Cadence Reports Second 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 September 14, 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 third quarter 2018 earnings release is published, which is currently scheduled for October 22, 2018.

 

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets
June 30, 2018 and December 30, 2017
(In thousands)
(Unaudited)
 
      June 30, 2018     December 30, 2017
 
Current assets:
Cash and cash equivalents $ 819,540 $ 688,087
Short-term investments 5,842 4,455

Receivables, net of allowances of $1,015 and $0, respectively

219,072 190,426
Inventories 28,558 33,209

Prepaid expenses and other

  56,042   63,811
Total current assets 1,129,054 979,988
 

Property, plant and equipment, net of accumulated depreciation of $677,737 and $658,377, respectively

252,193 251,342
Goodwill 663,320 666,009

Acquired intangibles, net of accumulated amortization of $308,055 and $297,456, respectively

251,385 278,835
Long-term receivables 4,740 12,239
Other assets   227,173   230,301
Total assets $ 2,527,865 $ 2,418,714
 
Current liabilities:
Revolving credit facility $ - $ 85,000
Current portion of long-term debt 299,879 -
Accounts payable and accrued liabilities 243,158 221,101
Current portion of deferred revenue   327,078   336,297
Total current liabilities   870,115   642,398
 
Long-term liabilities:
Long-term portion of deferred revenue 46,912 61,513
Long-term debt 344,939 644,369
Other long-term liabilities   77,911   81,232
Total long-term liabilities   469,762   787,114
 
Stockholders' equity   1,187,988   989,202
Total liabilities and stockholders' equity $ 2,527,865 $ 2,418,714
 
 
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Six Months Ended June 30, 2018 and July 1, 2017
(In thousands, except per share amounts)
(Unaudited)
 
      Three Months Ended     Six Months Ended

June 30, 2018

    July 1, 2017 June 30, 2018     July 1, 2017
 
Revenue:
Product and maintenance $ 487,870 $ 443,847 $ 968,479 $ 895,254
Services   30,521     35,154     67,225     60,658  
 
Total revenue   518,391     479,001     1,035,704     955,912  
 
Costs and expenses:
Cost of product and maintenance 40,127 38,829 81,857 82,546
Cost of services 18,833 22,003 40,312 40,078
Marketing and sales 109,300 103,897 218,448 207,244
Research and development 219,129 195,901 443,314 394,187
General and administrative 34,875 32,774 68,174 64,590
Amortization of acquired intangibles 3,518 3,836 7,148 7,692
Restructuring and other credits   (447 )   (929 )   (2,438 )   (2,717 )
 
Total costs and expenses   425,335     396,311     856,815     793,620  
 
Income from operations 93,056 82,690 178,889 162,292
 
Interest expense (6,669 ) (6,248 ) (13,644 ) (12,727 )
Other income, net   3,638     924     2,949     1,983  
 
Income before provision for income taxes 90,025 77,366 168,194 151,548
 
Provision for income taxes   14,876     8,239     20,160     14,162  
 
Net income $ 75,149   $ 69,127   $ 148,034   $ 137,386  
 
 
Net income per share - basic $ 0.27   $ 0.25   $ 0.54   $ 0.51  
 
Net income per share - diluted $ 0.27   $ 0.25   $ 0.53   $ 0.49  
 
Weighted average common shares outstanding - basic   273,564     271,887     273,703     271,030  
 
Weighted average common shares outstanding - diluted   280,774     279,526     281,247     278,631  
 
 
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2018 and July 1, 2017
(In thousands)
(Unaudited)
 
      Six Months Ended
June 30,     July 1,
2018 2017
 
Cash and cash equivalents at beginning of period $ 688,087   $ 465,232  
Cash flows from operating activities:
Net income 148,034 137,386
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 59,282 58,304
Amortization of debt discount and fees 586 633
Stock-based compensation 78,857 57,918
Gain on investments, net (2,136 ) (2,083 )
Deferred income taxes 1,664 4,813
Provisions for losses on receivables 1,015 -
Other non-cash items 462 2,157
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables (2,606 ) 6,342
Inventories 1,932 2,535
Prepaid expenses and other 13,294 (1,557 )
Other assets 5,622 (8,790 )
Accounts payable and accrued liabilities (11,832 ) (21,995 )
Deferred revenue 71,667 18,733
Other long-term liabilities   (2,928 )   174  
Net cash provided by operating activities   362,913     254,570  
 
Cash flows from investing activities:
Proceeds from the sale of available-for-sale securities - 189
Purchases of property, plant and equipment   (31,105 )   (27,488 )
Net cash used for investing activities   (31,105 )   (27,299 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility - 50,000
Payment on revolving credit facility (85,000 ) (100,000 )
Payment of debt issuance costs - (793 )
Proceeds from issuance of common stock 25,656 29,967
Stock received for payment of employee taxes on vesting of restricted stock (30,125 ) (25,819 )
Payments for repurchases of common stock (100,025 ) -
Change in book overdraft   (3,867 )   -  
Net cash used for financing activities   (193,361 )   (46,645 )
 
Effect of exchange rate changes on cash and cash equivalents   (6,994 )   10,140  
 
Increase in cash and cash equivalents   131,453     190,766  
 
Cash and cash equivalents at end of period $ 819,540   $ 655,998  
 
 
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     Q2 Q1     Q2
 
Americas 45% 45% 45% 44% 44% 45% 45% 45% 46%
Asia 26% 28% 27% 28% 27% 26% 26% 27% 26%
Europe, Middle East and Africa 20% 19% 19% 20% 20% 21% 21% 20% 20%
Japan 9% 8% 9% 8% 9% 8% 8% 8% 8%
Total

100%

100% 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 Q2 Q1 Q2
 
Functional Verification, including Emulation and Prototyping Hardware 23% 23% 21% 23% 22% 26% 23% 26% 23%
Digital IC Design and Signoff 29% 30% 30% 29% 29% 29% 29% 30% 30%
Custom IC Design 26% 26% 28% 26% 27% 26% 26% 26% 26%
System Interconnect and Analysis 10% 10% 10% 10% 10% 9% 10% 9% 9%
IP 12% 11% 11% 12% 12% 10% 12% 9% 12%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
Cadence Design Systems, Inc.
As of July 23, 2018
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
     
Three Months Ending     Year Ending     Year Ending
September 29, 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 $0.22 to $0.24 $0.95 to $1.01 ~ $1.06
 
Amortization of acquired intangibles 0.05 0.19 0.19
Stock-based compensation expense 0.17 0.60 0.60
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*

- (0.01) (0.01)
Income tax effect of non-GAAP adjustments (0.06) (0.17) (0.18)
     
Diluted net income per share on a non-GAAP basis�nbsp; $0.40 to $0.42 $1.64 to $1.70 ~ $1.74
 
 

Cadence Design Systems, Inc.

As of July 23, 2018
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
 
      Three Months Ending     Year Ending     Year Ending
September 29, 2018 December 29, 2018 December 29, 2018

($ in millions)

ASC 606 Forecast ASC 606 Forecast ASC 605 Forecast **
 
Net income on a GAAP basis $61 to $67 $267 to $283 ~ $298
 
Amortization of acquired intangibles 13 54 54
Stock-based compensation expense 47 169 169
Restructuring and other charges (credits) - (2) (2)
Acquisition and integration-related costs 6 26 26

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

- (2) (2)
Income tax effect of non-GAAP adjustments (16) (49) (51)
     
Net income on a non-GAAP basis�nbsp; $111 to $117 $463 to $479 ~$492
 

�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. ASC Topic 605 forecast at midpoint.

 

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