Cadence Reports First Quarter 2018 Financial Results

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 15, 2018, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute Cadence’s current expectations. During the Quiet Period, the business outlook in these documents should be considered historical, speaking as of prior to the Quiet Period only and not subject to any update by Cadence. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until Cadence’s second quarter 2018 earnings release is published, which is currently scheduled for July 23, 2018.

 
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, 2018 and December 30, 2017
(In thousands)
(Unaudited)
   
March 31, 2018 December 30, 2017
 
Current assets:
Cash and cash equivalents $ 746,968 $ 688,087
Short-term investments 5,466 4,455

Receivables, net of allowances of $666 and $0, respectively

225,822 190,426
Inventories 30,090 33,209
Prepaid expenses and other   61,597   63,811
Total current assets 1,069,943 979,988
 

Property, plant and equipment, net of accumulated depreciation of $673,265 and $658,377, respectively

249,810 251,342
Goodwill 665,615 666,009

Acquired intangibles, net of accumulated amortization of $295,018 and $297,456, respectively

264,927 278,835
Long-term receivables 9,380 12,239
Other assets   226,998   230,301
Total assets $ 2,486,673 $ 2,418,714
 
Current liabilities:
Revolving credit facility $ 45,000 $ 85,000
Current portion of long-term debt 299,826 -
Accounts payable and accrued liabilities 210,784 221,101
Current portion of deferred revenue   310,639   336,297
Total current liabilities   866,249   642,398
 
Long-term liabilities:
Long-term portion of deferred revenue 56,276 61,513
Long-term debt 344,766 644,369
Other long-term liabilities   77,084   81,232
Total long-term liabilities   478,126   787,114
 
Stockholders' equity   1,142,298   989,202
Total liabilities and stockholders' equity $ 2,486,673 $ 2,418,714
 
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended March 31, 2018 and April 1, 2017
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
March 31, 2018   April 1, 2017
 
Revenue:
Product and maintenance $ 480,609 $ 451,407
Services   36,704     25,504  
 
Total revenue   517,313     476,911  
 
Costs and expenses:
Cost of product and maintenance 41,730 43,717
Cost of services 21,479 18,075
Marketing and sales 109,148 103,347
Research and development 224,185 198,286
General and administrative 33,299 31,816
Amortization of acquired intangibles 3,630 3,856
Restructuring and other credits   (1,991 )   (1,788 )
 
Total costs and expenses   431,480     397,309  
 
Income from operations 85,833 79,602
 
Interest expense (6,975 ) (6,479 )

Other income (expense), net

  (689 )   1,059  
 
Income before provision for income taxes 78,169 74,182
 
Provision for income taxes   5,284     5,923  
 
Net income $ 72,885   $ 68,259  
 
 
Net income per share - basic $ 0.27   $ 0.25  
 
Net income per share - diluted $ 0.26   $ 0.25  
 
Weighted average common shares outstanding - basic   273,773     270,173  
 
Weighted average common shares outstanding - diluted   281,651     277,736  
 
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2018 and April 1, 2017
(In thousands)
(Unaudited)
 
  Three Months Ended
March 31,   April 1,
2018 2017
 
Cash and cash equivalents at beginning of period $ 688,087   $ 465,232  
Cash flows from operating activities:
Net income 72,885 68,259
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29,389 28,894
Amortization of debt discount and fees 292 350
Stock-based compensation 37,901 27,436
Gain on investments, net (1,123 ) (1,228 )
Deferred income taxes 1,363 1,990
Provisions for losses on receivables 666 -
Other non-cash items (43 ) 1,359
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables (10,988 ) (22,475 )
Inventories 2,105 6,000
Prepaid expenses and other 8,392 (3,777 )
Other assets 8,152 (3,657 )
Accounts payable and accrued liabilities (46,956 ) (46,159 )
Deferred revenue 59,854 34,325
Other long-term liabilities   (4,242 )   1,113  
Net cash provided by operating activities   157,647     92,430  
 
Cash flows from investing activities:
Proceeds from the sale of available-for-sale securities - 107
Purchases of property, plant and equipment   (13,128 )   (14,843 )
Net cash used for investing activities   (13,128 )   (14,736 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility - 50,000
Payment on revolving credit facility (40,000 ) (50,000 )
Payment of debt issuance costs - (793 )
Proceeds from issuance of common stock 23,339 22,715
Stock received for payment of employee taxes on vesting of restricted stock (26,515 ) (22,470 )
Payments for repurchases of common stock (50,013 ) -
Change in book overdraft   (3,867 )   -  
Net cash used for financing activities   (97,056 )   (548 )
 
Effect of exchange rate changes on cash and cash equivalents   11,418     1,750  
 
Increase in cash and cash equivalents   58,881     78,896  
 
Cash and cash equivalents at end of period $ 746,968   $ 544,128  
 
Cadence Design Systems, Inc.
(Unaudited)
 
Revenue Mix by Geography (% of Total Revenue)   ASC 605   ASC 605   ASC 606
2017 2018 2018

GEOGRAPHY

Q1   Q2   Q3   Q4   Year Q1 Q1
 
Americas 45%   45%   45%   44%   44% 45% 45%
Asia 26% 28% 27% 28% 27% 26% 27%
Europe, Middle East and Africa 20% 19% 19% 20% 20% 21% 20%
Japan 9% 8% 9% 8% 9% 8% 8%
Total 100% 100% 100% 100% 100% 100% 100%
 
 
Revenue Mix by Product Group (% of Total Revenue) ASC 605 ASC 605 ASC 606
2017 2018 2018

PRODUCT GROUP

Q1   Q2   Q3   Q4   Year Q1 Q1
 
Functional Verification, including Emulation and Prototyping Hardware 23% 23% 21% 23% 22% 26% 26%
Digital IC Design and Signoff 29% 30% 30% 29% 29% 29% 30%
Custom IC Design 26% 26% 28% 26% 27% 26% 26%
System Interconnect and Analysis 10% 10% 10% 10% 10% 9% 9%
IP 12% 11% 11% 12% 12% 10% 9%
Total 100% 100% 100% 100% 100% 100% 100%
 
Cadence Design Systems, Inc.
As of April 23, 2018
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
 
 

Three Months Ending

  Year Ending   Year Ending
June 30, 2018 December 29, 2018 December 29, 2018
ASC 606 Forecast ASC 606 Forecast ASC 605 Forecast **
 
Diluted net income per share on a GAAP basis $0.20 to $0.22 $0.86 to $0.94 $0.97 to $1.05
 
Amortization of acquired intangibles 0.05 0.19 0.19
Stock-based compensation expense 0.14 0.59 0.59
Restructuring and other charges (credits) - (0.01)

(0.01)

Acquisition and integration-related costs 0.02 0.09 0.09

Other income or expense related to investments and non-qualified deferred compensation plan assets*

- - -
Income tax effect of non-GAAP adjustments (0.02) (0.15)

(0.17)

     
Diluted net income per share on a non-GAAP basis�nbsp; $0.39 to $0.41 $1.57 to $1.65 $1.66 to $1.74
 
Cadence Design Systems, Inc.
As of April 23, 2018
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
 
Three Months Ending Year Ending Year Ending
June 30, 2018 December 29, 2018 December 29, 2018
($ in millions) ASC 606 Forecast ASC 606 Forecast ASC 605 Forecast **
 
Net income on a GAAP basis $57 to $63 $243 to $265 $273 to $296
 
Amortization of acquired intangibles 14 54 54
Stock-based compensation expense 39 166 166
Restructuring and other charges (credits) - (2)

(2)

Acquisition and integration-related costs 7 26 26

Other income or expense related to investments and non-qualified deferred compensation plan assets*

- (1)

(1)

Income tax effect of non-GAAP adjustments (7) (43)

(48)

     
Net income on a non-GAAP basis�nbsp; $110 to $116 $443 to $465 $468 to $491

 

�nbsp;The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

 

* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

 
** As required by the new standard, Cadence will report revenue under both methods for the 2018 transition year.

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