Cadence Reports Third Quarter 2017 Financial Results
SAN JOSE, Calif., Oct. 26, 2017 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter 2017.
Cadence reported third quarter 2017 revenue of $485 million, compared to revenue of $446 million reported for the same period in 2016. On a GAAP basis, Cadence recognized net income of $81 million, or $0.29 per share on a diluted basis, in the third quarter of 2017, compared to net income of $65 million, or $0.23 per share on a diluted basis, for the same period in 2016.
Using the non-GAAP measure defined below, net income in the third quarter of 2017 was $98 million, or $0.35 per share on a diluted basis, as compared to net income of $85 million, or $0.30 per share on a diluted basis, for the same period in 2016.
"Broad-based proliferation and adoption of our digital and signoff, custom analog tools and IP products with consistent execution enabled Cadence to achieve excellent operating results for the third quarter," said Lip-Bu Tan, president and chief executive officer.
"During the third quarter, we met or exceeded our key operating metrics and we are on track to deliver strong financial results for the fiscal year," said John Wall, senior vice president and chief financial officer.
CFO Commentary
Commentary on the third quarter 2017 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 2017, the company expects total revenue in the range of $490 million to $500 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.26 to $0.28. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.38 to $0.40.
For 2017, the company expects total revenue in the range of $1.931 billion to $1.941 billion. On a GAAP basis, net income per diluted share for 2017 is expected to be in the range of $1.04 to $1.06. Using the non-GAAP measure defined below, net income per diluted share for 2017 is expected to be in the range of $1.39 to $1.41.
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, and John Wall, senior vice president and chief financial officer, will host the third quarter 2017 financial results audio webcast today, October 26, 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 October 26, 2017 at 5 p.m. (Pacific) and ending December 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 third quarter 2017 financial results, 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
September 30, 2017 October 1, 2016
------------------ ---------------
(unaudited)
(in
thousands)
Net income
on a GAAP
basis $81,157 $64,712
Amortization
of
acquired
intangibles 13,618 14,482
Stock-
based
compensation
expense 36,090 29,998
Non-
qualified
deferred
compensation
expenses 2,825 921
Restructuring
and other
charges
(credits) (55) 101
Acquisition
and
integration-
related
costs 748 1,841
Other
income or assets*
expense
related
to
investments
and non-
qualified
deferred
compensation
plan (12,242) (806)
Income tax
effect of
non-GAAP
adjustments (23,942) (26,424)
------- -------
Net income
on a non-
GAAP
basis $98,199 $84,825
======= =======
* 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
September 30, 2017 October 1, 2016
------------------ ---------------
(unaudited)
(in
thousands,
except per
share data)
Diluted net
income per
share on a
GAAP basis $0.29 $0.23
Amortization
of acquired
intangibles 0.05 0.05
Stock-based
compensation
expense 0.13 0.10
Non-
qualified
deferred
compensation
expenses 0.01 -
Restructuring
and other
charges
(credits) - -
Acquisition
and
integration-
related
costs - 0.01
Other income
or expense
related to
investments
and non-
qualified
deferred
compensation
plan assets* (0.04) -
Income tax
effect of
non-GAAP
adjustments (0.09) (0.09)
----- -----
Diluted net
income per
share on a
non-GAAP
basis $0.35 $0.30
===== =====
Shares used
in
calculation
of diluted
net income
per share -
GAAP** 281,400 287,473
Shares used
in
calculation
of diluted
net income
per share -
non-GAAP** 281,400 287,473
* 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 December 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 Cadence's fourth quarter 2017 earnings release is published, which is currently scheduled for January 31, 2018.
For more information, please contact:
Cadence Investor Relations
Alan Lindstrom
408-428-5020
alind@cadence.com
Cadence Newsroom
408-944-7039
newsroom@cadence.com
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
September 30, 2017 and December 31, 2016
(In thousands)
(Unaudited)
September 30, 2017 December 31, 2016
------------------ -----------------
Current assets:
Cash and cash
equivalents $678,284 $465,232
Short-term
investments 4,135 3,057
Receivables,
net 170,312 157,171
Inventories 36,000 39,475
Prepaid
expenses and
other 42,374 37,099
Total
current
assets 931,105 702,034
Property, plant and equipment, net
of accumulated
depreciation
of $648,298
and
$612,961,
respectively 244,620 238,607
Goodwill 574,912 572,764
Acquired intangibles, net of
accumulated amortization of
$283,632 and $267,723, respectively 216,177 258,814
Long-term receivables 11,590 12,949
Other assets 326,823 311,740
-------
Total assets $2,305,227 $2,096,908
========== ==========
Current liabilities:
Revolving
credit
facility $ - $50,000
Accounts
payable and
accrued
liabilities 199,672 239,496
Current
portion of
deferred
revenue 320,462 296,066
Total
current
liabilities 520,134 585,562
------- -------
Long-term liabilities:
Long-term
portion of
deferred
revenue 57,865 66,769
Long-term
debt 644,146 643,493
Other long-
term
liabilities 72,342 59,314
Total
long-
term
liabilities 774,353 769,576
------- -------
Stockholders' equity 1,010,740 741,770
Total liabilities and stockholders'
equity $2,305,227 $2,096,908
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Nine Months Ended September 30, 2017 and October 1, 2016
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 30, October 1, September 30, October 1,
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Product and
maintenance $451,229 $415,370 $1,346,483 $1,247,077
Services 34,169 30,850 94,827 100,026
------
Total revenue 485,398 446,220 1,441,310 1,347,103
------- ------- --------- ---------
Costs and expenses:
Cost of product
and maintenance 34,825 38,740 117,371 125,881
Cost of services 19,657 17,867 59,735 54,563
Marketing and
sales 104,263 96,793 311,507 297,103
Research and
development 206,568 191,547 600,755 553,824
General and
administrative 36,302 30,441 100,892 95,129
Amortization of
acquired
intangibles 3,453 3,889 11,145 14,206
Restructuring and
other charges
(credits) (55) 101 (2,772) 14,613
----
Total costs
and expenses 405,013 379,378 1,198,633 1,155,319
------- ------- --------- ---------
Income from operations 80,385 66,842 242,677 191,784
Interest expense (6,225) (6,053) (18,952) (17,306)
Other income, net 12,387 2,836 14,370 10,441
------
Income before provision
(benefit) for income taxes 86,547 63,625 238,095 184,919
Provision
(benefit) for
income taxes 5,390 (1,087) 19,552 20,310
-----
Net income $81,157 $64,712 $218,543 $164,609
======= ======= ======== ========
Net income per share - basic $0.30 $0.23 $0.80 $0.57
===== ===== ===== =====
Net income per share - diluted $0.29 $0.23 $0.78 $0.56
===== ===== ===== =====
Weighted average common shares
outstanding -basic 273,156 280,622 271,739 288,476
======= ======= ======= =======
Weighted average common shares
outstanding -diluted 281,400 287,473 279,554 295,369
======= ======= ======= =======
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2017 and October 1, 2016
(In thousands)
(Unaudited)
Nine Months Ended
-----------------
September 30, October 1,
2017 2016
---- ----
Cash and cash equivalents at
beginning of period $465,232 $616,686
Cash flows from operating
activities:
Net income 218,543 164,609
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 86,605 89,726
Amortization of debt discount
and fees 920 792
Stock-based compensation 94,008 79,986
Gain on investments, net (12,502) (4,070)
Gain on sale of property,
plant and equipment - (482)
Deferred income taxes 212 8,657
Other non-cash items 3,763 1,869
Changes in operating assets
and liabilities, net of
effect of acquired
businesses:
Receivables (8,040) 2,873
Inventories 2,282 (16,339)
Prepaid expenses and other (4,627) (12,135)
Other assets (14,469) (3,822)
Accounts payable and accrued
liabilities (41,127) (46,585)
Deferred revenue 14,245 (10,823)
Other long-term liabilities 4,071 (6,239)
Net cash provided by
operating activities 343,884 248,017
------- -------
Cash flows from investing
activities:
Purchases of available-for-
sale securities - (20,525)
Proceeds from the sale of
available-for-sale
securities 421 55,418
Proceeds from the maturity of
available-for-sale
securities - 52,362
Proceeds from the sale of
long-term investments 9,108 2,913
Proceeds from the sale of
property, plant and
equipment - 482
Purchases of property, plant
and equipment (39,676) (42,452)
Cash paid in business
combinations and asset
acquisitions, net of cash
acquired (550) (41,627)
Net cash provided by (used
for) investing activities (30,697) 6,571
------- -----
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 45,419 50,293
Stock received for payment of
employee taxes on vesting of
restricted stock (54,130) (35,532)
Payments for repurchases of
common stock (50,013) (720,196)
Net cash used for financing
activities (109,517) (356,057)
-------- --------
Effect of exchange rate
changes on cash and cash
equivalents 9,382 9,116
----- -----
Increase (decrease) in cash
and cash equivalents 213,052 (92,353)
------- -------
Cash and cash equivalents at
end of period $678,284 $524,333
======== ========
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by
Geography (% of
Total Revenue)
2016 2017
---- ----
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3
--------- --- --- --- --- ---- --- --- ---
Americas 49% 47% 46% 48% 48% 45% 45% 45%
Asia 22% 24% 27% 25% 24% 26% 28% 27%
Europe, Middle East
and Africa 19% 20% 19% 19% 19% 20% 19% 19%
Japan 10% 9% 8% 8% 9% 9% 8% 9%
Total 100% 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 Q3
------------- --- --- --- --- ---- --- --- ---
Functional
Verification,
including Emulation
and Prototyping
Hardware 26% 27% 24% 25% 25% 23% 23% 21%
Digital IC Design and
Signoff 30% 27% 28% 30% 29% 29% 30% 30%
Custom IC Design 25% 26% 27% 25% 25% 26% 26% 28%
System Interconnect
and Analysis 9% 10% 10% 9% 10% 10% 10% 10%
IP 10% 10% 11% 11% 11% 12% 11% 11%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc.
As of October 26, 2017
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
Three Months Ending Year Ending
December 30, 2017 December 30, 2017
Forecast Forecast
-------- --------
Diluted net income per
share on a GAAP basis $0.26 to $0.28 $1.04 to $1.06
Amortization of acquired
intangibles 0.05 0.20
Stock-based compensation expense 0.13 0.46
Non-qualified deferred
compensation expenses - 0.02
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* - (0.05)
Income tax effect of non-GAAP
adjustments (0.06) (0.28)
Diluted net income per
share on a non-GAAP
basis** $0.38 to $0.40 $1.39 to $1.41
============== ==============
Cadence Design Systems, Inc.
As of October 26, 2017
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
December 30, 2017 December 30, 2017
($ in millions) Forecast Forecast
-------- --------
Net income on a GAAP basis $74 to $80 $292 to $298
Amortization of acquired
intangibles 14 56
Stock-based compensation expense 35 129
Non-qualified deferred
compensation expenses - 5
Restructuring and other charges
(credits) - (3)
Acquisition and integration-
related costs 1 4
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* - (14)
Income tax effect of non-GAAP
adjustments (16) (80)
Net income on a non-GAAP
basis** $108 to $114 $389 to $395
============ ============
** 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.
