CADENCE DESIGN SYSTEMS, INC. 
SAN JOSE, Calif., Feb. 3, 2016 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2015.
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Cadence reported fourth quarter 2015 revenue of $441 million, compared to revenue of $423 million reported for the same period in 2014. On a GAAP basis, Cadence recognized net income of $80 million, or $0.26 per share on a diluted basis, in the fourth quarter of 2015, compared to net income of $65 million, or $0.21 per share on a diluted basis, for the same period in 2014. Revenue for 2015 totaled $1.702 billion, compared to revenue of $1.581 billion for 2014. Net income for 2015 was $252 million, or $0.81 per share on a diluted basis, compared to net income of $159 million, or $0.52 per share on a diluted basis, for 2014.
Using the non-GAAP measure defined below, net income in the fourth quarter of 2015 was $95 million, or $0.31 per share on a diluted basis, as compared to net income of $84 million, or $0.27 per share on a diluted basis, for the same period in 2014. For 2015, non-GAAP net income was $341 million, or $1.09 per share on a diluted basis, compared to non-GAAP net income of $287 million, or $0.94 per share on a diluted basis, in 2014.
"In 2015, Cadence produced excellent financial results and continued innovating with the launch of nine new products, including Genus(TM) Synthesis, Innovus(TM) Implementation, the Palladium(®) Z1 Enterprise Emulation Platform and the Tensilica(®) Vision P5 processor. We expanded our digital business with additional market-shaping customers, and conducted pioneering work at the advanced nodes." said Lip-Bu Tan, president and chief executive officer. "Strong customer demand for the new Palladium Z1 helped drive robust hardware sales in the fourth quarter. Looking ahead to 2016, while we face many industry challenges, we are confident that our innovative technologies and the execution of our strategies will enable us to continue to drive growth and deliver enhanced shareholder value."
"Superb execution led to strong results for Q4 and fiscal 2015 in what continues to be a challenging environment." said Geoff Ribar, senior vice president and chief financial officer. "In 2015, we achieved strong revenue growth, profitability and cash flow that exceeded our expectations, and we initiated a $1.2 billion capital return program."
On January 28, 2016, Cadence entered into a $300 million three-year senior unsecured non-amortizing term loan facility with a group of seven lending institutions. The interest rate will float at a margin of 112.5 basis points over LIBOR, and the initial interest rate is approximately 1.75%. The proceeds from the term loan facility will be used for general corporate purposes, including the repurchase of our common stock. At the same time, Cadence also drew down $50 million on its existing revolving credit facility.
CFO Commentary
Commentary on the fourth quarter and fiscal year 2015 financial results by Geoff Ribar, senior vice president and chief financial officer, is available at www.cadence.com/company/investor_relations.
Business Outlook
For the first quarter of 2016, the company expects total revenue in the range of $440 million to $450 million. First quarter GAAP net income per diluted share is expected to be in the range of $0.17 to $0.19. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.26 to $0.28.
For 2016, the company expects total revenue in the range of $1.790 billion to $1.840 billion. On a GAAP basis, net income per diluted share for 2016 is expected to be in the range of $0.72 to $0.82. Using the non-GAAP measure defined below, net income per diluted share for 2016 is expected to be in the range of $1.15 to $1.25.
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 fourth quarter and fiscal year 2015 financial results audio webcast today, February 3, 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 February 3, 2016 at 5 p.m. (Pacific) and ending March 18, 2016 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, Genus, Innovus, Palladium and Tensilica 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 fourth quarter and fiscal year 2015 financial results and term loan facility, 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 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 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 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. 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 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 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
------------------
January 2, 2016 January 3,
2015
--------------- -----------
(unaudited)
(in thousands)
Net income on a
GAAP basis $80,374 $65,030
Amortization of
acquired
intangibles 15,826 17,559
Stock-based
compensation
expense 24,660 22,974
Non-qualified
deferred
compensation
expenses 575 409
Restructuring and
other charges
(credits) 347 (1,145)
Acquisition and
integration-
related costs 1,596 4,280
Special charges* 916 -
Amortization of
debt discount on
convertible notes - 4,782
Other income or
expense related to
investments and
non-qualified
deferred
compensation plan
assets** (579) (1,484)
Income tax effect
of non-GAAP
adjustments (28,627) (27,987)
------- -------
Net income on a
non-GAAP basis $95,088 $84,418
======= =======
* Comprised of executive
severance costs.
** 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.
Net Income
Reconciliation Years Ended
-----------
January 2, 2016 January 3,
2015
--------------- -----------
(unaudited)
(in thousands)
Net income on a
GAAP basis $252,417 $158,898
Amortization of
acquired
intangibles 64,248 60,924
Stock-based
compensation
expense 92,341 83,792
Non-qualified
deferred
compensation
expenses (credits) (369) 3,415
Restructuring and
other charges 4,511 10,252
Acquisition and
integration-
related costs 7,975 24,620
Special charges* 916 10,816
Amortization of
debt discount on
convertible notes 7,496 17,602
Other income or
expense related to
investments and
non-qualified
deferred
compensation plan
assets** (1,979) (4,629)
Income tax effect
of non-GAAP
adjustments (86,650) (78,723)
------- -------
Net income on a
non-GAAP basis $340,906 $286,967
======== ========
* Comprised of costs related to a
voluntary retirement program and
executive severance costs.
** 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
------------------
January 2, 2016 January 3,
2015
--------------- -----------
(unaudited)
(in thousands, except
per share data)
Diluted net income per
share on a GAAP basis $0.26 $0.21
Amortization of
acquired intangibles 0.05 0.06
Stock-based
compensation expense 0.08 0.07
Non-qualified deferred
compensation expenses - -
Restructuring and other
charges (credits) - -
Acquisition and
integration-related
costs 0.01 0.01
Special charges* - -
Amortization of debt
discount on
convertible notes - 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 $0.31 $0.27
===== =====
Shares used in
calculation of diluted
net income per share -
GAAP*** 310,512 310,273
Shares used in
calculation of diluted
net income per share -
non-GAAP*** 310,512 310,273
* Comprised of executive severance
costs.
** 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.
Diluted Net Income per
Share Reconciliation Years Ended
-----------
January 2, 2016 January 3,
2015
--------------- -----------
(unaudited)
(in thousands, except per
share data)
Diluted net income per
share on a GAAP basis $0.81 $0.52
Amortization of acquired
intangibles 0.21 0.20
Stock-based compensation
expense 0.30 0.27
Non-qualified deferred
compensation expenses
(credits) - 0.01
Restructuring and other
charges 0.01 0.03
Acquisition and
integration-related
costs 0.03 0.08
Special charges* - 0.04
Amortization of debt
discount on convertible
notes 0.02 0.06
Other income or expense
related to investments
and non-qualified
deferred compensation
plan assets** (0.01) (0.01)
Income tax effect of non-
GAAP adjustments (0.28) (0.26)
----- -----
Diluted net income per
share on a non-GAAP
basis $1.09 $0.94
===== =====
Shares used in calculation
of diluted net income per
share -GAAP*** 312,302 306,775
Shares used in calculation
of diluted net income per
share - non-GAAP*** 312,302 306,775
* Comprised of costs related to a
voluntary retirement program and
executive severance costs.
** 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 March 18, 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 first quarter 2016 earnings release is published, which is currently scheduled for April 25, 2016.
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
January 2, 2016 and January 3, 2015
(In thousands)
(Unaudited)
January 2, 2016 January 3, 2015
--------------- ---------------
Current assets:
Cash and cash equivalents $616,686 $932,161
Short-term investments 94,498 90,445
Receivables, net 164,848 122,492
Inventories 56,762 56,394
2015 notes hedges - 523,930
Prepaid expenses and other 31,967 126,313
-----------------
Total current assets 964,761 1,851,735
Property, plant and equipment, net of accumulated
depreciation of $581,345 and $552,551,
respectively 228,599 230,112
Goodwill 551,772 553,767
Acquired intangibles, net of accumulated amortization of
$216,589 and $154,814, respectively 296,482 360,932
Long-term receivables 4,498 3,644
Other assets 304,903 209,366
-------
Total assets $2,351,015 $3,209,556
========== ==========
Current liabilities:
Convertible notes $ - $342,499
2015 notes embedded conversion derivative - 523,930
Accounts payable and accrued liabilities 238,022 225,375
Current portion of deferred revenue 298,285 301,287
-----------------
Total current liabilities 536,307 1,393,091
------- ---------
Long-term liabilities:
Long-term portion of deferred revenue 30,209 54,726
Long-term debt 348,788 348,676
Other long-term liabilities 59,596 79,489
Total long-term liabilities 438,593 482,891
------- -------
Stockholders' equity 1,376,115 1,333,574
Total liabilities and stockholders' equity $2,351,015 $3,209,556
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended January 2, 2016 and January 3, 2015
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
------------------ -----------
January 2, 2016 January 3, 2015 January 2, 2016 January 3, 2015
--------------- --------------- --------------- ---------------
Revenue:
Product and
maintenance $413,489 $393,223 $1,578,944 $1,479,151
Services 27,590 29,875 123,147 101,781
------
Total revenue 441,079 423,098 1,702,091 1,580,932
------- ------- --------- ---------
Costs and expenses:
Cost of product
and maintenance 40,679 39,475 155,659 156,333
Cost of services 20,223 18,640 82,794 67,373
Marketing and
sales 103,552 102,367 402,432 399,688
Research and
development 161,970 155,124 637,567 603,006
General and
administrative 26,789 26,939 109,982 113,619
Amortization of
acquired
intangibles 5,679 6,912 23,716 24,017
Restructuring and
other charges
(credits) 347 (1,145) 4,511 10,252
---
Total costs
and expenses 359,239 348,312 1,416,661 1,374,288
------- ------- --------- ---------
Income from operations 81,840 74,786 285,430 206,644
Interest expense (4,200) (11,961) (28,311) (34,121)
Other income, net 2,510 3,879 10,477 8,479
-----
Income before provision
(benefit) for income taxes 80,150 66,704 267,596 181,002
Provision
(benefit) for
income taxes (224) 1,674 15,179 22,104
-----
Net income $80,374 $65,030 $252,417 $158,898
======= ======= ======== ========
Net income per share - basic $0.27 $0.23 $0.88 $0.56
===== ===== ===== =====
Net income per share - diluted $0.26 $0.21 $0.81 $0.52
===== ===== ===== =====
Weighted average common shares
outstanding -basic 297,433 283,928 288,018 283,349
======= ======= ======= =======
Weighted average common shares
outstanding -diluted 310,512 310,273 312,302 306,775
======= ======= ======= =======
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended January 2, 2016 and January 3, 2015
(In thousands)
(Unaudited)
Years Ended
-----------
January 2, January 3,
2016 2015
---- ----
Cash and cash equivalents
at beginning of year $932,161 $536,260
Cash flows from operating
activities:
Net income 252,417 158,898
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 118,165 115,634
Amortization of debt
discount and fees 9,402 20,529
Stock-based compensation 92,341 83,792
Gain on investments, net (2,124) (4,707)
Deferred income taxes (13,148) 12,478
Other non-cash items 646 6,854
Changes in operating assets
and liabilities, net of
effect of acquired
businesses:
Receivables (44,732) (17,925)
Inventories (1,120) (11,708)
Prepaid expenses and other (1,380) (2,501)
Other assets (1,558) (42,181)
Accounts payable and
accrued liabilities 15,321 3,856
Deferred revenue (27,019) (11,860)
Other long-term
liabilities (19,011) 5,563
Net cash provided by
operating activities 378,200 316,722
------- -------
Cash flows from investing
activities:
Purchases of available-
for-sale securities (96,531) (124,165)
Proceeds from the sale of
available-for-sale
securities 60,949 85,384
Proceeds from the maturity
of available-for-sale
securities 31,316 46,612
Proceeds from the sale of
long-term investments 4,570 1,085
Purchases of property,
plant and equipment (44,808) (39,810)
Cash paid in business
combinations and asset
acquisitions, net of cash
acquired - (167,121)
Net cash used for investing
activities (44,504) (198,015)
------- --------
Cash flows from financing
activities:
Proceeds from issuance of
debt - 348,649
Proceeds from revolving
credit facility - 100,000
Payment on revolving credit
facility - (100,000)
Payment of convertible
notes (349,999) (1)
Payment of convertible
notes embedded conversion
derivative liability (530,643) (1)
Proceeds from convertible
notes hedges 530,643 1
Payment of debt issuance
costs - (6,500)
Payment of acquisition-
related contingent
consideration - (1,835)
Excess tax benefits from
stock-based compensation 15,591 7,583
Proceeds from issuance of
common stock 74,938 65,913
Stock received for payment
of employee taxes on
vesting of restricted
stock (33,651) (24,727)
Payments for repurchases of
common stock (333,189) (100,117)
Net cash provided by (used
for) financing activities (626,310) 288,965
-------- -------
Effect of exchange rate
changes on cash and cash
equivalents (22,861) (11,771)
------- -------
Increase (decrease) in cash
and cash equivalents (315,475) 395,901
-------- -------
Cash and cash equivalents
at end of year $616,686 $932,161
======== ========
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (%
of Total Revenue)
2014 2015
---- ----
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
--------- --- --- --- --- ---- --- --- --- --- ----
Americas 45% 44% 46% 47% 45% 47% 48% 48% 48% 47%
Asia 23% 23% 22% 22% 23% 24% 23% 25% 25% 24%
Europe, Middle East and
Africa 20% 22% 21% 21% 21% 19% 20% 18% 17% 19%
Japan 12% 11% 11% 10% 11% 10% 9% 9% 10% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group
(% of Total Revenue)
2014 2015
---- ----
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
------------- --- --- --- --- ---- --- --- --- --- ----
Functional Verification,
including Emulation Hardware 23% 21% 23% 21% 22% 23% 21% 23% 25% 23%
Digital IC Design and Signoff 30% 30% 29% 28% 29% 28% 29% 28% 28% 28%
Custom IC Design 27% 28% 27% 28% 27% 27% 27% 26% 25% 26%
System Interconnect and
Analysis 10% 11% 10% 11% 11% 11% 11% 10% 10% 11%
IP 10% 10% 11% 12% 11% 11% 12% 13% 12% 12%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc.
As of February 3, 2016
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
Three Months Ending Year Ending
April 2, 2016 December 31, 2016
Forecast Forecast
-------- --------
Diluted net income per share on a GAAP basis $0.17 to $0.19 $0.72 to $0.82
Amortization of acquired intangibles 0.05 0.20
Stock-based compensation expense 0.08 0.38
Acquisition and integration-related costs - -
Other income or expense related to investments and non-qualified
deferred compensation plan assets* (0.01) (0.01)
Income tax effect of non-GAAP adjustments (0.03) (0.14)
Diluted net income per share on a non-GAAP basis** $0.26 to $0.28 $1.15 to $1.25
============== ==============
Cadence Design Systems, Inc.
As of February 3, 2016
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
April 2, 2016 December 31, 2016
($ in millions) Forecast Forecast
-------- --------
Net income on a GAAP basis $50 to $56 $206 to $235
Amortization of acquired intangibles 16 58
Stock-based compensation expense 25 109
Acquisition and integration-related costs - 1
Other income or expense related to investments and non-qualified
deferred compensation plan assets* (2) (2)
Income tax effect of non-GAAP adjustments (10) (41)
Net income on a non-GAAP basis** $79 to $85 $331 to $360
========== ============
**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 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.
