Cadence Reports Second Quarter 2017 Financial Results
SAN JOSE, Calif., July 24, 2017 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the second quarter 2017.
Cadence reported second quarter 2017 revenue of $479 million, compared to revenue of $453 million reported for the same period in 2016. On a GAAP basis, Cadence recognized net income of $69 million, or $0.25 per share on a diluted basis, in the second quarter of 2017, compared to net income of $49 million, or $0.17 per share on a diluted basis, for the same period in 2016.
Using the non-GAAP measure defined below, net income in the second quarter of 2017 was $94 million, or $0.34 per share on a diluted basis, as compared to net income of $86 million, or $0.29 per share on a diluted basis, for the same period in 2016.
"Customer adoption of our innovative product portfolio enabled Cadence's strong second quarter results, driven by robust software and IP growth," said Lip-Bu Tan, president and chief executive officer.
"Our excellent financial results for the second quarter were highlighted with revenue near the high end of our guidance range and operating margin, EPS and operating cash flow all exceeding expectations," said Geoff Ribar, senior vice president and chief financial officer, and added, "We are increasing our outlook for the fiscal year and expect to repurchase shares in the third quarter under our existing authorization."
CFO Commentary
Commentary on the second quarter 2017 financial results by Geoff Ribar, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.
Business Outlook
For the third quarter of 2017, the company expects total revenue in the range of $475 million to $485 million. Third quarter GAAP net income per diluted share is expected to be in the range of $0.24 to $0.26. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.33 to $0.35.
For 2017, the company expects total revenue in the range of $1.910 billion to $1.950 billion. On a GAAP basis, net income per diluted share for 2017 is expected to be in the range of $0.98 to $1.04. Using the non-GAAP measure defined below, net income per diluted share for 2017 is expected to be in the range of $1.36 to $1.42.
A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to non-GAAP net income and diluted net income per share is included in this release.
Audio Webcast Scheduled
Lip-Bu Tan, president and chief executive officer, Geoff Ribar, senior vice president and chief financial officer, and John Wall, corporate vice president, finance and corporate controller, will host a second quarter 2017 financial results audio webcast today, July 24, 2017, 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 July 24, 2017 at 5 p.m. (Pacific) and ending September 15, 2017 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.
About Cadence
Cadence enables electronic systems and semiconductor companies to create the innovative end products that are transforming the way people live, work and play. Cadence(®) software, hardware and semiconductor IP are used by customers to deliver products to market faster. The company's System Design Enablement strategy helps customers develop differentiated products-from chips to boards to systems-in mobile, consumer, cloud datacenter, automotive, aerospace, IoT, industrial and other market segments. Cadence is listed as one of Fortune Magazine's 100 Best Companies to Work For. Learn more at cadence.com.
Cadence and the Cadence logo are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
The statements contained above regarding Cadence's second quarter 2017 financial results and expectation to repurchase shares of its common stock, as well as the information in the Business Outlook section, are or include forward-looking statements based on current expectations or beliefs and preliminary assumptions about future events 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 electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence's efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence's products; (iv) change in customer demands, including those resulting from consolidation among Cadence's customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence's customers could result in delays in purchases of Cadence's products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence's ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence's efforts to improve operational efficiency in its business, including strategic, customer and supplier relationships, and its ability to retain key employees; (x) events that affect cash flow, liquidity, reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party. In addition, the actual timing and amount of Cadence's repurchase of its common stock under the existing authorization will be subject to business and market conditions, corporate and regulatory requirements, 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 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's management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company's core business operations and therefore provides supplemental information to Cadence's 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's management, including forecasting and budgeting.
The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
Net Income Reconciliation Three Months Ended July 1, 2017 July 2, 2016 ------------ ------------ (unaudited) (in thousands) Net income on a GAAP basis $69,127 $49,335 Amortization of acquired intangibles 14,704 15,083 Stock-based compensation expense 30,482 25,356 Non-qualified deferred compensation expenses 756 359 Restructuring and other charges (credits) (929) (74) Acquisition and integration-related costs 651 7,190 Other income or expense related to investments and non- qualified deferred compensation plan assets* (855) (594) Income tax effect of non-GAAP adjustments (19,861) (11,053) ------- ------- Net income on a non- GAAP basis $94,075 $85,602 ======= =======
* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of 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 July 1, 2017 July 2, 2016 ------------ ------------ (unaudited) (in thousands, except per share data) Diluted net income per share on a GAAP basis $0.25 $0.17 Amortization of acquired intangibles 0.05 0.05 Stock-based compensation expense 0.11 0.09 Non-qualified deferred compensation expenses - - Restructuring and other charges (credits) - - Acquisition and integration-related costs - 0.02 Other income or expense related to investments and non-qualified deferred compensation plan assets* - - Income tax effect of non- GAAP adjustments (0.07) (0.04) ----- ----- Diluted net income per share on a non-GAAP basis $0.34 $0.29 ===== ===== Shares used in calculation of diluted net income per share - GAAP** 279,526 295,201 Shares used in calculation of diluted net income per share - non-GAAP** 279,526 295,201
* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. ** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non- GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.
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 September 15, 2017, 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 the company'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 the company. 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 the day when Cadence's third quarter 2017 earnings release is published, which is currently scheduled for Thursday, October 26, 2017.
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 July 1, 2017 and December 31, 2016 (In thousands) (Unaudited) July 1, 2017 December 31, 2016 ------------ ----------------- Current assets: Cash and cash equivalents $655,998 $465,232 Short-term investments 3,229 3,057 Receivables, net 153,154 157,171 Inventories 31,894 39,475 Prepaid expenses and other 39,175 37,099 ------------- Total current assets 883,450 702,034 Property, plant and equipment, net of accumulated depreciation of $634,418 and $612,961, respectively 249,140 238,607 Goodwill 575,025 572,764 Acquired intangibles, net of accumulated amortization of $269,859 and $267,723, respectively 229,783 258,814 Long-term receivables 13,340 12,949 Other assets 316,961 311,740 ------- Total assets $2,267,699 $2,096,908 ========== ========== Current liabilities: Revolving credit facility $ - $50,000 Accounts payable and accrued liabilities 222,216 239,496 Current portion of deferred revenue 322,509 296,066 ----------- Total current liabilities 544,725 585,562 ------- ------- Long-term liabilities: Long-term portion of deferred revenue 60,158 66,769 Long-term debt 643,927 643,493 Other long- term liabilities 67,096 59,314 Total long-term liabilities 771,181 769,576 ------- ------- Stockholders' equity 951,793 741,770 Total liabilities and stockholders' equity $2,267,699 $2,096,908 ========== ==========
Cadence Design Systems, Inc. Condensed Consolidated Income Statements For the Three and Six Months Ended July 1, 2017 and July 2, 2016 (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended ------------------ ---------------- July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016 ------------ ------------ ------------ ------------ Revenue: Product and maintenance $443,847 $419,963 $895,254 $831,707 Services 35,154 33,058 60,658 69,176 ------ Total revenue 479,001 453,021 955,912 900,883 ------- ------- ------- ------- Costs and expenses: Cost of product and maintenance 38,829 42,960 82,546 87,141 Cost of services 22,003 18,823 40,078 36,696 Marketing and sales 103,897 101,110 207,244 200,310 Research and development 195,901 182,371 394,187 362,277 General and administrative 32,774 36,388 64,590 64,688 Amortization of acquired intangibles 3,836 4,537 7,692 10,317 Restructuring and other charges (credits) (929) (74) (2,717) 14,512 ----- Total costs and expenses 396,311 386,115 793,620 775,941 ------- ------- ------- ------- Income from operations 82,690 66,906 162,292 124,942 Interest expense (6,248) (5,896) (12,727) (11,253) Other income, net 924 2,842 1,983 7,605 --- Income before provision for income taxes 77,366 63,852 151,548 121,294 Provision for income taxes 8,239 14,517 14,162 21,397 ----- Net income $69,127 $49,335 $137,386 $99,897 ======= ======= ======== ======= Net income per share - basic $0.25 $0.17 $0.51 $0.34 ===== ===== ===== ===== Net income per share - diluted $0.25 $0.17 $0.49 $0.33 ===== ===== ===== ===== Weighted average common shares outstanding -basic 271,887 288,191 271,030 292,403 ======= ======= ======= ======= Weighted average common shares outstanding -diluted 279,526 295,201 278,631 299,318 ======= ======= ======= =======
Cadence Design Systems, Inc. Condensed Consolidated Statements of Cash Flows For the Six Months Ended July 1, 2017 and July 2, 2016 (In thousands) (Unaudited) Six Months Ended ---------------- July 1, July, 2 2017 2016 ---- ---- Cash and cash equivalents at beginning of period $465,232 $616,686 Cash flows from operating activities: Net income 137,386 99,897 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 58,304 62,759 Amortization of debt discount and fees 633 527 Stock- based compensation 57,918 49,988 Gain on investments, net (2,083) (3,265) Deferred income taxes 4,813 10,252 Other non- cash items 2,157 750 Changes in operating assets and liabilities, net of effect of acquired businesses: Receivables 6,342 (3,532) Inventories 2,535 (10,296) Prepaid expenses and other (1,557) (8,690) Other assets (8,790) (8,709) Accounts payable and accrued liabilities (21,995) (14,012) Deferred revenue 18,733 (7,412) Other long- term liabilities 174 (4,700) Net cash provided by operating activities 254,570 163,557 ------- ------- Cash flows from investing activities: Purchases of available- for- sale securities - (20,525) Proceeds from the sale of available- for- sale securities 189 55,168 Proceeds from the maturity of available- for- sale securities - 26,115 Proceeds from the sale of long- term investments - 2,583 Purchases of property, plant and equipment (27,488) (28,287) Cash paid acquired in business combinations and asset acquisitions, net of cash - (41,627) Net cash used for investing activities (27,299) (6,573) ------- ------ Cash flows from financing activities: Proceeds from term loan - 300,000 Proceeds from revolving credit facility 50,000 50,000 Payment on revolving credit facility (100,000) - Payment of debt issuance costs (793) (622) Proceeds from issuance of common stock 29,967 36,296 Stock received stock for payment of employee taxes on vesting of restricted (25,819) (17,490) Payments for repurchases of common stock - (480,100) Net cash used for financing activities (46,645) (111,916) ------- -------- Effect of exchange rate changes on cash and cash equivalents 10,140 7,819 ------ ----- Increase in cash and cash equivalents 190,766 52,887 ------- ------ Cash and cash equivalents at end of period $655,998 $669,573 ======== ========
Cadence Design Systems, Inc. (Unaudited) Revenue Mix by Geography (% of Total Revenue) 2016 2017 ---- ---- GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 --------- --- --- --- --- ---- --- --- Americas 49% 47% 46% 48% 48% 45% 45% Asia 22% 24% 27% 25% 24% 26% 28% Europe, Middle East and Africa 19% 20% 19% 19% 19% 20% 19% Japan 10% 9% 8% 8% 9% 9% 8% Total 100% 100% 100% 100% 100% 100% 100% Revenue Mix by Product Group (% of Total Revenue) 2016 2017 ---- ---- PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 ------------- --- --- --- --- ---- --- --- Functional Verification, including Emulation and Prototyping Hardware 26% 27% 24% 25% 25% 23% 23% Digital IC Design and Signoff 30% 27% 28% 30% 29% 29% 30% Custom IC Design 25% 26% 27% 25% 25% 26% 26% System Interconnect and Analysis 9% 10% 10% 9% 10% 10% 10% IP 10% 10% 11% 11% 11% 12% 11% Total 100% 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc. As of July 24, 2017 Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share (Unaudited) Three Months Ending Year Ending September 30, 2017 December 30, 2017 Forecast Forecast -------- -------- Diluted net income per share on a GAAP basis $0.24 to $0.26 $0.98 to $1.04 Amortization of acquired intangibles 0.05 0.20 Stock-based compensation expense 0.12 0.46 Non-qualified deferred compensation expenses - 0.01 Restructuring and other charges (credits) - (0.01) Acquisition and integration- related costs - 0.01 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (0.01) Income tax effect of non-GAAP adjustments (0.08) (0.28) Diluted net income per share on a non-GAAP basis** $0.33 to $0.35 $1.36 to $1.42 ============== ============== Cadence Design Systems, Inc. As of July 24, 2017 Impact of Non-GAAP Adjustments on Forward Looking Net Income (Unaudited) Three Months Ending Year Ending September 30, 2017 December 30, 2017 ($ in millions) Forecast Forecast -------- -------- Net income on a GAAP basis $66 to $72 $274 to $291 Amortization of acquired intangibles 14 56 Stock-based compensation expense 34 129 Non-qualified deferred compensation expenses - 2 Restructuring and other charges (credits) - (3) Acquisition and integration- related costs 1 3 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (2) Income tax effect of non-GAAP adjustments (23) (79) Net income on a non-GAAP basis** $92 to $98 $380 to $397 ========== ============
**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. * Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.
SOURCE CDNS-IR
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SOURCE Cadence Design Systems, Inc.