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Cadence Reports First Quarter 2024 Financial Results

Record First Quarter Backlog of $6.0 Billion and cRPO of $3.1 Billion

Raising 2024 Revenue Outlook

SAN JOSE, Calif. — (BUSINESS WIRE) — April 21, 2024 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the first quarter of 2024.

First Quarter 2024 Financial Results

“Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer. “I’m pleased with our record Q1 backlog that reflects our broad-based strength and product leadership. We’re thrilled with the momentum of our Cadence.AI portfolio which is providing customers with the most comprehensive and impactful chip-to-systems design capabilities and are excited about the launch of our innovative third generation Dynamic Duo hardware platforms that further expands our leadership.”

“Our strong Q1 results reflect our continued technology leadership supporting our customers and partners, and solid execution from the Cadence team,” said John Wall, senior vice president and chief financial officer. “I am pleased that we delivered record Q1 bookings and achieved record Q1 backlog of approximately $6.0 billion.”

CFO Commentary

Commentary on the first quarter of 2024 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

Business Outlook

For fiscal year 2024, the company expects:

For the second quarter of 2024, the company expects:

Cadence’s outlook does not include the impact of its pending acquisition of BETA CAE, the company’s expectations for which are largely unchanged from announcement.

The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use the current normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

Reconciliations of the financial highlights and business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, are included in this press release.

Business Highlights

Audio Webcast Scheduled

Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the first quarter 2024 financial results audio webcast today, April 22, 2024, 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 22, 2024 at 5 p.m. (Pacific) and ending June 14, 2024 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 systems 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 products from chips to boards to complete systems for the most dynamic market applications, including hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and healthcare. For 10 years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.

© 2024 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 press release contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends, pending transactions and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (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 deliveries 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, geopolitical and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions, and rising tensions and conflicts around the world such as in the Middle East and with respect to Taiwan; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates, Cadence's upcoming debt maturities and Cadence’s ability to access capital and debt markets; (vii) Cadence's pending acquisition of BETA CAE Systems International AG, which remains subject to certain closing conditions, the acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (viii) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (ix) 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; (x) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject; and (xi) Cadence's ability to successfully meet corporate governance, environmental and social targets and strategies. In addition, the timing and amount of Cadence’s repurchases of its common stock are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

Forward-looking statements regarding the pending BETA CAE acquisition and its impact are subject to additional risks and uncertainties including: the markets for BETA CAE’s or Cadence’s products and services may develop more slowly than expected or than they have in the past; operating results and cash flows may fluctuate more than expected; risks associated with tax liabilities or changes in applicable tax laws or interpretations to which the pending transaction or parties thereto are subject; BETA CAE or Cadence may fail to satisfy the closing conditions, including obtaining required regulatory approvals, in a timely manner or at all; uncertainties as to the availability of financing for the pending transaction upon acceptable terms on a timely basis and associated costs and expenses, including applicable interest rates; uncertainty as to the amount of shares to be issued by Cadence to acquire BETA CAE due to fluctuations in the trading prices of Cadence’s common stock; Cadence may fail to successfully acquire and integrate BETA CAE; Cadence may fail to realize the anticipated benefits of the pending acquisition; Cadence may incur unanticipated costs or other liabilities in connection with acquiring or integrating BETA CAE; Cadence may not repay debt or maintain share repurchases as anticipated, including as a result of insufficient free cash flow or use of cash for other purposes; the potential impact of the pending acquisition on relationships with third parties, including employees, customers, partners and competitors; Cadence may be unable to motivate and retain key personnel; and changes in or failure to comply with legislation or government regulations could affect the closing of the pending transaction or post-closing operations and results of operations.

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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.

All forward-looking statements in this press release are based on management's expectations as of the date of this press release and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

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 measures contained within this press release with their most directly comparable GAAP 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 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

 

March 31, 2024

March 31, 2023

 

(unaudited)

GAAP operating margin as a percent of total revenue

25

%

32

%

Reconciling items to non-GAAP operating margin as a percent of total revenue:

 

 

Stock-based compensation expense

9

%

7

%

Amortization of acquired intangibles

2

%

1

%

Acquisition and integration-related costs

2

%

2

%

Restructuring

0

%

0

%

Non-qualified deferred compensation expenses

0

%

0

%

Non-GAAP operating margin as a percent of total revenue

38

%

42

%

Net Income Reconciliation

Three Months Ended

 

March 31, 2024

March 31, 2023

(in thousands)

(unaudited)

Net income on a GAAP basis

$

247,643

 

$

241,804

 

Stock-based compensation expense

 

88,129

 

 

74,288

 

Amortization of acquired intangibles

 

16,755

 

 

14,527

 

Acquisition and integration-related costs

 

22,086

 

 

15,800

 

Restructuring

 

280

 

 

 

Non-qualified deferred compensation expenses

 

4,588

 

 

3,150

 

Other income or expense related to investments and non-qualified deferred compensation plan assets*

 

(59,986

)

 

(3,273

)

Income tax effect of non-GAAP adjustments

 

(613

)

 

5,137

 

Net income on a non-GAAP basis

$

318,882

 

$

351,433

 

*

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

 

March 31, 2024

March 31, 2023

(in thousands, except per share data)

(unaudited)

Diluted net income per share on a GAAP basis

$

0.91

 

$

0.89

 

Stock-based compensation expense

 

0.32

 

 

0.27

 

Amortization of acquired intangibles

 

0.06

 

 

0.05

 

Acquisition and integration-related costs

 

0.08

 

 

0.06

 

Restructuring

 

 

 

 

Non-qualified deferred compensation expenses

 

0.02

 

 

0.01

 

Other income or expense related to investments and non-qualified deferred compensation plan assets*

 

(0.22

)

 

(0.01

)

Income tax effect of non-GAAP adjustments

 

 

 

0.02

 

Diluted net income per share on a non-GAAP basis

$

1.17

 

$

1.29

 

Shares used in calculation of diluted net income per share

 

273,544

 

 

273,159

 

*

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 Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, 2024 and December 31, 2023
(In thousands)
(Unaudited)

 

March 31, 2024 December 31, 2023
 
Current assets:
Cash and cash equivalents

$

1,012,418

$

1,008,152

Receivables, net

 

389,865

 

489,224

Inventories

 

185,784

 

181,661

Prepaid expenses and other

 

341,865

 

297,180

Total current assets

 

1,929,932

 

1,976,217

 
Property, plant and equipment, net

 

433,016

 

403,213

Goodwill

 

1,575,107

 

1,535,845

Acquired intangibles, net

 

334,644

 

336,843

Deferred taxes

 

886,576

 

880,001

Other assets

 

562,855

 

537,372

Total assets

$

5,722,130

$

5,669,491

 
Current liabilities:
Current portion of long-term debt

$

349,507

$

349,285

Accounts payable and accrued liabilities

 

456,608

 

576,558

Current portion of deferred revenue

 

659,628

 

665,024

Total current liabilities

 

1,465,743

 

1,590,867

 
Long-term liabilities:
Long-term portion of deferred revenue

 

87,003

 

98,931

Long-term debt

 

299,805

 

299,771

Other long-term liabilities

 

301,983

 

275,651

Total long-term liabilities

 

688,791

 

674,353

 
Stockholders' equity

 

3,567,596

 

3,404,271

Total liabilities and stockholders' equity

$

5,722,130

$

5,669,491

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended March 31, 2024 and March 31, 2023
(In thousands, except per share amounts)
(Unaudited)

 

Three Months Ended
March 31, 2024 March 31, 2023
 
Revenue:
Product and maintenance

$

913,385

 

$

963,742

 

Services

 

95,718

 

 

57,948

 

 
Total revenue

 

1,009,103

 

 

1,021,690

 

 
Costs and expenses:
Cost of product and maintenance

 

75,395

 

 

100,238

 

Cost of services

 

49,802

 

 

24,234

 

Marketing and sales

 

180,589

 

 

166,666

 

Research and development

 

378,958

 

 

350,295

 

General and administrative

 

68,716

 

 

53,527

 

Amortization of acquired intangibles

 

5,407

 

 

4,267

 

Restructuring

 

280

 

 

-

 

 
Total costs and expenses

 

759,147

 

 

699,227

 

 
Income from operations

 

249,956

 

 

322,463

 

 
Interest expense

 

(8,692

)

 

(9,260

)

Other income, net

 

68,779

 

 

8,284

 

 
Income before provision for income taxes

 

310,043

 

 

321,487

 

 
Provision for income taxes

 

62,400

 

 

79,683

 

 
Net income

$

247,643

 

$

241,804

 

 
 
Net income per share - basic

$

0.92

 

$

0.90

 

 
Net income per share - diluted

$

0.91

 

$

0.89

 

 
Weighted average common shares outstanding - basic

 

269,606

 

 

269,501

 

 
Weighted average common shares outstanding - diluted

 

273,544

 

 

273,159

 

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2024 and March 31, 2023
(In thousands)
(Unaudited)

 

Three Months Ended
March 31, March 31,

2024

2023

 
Cash and cash equivalents at beginning of period

$

1,008,152

 

$

882,325

 

Cash flows from operating activities:
Net income

 

247,643

 

 

241,804

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

39,556

 

 

34,400

 

Amortization of debt discount and fees

 

320

 

 

311

 

Stock-based compensation

 

88,129

 

 

74,288

 

Gain on investments, net

 

(55,394

)

 

(123

)

Deferred income taxes

 

(1,523

)

 

(11,640

)

Provisions for losses on receivables

 

158

 

 

214

 

ROU asset amortization and change in operating lease liabilities

 

(917

)

 

(1,392

)

Other non-cash items

 

78

 

 

99

 

Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables

 

102,991

 

 

(8,719

)

Inventories

 

(10,689

)

 

399

 

Prepaid expenses and other

 

(15,073

)

 

56,212

 

Other assets

 

(7,535

)

 

(42,084

)

Accounts payable and accrued liabilities

 

(117,291

)

 

(117,915

)

Deferred revenue

 

(23,941

)

 

40,650

 

Other long-term liabilities

 

6,720

 

 

897

 

Net cash provided by operating activities

 

253,232

 

 

267,401

 

 
Cash flows from investing activities:
Purchases of investments

 

(2,095

)

 

(9,055

)

Proceeds from the sale and maturity of investments

 

43,377

 

 

102

 

Purchases of property, plant and equipment

 

(49,601

)

 

(26,719

)

Cash paid in business combinations, net of cash acquired

 

(71,450

)

 

-

 

Net cash used for investing activities

 

(79,769

)

 

(35,672

)

 
Cash flows from financing activities:
Proceeds from revolving credit facility

 

-

 

 

50,000

 

Payments on revolving credit facility

 

-

 

 

(120,000

)

Proceeds from issuance of common stock

 

116,725

 

 

65,370

 

Stock received for payment of employee taxes on vesting of restricted stock

 

(151,123

)

 

(67,712

)

Payments for repurchases of common stock

 

(125,006

)

 

(125,010

)

Net cash used for financing activities

 

(159,404

)

 

(197,352

)

 
Effect of exchange rate changes on cash and cash equivalents

 

(9,793

)

 

261

 

 
Increase in cash and cash equivalents

 

4,266

 

 

34,638

 

 
Cash and cash equivalents at end of period

$

1,012,418

 

$

916,963

 

Cadence Design Systems, Inc.
(Unaudited)

 

Revenue Mix by Geography (% of Total Revenue)

2023

2024

GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1
 
Americas

44%

41%

43%

44%

43%

46%

China

17%

18%

17%

15%

17%

12%

Other Asia

18%

18%

19%

19%

19%

20%

Europe, Middle East and Africa

15%

17%

15%

16%

16%

17%

Japan

6%

6%

6%

6%

5%

5%

Total

100%

100%

100%

100%

100%

100%

 
 
Revenue Mix by Product Category (% of Total Revenue)

2023

2024

PRODUCT CATEGORY Q1 Q2 Q3 Q4 Year Q1
 
Custom IC Design and Simulation

20%

22%

22%

22%

22%

22%

Digital IC Design and Signoff

25%

27%

28%

29%

27%

29%

Functional Verification, including Emulation and Prototyping Hardware

32%

27%

26%

24%

27%

25%

IP

11%

11%

11%

13%

12%

12%

System Design and Analysis

12%

13%

13%

12%

12%

12%

Total

100%

100%

100%

100%

100%

100%

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of April 22, 2024
(Unaudited)
 

Three Months Ending

Year Ending

June 30,
2024

December 31, 2024

Forecast Forecast
 
GAAP operating margin as a percent of total revenue

26.5% - 27.5%

31% - 32%

 

 

Reconciling items to non-GAAP operating margin as a

 

 

percent of total revenue:

 

 

Stock-based compensation expense

9%

8%

Amortization of acquired intangibles

2%

2%

Acquisition and integration-related costs

1%

1%

Non-qualified deferred compensation expenses

0%

0%

 

 

Non-GAAP operating margin as a percent of total revenue�nbsp;

38.5% - 39.5%

42% - 43%

 
�nbsp;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.
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of April 22, 2024
(Unaudited)

 

Three Months Ending

Year Ending

June 30,
2024

December 31, 2024

Forecast Forecast
 
Diluted net income per share on a GAAP basis

$0.73 to $0.77

$4.04 to $4.14

 

 

Stock-based compensation expense

0.32

1.41

Amortization of acquired intangibles

0.06

0.25

Acquisition and integration-related costs

0.06

0.20

Non-qualified deferred compensation expenses

-

0.02

Other income or expense related to investments and

 

 

non-qualified deferred compensation plan assets*

-

(0.22)

Income tax effect of non-GAAP adjustments

0.03

0.18

 

 

Diluted net income per share on a non-GAAP basis�nbsp;

$1.20 to $1.24

$5.88 to $5.98

 
�nbsp;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 investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.
 
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of April 22, 2024
(Unaudited)
 
Three Months Ending Year Ending
June 30,
2024
December 31, 2024
Forecast Forecast
($ in millions)
Net income on a GAAP basis

$200 to $211

$1,105 to $1,132

 

Stock-based compensation expense

89

386

Amortization of acquired intangibles

17

68

Acquisition and integration-related costs

15

56

Non-qualified deferred compensation expenses

-

5

Other income or expense related to investments and

 

 

non-qualified deferred compensation plan assets*

-

(60)

Income tax effect of non-GAAP adjustments

8

48

 
Net income on a non-GAAP basis�nbsp; $329 to $340 $1,608 to $1,635
 
�nbsp;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 investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

CDNS-IR

Category: Financial, Featured



Contact:

For more information, please contact:

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408-944-7100
investor_relations@cadence.com

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408-944-7039
newsroom@cadence.com