302
183
Changes in operating assets and liabilities, net of effect of
acquired businesses: Receivables
(45,927
)
26,475
Inventories
(669
)
(5,260
)
Prepaid expenses and other
(3,014
)
(4,964
)
Other assets
6,260
(8,344
)
Accounts payable and accrued liabilities
(80,769
)
(84,839
)
Deferred revenue
59,166
86,914
Other long-term liabilities
(2,372
)
(4,239
)
Net cash provided by operating activities
208,442
217,719
Cash flows from investing activities: Purchases of property,
plant and equipment
(16,968
)
(22,179
)
Cash paid in business combinations, net of cash acquired
(189,262
)
(193,820
)
Net cash used for investing activities
(206,230
)
(215,999
)
Cash flows from financing activities: Proceeds from
revolving credit facility
-
350,000
Proceeds from issuance of common stock
46,384
33,312
Stock received for payment of employee taxes on vesting of
restricted stock
(56,385
)
(37,528
)
Payments for repurchases of common stock
(172,267
)
(100,022
)
Net cash provided by (used for) financing activities
(182,268
)
245,762
Effect of exchange rate changes on cash and cash equivalents
(5,395
)
(6,407
)
Increase (decrease) in cash and cash equivalents
(185,451
)
241,075
Cash and cash equivalents at end of period
$
742,981
$
946,285
Cadence Design Systems, Inc. (Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2020
2021
GEOGRAPHY
Q1
Q2
Q3
Q4
Year
Q1
Americas
43%
44%
42%
41%
42%
46%
China
13%
12%
17%
17%
15%
12%
Other Asia
18%
19%
19%
18%
18%
18%
Europe, Middle East and Africa
19%
18%
16%
17%
18%
18%
Japan
7%
7%
6%
7%
7%
6%
Total
100%
100%
100%
100%
100%
100%
Revenue Mix by Product Category (%
of Total Revenue)
2020
2021
PRODUCT CATEGORY
Q1
Q2
Q3
Q4
Year
Q1
Custom IC Design and Simulation
25%
24%
24%
26%
25%
23%
Digital IC Design and Signoff
29%
28%
27%
31%
29%
27%
Functional Verification, including Emulation and Prototyping
Hardware
23%
24%
23%
19%
22%
26%
IP
14%
14%
15%
13%
14%
14%
System Design and Analysis
9%
10%
11%
11%
10%
10%
Total
100%
100%
100%
100%
100%
100%
Cadence Design Systems, Inc. Impact of Non-GAAP
Adjustments on Forward Looking Operating Margin As of April
26, 2021 (Unaudited)
Three Months Ending
Year Ending
July 3, 2021
January 1, 2022
Forecast
Forecast
GAAP operating margin as a percent of total revenue
~22%
23% - 24%
Reconciling items to non-GAAP operating margin as a percent of
total revenue:
Stock-based compensation expense
7%
8%
Amortization of acquired intangibles
2%
2%
Acquisition and integration-related costs
1%
1%
Restructuring and other charges (credits)
0%
0%
Non-qualified deferred compensation expenses
0%
0%
Special charges*
4%
1%
Non-GAAP operating margin as a percent of total revenue†
~36%
35% - 36%
†
The non-GAAP measures presented in the table above should not be
considered a substitute for financial results and measures
determined or calculated in accordance with GAAP.
*
Comprised of costs related to a voluntary retirement program.
Cadence Design Systems, Inc. Impact of Non-GAAP
Adjustments on Forward Looking Diluted Net Income Per Share
As of April 26, 2021 (Unaudited)
Three Months Ending
Year Ending
July 3, 2021
January 1, 2022
Forecast
Forecast
Diluted net income per share on a GAAP basis
$0.44 to $0.48
$2.01 to $2.09
Stock-based compensation expense
0.19
0.79
Amortization of acquired intangibles
0.06
0.24
Acquisition and integration-related costs
0.02
0.08
Non-qualified deferred compensation expenses
-
0.01
Special charges*
0.09
0.09
Other income or expense related to investments and non-qualified
deferred compensation plan assets**
-
(0.01)
Income tax effect of non-GAAP adjustments
(0.06)
(0.22)
Diluted net income per share on a non-GAAP basis†
$0.74 to $0.78
$2.99 to $3.07
Cadence Design Systems,
Inc.
Impact of Non-GAAP Adjustments
on Forward Looking Net Income
As of April 26, 2021
(Unaudited)
Three Months Ending
Year Ending
July 3, 2021
January 1, 2022
($ in millions)
Forecast
Forecast
Net income on a GAAP basis
$122 to $133
$563 to $586
Stock-based compensation expense
53
222
Amortization of acquired intangibles
17
67
Acquisition and integration-related costs
6
21
Non-qualified deferred compensation expenses
-
2
Special charges*
26
26
Other income or expense related to investments and non-qualified
deferred compensation plan assets**
-
(3)
Income tax effect of non-GAAP adjustments
(17)
(60)
Net income on a non-GAAP basis†
$207 to $218
$838 to $861
†
The non-GAAP measures presented in the table above should not be
considered a substitute for financial results and measures
determined or calculated in accordance with GAAP.
*
Comprised of costs related to a voluntary retirement program.
**
Includes, as applicable, equity in losses or income from
investments, write-down of investments, gains or losses on
investments and gains or losses on non-qualified deferred
compensation plan assets recorded in other income or expense.
CDNS-IR
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For more information, please contact:
Cadence Investor Relations 408-944-7100 investor_relations@cadence.com
Cadence Newsroom 408-944-7039 newsroom@cadence.com
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