press release

April 25, 2022, 4:05 p.m. EDT

Cadence Reports First Quarter 2022 Financial Results

SAN JOSE, Calif., (BUSINESS WIRE) -- Cadence Design Systems, Inc. /zigman2/quotes/207095682/composite CDNS +0.53% today announced results for the first quarter of 2022.

Cadence reported first quarter 2022 revenue of $902 million, compared to revenue of $736 million for the same period in 2021. On a GAAP basis, Cadence achieved operating margin of 35 percent and recognized net income of $235 million, or $0.85 per share on a diluted basis, in the first quarter of 2022, compared to operating margin of 28 percent and net income of $187 million, or $0.67 per share on a diluted basis, for the same period in 2021.

Using the non-GAAP measures defined below, operating margin for the first quarter of 2022 was 44 percent and net income was $324 million, or $1.17 per share on a diluted basis, compared to operating margin of 38 percent and net income of $231 million, or $0.83 per share on a diluted basis, for the same period in 2021.

“Q1 was a strong start of the year for Cadence, as we delivered outstanding results driven by broad-based strength across our diverse product portfolio,” said Anirudh Devgan, president and chief executive officer. “Our Intelligent System Design strategy aligns well with the generational secular trends that are fueling robust design activity, and our innovative solutions are accelerating growth in both our core and our new systems businesses across a rapidly expanding customer base.”

“Q1 results reflect the success we have with our customers and partners, as well as the solid execution from the Cadence team. We benefited from strong demand for our technologies,” said John Wall, senior vice president and chief financial officer. “We exceeded all key operating metrics for the quarter and are raising our full year guidance.”

CFO Commentary

Commentary on the first quarter 2022 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 second quarter of 2022, the company expects total revenue in the range of $825 million to $845 million. Second quarter GAAP operating margin is expected to be in the range of 29 percent to 30 percent and GAAP net income per diluted share is expected to be in the range of $0.59 to $0.63. Using the non-GAAP measures defined below, operating margin is expected to be in the range of 39 percent to 40 percent and net income per diluted share is expected to be in the range of $0.95 to $0.99.

For fiscal year 2022, the company expects total revenue in the range of $3.395 billion to $3.435 billion. On a GAAP basis, operating margin is expected to be in the range of 28.5 percent to 30 percent and GAAP net income per diluted share for 2022 is expected to be in the range of $2.51 to $2.59. Using the non-GAAP measures defined below, operating margin for 2022 is expected to be in the range of 38.5 percent to 40 percent and net income per diluted share for 2022 is expected to be in the range of $3.89 to $3.97.

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 could be 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 this normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

A schedule showing reconciliations of the 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, is included in this release.

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 2022 financial results audio webcast today, April 25, 2022, 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 25, 2022 at 5 p.m. (Pacific) and ending June 17, 2022 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 eight years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com .

© 2022 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 document includes forward-looking statements which are based on current expectations and preliminary assumptions 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 highly competitive industries in which it operates; (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 and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates and Cadence’s ability to access capital and debt markets; (vii) the acquisition of other companies or technologies or the failure to successfully integrate and operate them; (viii) 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; (ix) the effects of any litigation, regulatory or other proceedings to which Cadence is or may become a party; and (x) the duration, severity, volatility and effects of the COVID-19 pandemic and containment measures on Cadence, its employees, and its suppliers and customers, which may also have the effect of heightening the other risks described in this paragraph. In addition, the timing and amount of Cadence's repurchase of its common stock under the authorizations will be subject to business and market conditions, corporate and regulatory requirements, stock price, 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 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
  April 2, 2022 April 3, 2021
  (unaudited)
GAAP operating margin as a percent of total revenue 35% 28%
Reconciling items to non-GAAP operating margin as a percent of total revenue:    
Stock-based compensation expense 7% 7%
Amortization of acquired intangibles 2% 2%
Acquisition and integration-related costs 0% 1%
Restructuring 0% 0%
Non-qualified deferred compensation expenses (credits) 0% 0%
Non-GAAP operating margin as a percent of total revenue 44% 38%
Net Income Reconciliation Three Months Ended
  April 2, 2022 April 3, 2021
(in thousands) (unaudited)
Net income on a GAAP basis $ 235,335   $ 187,169  
Stock-based compensation expense   59,469     52,596  
Amortization of acquired intangibles   16,935     16,399  
Acquisition and integration-related costs   3,897     5,510  
Restructuring   12     (277 )
Non-qualified deferred compensation expenses (credits)   (2,568 )   1,898  
Other income or expense related to investments and non-qualified deferred compensation plan assets*   4,606     (3,332 )
Income tax effect of non-GAAP adjustments   5,938     (28,782 )
Net income on a non-GAAP basis $ 323,624   $ 231,181  
* 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
  April 2, 2022 April 3, 2021
(in thousands, except per share data) (unaudited)
Diluted net income per share on a GAAP basis $ 0.85   $ 0.67  
Stock-based compensation expense   0.22     0.19  
Amortization of acquired intangibles   0.06     0.06  
Acquisition and integration-related costs   0.01     0.02  
Restructuring        
Non-qualified deferred compensation expenses (credits)   (0.01 )    
Other income or expense related to investments and non-qualified deferred compensation plan assets*   0.02     (0.01 )
Income tax effect of non-GAAP adjustments   0.02     (0.10 )
Diluted net income per share on a non-GAAP basis $ 1.17   $ 0.83  
Shares used in calculation of diluted net income per share   276,918     280,140  
* 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 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 17, 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 second quarter 2022 earnings release is published, which is currently scheduled for July 25, 2022.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
April 2, 2022 and January 1, 2022
(In thousands)
(Unaudited)
 
April 2, 2022 January 1, 2022
 
Current assets:
Cash and cash equivalents $ 1,134,752 $ 1,088,940
Receivables, net   361,789   337,596
Inventories   110,213   115,721
Prepaid expenses and other   128,143   173,512
Total current assets   1,734,897   1,715,769
 
Property, plant and equipment, net   310,690   305,911
Goodwill   923,719   928,358
Acquired intangibles, net   219,110   233,265
Deferred taxes   787,111   763,770
Other assets   419,540   439,226
Total assets $ 4,395,067 $ 4,386,299
 
Current liabilities:
Accounts payable and accrued liabilities $ 360,547 $ 417,283
Current portion of deferred revenue   600,279   553,942
Total current liabilities   960,826   971,225
 
Long-term liabilities:
Long-term portion of deferred revenue   106,838   101,148
Long-term debt   347,792   347,588
Other long-term liabilities   219,428   225,663
Total long-term liabilities   674,058   674,399
 
Stockholders' equity   2,760,183   2,740,675
Total liabilities and stockholders' equity $ 4,395,067 $ 4,386,299
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended April 2, 2022 and April 3, 2021
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended
April 2, 2022 April 3, 2021
 
Revenue:
Product and maintenance $ 846,244   $ 699,054  
Services   55,522     36,974  
 
Total revenue   901,766     736,028  
 
Costs and expenses:
Cost of product and maintenance   72,795     64,906  
Cost of services   25,048     19,061  
Marketing and sales   140,186     132,826  
Research and development   290,895     270,992  
General and administrative   48,937     39,952  
Amortization of acquired intangibles   4,964     4,631  
Restructuring   12     (277 )
 
Total costs and expenses   582,837     532,091  
 
Income from operations   318,929     203,937  
 
Interest expense   (4,108 )   (4,217 )
Other income (expense), net   (4,900 )   2,701  
 
Income before provision for income taxes   309,921     202,421  
 
Provision for income taxes   74,586     15,252  
 
Net income $ 235,335   $ 187,169  
 
 
Net income per share - basic $ 0.86   $ 0.68  
 
Net income per share - diluted $ 0.85   $ 0.67  
 
Weighted average common shares outstanding - basic   272,431     274,021  
 
Weighted average common shares outstanding - diluted   276,918     280,140  
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended April 2, 2022 and April 3, 2021
(In thousands)
(Unaudited)
 
 
Three Months Ended
April 2, April 3,
  2022     2021  
 
Cash and cash equivalents at beginning of period $ 1,088,940   $ 928,432  
Cash flows from operating activities:
Net income   235,335     187,169  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization   34,825     36,218  
Amortization of debt discount and fees   268     264  
Stock-based compensation   59,469     52,596  
(Gain) loss on investments, net   2,038     (1,433 )
Deferred income taxes   (24,920 )   2,710  
Provisions for losses (recoveries) on receivables   (344 )   77  
ROU asset amortization and change in operating lease liabilities   926     (2,136 )
Other non-cash items   88     302  
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables   (28,426 )   (45,927 )
Inventories   4,580     (669 )
Prepaid expenses and other   44,419     (3,014 )
Other assets   11,588     6,260  
Accounts payable and accrued liabilities   (58,203 )   (80,769 )
Deferred revenue   56,225     59,166  
Other long-term liabilities   (1,260 )   (2,372 )
Net cash provided by operating activities   336,608     208,442  
 
Cash flows from investing activities:
Purchases of non-marketable investments   (1,000 )   -  
Purchases of property, plant and equipment   (18,130 )   (16,968 )
Purchases of intangible assets   (750 )   -  
Cash paid in business combinations, net of cash acquired   -     (189,262 )
Net cash used for investing activities   (19,880 )   (206,230 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock   45,673     46,384  
Stock received for payment of employee taxes on vesting of restricted stock   (56,343 )   (56,385 )
Payments for repurchases of common stock   (250,016 )   (172,267 )
Net cash used for financing activities   (260,686 )   (182,268 )
 
Effect of exchange rate changes on cash and cash equivalents   (10,230 )   (5,395 )
 
Increase (decrease) in cash and cash equivalents   45,812     (185,451 )
 
Cash and cash equivalents at end of period $ 1,134,752   $ 742,981  
Cadence Design Systems, Inc.
(Unaudited)
 
 
 
Revenue Mix by Geography (% of Total Revenue)
2021   2022
GEOGRAPHY Q1   Q2   Q3   Q4   Year   Q1
 
Americas 46% 44% 46% 43% 45% 47%
China 12% 14% 13% 12% 13% 16%
Other Asia 18% 19% 18% 21% 19% 18%
Europe, Middle East and Africa 18% 17% 17% 18% 17% 14%
Japan 6% 6% 6% 6% 6% 5%
Total 100% 100% 100% 100% 100% 100%
 
 
 
 
Revenue Mix by Product Category (% of Total Revenue)
2021     2022
PRODUCT CATEGORY Q1   Q2   Q3   Q4   Year     Q1
 
Custom IC Design and Simulation 23% 23% 23% 24% 23% 22%
Digital IC Design and Signoff 27% 28% 29% 29% 29% 27%
Functional Verification, including Emulation and Prototyping Hardware 26% 25% 23% 21% 24% 28%
IP 14% 13% 14% 14% 13% 13%
System Design and Analysis 10% 11% 11% 12% 11% 10%
Total 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of April 25, 2022
(Unaudited)
 
Three Months Ending   Year Ending
July 2, 2022   December 31, 2022
Forecast   Forecast
     
GAAP operating margin as a percent of total revenue 29% - 30%   28.5% - 30%
     
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 0%   0%
Non-qualified deferred compensation credits 0%   0%
     
Non-GAAP operating margin as a percent of total revenue+ 39% - 40%   38.5% - 40%
+ 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 25, 2022
(Unaudited)
 
Three Months Ending   Year Ending
July 2, 2022   December 31, 2022
Forecast   Forecast
     
Diluted net income per share on a GAAP basis $0.59 to $0.63   $2.51 to $2.59
     
Stock-based compensation expense 0.23   0.98
Amortization of acquired intangibles 0.05   0.19
Acquisition and integration-related costs 0.01   0.03
Non-qualified deferred compensation credits -   (0.01)
Other income or expense related to investments and non-qualified deferred compensation plan assets* -   0.02
Income tax effect of non-GAAP adjustments 0.07   0.17
     
Diluted net income per share on a non-GAAP basis+ $0.95 to $0.99   $3.89 to $3.97
 
 
 
 
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of April 25, 2022
(Unaudited)
 
 
Three Months Ending   Year Ending
July 2, 2022   December 31, 2022
($ in millions) Forecast   Forecast
     
Net income on a GAAP basis $164 to $175   $697 to $719
     
Stock-based compensation expense 64   272
Amortization of acquired intangibles 15   52
Acquisition and integration-related costs 1   8
Non-qualified deferred compensation credits -   (3)
Other income or expense related to investments and non-qualified deferred compensation plan assets* -   5
Income tax effect of non-GAAP adjustments 19   49
     
Net income on a non-GAAP basis+ $263 to $274   $1,080 to $1,102
+ 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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220424005073/en/

SOURCE: Cadence Design Systems, Inc.

Cadence Investor Relations
408-944-7100
investor_relations@cadence.com

Cadence Newsroom
408-944-7039
newsroom@cadence.com

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