Cadence Reports Second Quarter 2021 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 17, 2021, 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 2021 earnings release is published, which is currently scheduled for October 25, 2021.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
July 3, 2021 and January 2, 2021
(In thousands)
(Unaudited)
 
July 3, 2021 January 2, 2021
 
Current assets:
Cash and cash equivalents

$

847,160

$

928,432

Receivables, net

 

389,986

 

338,487

Inventories

 

90,479

 

75,956

Prepaid expenses and other

 

129,442

 

135,712

Total current assets

 

1,457,067

 

1,478,587

 
Property, plant and equipment, net

 

301,979

 

311,125

Goodwill

 

929,525

 

782,087

Acquired intangibles, net

 

264,789

 

210,590

Deferred taxes

 

729,790

 

732,290

Other assets

 

439,398

 

436,106

Total assets

$

4,122,548

$

3,950,785

 
Current liabilities:
Accounts payable and accrued liabilities

$

340,607

$

349,951

Current portion of deferred revenue

 

586,109

 

446,857

Total current liabilities

 

926,716

 

796,808

 
Long-term liabilities:
Long-term portion of deferred revenue

 

98,408

 

107,064

Long-term debt

 

347,186

 

346,793

Other long-term liabilities

 

233,495

 

207,102

Total long-term liabilities

 

679,089

 

660,959

 
Stockholders' equity

 

2,516,743

 

2,493,018

Total liabilities and stockholders' equity

$

4,122,548

$

3,950,785

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Six Months Ended July 3, 2021 and June 27, 2020
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
 
Revenue:
Product and maintenance

$

687,884

 

$

601,356

 

$

1,386,938

 

$

1,183,055

 

Services

 

40,401

 

 

37,062

 

 

77,375

 

 

73,320

 

 
Total revenue

 

728,285

 

 

638,418

 

 

1,464,313

 

 

1,256,375

 

 
Costs and expenses:
Cost of product and maintenance

 

55,842

 

 

55,669

 

 

120,748

 

 

111,115

 

Cost of services

 

20,917

 

 

19,546

 

 

39,978

 

 

38,563

 

Marketing and sales

 

135,967

 

 

120,476

 

 

268,793

 

 

246,220

 

Research and development

 

285,227

 

 

250,821

 

 

556,219

 

 

492,489

 

General and administrative

 

40,333

 

 

35,641

 

 

80,285

 

 

69,233

 

Amortization of acquired intangibles

 

5,030

 

 

4,590

 

 

9,661

 

 

8,796

 

Restructuring and other credits

 

(469

)

 

(275

)

 

(746

)

 

(1,342

)

 
Total costs and expenses

 

542,847

 

 

486,468

 

 

1,074,938

 

 

965,074

 

 
Income from operations

 

185,438

 

 

151,950

 

 

389,375

 

 

291,301

 

 
Interest expense

 

(4,316

)

 

(5,914

)

 

(8,533

)

 

(10,551

)

Other income, net

 

2,143

 

 

4,630

 

 

4,844

 

 

96

 

 
Income before provision for income taxes

 

183,265

 

 

150,666

 

 

385,686

 

 

280,846

 

 
Provision for income taxes

 

27,365

 

 

19,378

 

 

42,617

 

 

25,570

 

 
Net income

$

155,900

 

$

131,288

 

$

343,069

 

$

255,276

 

 
 
Net income per share - basic

$

0.57

 

$

0.48

 

$

1.25

 

$

0.93

 

 
Net income per share - diluted

$

0.56

 

$

0.47

 

$

1.23

 

$

0.91

 

 
Weighted average common shares outstanding - basic

 

273,565

 

 

273,432

 

 

273,843

 

 

273,488

 

 
Weighted average common shares outstanding - diluted

 

278,558

 

 

279,080

 

 

279,399

 

 

279,207

 

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 3, 2021 and June 27, 2020
(In thousands)
(Unaudited)
 
Six Months Ended
July 3, June 27,

2021

2020

 
Cash and cash equivalents at beginning of period

$

928,432

 

$

705,210

 

Cash flows from operating activities:
Net income

 

343,069

 

 

255,276

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

71,799

 

 

69,902

 

Amortization of debt discount and fees

 

687

 

 

512

 

Stock-based compensation

 

103,114

 

 

93,389

 

(Gain) loss on investments, net

 

(795

)

 

4,036

 

Deferred income taxes

 

1,710

 

 

(1,609

)

Provisions for losses on receivables

 

242

 

 

922

 

ROU asset amortization and change in operating lease liabilities

 

(2,483

)

 

1,502

 

Other non-cash items

 

183

 

 

296

 

Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables

 

(48,016

)

 

(2,497

)

Inventories

 

(14,527

)

 

11,020

 

Prepaid expenses and other

 

7,690

 

 

9,910

 

Other assets

 

6,991

 

 

(17,687

)

Accounts payable and accrued liabilities

 

(14,771

)

 

(11,141

)

Deferred revenue

 

127,286

 

 

148,508

 

Other long-term liabilities

 

6,639

 

 

504

 

Net cash provided by operating activities

 

588,818

 

 

562,843

 

 
Cash flows from investing activities:
Purchases of property, plant and equipment

 

(31,139

)

 

(43,535

)

Cash paid in business combinations, net of cash acquired

 

(220,660

)

 

(195,118

)

Net cash used for investing activities

 

(251,799

)

 

(238,653

)

 
Cash flows from financing activities:
Proceeds from revolving credit facility

 

-

 

 

350,000

 

Payment of debt issuance costs

 

(1,285

)

 

-

 

Proceeds from issuance of common stock

 

52,252

 

 

43,667

 

Stock received for payment of employee taxes on vesting of restricted stock

 

(78,053

)

 

(53,657

)

Payments for repurchases of common stock

 

(392,290

)

 

(175,036

)

Net cash provided by (used for) financing activities

 

(419,376

)

 

164,974

 

 
Effect of exchange rate changes on cash and cash equivalents

 

1,085

 

 

(5,188

)

 
Increase (decrease) in cash and cash equivalents

 

(81,272

)

 

483,976

 

 
Cash and cash equivalents at end of period

$

847,160

 

$

1,189,186

 

 
Cadence Design Systems, Inc.
(Unaudited)
             
             
             
Revenue Mix by Geography (% of Total Revenue)            

2020

 

2021

GEOGRAPHY

Q1

 

Q2

 

Q3

 

Q4

 

Year

 

Q1

 

Q2

             
Americas

43%

 

44%

 

42%

 

41%

 

42%

 

46%

 

44%

China

13%

 

12%

 

17%

 

17%

 

15%

 

12%

 

14%

Other Asia

18%

 

19%

 

19%

 

18%

 

18%

 

18%

 

19%

Europe, Middle East and Africa

19%

 

18%

 

16%

 

17%

 

18%

 

18%

 

17%

Japan

7%

 

7%

 

6%

 

7%

 

7%

 

6%

 

6%

Total

100%

 

100%

 

100%

 

100%

 

100%

 

100%

 

100%

             
             
             
             
Revenue Mix by Product Category (% of Total Revenue)            

2020

 

2021

PRODUCT CATEGORY

Q1

 

Q2

 

Q3

 

Q4

 

Year

 

Q1

 

Q2

             
Custom IC Design and Simulation

25%

 

24%

 

24%

 

26%

 

25%

 

23%

 

23%

Digital IC Design and Signoff

29%

 

28%

 

27%

 

31%

 

29%

 

27%

 

28%

Functional Verification, including Emulation and Prototyping Hardware

23%

 

24%

 

23%

 

19%

 

22%

 

26%

 

25%

IP

14%

 

14%

 

15%

 

13%

 

14%

 

14%

 

13%

System Design and Analysis

9%

 

10%

 

11%

 

11%

 

10%

 

10%

 

11%

Total

100%

 

100%

 

100%

 

100%

 

100%

 

100%

 

100%

             
             
             
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of July 26, 2021
(Unaudited)
 
Three Months Ending Year Ending
October 2, 2021 January 1, 2022
Forecast Forecast
 
GAAP operating margin as a percent of total revenue ~23%

24.5% - 25.25%

 
Reconciling items to non-GAAP operating margin as a
percent of total revenue:
Stock-based compensation expense

8%

7.5%

Amortization of acquired intangibles

2%

2.3%

Acquisition and integration-related costs

1%

0.7%

Restructuring and other credits

0%

0.0%

Non-qualified deferred compensation expenses

0%

0.1%

Special charges*

0%

0.9%

 
Non-GAAP operating margin as a percent of total revenue�nbsp;

~34%

36% - 36.75%

�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. 
 
*   Comprised of costs related to a voluntary retirement program.
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of July 26, 2021
(Unaudited)
 
Three Months Ending Year Ending
October 2, 2021 January 1, 2022
Forecast Forecast
 
Diluted net income per share on a GAAP basis $0.48 to $0.50 $2.15 to $2.21
 
Stock-based compensation expense

0.20

0.79

Amortization of acquired intangibles

0.06

0.24

Acquisition and integration-related costs

0.02

0.08

Restructuring and other credits

-

-

Non-qualified deferred compensation expenses

-

0.01

Special charges*

-

0.10

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

-

(0.02)

Income tax effect of non-GAAP adjustments

(0.02)

(0.21)

 
Diluted net income per share on a non-GAAP basis�nbsp; $0.74 to $0.76 $3.14 to $3.20
 
 
 
 
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of July 26, 2021
(Unaudited)
 
 
Three Months Ending Year Ending
October 2, 2021 January 1, 2022
($ in millions) Forecast Forecast
 
Net income on a GAAP basis $133 to $139 $600 to $616
 
Stock-based compensation expense

57

220

Amortization of acquired intangibles

17

67

Acquisition and integration-related costs

5

22

Restructuring and other credits

-

(1)

Non-qualified deferred compensation expenses

-

4

Special charges*

-

27

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

-

(5)

Income tax effect of non-GAAP adjustments

(7)

(57)

 
Net income on a non-GAAP basis�nbsp; $205 to $211 $877 to $893
�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.
 
* Comprised of costs related to a voluntary retirement program.
 

**

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.

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