CADENCE DESIGN SYSTEMS, INC. 
SAN JOSE, Calif., July 25, 2016 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the second quarter 2016.
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Cadence reported second quarter 2016 revenue of $453 million, compared to revenue of $416 million reported for the same period in 2015. On a GAAP basis, Cadence recognized net income of $49 million, or $0.17 per share on a diluted basis, in the second quarter of 2016, compared to net income of $58 million, or $0.19 per share on a diluted basis, for the same period in 2015.
Using the non-GAAP measure defined below, net income in the second quarter of 2016 was $86 million, or $0.29 per share on a diluted basis, as compared to net income of $85 million, or $0.27 per share on a diluted basis, for the same period in 2015.
"The second quarter was highlighted by strong business with systems companies across multiple vertical segments," said Lip-Bu Tan, president and chief executive officer. "Demand for our new Palladium(®) Z1 emulation platform led to another record quarter for hardware revenue, and we introduced the next generation of our OrCAD(®) and Allegro(®) families of printed circuit board design products with support for flexible board technology."
"Through strong execution Cadence again produced good financial results in a challenging environment," said Geoff Ribar, senior vice president and chief financial officer. "Since our current stock repurchase program began in Q3 of 2015, we have repurchased a total of 32.9 million shares for $720 million, representing approximately 11 percent of shares outstanding."
CFO Commentary
Commentary on the second 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 third quarter of 2016, the company expects total revenue in the range of $440 million to $450 million. Third 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 $0.27 to $0.29.
For 2016, the company expects total revenue in the range of $1.800 billion to $1.830 billion. On a GAAP basis, net income per diluted share for 2016 is expected to be in the range of $0.70 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 $1.17 to $1.23.
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 second quarter 2016 financial results audio webcast today, July 25, 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 July 25, 2016 at 5 p.m. (Pacific) and ending September 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, Allegro, OrCAD 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 second 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
------------------
July 2, 2016 July 4, 2015
------------ ------------
(unaudited)
(in thousands)
Net income on a GAAP
basis $49,335 $58,160
Amortization of
acquired intangibles 15,083 16,224
Stock-based
compensation expense 25,356 21,703
Non-qualified
deferred compensation
expenses 359 37
Restructuring and
other charges
(credits) (74) (498)
Acquisition and
integration-related
costs 7,190 1,681
Amortization of debt
discount on
convertible notes - 2,470
Other income or
expense related to
investments and non-
qualified deferred
compensation plan
assets* (594) (311)
Income tax effect of
non-GAAP adjustments (11,053) (14,091)
------- -------
Net income on a non-
GAAP basis $85,602 $85,375
======= =======
* 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
------------------
July 2, 2016 July 4, 2015
------------ ------------
(unaudited)
(in thousands, except per
share data)
Diluted net income per
share on a GAAP basis $0.17 $0.19
Amortization of acquired
intangibles 0.05 0.05
Stock-based compensation
expense 0.09 0.07
Non-qualified deferred
compensation expenses - -
Restructuring and other
charges (credits) - -
Acquisition and
integration-related
costs 0.02 -
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 (0.04) (0.05)
----- -----
Diluted net income per
share on a non-GAAP
basis $0.29 $0.27
===== =====
Shares used in
calculation of diluted
net income per share -
GAAP** 295,201 313,665
Shares used in
calculation of diluted
net income per share -
non-GAAP** 295,201 313,665
* 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 September 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 third quarter 2016 earnings release is published, which is currently scheduled for October 24, 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
July 2, 2016 and January 2, 2016
(In thousands)
(Unaudited)
July 2, 2016 January 2, 2016
------------ ---------------
Current assets:
Cash and cash
equivalents $669,573 $616,686
Short-term
investments 34,745 94,498
Receivables,
net 156,444 164,848
Inventories 61,932 56,762
Prepaid
expenses and
other 39,485 31,441
-------------
Total current assets 962,179 964,235
Property, plant and
equipment, net of
accumulated
depreciation of
$604,532 and $581,345,
respectively 235,911 228,599
Goodwill 573,714 551,772
287,888 296,482
Acquired intangibles, net of
accumulated amortization of $239,170
and $216,589, respectively
Long-term receivables 17,368 4,498
Other assets 300,813 299,929
-------
Total assets $2,377,873 $2,345,515
========== ==========
Current liabilities:
Revolving
credit
facility $50,000 $ -
Accounts
payable and
accrued
liabilities 224,685 238,022
Current
portion of
deferred
revenue 289,786 298,285
-----------
Total current liabilities 564,471 536,307
------- -------
Long-term liabilities:
Long-term
portion of
deferred
revenue 38,094 30,209
Long-term
debt 643,073 343,288
Other long-
term
liabilities 56,842 59,596
Total long-term
liabilities 738,009 433,093
------- -------
Stockholders' equity 1,075,393 1,376,115
Total liabilities and
stockholders' equity $2,377,873 $2,345,515
========== ==========
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Six Months Ended July 2, 2016 and July 4, 2015
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
July 2, 2016 July 4, 2015 July 2, 2016 July 4, 2015
------------ ------------ ------------ ------------
Revenue:
Product and
maintenance $419,963 $384,951 $831,707 $768,588
Services 33,058 30,932 69,176 58,661
------
Total revenue 453,021 415,883 900,883 827,249
------- ------- ------- -------
Costs and expenses:
Cost of product
and maintenance 42,960 31,715 87,141 73,774
Cost of services 18,823 20,040 36,696 38,566
Marketing and
sales 101,110 96,662 200,310 196,930
Research and
development 182,371 157,974 362,277 320,970
General and
administrative 36,388 27,467 64,688 55,109
Amortization of
acquired
intangibles 4,537 6,119 10,317 12,350
Restructuring and
other charges
(credits) (74) (498) 14,512 3,861
----
Total costs
and expenses 386,115 339,479 775,941 701,560
------- ------- ------- -------
Income from operations 66,906 76,404 124,942 125,689
Interest expense (5,896) (8,180) (11,253) (19,934)
Other income, net 2,842 1,347 7,605 6,128
-----
Income before provision for
income taxes 63,852 69,571 121,294 111,883
Provision for
income taxes 14,517 11,411 21,397 17,464
------
Net income $49,335 $58,160 $99,897 $94,419
======= ======= ======= =======
Net income per share - basic $0.17 $0.20 $0.34 $0.33
===== ===== ===== =====
Net income per share - diluted $0.17 $0.19 $0.33 $0.30
===== ===== ===== =====
Weighted average common shares
outstanding -basic 288,191 285,297 292,403 284,910
======= ======= ======= =======
Weighted average common shares
outstanding -diluted 295,201 313,665 299,318 312,756
======= ======= ======= =======
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 2, 2016 and July 4, 2015
(In thousands)
(Unaudited)
Six Months Ended
----------------
July 2, July 4,
2016 2015
---- ----
Cash and cash
equivalents at
beginning of
period $616,686 $932,161
Cash flows from operating activities:
Net income 99,897 94,419
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and
amortization 62,759 58,963
Amortization of
debt discount and
fees 527 8,971
Stock-based
compensation 49,988 43,564
Gain on
investments, net (3,265) (1,590)
Deferred income
taxes 10,252 7,097
Other non-cash
items 750 1,142
Changes in operating assets and liabilities, net of effect of
acquired businesses:
Receivables (3,532) (8,078)
Inventories (10,296) (6,243)
Prepaid expenses
and other (8,690) (8,036)
Other assets (8,709) 1,117
Accounts payable
and accrued
liabilities (14,012) (20,653)
Deferred revenue (7,412) 5,827
Other long-term
liabilities (4,700) (8,058)
Net cash provided
by operating
activities 163,557 168,442
------- -------
Cash flows from investing activities:
Purchases of
available-for-
sale securities (20,525) (59,516)
Proceeds from the
sale of available-
for-sale
securities 55,168 37,586
Proceeds from the
maturity of
available-for-
sale securities 26,115 15,600
Proceeds from the
sale of long-term
investments 2,583 2,293
Purchases of
property, plant
and equipment (28,287) (24,067)
Cash paid in
business
combinations and
asset
acquisitions, net
of cash acquired (41,627) -
Net cash used for
investing
activities (6,573) (28,104)
------ -------
Cash flows from financing activities:
Proceeds from term
loan 300,000 -
Proceeds from
revolving credit
facility 50,000 -
Payment of
convertible notes - (349,999)
Payment of
convertible notes
embedded
conversion
derivative
liability - (530,643)
Proceeds from
convertible notes
hedges - 530,643
Payment of debt
issuance costs (622) -
Excess tax benefits
from stock-based
compensation - 10,097
Proceeds from
issuance of common
stock 36,296 38,167
Stock received for
payment of
employee taxes on
vesting of
restricted stock (17,490) (15,814)
Payments for
repurchases of
common stock (480,100) (93,076)
Net cash used for
financing
activities (111,916) (410,625)
-------- --------
Effect of exchange
rate changes on
cash and cash
equivalents 7,819 (14,023)
----- -------
Increase (decrease)
in cash and cash
equivalents 52,887 (284,310)
------ --------
Cash and cash
equivalents at end
of period $669,573 $647,851
======== ========
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2015 2016
---- ----
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2
--------- --- --- --- --- ---- --- ---
Americas 47% 48% 48% 48% 47% 49% 47%
Asia 24% 23% 25% 25% 24% 22% 24%
Europe, Middle East
and Africa 19% 20% 18% 17% 19% 19% 20%
Japan 10% 9% 9% 10% 10% 10% 9%
Total 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
------------- --- --- --- --- ---- --- ---
Functional
Verification,
including
Emulation Hardware 23% 21% 23% 25% 23% 26% 27%
Digital IC Design
and Signoff 28% 29% 28% 28% 28% 30% 27%
Custom IC Design 27% 27% 26% 25% 26% 25% 26%
System Interconnect
and Analysis 11% 11% 10% 10% 11% 9% 10%
IP 11% 12% 13% 12% 12% 10% 10%
Total 100% 100% 100% 100% 100% 100% 100%
Cadence Design Systems, Inc.
As of July 25, 2016
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
Three Months Ending Year Ending
October 1, 2016 December 31, 2016
Forecast Forecast
-------- --------
Diluted net income per share
on a GAAP basis $0.17 to $0.19 $0.70 to $0.76
Amortization of acquired intangibles 0.05 0.21
Stock-based compensation expense 0.10 0.38
Restructuring and other charges - 0.05
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 (0.05) (0.20)
Diluted net income per share
on a non-GAAP basis** $0.27 to $0.29 $1.17 to $1.23
============== ==============
Cadence Design Systems, Inc.
As of July 25, 2016
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
October 1, 2016 December 31, 2016
($ in millions) Forecast Forecast
-------- --------
Net income on a GAAP basis $48 to $54 $203 to $221
Amortization of acquired intangibles 14 61
Stock-based compensation expense 28 109
Restructuring and other charges - 15
Acquisition and integration-related
costs 1 11
Other income or expense related to
investments and non-qualified
deferred compensation plan assets* - (3)
Income tax effect of non-GAAP
adjustments (14) (57)
Net income on a non-GAAP
basis** $77 to $83 $339 to $357
========== ============
**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.
