Cadence Reports Second Quarter 2022 Financial Results

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 16, 2022, 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 third quarter 2022 earnings release is published, which is currently scheduled for October 24, 2022.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
July 2, 2022 and January 1, 2022
(In thousands)
(Unaudited)
 
July 2, 2022 January 1, 2022
 
Current assets:
Cash and cash equivalents

$

1,029,544

$

1,088,940

Receivables, net

 

391,738

 

337,596

Inventories

 

106,372

 

115,721

Prepaid expenses and other

 

129,966

 

173,512

Total current assets

 

1,657,620

 

1,715,769

 
Property, plant and equipment, net

 

316,741

 

305,911

Goodwill

 

924,460

 

928,358

Acquired intangibles, net

 

215,781

 

233,265

Deferred taxes

 

802,886

 

763,770

Other assets

 

443,786

 

439,226

Total assets

$

4,361,274

$

4,386,299

 
Current liabilities:
Accounts payable and accrued liabilities

$

437,195

$

417,283

Current portion of deferred revenue

 

605,296

 

553,942

Total current liabilities

 

1,042,491

 

971,225

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

 

114,573

 

101,148

Long-term debt

 

347,999

 

347,588

Other long-term liabilities

 

230,982

 

225,663

Total long-term liabilities

 

693,554

 

674,399

 
Stockholders' equity

 

2,625,229

 

2,740,675

Total liabilities and stockholders' equity

$

4,361,274

$

4,386,299

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Six Months Ended July 2, 2022 and July 3, 2021
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended Six Months Ended
July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021
 
Revenue:
Product and maintenance

$

802,285

 

$

687,884

 

$

1,648,529

 

$

1,386,938

 

Services

 

55,236

 

 

40,401

 

 

110,758

 

 

77,375

 

 
Total revenue

 

857,521

 

 

728,285

 

 

1,759,287

 

 

1,464,313

 

 
Costs and expenses:
Cost of product and maintenance

 

68,717

 

 

55,842

 

 

141,512

 

 

120,748

 

Cost of services

 

23,948

 

 

20,917

 

 

48,996

 

 

39,978

 

Marketing and sales

 

139,296

 

 

135,967

 

 

279,482

 

 

268,793

 

Research and development

 

286,597

 

 

285,227

 

 

577,492

 

 

556,219

 

General and administrative

 

51,426

 

 

40,333

 

 

100,363

 

 

80,285

 

Amortization of acquired intangibles

 

4,633

 

 

5,030

 

 

9,597

 

 

9,661

 

Restructuring

 

16

 

 

(469

)

 

28

 

 

(746

)

 
Total costs and expenses

 

574,633

 

 

542,847

 

 

1,157,470

 

 

1,074,938

 

 
Income from operations

 

282,888

 

 

185,438

 

 

601,817

 

 

389,375

 

 
Interest expense

 

(4,281

)

 

(4,316

)

 

(8,389

)

 

(8,533

)

Other income (expense), net

 

(5,962

)

 

2,143

 

 

(10,862

)

 

4,844

 

 
Income before provision for income taxes

 

272,645

 

 

183,265

 

 

582,566

 

 

385,686

 

 
Provision for income taxes

 

85,725

 

 

27,365

 

 

160,311

 

 

42,617

 

 
Net income

$

186,920

 

$

155,900

 

$

422,255

 

$

343,069

 

 
 
Net income per share - basic

$

0.69

 

$

0.57

 

$

1.55

 

$

1.25

 

 
Net income per share - diluted

$

0.68

 

$

0.56

 

$

1.53

 

$

1.23

 

 
Weighted average common shares outstanding - basic

 

271,520

 

 

273,565

 

 

272,028

 

 

273,843

 

 
Weighted average common shares outstanding - diluted

 

275,172

 

 

278,558

 

 

276,097

 

 

279,399

 

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 2, 2022 and July 3, 2021
(In thousands)
(Unaudited)
 
Six Months Ended

July 2,

July 3,

2022

2021

 
Cash and cash equivalents at beginning of period

$

1,088,940

 

$

928,432

 

Cash flows from operating activities:
Net income

 

422,255

 

 

343,069

 

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

 

67,690

 

 

71,799

 

Amortization of debt discount and fees

 

539

 

 

687

 

Stock-based compensation

 

123,739

 

 

103,114

 

(Gain) loss on investments, net

 

3,124

 

 

(795

)

Deferred income taxes

 

(41,597

)

 

1,710

 

Provisions for losses on receivables

 

133

 

 

242

 

ROU asset amortization and change in operating lease liabilities

 

1,742

 

 

(2,483

)

Other non-cash items

 

88

 

 

183

 

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

 

(64,036

)

 

(48,016

)

Inventories

 

367

 

 

(14,527

)

Prepaid expenses and other

 

40,571

 

 

7,690

 

Other assets

 

14,476

 

 

6,991

 

Accounts payable and accrued liabilities

 

17,470

 

 

(14,771

)

Deferred revenue

 

80,460

 

 

127,286

 

Other long-term liabilities

 

(5,872

)

 

6,639

 

Net cash provided by operating activities

 

661,149

 

 

588,818

 

 
Cash flows from investing activities:
Purchases of non-marketable investments

 

(1,000

)

 

-

 

Purchases of property, plant and equipment

 

(42,202

)

 

(31,139

)

Purchases of intangible assets

 

(750

)

 

-

 

Cash paid in business combinations, net of cash acquired

 

(25,000

)

 

(220,660

)

Net cash used for investing activities

 

(68,952

)

 

(251,799

)

 
Cash flows from financing activities:
Payment of debt issuance costs

 

-

 

 

(1,285

)

Proceeds from issuance of common stock

 

50,224

 

 

52,252

 

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

 

(63,544

)

 

(78,053

)

Payments for repurchases of common stock

 

(600,049

)

 

(392,290

)

Net cash used for financing activities

 

(613,369

)

 

(419,376

)

 
Effect of exchange rate changes on cash and cash equivalents

 

(38,224

)

 

1,085

 

 
Decrease in cash and cash equivalents

 

(59,396

)

 

(81,272

)

 
Cash and cash equivalents at end of period

$

1,029,544

 

$

847,160

 

Cadence Design Systems, Inc.
(Unaudited)
 
 
 
Revenue Mix by Geography (% of Total Revenue)

2021

2022

GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2
 
Americas

46%

44%

46%

43%

45%

47%

45%

China

12%

14%

13%

12%

13%

16%

13%

Other Asia

18%

19%

18%

21%

19%

18%

18%

Europe, Middle East and Africa

18%

17%

17%

18%

17%

14%

18%

Japan

6%

6%

6%

6%

6%

5%

6%

Total

100%

100%

100%

100%

100%

100%

100%

 
 
 
 
Revenue Mix by Product Category (% of Total Revenue)

2021

2022

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

23%

23%

23%

24%

23%

22%

23%

Digital IC Design and Signoff

27%

28%

29%

29%

29%

27%

27%

Functional Verification, including Emulation and Prototyping Hardware

26%

25%

23%

21%

24%

28%

24%

IP

14%

13%

14%

14%

13%

13%

14%

System Design and Analysis

10%

11%

11%

12%

11%

10%

12%

Total

100%

100%

100%

100%

100%

100%

100%

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of July 25, 2022
(Unaudited)
 
Three Months Ending Year Ending
October 1, 2022 December 31, 2022
Forecast Forecast
 
GAAP operating margin as a percent of total revenue

26% - 27%

 

29.25% - 30.25%

 

 

 

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

 

 

 

Stock-based compensation expense

8%

 

7.7%

Amortization of acquired intangibles

2%

 

1.8%

Acquisition and integration-related costs

1%

 

0.8%

Non-qualified deferred compensation credits

0%

 

(0.3)%

 

 

 

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

37% - 38%

 

39.25% - 40.25%

�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 July 25, 2022
(Unaudited)
 
Three Months Ending Year Ending
October 1, 2022 December 31, 2022
Forecast Forecast
 
Diluted net income per share on a GAAP basis

$0.58 to $0.62

$2.59 to $2.65

 

 

Stock-based compensation expense

0.26

0.98

Amortization of acquired intangibles

0.06

0.24

Acquisition and integration-related costs

0.02

0.10

Non-qualified deferred compensation credits

-

(0.03)

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

-

0.04

Income tax effect of non-GAAP adjustments

0.02

0.14

 

 

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

$0.94 to $0.98

$4.06 to $4.12

 
 
 
 
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of July 25, 2022
(Unaudited)
 
 
Three Months Ending Year Ending
October 1, 2022 December 31, 2022
($ in millions) Forecast Forecast
 
Net income on a GAAP basis

$160 to $170

$716 to $732

 

 

Stock-based compensation expense

73

270

Amortization of acquired intangibles

16

65

Acquisition and integration-related costs

6

28

Non-qualified deferred compensation credits

-

(9)

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

-

12

Income tax effect of non-GAAP adjustments

5

39

 

 

Net income on a non-GAAP basis�nbsp;

$260 to $270

$1,121 to $1,137

�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.


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