Cadence Design : Reports Third Quarter 2021 Financial Results - Form 8-K
October 26, 2021 at 01:45 am IST
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Cadence Reports Third Quarter 2021 Financial Results
SAN JOSE, Calif. - October 25, 2021 - Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the third quarter of 2021.
Cadence reported third quarter 2021 revenue of $751 million, compared to revenue of $667 million for the same period in 2020. On a GAAP basis, Cadence achieved operating margin of 26 percent and recognized net income of $176 million, or $0.63 per share on a diluted basis, in the third quarter of 2021, compared to operating margin of 25 percent and net income of $162 million, or $0.58 per share on a diluted basis for the same period in 2020.
Using the non-GAAP measure defined below, operating margin for the third quarter of 2021 was 36 percent and net income was $222 million, or $0.80 per share on a diluted basis, compared to operating margin of 36 percent and net income of $197 million, or $0.70 per share on a diluted basis, for the same period in 2020.
"Cadence delivered stronger than expected financial results for the third quarter, fueled by accelerating demand for our highly differentiated solutions." said Lip-Bu Tan, chief executive officer. "Design activity remains robust and the Cadence team continues to execute exceedingly well to our Intelligent System Design strategy."
"Delighting customers and accelerating growth requires a relentless commitment to innovation," added Anirudh Devgan, president. "Our innovation pipeline continued to deliver, as we introduced four additional significant new products this quarter, including the revolutionary Integrity 3D-IC Platform."
"We exceeded our guidance on all key metrics for the third quarter and as a result, I am pleased to raise our outlook for the year," said John Wall, senior vice president and chief financial officer.
CFO Commentary
Commentary on the third 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 fourth quarter of 2021, the company expects total revenue in the range of $745 million to $765 million. Fourth quarter GAAP operating margin is expected to be approximately 24 percent and GAAP net income per diluted share is expected to be in the range of $0.49 to $0.53. Using the non-GAAP measure defined below, operating margin is expected to be approximately 35 percent and net income per diluted share is expected to be in the range of $0.76 to $0.80.
For 2021, the company expects total revenue in the range of $2.96 billion to $2.98 billion. On a GAAP basis, operating margin is expected to be approximately 26 percent and GAAP net income per diluted share for 2021 is expected to be in the range of $2.36 to $2.40. Using the non-GAAP measure defined below, operating margin for 2021 is expected to be approximately 37 percent and net income per diluted share for 2021 is expected to be in the range of $3.24 to $3.28.
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 third quarter 2021 financial results audio webcast today, October 25, 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 October 25, 2021 at 5 p.m. (Pacific) and ending December 17, 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.
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 or supply constraints 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, regulatory or other matters; (ix) the effects of any litigation, regulatory 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
October 2, 2021
September 26, 2020
(unaudited)
GAAP operating margin as a percent of total revenue
26%
25%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Other income or expense related to investments and non-qualified deferred compensation plan assets*
815
(876)
Income tax effect of non-GAAP adjustments
(29,817)
(33,451)
Net income on a non-GAAP basis
$
221,578
$
197,053
*
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.
Other income or expense related to investments and non-qualified deferred compensation plan assets*
-
-
Income tax effect of non-GAAP adjustments
(0.10)
(0.12)
Diluted net income per share on a non-GAAP basis
$
0.80
$
0.70
Shares used in calculation of diluted net income per share
278,311
280,024
*
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 December 17, 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 fourth quarter 2021 earnings release is published, which is currently scheduled for February 22, 2022.
For more information, please contact:
Cadence Investor Relations
408-944-7100
investor_relations@cadence.com
Cadence Newsroom
408-944-7039
newsroom@cadence.com
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
October 2, 2021 and January 2, 2021
(In thousands)
(Unaudited)
October 2, 2021
January 2, 2021
Current assets:
Cash and cash equivalents
$
1,013,819
$
928,432
Receivables, net
327,191
338,487
Inventories
101,575
75,956
Prepaid expenses and other
100,428
135,712
Total current assets
1,543,013
1,478,587
Property, plant and equipment, net
303,313
311,125
Goodwill
925,949
782,087
Acquired intangibles, net
247,628
210,590
Deferred taxes
766,036
732,290
Other assets
427,936
436,106
Total assets
$
4,213,875
$
3,950,785
Current liabilities:
Accounts payable and accrued liabilities
$
363,835
$
349,951
Current portion of deferred revenue
543,361
446,857
Total current liabilities
907,196
796,808
Long-term liabilities:
Long-term portion of deferred revenue
95,991
107,064
Long-term debt
347,385
346,793
Other long-term liabilities
232,041
207,102
Total long-term liabilities
675,417
660,959
Stockholders' equity
2,631,262
2,493,018
Total liabilities and stockholders' equity
$
4,213,875
$
3,950,785
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Nine Months Ended October 2, 2021 and September 26, 2020
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
October 2, 2021
September 26, 2020
October 2, 2021
September 26, 2020
Revenue:
Product and maintenance
$
706,160
$
630,329
$
2,093,098
$
1,813,384
Services
44,735
36,278
122,110
109,598
Total revenue
750,895
666,607
2,215,208
1,922,982
Costs and expenses:
Cost of product and maintenance
54,185
64,800
174,933
175,915
Cost of services
22,402
17,484
62,380
56,047
Marketing and sales
143,401
123,738
412,194
369,958
Research and development
289,105
250,934
845,324
743,423
General and administrative
42,990
35,928
123,275
105,161
Amortization of acquired intangibles
5,000
4,438
14,661
13,234
Restructuring and other charges (credits)
(222)
13
(968)
(1,329)
Total costs and expenses
556,861
497,335
1,631,799
1,462,409
Income from operations
194,034
169,272
583,409
460,573
Interest expense
(4,196)
(5,325)
(12,729)
(15,876)
Other income (expense), net
(1,143)
1,766
3,701
1,862
Income before provision for income taxes
188,695
165,713
574,381
446,559
Provision for income taxes
12,388
4,083
55,005
29,653
Net income
$
176,307
$
161,630
$
519,376
$
416,906
Net income per share - basic
$
0.65
$
0.59
$
1.90
$
1.52
Net income per share - diluted
$
0.63
$
0.58
$
1.86
$
1.49
Weighted average common shares outstanding - basic
273,194
273,996
273,636
273,633
Weighted average common shares outstanding - diluted
278,311
280,024
279,046
279,455
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended October 2, 2021 and September 26, 2020
(In thousands)
(Unaudited)
Nine Months Ended
October 2, 2021
September 26, 2020
Cash and cash equivalents at beginning of period
$
928,432
$
705,210
Cash flows from operating activities:
Net income
519,376
416,906
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
106,962
107,019
Amortization of debt discount and fees
952
770
Stock-based compensation
155,860
138,723
(Gain) loss on investments, net
(330)
5,118
Deferred income taxes
(34,566)
(18,966)
Provisions for losses on receivables
234
1,087
ROU asset amortization and change in operating lease liabilities
(2,917)
2,064
Other non-cash items
146
410
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables
15,132
9,945
Inventories
(25,608)
6,376
Prepaid expenses and other
36,632
22,769
Other assets
8,127
(21,287)
Accounts payable and accrued liabilities
10,501
(30,455)
Deferred revenue
84,183
124,491
Other long-term liabilities
10,417
4,430
Net cash provided by operating activities
885,101
769,400
Cash flows from investing activities:
Proceeds from the sale of non-marketable investments
128
-
Purchases of property, plant and equipment
(49,977)
(63,745)
Cash paid in business combinations, net of cash acquired
(220,026)
(197,562)
Net cash used for investing activities
(269,875)
(261,307)
Cash flows from financing activities:
Proceeds from revolving credit facility
-
350,000
Payment of debt issuance costs
(1,285)
-
Proceeds from issuance of common stock
83,632
71,451
Stock received for payment of employee taxes on vesting of restricted stock
(108,185)
(85,515)
Payments for repurchases of common stock
(502,301)
(250,047)
Net cash provided by (used for) financing activities
(528,139)
85,889
Effect of exchange rate changes on cash and cash equivalents
(1,700)
7,372
Increase in cash and cash equivalents
85,387
601,354
Cash and cash equivalents at end of period
$
1,013,819
$
1,306,564
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2020
2021
GEOGRAPHY
Q1
Q2
Q3
Q4
Year
Q1
Q2
Q3
Americas
43
%
44
%
42
%
41
%
42
%
46
%
44
%
46
%
China
13
%
12
%
17
%
17
%
15
%
12
%
14
%
13
%
Other Asia
18
%
19
%
19
%
18
%
18
%
18
%
19
%
18
%
Europe, Middle East and Africa
19
%
18
%
16
%
17
%
18
%
18
%
17
%
17
%
Japan
7
%
7
%
6
%
7
%
7
%
6
%
6
%
6
%
Total
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
Revenue Mix by Product Category (% of Total Revenue)
2020
2021
PRODUCT CATEGORY
Q1
Q2
Q3
Q4
Year
Q1
Q2
Q3
Custom IC Design and Simulation
25
%
24
%
24
%
26
%
25
%
23
%
23
%
23
%
Digital IC Design and Signoff
29
%
28
%
27
%
31
%
29
%
27
%
28
%
29
%
Functional Verification, including Emulation and Prototyping Hardware
23
%
24
%
23
%
19
%
22
%
26
%
25
%
23
%
IP
14
%
14
%
15
%
13
%
14
%
14
%
13
%
14
%
System Design and Analysis
9
%
10
%
11
%
11
%
10
%
10
%
11
%
11
%
Total
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of October 25, 2021
(Unaudited)
Three Months Ending
January 1, 2022
Year Ending
January 1, 2022
Forecast
Forecast
GAAP operating margin as a percent of total revenue
~24%
~26%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense
8%
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
0%
0%
Special charges*
0%
1%
Non-GAAP operating margin as a percent of total revenue†
~35%
~37%
†
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 cost related to a voluntary retirement program in the second quarter of 2021.
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of October 25, 2021
(Unaudited)
Three Months Ending
January 1, 2022
Year Ending
January 1, 2022
Forecast
Forecast
Diluted net income per share on a GAAP basis
$0.49 to $0.53
$2.36 to $2.40
Stock-based compensation expense
0.21
0.77
Amortization of acquired intangibles
0.06
0.24
Acquisition and integration-related costs
0.02
0.08
Restructuring and other credits
-
-
Non-qualified deferred compensation expenses
-
0.01
Special charges*
-
0.10
Other income or expense related to investments and non-qualified deferred compensation plan assets**
-
(0.02)
Income tax effect of non-GAAP adjustments
(0.02)
(0.30)
Diluted net income per share on a non-GAAP basis†
$0.76 to $0.80
$3.24 to $3.28
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of October 25, 2021
(Unaudited)
Three Months Ending
January 1, 2022
Year Ending
January 1, 2022
($ in millions)
Forecast
Forecast
Net income on a GAAP basis
$137 to $149
$657 to $669
Stock-based compensation expense
58
214
Amortization of acquired intangibles
17
67
Acquisition and integration-related costs
6
22
Restructuring and other credits
-
(1)
Non-qualified deferred compensation expenses
-
4
Special charges*
-
27
Other income or expense related to investments and non-qualified deferred compensation plan assets**
-
(4)
Income tax effect of non-GAAP adjustments
(7)
(84)
Net income on a non-GAAP basis†
$211 to $223
$902 to $914
†
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 cost related to a voluntary retirement program in the second quarter of 2021.
**
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.
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Cadence Design Systems Inc. published this content on 25 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 October 2021 20:13:49 UTC.
Cadence Design Systems, Inc. is No. 1 worldwide in developing and marketing design software for integrated circuits and electronic systems. Net sales break down by activity as follows:
- sale of licenses (93.8%): design software, integrated circuit verification, simulation, and performance control systems, etc. In addition, the group offers maintenance services;
- services (6.2%): consulting, training, system design and development, technical assistance, etc.
Net sales are distributed geographically as follows: the United States (41.4%), Americas (1.6%), China (16.6%), Japan (5.6%), Asia (18.8%) and Europe/Middle East/Africa (16 %).