CADENCE DESIGN SYSTEMS, INC. 
SAN JOSE, Calif., April 27, 2015 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the first quarter of fiscal year 2015.
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Cadence reported first quarter 2015 revenue of $411 million, compared to revenue of $379 million reported for the same period in 2014. On a GAAP basis, Cadence recognized net income of $36 million, or $0.12 per share on a diluted basis, in the first quarter of 2015, compared to net income of $33 million, or $0.11 per share on a diluted basis, for the same period in 2014.
Using the non-GAAP measure defined below, net income in the first quarter of 2015 was $72 million, or $0.23 per share on a diluted basis, as compared to net income of $59 million, or $0.20 per share on a diluted basis, for the same period in 2014.
"Cadence continued its excellent record of innovation and execution in the first quarter," said Lip-Bu Tan, president and chief executive officer. "We achieved strong financial results, expanded relationships with key customers and ecosystem partners, launched Innovus, our next-generation digital implementation system, to enthusiastic customer support, and Cadence was recognized in FORTUNE Magazine's 2015 list of '100 Best Companies to Work For.'"
"Successful execution of a sound strategy drives superior results," added Geoff Ribar, senior vice president and chief financial officer. "With the progress we are making on our strategy and confidence in Cadence's prospects, we are pleased to announce that we are replacing our existing stock repurchase program with an expanded program to repurchase $450 million over the next two years."
Cadence expects to repurchase approximately $56.25 million of its common stock per quarter, beginning with the second quarter of 2015. The actual timing and amount of repurchases will be based on corporate and regulatory requirements and other factors. The stock repurchase program may be suspended, modified or discontinued at any time.
Business Outlook
For the second quarter of 2015, the company expects total revenue in the range of $410 million to $420 million. Second quarter GAAP net income per diluted share is expected to be in the range of $0.14 to $0.16. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.23 to $0.25.
For 2015, the company expects total revenue in the range of $1.680 billion to $1.720 billion. On a GAAP basis, net income per diluted share for 2015 is expected to be in the range of $0.60 to $0.70. Using the non-GAAP measure defined below, net income per diluted share for 2015 is expected to be in the range of $0.96 to $1.06.
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 first quarter 2015 financial results audio webcast today, April 27, 2015, 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 27, 2015 at 5 p.m. (Pacific) and ending June 19, 2015 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/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 Innovus 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 first quarter 2015 financial results and Cadence's intention to repurchase shares of its common stock under its share repurchase plan, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, 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 Securities and Exchange Commission. These include Cadence's most recent reports on Form 10-K and Form 10-Q, including Cadence's future filings.
GAAP to Non-GAAP Reconciliation
To supplement Cadence's financial results presented on a generally accepted accounting principles, or 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, and is calculated by taking GAAP net income and excluding, as applicable, amortization of intangible assets and debt discount related to our convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, special charges (comprised of costs related to a voluntary retirement program and executive severance costs), 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. For 2015, Cadence is applying a non-GAAP income tax rate of 23 percent, down from 26 percent used in fiscal 2014, based on forecasted increases in foreign earnings that are expected to lower Cadence's long-term non-GAAP effective income tax rate.
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 useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations, facilitates comparisons to the company's historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence's management also uses non-GAAP net income internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors and potential 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 encouraged to look at the GAAP results as the best measure of financial performance.
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
------------------
April 4, 2015 March 29, 2014
------------- --------------
(unaudited)
(in thousands)
Net income on a GAAP basis $36,259 $33,070
Amortization of acquired intangibles 16,404 12,786
Stock-based compensation expense 21,861 18,864
Non-qualified deferred compensation
expenses 527 2,063
Restructuring and other charges 4,359 396
Acquisition and integration-related
costs 3,750 7,118
Amortization of debt discount on
convertible notes 5,026 4,209
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* (1,263) (3,609)
Income tax effect of non-GAAP
adjustments (15,331) (15,510)
------- -------
Net income on a non-GAAP basis $71,592 $59,387
======= =======
* 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
------------------
April 4, 2015 March 29, 2014
------------- --------------
(unaudited)
(in thousands, except per share data)
Diluted net income per share on a
GAAP basis $0.12 $0.11
Amortization of acquired intangibles 0.05 0.04
Stock-based compensation expense 0.07 0.06
Non-qualified deferred compensation
expenses - 0.01
Restructuring and other charges 0.01 -
Acquisition and integration-related
costs 0.01 0.02
Amortization of debt discount on
convertible notes 0.02 0.02
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* - (0.01)
Income tax effect of non-GAAP
adjustments (0.05) (0.05)
----- -----
Diluted net income per share on a
non-GAAP basis $0.23 $0.20
===== =====
Shares used in calculation of diluted
net income per share -GAAP** 311,847 301,034
Shares used in calculation of diluted
net income per share - non-GAAP** 311,847 301,034
* 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 June 19, 2015, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the company's 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 to be 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 second quarter 2015 earnings release is published, which is currently scheduled for July 27, 2015.
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
Mark Plungy
Cadence Design Systems, Inc.
408-944-7039
publicrelations@cadence.com
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
April 4, 2015 and January 3, 2015
(In thousands)
(Unaudited)
April 4, January 3,
2015 2015
---- ----
Current assets:
Cash and cash equivalents $887,736 $932,161
Short-term investments 92,640 90,445
Receivables, net 133,924 122,492
Inventories 54,450 56,394
2015 notes hedges 429,847 523,930
Prepaid expenses and other 135,047 126,313
Total current assets 1,733,644 1,851,735
Property, plant and equipment, net of accumulated
depreciation of $560,774 and $552,551,
respectively 225,556 230,112
Goodwill 553,942 553,767
Acquired intangibles, net of accumulated amortization of
$169,013 and $154,814, respectively 344,450 360,932
Long-term receivables 3,619 3,644
Other assets 201,354 209,366
-------
Total assets $3,062,565 $3,209,556
========== ==========
Current liabilities:
Convertible notes $293,667 $342,499
2015 notes embedded conversion derivative 429,847 523,930
Accounts payable and accrued liabilities 178,474 225,375
Current portion of deferred revenue 324,448 301,287
Total current liabilities 1,226,436 1,393,091
--------- ---------
Long-term liabilities:
Long-term portion of deferred revenue 48,418 54,726
Long-term debt 348,705 348,676
Other long-term liabilities 75,816 79,489
Total long-term
liabilities 472,939 482,891
------- -------
Stockholders' equity 1,363,190 1,333,574
Total liabilities and stockholders' equity $3,062,565 $3,209,556
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended April 4, 2015 and March 29, 2014
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
------------------
April 4, March 29,
2015 2014
---- ----
Revenue:
Product and
maintenance $383,637 $357,350
Services 27,729 21,200
Total
revenue 411,366 378,550
------- -------
Costs and expenses:
Cost of product and
maintenance 42,059 42,197
Cost of
services 18,526 14,902
Marketing and
sales 100,268 98,323
Research and
development 162,996 146,466
General and
administrative 27,642 28,744
Amortization of
acquired
intangibles 6,231 5,210
Restructuring and
other charges 4,359 396
-----
Total costs
and expenses 362,081 336,238
------- -------
Income from
operations 49,285 42,312
Interest
expense (11,754) (7,268)
Other income,
net 4,781 3,382
Income
before
provision
for income
taxes 42,312 38,426
Provision for
income taxes 6,053 5,356
Net
income $36,259 $33,070
======= =======
Net income per share - basic $0.13 $0.12
===== =====
Net income per share - diluted $0.12 $0.11
===== =====
Weighted average common shares outstanding
-basic 284,523 281,615
======= =======
Weighted average common shares outstanding
-diluted 311,847 301,034
======= =======
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended April 4, 2015 and March 29, 2014
(In thousands)
(Unaudited)
Three Months Ended
------------------
April 4, March 29,
2015 2014
---- ----
Cash and cash equivalents
at beginning of period $932,161 $536,260
Cash flows from operating
activities:
Net income 36,259 33,070
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and
amortization 29,433 26,017
Amortization of debt
discount and fees 5,945 4,882
Stock-based compensation 21,861 18,864
Gain on investments, net (1,270) (3,651)
Deferred income taxes 1,864 2,245
Other non-cash items 929 2,344
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables (12,450) (108)
Inventories 1,682 (9,373)
Prepaid expenses and other (10,004) (9,753)
Other assets 3,627 3,157
Accounts payable and
accrued liabilities (44,754) (29,680)
Deferred revenue 16,812 (5,508)
Other long-term
liabilities (3,246) (4,408)
Net cash provided by
operating activities 46,688 28,098
------ ------
Cash flows from investing
activities:
Purchases of available-
for-sale securities (33,161) (47,005)
Proceeds from the sale of
available-for-sale
securities 20,551 32,586
Proceeds from the maturity
of available-for-sale
securities 10,350 13,905
Proceeds from the sale of
long-term investments 1,364 -
Purchases of property,
plant and equipment (7,520) (6,252)
Cash paid in business
combinations and asset
acquisitions, net of cash
acquired - (27,422)
Net cash used for investing
activities (8,416) (34,188)
------ -------
Cash flows from financing
activities:
Payment of convertible
notes (53,862) -
Payment of convertible
notes embedded conversion
derivative liability (77,139) -
Proceeds from convertible
notes hedges 77,139 -
Payment of acquisition-
related contingent
consideration - (1,835)
Tax effect related to
employee stock
transactions allocated to
equity 6,482 1,827
Proceeds from issuance of
common stock 24,609 23,377
Stock received for payment
of employee taxes on
vesting of restricted
stock (14,114) (10,981)
Payments for repurchases of
common stock (36,797) (12,517)
Net cash used for financing
activities (73,682) (129)
------- ----
Effect of exchange rate
changes on cash and cash
equivalents (9,015) 2,720
------ -----
Decrease in cash and cash
equivalents (44,425) (3,499)
------- ------
Cash and cash equivalents
at end of period $887,736 $532,761
======== ========
Cadence Design Systems, Inc.
As of April 27, 2015
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
Three Months Ending Year Ending
July 4, 2015 January 2, 2016
Forecast Forecast
-------- --------
Diluted net income per share on a GAAP basis $0.14 to $0.16 $0.60 to $0.70
Amortization of acquired intangibles 0.05 0.20
Stock-based compensation expense 0.07 0.30
Non-qualified deferred compensation expenses - -
Restructuring and other charges - 0.01
Acquisition and integration-related costs 0.01 0.03
Amortization of debt discount on convertible notes 0.01 0.02
Other income or expense related to investments and non-qualified
deferred compensation plan assets* - -
Income tax effect of non-GAAP adjustments (0.05) (0.20)
Diluted net income per share on a non-GAAP basis $0.23 to $0.25 $0.96 to $1.06
============== ==============
* Includes, as applicable, equity in
losses or income from investments,
write-down of investments, gains
or losses on sale of investments
and gains or losses on non-
qualified deferred compensation
plan assets recorded in other
income or expense.
Cadence Design Systems, Inc.
As of April 27, 2015
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
July 4, 2015 January 2, 2016
($ in millions) Forecast Forecast
-------- --------
Net income on a GAAP basis $45 to $51 $186 to $218
Amortization of acquired intangibles 16 64
Stock-based compensation expense 23 95
Non-qualified deferred compensation expenses - 1
Restructuring and other charges - 4
Acquisition and integration-related costs 2 8
Amortization of debt discount on convertible notes 2 7
Other income or expense related to investments and non-qualified
deferred compensation plan assets* - (1)
Income tax effect of non-GAAP adjustments (15) (64)
Net income on a non-GAAP basis $73 to $79 $300 to $332
========== ============
* 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.
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2014 2015
---- ----
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1
--------- --- --- --- --- ---- ---
Americas 45% 44% 46% 47% 45% 47%
Asia 23% 23% 22% 22% 23% 24%
Europe, Middle East and
Africa 20% 22% 21% 21% 21% 19%
Japan 12% 11% 11% 10% 11% 10%
Total 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2014 2015
---- ----
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1
------------- --- --- --- --- ---- ---
Functional Verification,
including Emulation Hardware 23% 21% 23% 21% 22% 23%
Digital IC Design and Signoff 30% 30% 29% 28% 29% 28%
Custom IC Design 27% 28% 27% 28% 27% 27%
System Interconnect and
Analysis 10% 11% 10% 11% 11% 11%
IP 10% 10% 11% 12% 11% 11%
Total 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc.
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures
For the Three Months Ended April 4, 2015
(In thousands)
(Unaudited)
Three Months Ended
April 4, 2015
-------------
GAAP Adjustments Non-GAAP
Revenue:
Product and
maintenance $383,637 $ - $383,637
Services 27,729 - 27,729
Total
revenue 411,366 - 411,366
------- --- -------
Costs and expenses:
Cost of product
and maintenance 42,059 (10,746) (A) 31,313
Cost of
services 18,526 (838) (A) 17,688
Marketing and
sales 100,268 (5,756) (A) 94,512
Research and
development 162,996 (15,153) (A) 147,843
General and
administrative 27,642 (3,818) (A) 23,824
Amortization of
acquired
intangibles 6,231 (6,231) (A) -
Restructuring and
other charges 4,359 (4,359) -
Total costs and
expenses 362,081 (46,901) 315,180
------- ------- -------
Income from
operations 49,285 46,901 96,186
Interest
expense (11,754) 5,026 (B) (6,728)
Other income,
net 4,781 (1,263) (C) 3,518
---
Income
before
provision
for income
taxes 42,312 50,664 92,976
Provision for
income taxes 6,053 15,331 (D) 21,384
---
Net income $36,259 $35,333 $71,592
======= ======= =======
Notes:
(A) For the three months ended
April 4, 2015, adjustments to
GAAP are as follows for the
line items specified:
Amortization of Stock-based Non-qualified Acquisition and Total
acquired compensation deferred integration- adjustments
intangibles expense compensation related costs
expenses
--------
Cost of product and
maintenance $10,173 $569 $4 $ - $10,746
Cost of services - 832 6 - 838
Marketing and sales - 5,447 34 275 5,756
Research and development - 11,377 362 3,414 15,153
General and administrative - 3,636 121 61 3,818
Amortization of acquired
intangibles 6,231 - - - 6,231
Total $16,404 $21,861 $527 $3,750 $42,542
=======
(B) Amortization of debt discount
related to convertible notes
(C) Other income or expense
related to investments and non-
qualified deferred compensation
plan assets
(D) Income tax effect of non-GAAP
adjustments
Cadence Design Systems, Inc.
Supplemental Reconciliation of Certain GAAP to Non-GAAP Measures
For the Three Months Ended March 29, 2014
(In thousands)
(Unaudited)
Three Months Ended
March 29, 2014
--------------
GAAP Adjustments Non-GAAP
Revenue:
Product and
maintenance $357,350 $ - $357,350
Services 21,200 - 21,200
Total revenue 378,550 - 378,550
------- --- -------
Costs and expenses:
Cost of product
and maintenance 42,197 (8,082) (E) 34,115
Cost of services 14,902 (739) (E) 14,163
Marketing and
sales 98,323 (5,695) (E) 92,628
Research and
development 146,466 (15,751) (E) 130,715
General and
administrative 28,744 (5,354) (E) 23,390
Amortization of
acquired
intangibles 5,210 (5,210) (E) -
Restructuring and
other charges 396 (396) -
Total costs
and expenses 336,238 (41,227) 295,011
------- ------- -------
Income from
operations 42,312 41,227 83,539
Interest
expense (7,268) 4,209 (F) (3,059)
Other income
(expense), net 3,382 (3,609) (G) (227)
---
Income
before
provision
for income
taxes 38,426 41,827 80,253
Provision for
income taxes 5,356 15,510 (H) 20,866
---
Net income $33,070 $26,317 $59,387
======= ======= =======
Notes:
(E) For the three months ended
March 29, 2014, adjustments
to GAAP are as follows for
the line items specified:
Amortization of Stock-based Non-qualified Acquisition and Total
acquired compensation deferred integration- adjustments
intangibles expense compensation related costs
expenses
--------
Cost of product and
maintenance $7,576 $482 $24 $ - $8,082
Cost of services - 703 36 - 739
Marketing and sales - 4,596 111 988 5,695
Research and development - 9,667 1,123 4,961 15,751
General and administrative - 3,416 769 1,169 5,354
Amortization of acquired
intangibles 5,210 - - - 5,210
Total $12,786 $18,864 $2,063 $7,118 $40,831
=======
(F) Amortization of debt discount
related to convertible notes
(G) Other income or expense
related to investments and non-
qualified deferred compensation
plan assets
(H) Income tax effect of non-GAAP
adjustments
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SOURCE Cadence Design Systems, Inc.
