Cadence Reports First Quarter 2023 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 June 16, 2023, 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 second quarter 2023 earnings release is published, which is currently scheduled for July 24, 2023.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, 2023 and December 31, 2022
(In thousands)
(Unaudited)
 
March 31, 2023 December 31, 2022
 
Current assets:
Cash and cash equivalents

$

916,963

$

882,325

Receivables, net

 

488,237

 

486,710

Inventories

 

127,566

 

128,005

Prepaid expenses and other

 

165,778

 

209,727

Total current assets

 

1,698,544

 

1,706,767

 
Property, plant and equipment, net

 

372,956

 

371,451

Goodwill

 

1,377,625

 

1,374,268

Acquired intangibles, net

 

341,738

 

354,617

Deferred taxes

 

864,750

 

853,691

Other assets

 

516,006

 

476,277

Total assets

$

5,171,619

$

5,137,071

 
Current liabilities:
Revolving credit facility

$

30,000

$

100,000

Accounts payable and accrued liabilities

 

430,135

 

557,158

Current portion of deferred revenue

 

721,246

 

690,538

Total current liabilities

 

1,181,381

 

1,347,696

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

 

102,515

 

91,524

Long-term debt

 

648,301

 

648,078

Other long-term liabilities

 

298,546

 

304,660

Total long-term liabilities

 

1,049,362

 

1,044,262

 
Stockholders' equity

 

2,940,876

 

2,745,113

Total liabilities and stockholders' equity

$

5,171,619

$

5,137,071

 
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended March 31, 2023 and April 2, 2022
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
March 31, 2023 April 2, 2022
 
Revenue:
Product and maintenance

$

963,742

 

$

846,244

 

Services

 

57,948

 

 

55,522

 

 
Total revenue

 

1,021,690

 

 

901,766

 

 
Costs and expenses:
Cost of product and maintenance

 

100,238

 

 

72,795

 

Cost of services

 

24,234

 

 

25,048

 

Marketing and sales

 

166,666

 

 

140,186

 

Research and development

 

350,295

 

 

290,895

 

General and administrative

 

53,527

 

 

48,937

 

Amortization of acquired intangibles

 

4,267

 

 

4,964

 

Restructuring

 

-

 

 

12

 

 
Total costs and expenses

 

699,227

 

 

582,837

 

 
Income from operations

 

322,463

 

 

318,929

 

 
Interest expense

 

(9,260

)

 

(4,108

)

Other income (expense), net

 

8,284

 

 

(4,900

)

 
Income before provision for income taxes

 

321,487

 

 

309,921

 

 
Provision for income taxes

 

79,683

 

 

74,586

 

 
Net income

$

241,804

 

$

235,335

 

 
 
Net income per share - basic

$

0.90

 

$

0.86

 

 
Net income per share - diluted

$

0.89

 

$

0.85

 

 
Weighted average common shares outstanding - basic

 

269,501

 

 

272,431

 

 
Weighted average common shares outstanding - diluted

 

273,159

 

 

276,918

 

 
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2023 and April 2, 2022
(In thousands)
(Unaudited)
 
Three Months Ended
March 31, April 2,

2023

2022

 
Cash and cash equivalents at beginning of period

$

882,325

 

$

1,088,940

 

Cash flows from operating activities:
Net income

 

241,804

 

 

235,335

 

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

 

34,400

 

 

34,825

 

Amortization of debt discount and fees

 

311

 

 

268

 

Stock-based compensation

 

74,288

 

 

59,469

 

(Gain) loss on investments, net

 

(123

)

 

2,038

 

Deferred income taxes

 

(11,640

)

 

(24,920

)

Provisions for losses (recoveries) on receivables

 

214

 

 

(344

)

ROU asset amortization and change in operating lease liabilities

 

(1,392

)

 

926

 

Other non-cash items

 

99

 

 

88

 

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

 

(8,719

)

 

(28,426

)

Inventories

 

399

 

 

4,580

 

Prepaid expenses and other

 

56,212

 

 

44,419

 

Other assets

 

(42,084

)

 

11,588

 

Accounts payable and accrued liabilities

 

(117,915

)

 

(58,203

)

Deferred revenue

 

40,650

 

 

56,225

 

Other long-term liabilities

 

897

 

 

(1,260

)

Net cash provided by operating activities

 

267,401

 

 

336,608

 

 
Cash flows from investing activities:
Purchases of investments

 

(9,055

)

 

(1,000

)

Proceeds from the sale of investments

 

102

 

 

-

 

Purchases of property, plant and equipment

 

(26,719

)

 

(18,130

)

Purchases of intangible assets

 

-

 

 

(750

)

Net cash used for investing activities

 

(35,672

)

 

(19,880

)

 
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

 

65,370

 

 

45,673

 

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

 

(67,712

)

 

(56,343

)

Payments for repurchases of common stock

 

(125,010

)

 

(250,016

)

Net cash used for financing activities

 

(197,352

)

 

(260,686

)

 
Effect of exchange rate changes on cash and cash equivalents

 

261

 

 

(10,230

)

 
Increase in cash and cash equivalents

 

34,638

 

 

45,812

 

 
Cash and cash equivalents at end of period

$

916,963

 

$

1,134,752

 

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

2022

2023

GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1
 
Americas

47%

45%

45%

46%

46%

44%

China

16%

13%

17%

13%

15%

17%

Other Asia

18%

18%

17%

18%

18%

18%

Europe, Middle East and Africa

14%

18%

16%

17%

16%

15%

Japan

5%

6%

5%

6%

5%

6%

Total

100%

100%

100%

100%

100%

100%

 
 
Revenue Mix by Product Category (% of Total Revenue)

2022

2023

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

22%

23%

22%

22%

22%

20%

Digital IC Design and Signoff

27%

27%

29%

28%

28%

25%

Functional Verification, including Emulation and Prototyping Hardware

28%

24%

25%

25%

26%

32%

IP

13%

14%

12%

12%

12%

11%

System Design and Analysis

10%

12%

12%

13%

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 24, 2023
(Unaudited)
   
  Three Months Ending Year Ending
  June 30, 2023 December 31, 2023
  Forecast Forecast
   
GAAP operating margin as a percent of total revenue  

 29% - 30% 

 

 30% - 31% 

 

 

 

 

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

 

 

 

Stock-based compensation expense  

8%

 

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;  

 40% - 41% 

 

 41% - 42% 

   
�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 24, 2023
(Unaudited)
   
  Three Months Ending Year Ending
  June 30, 2023 December 31, 2023
  Forecast Forecast
   
Diluted net income per share on a GAAP basis    $0.73 to $0.77   $3.26 to $3.34 
   
Stock-based compensation expense  

0.29

 

1.21

Amortization of acquired intangibles  

0.05

 

0.21

Acquisition and integration-related costs  

0.04

 

0.16

Non-qualified deferred compensation expenses  

-

 

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  

0.04

 

0.12

     
Diluted net income per share on a non-GAAP basis�nbsp;    $1.15 to $1.19   $4.96 to $5.04 
   
   
   
   
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of April 24, 2023
(Unaudited)
   
   
  Three Months Ending Year Ending
  June 30, 2023 December 31, 2023
($ in millions)   Forecast Forecast
   
Net income on a GAAP basis  

 $199 to $210 

 

 $889 to $911 

 

 

 

 

Stock-based compensation expense  

79

 

330

Amortization of acquired intangibles  

15

 

58

Acquisition and integration-related costs  

12

 

43

Non-qualified deferred compensation expenses  

-

 

3

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

-

 

(3)

Income tax effect of non-GAAP adjustments  

10

 

34

     
Net income on a non-GAAP basis�nbsp;    $315 to $326   $1,354 to $1,376 
   
   
�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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