CADENCE DESIGN SYSTEMS, INC. 
SAN JOSE, Calif., Oct. 24, 2016 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter 2016.
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Cadence reported third quarter 2016 revenue of $446 million, compared to revenue of $434 million reported for the same period in 2015. On a GAAP basis, Cadence recognized net income of $65 million, or $0.23 per share on a diluted basis, in the third quarter of 2016, compared to net income of $78 million, or $0.25 per share on a diluted basis, for the same period in 2015.
Using the non-GAAP measure defined below, net income in the third quarter of 2016 was $85 million, or $0.30 per share on a diluted basis, as compared to net income of $89 million, or $0.28 per share on a diluted basis, for the same period in 2015.
"We continued to make progress on our System Design Enablement strategy in the third quarter, which resulted in solid financial results," said Lip-Bu Tan, president and chief executive officer. "Our digital and signoff solutions maintained their momentum with market-shaping customers; five new systems customers, including a major aerospace company, adopted our Palladium(®) Z1 emulation platform; and we increased our expansion into automotive functional safety verification."
"Our results for the third quarter reflect our relentless focus on innovation and execution," said Geoff Ribar, senior vice president and chief financial officer. "We believe that we are well-positioned for the rest of the year as we continue to execute on our strategic priorities and return capital to shareholders. In the third quarter, we repurchased 9.6 million shares of stock, and we have now repurchased 42.5 million shares for $960 million under the current $1.2 billion program, representing approximately 15 percent of shares outstanding as of July 4, 2015."
CFO Commentary
Commentary on the third quarter 2016 financial results by Geoff Ribar, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.
Business Outlook
For the fourth quarter of 2016, the company expects total revenue in the range of $463 million to $473 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.18 to $0.20. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.32 to $0.34.
For 2016, the company expects total revenue in the range of $1.810 billion to $1.820 billion. On a GAAP basis, net income per diluted share for 2016 is expected to be in the range of $0.74 to $0.76. Using the non-GAAP measure defined below, net income per diluted share for 2016 is expected to be in the range of $1.19 to $1.21.
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 Geoff Ribar, senior vice president and chief financial officer, will host a third quarter 2016 financial results audio webcast today, October 24, 2016, 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 24, 2016 at 5 p.m. (Pacific) and ending December 16, 2016 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.
About Cadence
Cadence enables global electronic design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence(®) software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company and its products and services is available at www.cadence.com.
Cadence, the Cadence logo and Palladium 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 2016 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 the reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.
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 and debt discount related to convertible notes, stock-based compensation expense, acquisition and integration-related costs including retention expenses, special charges, 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
------------------
October 1, 2016 October 3, 2015
--------------- ---------------
(unaudited)
(in
thousands)
Net
income
on a
GAAP
basis $64,712 $77,624
Amortization
of
acquired
intangibles 14,482 15,794
Stock-
based
compensation
expense 29,998 24,117
Non-
qualified
deferred
compensation
expenses
(credits) 921 (1,508)
Restructuring
and
other
charges 101 303
Acquisition
and
integration-
related
costs 1,841 948
Other
income plan
or assets*
expense
related
to
investments
and non-
qualified
deferred
compensation (806) 174
Income
tax
effect
of non-
GAAP
adjustments (26,424) (28,601)
------- -------
Net
income
on a
non-
GAAP
basis $84,825 $88,851
======= =======
* 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
------------------
October 1, 2016 October 3, 2015
--------------- ---------------
(unaudited)
(in thousands,
except per
share data)
Diluted net
income per
share on a
GAAP basis $0.23 $0.25
Amortization
of acquired
intangibles 0.05 0.05
Stock-based
compensation
expense 0.10 0.08
Non-qualified
deferred
compensation
expenses
(credits) - (0.01)
Restructuring
and other
charges - -
Acquisition
and
integration-
related costs 0.01 -
Other income
or expense
related to
investments
and non-
qualified
deferred
compensation
plan assets* - -
Income tax
effect of
non-GAAP
adjustments (0.09) (0.09)
----- -----
Diluted net
income per
share on a
non-GAAP
basis $0.30 $0.28
===== =====
Shares used in
calculation
of diluted
net income
per share -
GAAP** 287,473 313,186
Shares used in
calculation
of diluted
net income
per share -
non-GAAP** 287,473 313,186
* 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 16, 2016, 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 the day when Cadence's fourth quarter and fiscal year 2016 earnings release is published, which is currently scheduled for February 1, 2017.
For more information, please contact:
Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com
Media and Industry Analysts
Craig Cochran
Cadence Design Systems, Inc.
408-944-7039
newsroom@cadence.com
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
October 1, 2016 and January 2, 2016
(In thousands)
(Unaudited)
October 1, 2016 January 2, 2016
--------------- ---------------
Current assets:
Cash and cash
equivalents $524,333 $616,686
Short-term
investments 8,503 94,498
Receivables,
net 152,025 164,848
Inventories 64,476 56,762
Prepaid
expenses and
other 42,953 31,441
-------------
Total current assets 792,290 964,235
Property, plant and equipment, net of
accumulated depreciation of $613,314
and $581,345, respectively
240,590 228,599
Goodwill 573,890 551,772
Acquired intangibles,
net of accumulated
amortization of
$253,562 and $216,589,
respectively 273,381 296,482
Long-term receivables 14,961 4,498
Other assets 298,975 299,929
-------
Total assets $2,194,087 $2,345,515
========== ==========
Current liabilities:
Revolving
credit
facility $50,000 $ -
Accounts
payable and
accrued
liabilities 192,948 238,022
Current
portion of
deferred
revenue 288,373 298,285
-----------
Total current liabilities 531,321 536,307
------- -------
Long-term liabilities:
Long-term
portion of
deferred
revenue 36,338 30,209
Long-term
debt 643,277 343,288
Other long-
term
liabilities 56,355 59,596
Total long-term
liabilities 735,970 433,093
------- -------
Stockholders' equity 926,796 1,376,115
Total liabilities and
stockholders' equity $2,194,087 $2,345,515
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Nine Months Ended October 1, 2016 and October 3, 2015
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
October 1, October 3, October 1, October 3,
2016 2015 2016 2015
---- ---- ---- ----
Revenue:
Product and
maintenance $415,370 $396,867 $1,247,077 $1,165,455
Services 30,850 36,896 100,026 95,557
------
Total revenue 446,220 433,763 1,347,103 1,261,012
------- ------- --------- ---------
Costs and expenses:
Cost of product
and maintenance 38,740 41,206 125,881 114,980
Cost of services 17,867 24,005 54,563 62,571
Marketing and
sales 96,793 101,950 297,103 298,880
Research and
development 191,547 154,627 553,824 475,597
General and
administrative 30,441 28,084 95,129 83,193
Amortization of
acquired
intangibles 3,889 5,687 14,206 18,037
Restructuring and
other charges 101 303 14,613 4,164
---
Total costs
and expenses 379,378 355,862 1,155,319 1,057,422
------- ------- --------- ---------
Income from operations 66,842 77,901 191,784 203,590
Interest expense (6,053) (4,177) (17,306) (24,111)
Other income, net 2,836 1,839 10,441 7,967
-----
Income before provision
(benefit) for income taxes 63,625 75,563 184,919 187,446
Provision
(benefit) for
income taxes (1,087) (2,061) 20,310 15,403
-------
Net income $64,712 $77,624 $164,609 $172,043
======= ======= ======== ========
Net income per share - basic $0.23 $0.27 $0.57 $0.60
===== ===== ===== =====
Net income per share - diluted $0.23 $0.25 $0.56 $0.55
===== ===== ===== =====
Weighted average common shares
outstanding -basic 280,622 284,818 288,476 284,880
======= ======= ======= =======
Weighted average common shares
outstanding -diluted 287,473 313,186 295,369 312,899
======= ======= ======= =======
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended October 1, 2016 and October 3, 2015
(In thousands)
(Unaudited)
Nine Months Ended
-----------------
October 1, October 3,
2016 2015
---- ----
Cash and cash equivalents
at beginning of period $616,686 $932,161
Cash flows from operating
activities:
Net income 164,609 172,043
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 89,726 88,006
Amortization of debt
discount and fees 792 9,185
Stock-based compensation 79,986 67,681
Gain on investments, net (4,070) (1,434)
Gain on sale of property,
plant and equipment (482) -
Deferred income taxes 8,657 1,713
Other non-cash items 1,869 (69)
Changes in operating assets
and liabilities, net of
effect of acquired
businesses:
Receivables 2,873 (10,100)
Inventories (16,339) (1,861)
Prepaid expenses and other (12,135) (12,451)
Other assets (3,822) 300
Accounts payable and
accrued liabilities (46,585) (28,154)
Deferred revenue (10,823) (9,207)
Other long-term
liabilities (6,239) (20,303)
Net cash provided by
operating activities 248,017 255,349
------- -------
Cash flows from investing
activities:
Purchases of available-
for-sale securities (20,525) (81,300)
Proceeds from the sale of
available-for-sale
securities 55,418 50,806
Proceeds from the maturity
of available-for-sale
securities 52,362 25,550
Proceeds from the sale of
long-term investments 2,913 4,510
Proceeds from the sale of
property, plant and
equipment 482 -
Purchases of property,
plant and equipment (42,452) (34,093)
Cash paid in business
combinations and asset
acquisitions, net of cash
acquired (41,627) -
Net cash provided by (used
for) investing activities 6,571 (34,527)
----- -------
Cash flows from financing
activities:
Proceeds from term loan 300,000 -
Proceeds from revolving
credit facility 50,000 -
Payment of debt issuance
costs (622) -
Payment of convertible
notes - (349,999)
Payment of convertible
notes embedded conversion
derivative liability - (530,643)
Proceeds from convertible
notes hedges - 530,643
Excess tax benefits from
stock-based compensation - 16,940
Proceeds from issuance of
common stock 50,293 59,448
Stock received for payment
of employee taxes on
vesting of restricted
stock (35,532) (31,795)
Payments for repurchases of
common stock (720,196) (213,135)
Net cash used for financing
activities (356,057) (518,541)
-------- --------
Effect of exchange rate
changes on cash and cash
equivalents 9,116 (18,351)
----- -------
Decrease in cash and cash
equivalents (92,353) (316,070)
------- --------
Cash and cash equivalents
at end of period $524,333 $616,091
======== ========
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by
Geography (% of
Total Revenue)
2015 2016
---- ----
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3
--------- --- --- --- --- ---- --- --- ---
Americas 47% 48% 48% 48% 47% 49% 47% 46%
Asia 24% 23% 25% 25% 24% 22% 24% 27%
Europe, Middle East
and Africa 19% 20% 18% 17% 19% 19% 20% 19%
Japan 10% 9% 9% 10% 10% 10% 9% 8%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by
Product Group (%
of Total Revenue)
2015 2016
---- ----
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 Q3
------------- --- --- --- --- ---- --- --- ---
Functional
Verification,
including
Emulation and
Prototyping
Hardware 23% 21% 23% 25% 23% 26% 27% 24%
Digital IC Design
and Signoff 28% 29% 28% 28% 28% 30% 27% 28%
Custom IC Design 27% 27% 26% 25% 26% 25% 26% 27%
System Interconnect
and Analysis 11% 11% 10% 10% 11% 9% 10% 10%
IP 11% 12% 13% 12% 12% 10% 10% 11%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc.
As of October 24, 2016
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
Three Months Ending Year Ending
December 31, 2016 December 31, 2016
Forecast Forecast
-------- --------
Diluted net income per share
on a GAAP basis $0.18 to $0.20 $0.74 to $0.76
Amortization of acquired
intangibles 0.05 0.21
Stock-based compensation expense 0.11 0.37
Non-qualified deferred
compensation expenses - -
Restructuring and other charges* 0.04 0.09
Acquisition and integration-
related costs - 0.04
Other income or expense related to
investments and non-qualified
deferred compensation plan
assets**
- (0.01)
Income tax effect of non-GAAP
adjustments (0.06) (0.25)
Diluted net income per share
on a non-GAAP basis** $0.32 to $0.34 $1.19 to $1.21
============== ==============
Cadence Design Systems, Inc.
As of October 24, 2016
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
December 31, 2016 December 31, 2016
($ in millions) Forecast Forecast
-------- --------
Net income on a GAAP basis $50 to $56 $214 to $220
Amortization of acquired
intangibles 14 60
Stock-based compensation expense 29 109
Non-qualified deferred
compensation expenses - 1
Restructuring and other charges* 12 27
Acquisition and integration-
related costs 1 11
Other income or expense related to
investments and non-qualified
deferred compensation plan
assets** - (4)
Income tax effect of non-GAAP
adjustments (17) (73)
Net income on a non-GAAP
basis** $89 to $95 $345 to $351
========== ============
** 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
expected
costs
related to a
voluntary
retirement
program
being
offered in
the fourth
quarter of
2016.
** 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.
