8-K
Cadence Design Systems Inc (CDNS)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 22, 2024
CADENCE DESIGN SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 000-15867 | 00-0000000 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (I.R.S. Employer<br>Identification No.) |
2655 Seely Avenue, San Jose, California 95134
(Address of Principal Executive Offices) (Zip Code)
(408) 943-1234
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value per share | CDNS | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 22, 2024, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter ended March 31, 2024.
A copy of the press release is attached hereto as Exhibit 99.01 and a copy of the commentary by the Chief Financial Officer of Cadence regarding Cadence's financial results for the quarter ended March 31, 2024 is attached hereto as Exhibit 99.02, and the press release and the commentary are incorporated herein by reference.
The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits
| Exhibit No. | Description |
|---|---|
| 99.01 | Press Release issued by Cadence Design Systems, Inc. onApril 22, 2024. |
| 99.02 | CFO Commentary on Results of QuarterEndedMarch31, 2024. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: April 22, 2024
| CADENCE DESIGN SYSTEMS, INC. | |
|---|---|
| By: | /s/ John M. Wall |
| John M. Wall | |
| Senior Vice President and Chief Financial Officer |
Document
Exhibit 99.01
Cadence Reports First Quarter 2024 Financial Results
Record First Quarter Backlog of $6.0 Billion and cRPO of $3.1 Billion
Raising 2024 Revenue Outlook
SAN JOSE, Calif. — April 22, 2024 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the first quarter of 2024.
First Quarter 2024 Financial Results
•Revenue of $1.009 billion, compared to revenue of $1.022 billion in Q1 2023
•GAAP operating margin of 25%, compared to 32% in Q1 2023
•Non-GAAP operating margin of 38%, compared to 42% in Q1 2023
•GAAP diluted net income per share of $0.91, compared to $0.89 in Q1 2023
•Non-GAAP diluted net income per share of $1.17, compared to $1.29 in Q1 2023
•Quarter-end backlog was $6.0 billion and current remaining performance obligations ("cRPO"), contract revenue expected to be recognized as revenue in the next 12 months, was $3.1 billion.
“Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer. “I’m pleased with our record Q1 backlog that reflects our broad-based strength and product leadership. We’re thrilled with the momentum of our Cadence.AI portfolio which is providing customers with the most comprehensive and impactful chip-to-systems design capabilities and are excited about the launch of our innovative third generation Dynamic Duo hardware platforms that further expands our leadership.”
“Our strong Q1 results reflect our continued technology leadership supporting our customers and partners, and solid execution from the Cadence team,” said John Wall, senior vice president and chief financial officer. “I am pleased that we delivered record Q1 bookings and achieved record Q1 backlog of approximately $6.0 billion.”
CFO Commentary
Commentary on the first quarter of 2024 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.
Business Outlook
For fiscal year 2024, the company expects:
•Revenue in the range of $4.56 billion to $4.62 billion
•GAAP operating margin in the range of 31% to 32%
•Non-GAAP operating margin in the range of 42% to 43%
•GAAP diluted net income per share in the range of $4.04 to $4.14
•Non-GAAP diluted net income per share in the range of $5.88 to $5.98
For the second quarter of 2024, the company expects:
•Revenue in the range of $1.03 billion to $1.05 billion
•GAAP operating margin in the range of 26.5% to 27.5%
•Non-GAAP operating margin in the range of 38.5% to 39.5%
•GAAP diluted net income per share in the range of $0.73 to $0.77
•Non-GAAP diluted net income per share in the range of $1.20 to $1.24
Cadence's outlook does not include the impact of its pending acquisition of BETA CAE, the company's expectations for which are largely unchanged from announcement.
The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use the current
normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.
Reconciliations of the financial highlights and business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, are included in this press release.
Business Highlights
•Built upon AI-enhanced core design engines, the company's generative AI solutions boosted by foundational LLM co-pilots, are delivering unparalleled productivity, quality of results and time to market benefits for customers. Last week, at CadenceLIVE Silicon Valley, several top tier customers shared their remarkable successes with Cadence.AI products
•Launched the company's third generation hardware accelerated verification platforms - the Palladium Z3 emulation and Protium X3 prototyping platforms delivering more than 2x the capacity and 1.5x higher performance than the previous generation
•Introduced the Cadence Reality Digital Twin Platform that virtualizes the entire data center and uses AI, high-performance computing and physics-based simulation to significantly improve data center energy efficiency by up to 30%
•Announced a collaboration with Arm to develop a chiplet-based reference design and software development platform to accelerate software-defined vehicle innovation
Audio Webcast Scheduled
Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the first quarter 2024 financial results audio webcast today, April 22, 2024, 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 April 22, 2024 at 5 p.m. (Pacific) and ending June 14, 2024 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.
About Cadence
Cadence is a pivotal leader in electronic systems design, building upon more than 30 years of computational software expertise. The company applies its underlying Intelligent System Design strategy to deliver software, hardware and IP that turn design concepts into reality. Cadence customers are the world’s most innovative companies, delivering extraordinary products from chips to boards to complete systems for the most dynamic market applications, including hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and healthcare. For 10 years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.
© 2024 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
This press release contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends, pending transactions and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands or supply constraints that could result in delays in purchases, development, installations or deliveries of Cadence's products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic, geopolitical and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions, and rising tensions and conflicts around the world such as in the Middle East and with respect to Taiwan; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates, Cadence's upcoming debt maturities and Cadence’s ability to access capital and debt markets; (vii) Cadence's pending acquisition of BETA CAE Systems International AG, which remains subject to certain closing conditions, the acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (viii) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (ix) events that affect cash flow, liquidity, or reserves, or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation, regulatory or other matters; (x) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject; and (xi) Cadence's ability to successfully meet corporate governance, environmental and social targets and strategies. In addition, the timing and amount of Cadence’s repurchases of its common stock are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
Forward-looking statements regarding the pending BETA CAE acquisition and its impact are subject to additional risks and uncertainties including: the markets for BETA CAE’s or Cadence’s products and services may develop more slowly than expected or than they have in the past; operating results and cash flows may fluctuate more than expected; risks associated with tax liabilities or changes in applicable tax laws or interpretations to which the pending transaction or parties thereto are subject; BETA CAE or Cadence may fail to satisfy the closing conditions, including obtaining required regulatory approvals, in a timely manner or at all; uncertainties as to the availability of financing for the pending transaction upon acceptable terms on a timely basis and associated costs and expenses, including applicable interest rates; uncertainty as to the amount of shares to be issued by Cadence to acquire BETA CAE due to fluctuations in the trading prices of Cadence’s common stock; Cadence may fail to successfully acquire and integrate BETA CAE; Cadence may fail to realize the anticipated benefits of the pending acquisition; Cadence may incur unanticipated costs or other liabilities in connection with acquiring or integrating BETA CAE; Cadence may not repay debt or maintain share repurchases as anticipated, including as a result of insufficient free cash flow or use of cash for other purposes; the potential impact of the pending acquisition on relationships with third parties, including employees, customers, partners and competitors; Cadence may be unable to motivate and retain key personnel; and changes in or failure to comply with legislation or government regulations could affect the closing of the pending transaction or post-closing operations and results of operations.
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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.
All forward-looking statements in this press release are based on management's expectations as of the date of this press release and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.
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 measures contained within this press release with their most directly comparable GAAP 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, stock-based compensation expense, acquisition and integration-related costs including retention expenses, 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 management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of Cadence’s core business operations and therefore provides supplemental information to Cadence 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 management, including forecasting and budgeting.
The following tables reconcile the specific items excluded from GAAP operating margin, GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
| Operating Margin Reconciliation | Three Months Ended | ||||||
|---|---|---|---|---|---|---|---|
| March 31, 2024 | March 31, 2023 | ||||||
| (unaudited) | |||||||
| GAAP operating margin as a percent of total revenue | 25% | 32% | |||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue: | |||||||
| Stock-based compensation expense | 9% | 7% | |||||
| Amortization of acquired intangibles | 2% | 1% | |||||
| Acquisition and integration-related costs | 2% | 2% | |||||
| Restructuring | 0% | 0% | |||||
| Non-qualified deferred compensation expenses | 0% | 0% | |||||
| Non-GAAP operating margin as a percent of total revenue | 38% | 42% | |||||
| Net Income Reconciliation | Three Months Ended | ||||||
| --- | --- | --- | --- | --- | |||
| March 31, 2024 | March 31, 2023 | ||||||
| (in thousands) | (unaudited) | ||||||
| Net income on a GAAP basis | $ | 247,643 | $ | 241,804 | |||
| Stock-based compensation expense | 88,129 | 74,288 | |||||
| Amortization of acquired intangibles | 16,755 | 14,527 | |||||
| Acquisition and integration-related costs | 22,086 | 15,800 | |||||
| Restructuring | 280 | — | |||||
| Non-qualified deferred compensation expenses | 4,588 | 3,150 | |||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | (59,986) | (3,273) | |||||
| Income tax effect of non-GAAP adjustments | (613) | 5,137 | |||||
| Net income on a non-GAAP basis | $ | 318,882 | $ | 351,433 | |||
| * | 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. | ||||||
| --- | --- | ||||||
| Diluted Net Income Per Share Reconciliation | Three Months Ended | ||||||
| --- | --- | --- | --- | --- | |||
| March 31, 2024 | March 31, 2023 | ||||||
| (in thousands, except per share data) | (unaudited) | ||||||
| Diluted net income per share on a GAAP basis | $ | 0.91 | $ | 0.89 | |||
| Stock-based compensation expense | 0.32 | 0.27 | |||||
| Amortization of acquired intangibles | 0.06 | 0.05 | |||||
| Acquisition and integration-related costs | 0.08 | 0.06 | |||||
| Restructuring | — | — | |||||
| Non-qualified deferred compensation expenses | 0.02 | 0.01 | |||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | (0.22) | (0.01) | |||||
| Income tax effect of non-GAAP adjustments | — | 0.02 | |||||
| Diluted net income per share on a non-GAAP basis | $ | 1.17 | $ | 1.29 | |||
| Shares used in calculation of diluted net income per share | 273,544 | 273,159 | * | 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. | |||
| --- | --- |
For more information, please contact:
Cadence Investor Relations
408-944-7100
investor_relations@cadence.com
Cadence Newsroom
408-944-7039
newsroom@cadence.com
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, 2024 and December 31, 2023
(In thousands)
(Unaudited)
| March 31, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| Current assets: | ||||
| Cash and cash equivalents | $ | 1,012,418 | $ | 1,008,152 |
| Receivables, net | 389,865 | 489,224 | ||
| Inventories | 185,784 | 181,661 | ||
| Prepaid expenses and other | 341,865 | 297,180 | ||
| Total current assets | 1,929,932 | 1,976,217 | ||
| Property, plant and equipment, net | 433,016 | 403,213 | ||
| Goodwill | 1,575,107 | 1,535,845 | ||
| Acquired intangibles, net | 334,644 | 336,843 | ||
| Deferred taxes | 886,576 | 880,001 | ||
| Other assets | 562,855 | 537,372 | ||
| Total assets | $ | 5,722,130 | $ | 5,669,491 |
| Current liabilities: | ||||
| Current portion of long-term debt | $ | 349,507 | $ | 349,285 |
| Accounts payable and accrued liabilities | 456,608 | 576,558 | ||
| Current portion of deferred revenue | 659,628 | 665,024 | ||
| Total current liabilities | 1,465,743 | 1,590,867 | ||
| Long-term liabilities: | ||||
| Long-term portion of deferred revenue | 87,003 | 98,931 | ||
| Long-term debt | 299,805 | 299,771 | ||
| Other long-term liabilities | 301,983 | 275,651 | ||
| Total long-term liabilities | 688,791 | 674,353 | ||
| Stockholders’ equity | 3,567,596 | 3,404,271 | ||
| Total liabilities and stockholders’ equity | $ | 5,722,130 | $ | 5,669,491 |
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended March 31, 2024 and March 31, 2023
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, 2024 | March 31, 2023 | |||
| Revenue: | ||||
| Product and maintenance | $ | 913,385 | $ | 963,742 |
| Services | 95,718 | 57,948 | ||
| Total revenue | 1,009,103 | 1,021,690 | ||
| Costs and expenses: | ||||
| Cost of product and maintenance | 75,395 | 100,238 | ||
| Cost of services | 49,802 | 24,234 | ||
| Marketing and sales | 180,589 | 166,666 | ||
| Research and development | 378,958 | 350,295 | ||
| General and administrative | 68,716 | 53,527 | ||
| Amortization of acquired intangibles | 5,407 | 4,267 | ||
| Restructuring | 280 | — | ||
| Total costs and expenses | 759,147 | 699,227 | ||
| Income from operations | 249,956 | 322,463 | ||
| Interest expense | (8,692) | (9,260) | ||
| Other income, net | 68,779 | 8,284 | ||
| Income before provision for income taxes | 310,043 | 321,487 | ||
| Provision for income taxes | 62,400 | 79,683 | ||
| Net income | $ | 247,643 | $ | 241,804 |
| Net income per share - basic | $ | 0.92 | $ | 0.90 |
| Net income per share - diluted | $ | 0.91 | $ | 0.89 |
| Weighted average common shares outstanding - basic | 269,606 | 269,501 | ||
| Weighted average common shares outstanding - diluted | 273,544 | 273,159 |
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2024 and March 31, 2023
(In thousands)
(Unaudited)
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, 2024 | March 31, 2023 | |||
| Cash and cash equivalents at beginning of period | $ | 1,008,152 | $ | 882,325 |
| Cash flows from operating activities: | ||||
| Net income | 247,643 | 241,804 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 39,556 | 34,400 | ||
| Amortization of debt discount and fees | 320 | 311 | ||
| Stock-based compensation | 88,129 | 74,288 | ||
| Gain on investments, net | (55,394) | (123) | ||
| Deferred income taxes | (1,523) | (11,640) | ||
| Provisions for losses on receivables | 158 | 214 | ||
| ROU asset amortization and change in operating lease liabilities | (917) | (1,392) | ||
| Other non-cash items | 78 | 99 | ||
| Changes in operating assets and liabilities, net of effect of acquired businesses: | ||||
| Receivables | 102,991 | (8,719) | ||
| Inventories | (10,689) | 399 | ||
| Prepaid expenses and other | (15,073) | 56,212 | ||
| Other assets | (7,535) | (42,084) | ||
| Accounts payable and accrued liabilities | (117,291) | (117,915) | ||
| Deferred revenue | (23,941) | 40,650 | ||
| Other long-term liabilities | 6,720 | 897 | ||
| Net cash provided by operating activities | 253,232 | 267,401 | ||
| Cash flows from investing activities: | ||||
| Purchases of investments | (2,095) | (9,055) | ||
| Proceeds from the sale and maturity of investments | 43,377 | 102 | ||
| Purchases of property, plant and equipment | (49,601) | (26,719) | ||
| Cash paid in business combinations, net of cash acquired | (71,450) | — | ||
| Net cash used for investing activities | (79,769) | (35,672) | ||
| Cash flows from financing activities: | ||||
| Proceeds from revolving credit facility | — | 50,000 | ||
| Payments on revolving credit facility | — | (120,000) | ||
| Proceeds from issuance of common stock | 116,725 | 65,370 | ||
| Stock received for payment of employee taxes on vesting of restricted stock | (151,123) | (67,712) | ||
| Payments for repurchases of common stock | (125,006) | (125,010) | ||
| Net cash used for financing activities | (159,404) | (197,352) | ||
| Effect of exchange rate changes on cash and cash equivalents | (9,793) | 261 | ||
| Increase in cash and cash equivalents | 4,266 | 34,638 | ||
| Cash and cash equivalents at end of period | $ | 1,012,418 | $ | 916,963 |
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
| 2023 | 2024 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GEOGRAPHY | Q1 | Q2 | Q3 | Q4 | Year | Q1 | ||||||
| Americas | 44 | % | 41 | % | 43 | % | 44 | % | 43 | % | 46 | % |
| China | 17 | % | 18 | % | 17 | % | 15 | % | 17 | % | 12 | % |
| Other Asia | 18 | % | 18 | % | 19 | % | 19 | % | 19 | % | 20 | % |
| Europe, Middle East and Africa | 15 | % | 17 | % | 15 | % | 16 | % | 16 | % | 17 | % |
| Japan | 6 | % | 6 | % | 6 | % | 6 | % | 5 | % | 5 | % |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Revenue Mix by Product Category (% of Total Revenue)
| 2023 | 2024 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PRODUCT CATEGORY | Q1 | Q2 | Q3 | Q4 | Year | Q1 | ||||||
| Custom IC Design and Simulation | 20 | % | 22 | % | 22 | % | 22 | % | 22 | % | 22 | % |
| Digital IC Design and Signoff | 25 | % | 27 | % | 28 | % | 29 | % | 27 | % | 29 | % |
| Functional Verification, including Emulation and Prototyping Hardware | 32 | % | 27 | % | 26 | % | 24 | % | 27 | % | 25 | % |
| IP | 11 | % | 11 | % | 11 | % | 13 | % | 12 | % | 12 | % |
| System Design and Analysis | 12 | % | 13 | % | 13 | % | 12 | % | 12 | % | 12 | % |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of April 22, 2024
(Unaudited)
| Three Months Ending<br><br>June 30, 2024 | Year Ending<br><br>December 31, 2024 | |
|---|---|---|
| Forecast | Forecast | |
| GAAP operating margin as a percent of total revenue | 26.5% - 27.5% | 31% - 32% |
| Reconciling items to non-GAAP operating margin as a percent of total revenue: | ||
| Stock-based compensation expense | 9% | 8% |
| Amortization of acquired intangibles | 2% | 2% |
| Acquisition and integration-related costs | 1% | 1% |
| Non-qualified deferred compensation expenses | 0% | 0% |
| Non-GAAP operating margin as a percent of total revenue† | 38.5% - 39.5% | 42% - 43% |
| † | 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. | |
| --- | --- |
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of April 22, 2024
(Unaudited)
| Three Months Ending<br><br>June 30, 2024 | Year Ending<br><br>December 31, 2024 | |||
|---|---|---|---|---|
| Forecast | Forecast | |||
| Diluted net income per share on a GAAP basis | $0.73 to $0.77 | $4.04 to $4.14 | ||
| Stock-based compensation expense | 0.32 | 1.41 | ||
| Amortization of acquired intangibles | 0.06 | 0.25 | ||
| Acquisition and integration-related costs | 0.06 | 0.20 | ||
| Non-qualified deferred compensation expenses | — | 0.02 | ||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | — | (0.22) | ||
| Income tax effect of non-GAAP adjustments | 0.03 | 0.18 | ||
| Diluted net income per share on a non-GAAP basis† | $1.20 to $1.24 | $5.88 to $5.98 | ||
| † | The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP. | |||
| --- | --- | * | Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. | |
| --- | --- |
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of April 22, 2024
(Unaudited)
| Three Months Ending<br><br>June 30, 2024 | Year Ending<br><br>December 31, 2024 | |||
|---|---|---|---|---|
| ($ in millions) | Forecast | Forecast | ||
| Net income on a GAAP basis | $200 to $211 | $1,105 to $1,132 | ||
| Stock-based compensation expense | 89 | 386 | ||
| Amortization of acquired intangibles | 17 | 68 | ||
| Acquisition and integration-related costs | 15 | 56 | ||
| Non-qualified deferred compensation expenses | — | 5 | ||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | — | (60) | ||
| Income tax effect of non-GAAP adjustments | 8 | 48 | ||
| Net income on a non-GAAP basis† | $329 to $340 | $1,608 to $1,635 | ||
| † | 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. | |
| --- | --- |
Document
Exhibit 99.02
| CADENCE REPORTS FIRST QUARTER2024 | |
|---|---|
| CADENCE DESIGN SYSTEMS, INC. | |
| CFO COMMENTARY | |
| Key Takeaways• Record Q1 bookings and record Q1 backlog of approximately 6.0 billion• Raising 2024 revenue outlook• The pending acquisition of BETA CAE is not included in Cadence's outlook | Q1 2024 KEY METRICS |
| FY 2024 Outlook• Revenue: 4.56 - 4.62 billion• GAAP operating margin: 31% - 32%• Non-GAAP operating margin: 42% - 43%• GAAP EPS: 4.04 - 4.14• Non-GAAP EPS 5.88 - 5.98• Operating cash flow: 1.35 - 1.45 billion• Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year | |
All values are in US Dollars.
| April 22, 2024 | Cadence Q1 2024 Financial Results | 1 |
|---|---|---|
| Cadence Design Systems, Inc. | ||
| --- |
Financial Metrics
| (In Millions, except per share data) | 2018 | 2019 | 2020* | 2021 | 2022 | 2023* | 2024E | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $ | 2,138 | $ | 2,336 | $ | 2,683 | $ | 2,988 | $ | 3,562 | $ | 4,090 | 4,560- 4,620 |
| Revenue growth* | 10% | 9% | 15% | 11% | 19% | 15% | 11% - 13% | ||||||
| 3-year CAGR | 8% | 9% | 11% | 12% | 15% | 15% | ~15% | ||||||
| 3-year CAGR without 53rd week impact | 11% | 16% | |||||||||||
| GAAP operating expenses | $ | 1,742 | $ | 1,845 | $ | 2,037 | $ | 2,209 | $ | 2,488 | $ | 2,839 | ~3,154 |
| GAAP operating expense growth | 8% | 6% | 10% | 8% | 13% | 14% | ~11% | ||||||
| Non-GAAP operating expenses | $ | 1,491 | $ | 1,587 | $ | 1,739 | $ | 1,877 | $ | 2,125 | $ | 2,373 | ~2,639 |
| Non-GAAP operating expense growth | 6% | 6% | 10% | 8% | 13% | 12% | ~11% | ||||||
| GAAP operating margin** | 19% | 21% | 24% | 26% | 30% | 31% | 32.5 | ||||||
| Non-GAAP operating margin** | 30% | 32% | 35% | 37% | 40% | 42% | 42.5 | ||||||
| GAAP earnings per share | $ | 1.23 | $ | 3.53 | $ | 2.11 | $ | 2.50 | $ | 3.09 | $ | 3.82 | 4.04 - 4.14 |
| Non-GAAP earning per share | $ | 1.87 | $ | 2.20 | $ | 2.80 | $ | 3.29 | $ | 4.27 | $ | 5.15 | 5.88 - 5.98 |
| Non-GAAP EPS growth** | 34% | 18% | 27% | 18% | 30% | 21% | 15 | ||||||
| 3-year Non-GAAP EPS CAGR** | 20% | 22% | 26% | 21% | 25% | 23% | 22 | ||||||
| Weighted average shares diluted outstanding | 281.1 | 280.5 | 279.6 | 278.9 | 275.0 | 272.7 | 272.5 - 274.5 | ||||||
| Cash flow from operations | 605 | 730 | 905 | 1,101 | 1,242 | 1,349 | 1,350 - 1,450 | ||||||
| Capital expenditures | 62 | 75 | 95 | 65 | 123 | 102 | ~120 |
All values are in US Dollars.
* Fiscal 2020 was a 53-week year, compared to all other years which were 52 week years. 2020 (which impacts the 3 year CAGR in 2023) included approximately $45 million revenue impact for the extra week.
** At midpoint of guidance.
Profitability Trends
| (In Millions) | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024E* | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $ | 2,138 | $ | 2,336 | $ | 2,683 | $ | 2,988 | $ | 3,562 | $ | 4,090 | $ | 4,590 |
| Revenue Growth | 10% | 9% | 15% | 11% | 19% | 15% | 12% | |||||||
| 3-Year Revenue Growth CAGR | 8% | 9% | 11% | 12% | 15% | 15% | 15% | |||||||
| GAAP operating margin | 19% | 21% | 24% | 26% | 30% | 31% | 32.5% | |||||||
| Non-GAAP operating margin | 30.2% | 32.1% | 35.2% | 37.2% | 40.3% | 42.0% | 42.5% | |||||||
| Stock-based compensation | (7.8)% | (7.8)% | (7.4)% | (7.0)% | (7.6)% | (8.0)% | (8.4)% | |||||||
| Non-GAAP operating margin adjusted for stock-based compensation | 22.4% | 24.3% | 27.8% | 30.2% | 32.7% | 34.0% | 34.1% | |||||||
| GAAP operating income | $ | 396 | $ | 492 | $ | 646 | $ | 779 | $ | 1,074 | $ | 1,251 | $ | 1,436 |
| Non-GAAP operating income | $ | 647 | $ | 749 | $ | 944 | $ | 1,111 | $ | 1,436 | $ | 1,717 | $ | 1,951 |
| Non-GAAP operating income adjusted for stock-based compensation | $ | 479 | $ | 567 | $ | 747 | $ | 901 | $ | 1,166 | $ | 1,391 | $ | 1,565 |
* At midpoint of guidance.
| April 22, 2024 | Cadence Q1 2024 Financial Results | 2 | | --- | --- | --- || Cadence Design Systems, Inc. | | --- |
Second Quarter 2024 Financial Outlook
| Q2 2023 | Q1 2024 | Q2 2024E | |||
|---|---|---|---|---|---|
| Total Revenue ($ Millions) | $ | 977 | $ | 1,009 | $1,030 - $1,050 |
| Q/Q Growth | (6)% | 2% - 4% | |||
| Y/Y Growth | (1)% | 5% - 7% | |||
| GAAP Operating Margin | 31% | 25% | 26.5% - 27.5% | ||
| Non-GAAP Operating Margin | 42% | 38% | 38.5% - 39.5% | ||
| GAAP EPS | $ | 0.81 | $ | 0.91 | $0.73 - $0.77 |
| Non-GAAP EPS | $ | 1.22 | $ | 1.17 | $1.20 - $1.24 |
Fiscal Year 2024 Financial Outlook
| Previous | Current | |||
|---|---|---|---|---|
| FY 2023 | FY 2024E | FY 2024E | ||
| Recurring Revenue | 84% | 80% - 85% | 80% - 85% | |
| Total Revenue ($ Millions) | $ | 4,090 | $4,550 - $4,610 | $4,560 - $4,620 |
| Y/Y Growth | 15% | 11% - 13% | 11% - 13% | |
| Revenue from Beginning Backlog | ~75% | ~70% | ~70% | |
| GAAP Operating Margin | 30.6% | 32% - 33% | 31% - 32% | |
| Non-GAAP Operating Margin | 42.0% | 42% - 43% | 42% - 43% | |
| GAAP Other Income & Expense ($ Millions) | $ | 31 | $(10) - $(18) | $49 - $55 |
| Non-GAAP Other Income & Expense ($ Millions) | $ | (15) | $(10) - $(18) | $(5) - $(11) |
| GAAP Tax Rate | 19% | ~23% | ~25% | |
| Non-GAAP Tax Rate | 17.5% | 16.5% | 16.5% | |
| Weighted Average Diluted Shares Outstanding (Millions) | 272.7 | 271.5 - 273.5 | 272.5 - 274.5 | |
| GAAP EPS | $ | 3.82 | $4.08 - $4.18 | $4.04 - $4.14 |
| Y/Y Growth | 24% | 7% - 9% | 6% - 8% | |
| Non-GAAP EPS | $ | 5.15 | $5.87 - $5.97 | $5.88 - $5.98 |
| Y/Y Growth | 21% | 14% - 16% | 14% - 16% | |
| Cash Flow from Operations ($ Millions) | $ | 1,349 | $1,350 - $1,450 | $1,350 - $1,450 |
| DSO | 43 | ~45 | ~45 | |
| Capital Expenditures ($ Millions) | $ | 102 | ~$120 | ~$120 |
| April 22, 2024 | Cadence Q1 2024 Financial Results | 3 | ||
| --- | --- | --- | Cadence Design Systems, Inc. | |
| --- |
First Quarter Financial Results
Backlog
| (In Billions) | 2020 | 2021 | 2022 | 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Backlog | $ | 3.9 | $ | 4.4 | $ | 5.8 | $ | 6.0 | $ | 6.0 |
Revenue
| (In Millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Product and Maintenance | $ | 964 | $ | 923 | $ | 966 | $ | 982 | $ | 913 |
| Services | 58 | 54 | 57 | 87 | 96 | |||||
| Total Revenue | $ | 1,022 | $ | 977 | $ | 1,023 | $ | 1,069 | $ | 1,009 |
Recurring and Up-Front Revenue
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue recognized over time | 77 | % | 82 | % | 83 | % | 85 | % | 87 | % |
| Revenue from arrangements with non-cancelable commitments | 3 | % | 3 | % | 2 | % | 2 | % | 3 | % |
| Recurring Revenue | 80 | % | 85 | % | 85 | % | 87 | % | 90 | % |
| Up-Front Revenue | 20 | % | 15 | % | 15 | % | 13 | % | 10 | % |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Trailing Twelve Months Recurring and Up-Front Revenue
| Trailing Twelve Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||||||
| Recurring Revenue | 84 | % | 84 | % | 84 | % | 84 | % | 87 | % |
| Up-Front Revenue | 16 | % | 16 | % | 16 | % | 16 | % | 13 | % |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Revenue Mix by Geography
| (% of Total Revenue) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Americas | 44 | % | 41 | % | 43 | % | 44 | % | 46 | % |
| China | 17 | % | 18 | % | 17 | % | 15 | % | 12 | % |
| Other Asia | 18 | % | 18 | % | 19 | % | 19 | % | 20 | % |
| Europe, Middle East and Africa | 15 | % | 17 | % | 15 | % | 16 | % | 17 | % |
| Japan | 6 | % | 6 | % | 6 | % | 6 | % | 5 | % |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Revenue Mix by Product Category
| (% of Total Revenue) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Custom IC Design and Simulation | 20 | % | 22 | % | 22 | % | 22 | % | 22 | % |
| Digital IC Design and Signoff | 25 | % | 27 | % | 28 | % | 29 | % | 29 | % |
| Functional Verification | 32 | % | 27 | % | 26 | % | 24 | % | 25 | % |
| IP | 11 | % | 11 | % | 11 | % | 13 | % | 12 | % |
| System Design and Analysis | 12 | % | 13 | % | 13 | % | 12 | % | 12 | % |
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
| April 22, 2024 | Cadence Q1 2024 Financial Results | 4 | ||||||||
| --- | --- | --- | Cadence Design Systems, Inc. | |||||||
| --- |
Gross Margin
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| GAAP Gross Margin | 87.8 | % | 90.1 | % | 89.3 | % | 90.3 | % | 87.6 | % |
| Non-GAAP Gross Margin | 89.1 | % | 91.4 | % | 90.6 | % | 91.7 | % | 89.1 | % |
Total Costs and Expenses
| (In Millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total GAAP Costs and Expenses | $ | 699 | $ | 677 | $ | 730 | $ | 732 | $ | 759 |
| Total Non-GAAP Costs and Expenses | $ | 591 | $ | 569 | $ | 603 | $ | 610 | $ | 627 |
Operating Margin
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| GAAP Operating Margin | 31.6 | % | 30.7 | % | 28.6 | % | 31.5 | % | 24.8 | % |
| Non-GAAP Operating Margin | 42.1 | % | 41.8 | % | 41.1 | % | 42.9 | % | 37.8 | % |
Net Income Per Share
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| GAAP Net Income Per Share | $ | 0.89 | $ | 0.81 | $ | 0.93 | $ | 1.19 | $ | 0.91 |
| Non-GAAP Net Income Per Share | $ | 1.29 | $ | 1.22 | $ | 1.26 | $ | 1.38 | $ | 1.17 |
Total DSO
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |
|---|---|---|---|---|---|
| DSO | 44 | 42 | 39 | 43 | 36 |
Balance Sheet and Cash Review
Free Cash Flow
| (In Millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net Cash from Operating Activities | $ | 267 | $ | 414 | $ | 396 | $ | 272 | $ | 253 |
| Capital Expenditures | 26 | 20 | 22 | 34 | 49 | |||||
| Free Cash Flow | $ | 241 | $ | 394 | $ | 374 | $ | 238 | $ | 204 |
Cash and Cash Equivalents
| (In Millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Cash and Cash Equivalents | $ | 917 | $ | 874 | $ | 962 | $ | 1,008 | $ | 1,012 |
•Approximately 27 percent of our cash and cash equivalents were in the U.S. at quarter-end.
Share Repurchase
| (In Millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share Repurchase | $ | 125 | $ | 265 | $ | 185 | $ | 125 | $ | 125 |
| Number of Shares | 0.668 | 1.178 | 0.811 | 0.488 | 0.425 |
•Q3 2023 includes 276,330 shares and $60 million equity forward contract from Q2 2023 ASR settled in Q3 2023.
Employees
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |
|---|---|---|---|---|---|
| Headcount | 10,579 | 10,832 | 11,139 | 11,226 | 11,753 |
| April 22, 2024 | Cadence Q1 2024 Financial Results | 5 | |||
| --- | --- | --- | Cadence Design Systems, Inc. | ||
| --- |
Forward Looking Statements
This CFO Commentary contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends, pending transactions and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands or supply constraints that could result in delays in purchases, development, installations or deliveries of Cadence's products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic, geopolitical and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions, and rising tensions and conflicts around the world such as in the Middle East and with respect to Taiwan; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates, Cadence's upcoming debt maturities and Cadence’s ability to access capital and debt markets; (vii) Cadence's pending acquisition of BETA CAE Systems International AG, which remains subject to certain closing conditions, the acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (viii) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (ix) events that affect cash flow, liquidity, or reserves, or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation, regulatory or other matters; (x) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject; and (xi) Cadence's ability to successfully meet corporate governance, environmental and social targets and strategies. In addition, the timing and amount of Cadence’s repurchases of its common stock are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.
All forward-looking statements in this document are based on management's expectations as of the date of this document and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.
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 CFO Commentary 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. See our earnings press release issued today for further discussion of our non-GAAP financial measures, as well as the reconciliation provided in the Appendix to this CFO Commentary.
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.
| April 22, 2024 | Cadence Q1 2024 Financial Results | 6 | | --- | --- | --- || Cadence Design Systems, Inc. | | --- |
© 2024 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
| April 22, 2024 | Cadence Q1 2024 Financial Results | 7 |
|---|---|---|
| Cadence Design Systems, Inc. | ||
| --- |
APPENDIX I
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses
| (In Millions) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| GAAP total costs and expenses | $ | 699 | $ | 677 | $ | 730 | $ | 732 | $ | 759 |
| Reconciling items to non-GAAP total costs and expenses | ||||||||||
| Stock-based compensation expense | (74) | (76) | (88) | (87) | (88) | |||||
| Amortization of acquired intangibles | (15) | (15) | (15) | (17) | (17) | |||||
| Acquisition and integration-related costs | (16) | (14) | (14) | (13) | (22) | |||||
| Restructuring | — | — | (12) | 1 | — | |||||
| Non-qualified deferred compensation (expenses) credits | (3) | (3) | 2 | (6) | (5) | |||||
| Non-GAAP total costs and expenses* | $ | 591 | $ | 569 | $ | 603 | $ | 610 | $ | 627 |
| * | 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. | |||||||||
| --- | --- |
Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses
| (In Millions) | 2018 | 2019 | 2020* | 2021 | 2022 | 2023 | 2024E | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP total costs and expenses | $ | 1,742 | $ | 1,845 | $ | 2,037 | $ | 2,209 | $ | 2,488 | $ | 2,839 | $ | 3,154 |
| Reconciling items to non-GAAP total costs and expenses | ||||||||||||||
| Stock-based compensation expense | (168) | (182) | (197) | (210) | (270) | (326) | (386) | |||||||
| Amortization of acquired intangibles | (53) | (53) | (64) | (67) | (60) | (62) | (68) | |||||||
| Acquisition and integration-related costs | (20) | (8) | (23) | (23) | (41) | (56) | (56) | |||||||
| Restructuring | (11) | (9) | (9) | 1 | — | (11) | — | |||||||
| Non-qualified deferred compensation (expenses) credits | 1 | (5) | (5) | (6) | 8 | (11) | (5) | |||||||
| Special charges** | — | (1) | — | (27) | — | — | — | |||||||
| Non-GAAP total costs and expenses*** | $ | 1,491 | $ | 1,587 | $ | 1,739 | $ | 1,877 | $ | 2,125 | $ | 2,373 | $ | 2,639 |
| * | Fiscal 2020 was a 53-week year. | |||||||||||||
| --- | --- | |||||||||||||
| ** | 2021 includes costs related to a voluntary retirement program. | |||||||||||||
| *** | 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. | April 22, 2024 | Cadence Q1 2024 Financial Results | 8 | ||||||||||
| --- | --- | --- | Cadence Design Systems, Inc. | |||||||||||
| --- |
Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and Non-GAAP Operating Income Adjusted for Stock-based Compensation
| (In Millions) | 2018 | 2019 | 2020* | 2021 | 2022 | 2023 | 2024E | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP operating income | $ | 396 | $ | 492 | $ | 646 | $ | 779 | $ | 1,074 | $ | 1,251 | $ | 1,436 |
| Reconciling items to non-GAAP operating income | ||||||||||||||
| Stock-based compensation expense | 168 | 182 | 197 | 210 | 270 | 326 | 386 | |||||||
| Amortization of acquired intangibles | 53 | 53 | 64 | 67 | 60 | 62 | 68 | |||||||
| Acquisition and integration-related costs | 20 | 8 | 23 | 23 | 41 | 56 | 56 | |||||||
| Restructuring | 11 | 9 | 9 | (1) | — | 11 | — | |||||||
| Non-qualified deferred compensation expenses (credits) | (1) | 5 | 5 | 6 | (8) | 11 | 5 | |||||||
| Special charges** | — | 1 | — | 27 | — | — | — | |||||||
| Non-GAAP operating income*** | $ | 647 | $ | 749 | $ | 944 | $ | 1,111 | $ | 1,436 | $ | 1,717 | $ | 1,951 |
| Stock-based compensation expense | (168) | (182) | (197) | (210) | (270) | (326) | $ | (386) | ||||||
| Non-GAAP operating income adjusted for stock-based compensation*** | $ | 479 | $ | 567 | $ | 747 | $ | 901 | $ | 1,166 | $ | 1,391 | $ | 1,565 |
Table may not foot due to rounding
| * | Fiscal 2020 was a 53-week year. | ||||
|---|---|---|---|---|---|
| ** | 2021 includes costs related to a voluntary retirement program. | ||||
| *** | 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. | April 22, 2024 | Cadence Q1 2024 Financial Results | 9 | |
| --- | --- | --- | Cadence Design Systems, Inc. | ||
| --- |
Reconciliation of GAAP Gross Margin as a Percent of Total Revenue to Non-GAAP Gross Margin as a Percent of Total Revenue
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | |
|---|---|---|---|---|---|
| GAAP gross margin as a percent of total revenue | 87.8% | 90.1% | 89.3% | 90.3% | 87.6% |
| Reconciling items to non-GAAP gross margin as a percent of total revenue | |||||
| Stock-based compensation expense | 0.3% | 0.2% | 0.2% | 0.3% | 0.3% |
| Amortization of acquired intangibles | 1.0% | 1.1% | 1.1% | 1.1% | 1.1% |
| Non-qualified deferred compensation expenses (credits) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| Acquisition and integration-related costs | 0.0% | 0.0% | 0.0% | 0.0% | 0.1% |
| Non-GAAP gross margin as a percent of total revenue* | 89.1% | 91.4% | 90.6% | 91.7% | 89.1% |
| * | 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. | ||||
| --- | --- | ||||
| April 22, 2024 | Cadence Q1 2024 Financial Results | 10 | |||
| --- | --- | --- | Cadence Design Systems, Inc. | ||
| --- |
Reconciliation of GAAP Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue
| Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024E | |
|---|---|---|---|---|---|---|
| GAAP operating margin as a percent of total revenue | 32% | 31% | 29% | 31% | 25% | 26.5% - 27.5% |
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||
| Stock-based compensation expense | 7% | 8% | 9% | 8% | 9% | 9% |
| Amortization of acquired intangibles | 1% | 2% | 1% | 2% | 2% | 2% |
| Acquisition and integration-related costs | 2% | 1% | 1% | 1% | 2% | 1% |
| Restructuring | 0% | 0% | 1% | 0% | 0% | 0% |
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | 1% | 0% | 0% |
| Non-GAAP operating margin as a percent of total revenue* | 42% | 42% | 41% | 43% | 38% | 38.5% - 39.5% |
| * | 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. | |||||
| --- | --- |
Reconciliation of GAAP Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024E | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| GAAP operating margin as a percent of total revenue | 19% | 21% | 24% | 26% | 30% | 31% | 31% - 32% | |||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||
| Stock-based compensation expense | 8% | 8% | 7% | 7% | 8% | 8% | 8% | |||
| Amortization of acquired intangibles | 2% | 2% | 3% | 2% | 2% | 2% | 2% | |||
| Acquisition and integration-related costs | 1% | 0% | 1% | 1% | 1% | 1% | 1% | |||
| Restructuring | 0% | 1% | 0% | 0% | 0% | 0% | 0% | |||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | 0% | (1)% | 0% | 0% | |||
| Special charges * | 0% | 0% | 0% | 1% | 0% | 0% | 0% | |||
| Non-GAAP operating margin as a percent of total revenue** | 30% | 32% | 35% | 37% | 40% | 42% | 42% - 43% | * | 2021 includes costs related to a voluntary retirement program. | |
| --- | --- | |||||||||
| ** | 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. | April 22, 2024 | Cadence Q1 2024 Financial Results | 11 | ||||||
| --- | --- | --- | Cadence Design Systems, Inc. | |||||||
| --- |
Reconciliation of GAAP Diluted Net Income Per Share to Non-GAAP Diluted Net Income Per Share
| (In Thousands, Except Per Share Data) | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024E | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Diluted net income per share on a GAAP basis | $ | 0.89 | $ | 0.81 | $ | 0.93 | $ | 1.19 | $ | 0.91 | $0.73 - $0.77 |
| Stock-based compensation expense | 0.27 | 0.28 | 0.32 | 0.32 | 0.32 | 0.32 | |||||
| Amortization of acquired intangibles | 0.05 | 0.06 | 0.06 | 0.06 | 0.06 | 0.06 | |||||
| Acquisition and integration-related costs | 0.06 | 0.05 | 0.05 | 0.04 | 0.08 | 0.06 | |||||
| Restructuring | — | — | 0.04 | — | — | — | |||||
| Non-qualified deferred compensation expenses (credits) | 0.01 | 0.01 | — | 0.02 | 0.02 | — | |||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets** | (0.01) | (0.01) | (0.04) | (0.10) | (0.22) | — | |||||
| Income tax effect of non-GAAP adjustments | 0.02 | 0.02 | (0.10) | (0.15) | — | 0.03 | |||||
| Diluted net income per share on a non-GAAP basis* | $ | 1.29 | $ | 1.22 | $ | 1.26 | $ | 1.38 | $ | 1.17 | $1.20 - $1.24 |
| Shares used in calculation of diluted net income per share | 273,159 | 272,996 | 272,427 | 272,419 | 273,544 | ||||||
| * | 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. | ||||||||||
| April 22, 2024 | Cadence Q1 2024 Financial Results | 12 | |||||||||
| --- | --- | --- | Cadence Design Systems, Inc. | ||||||||
| --- |
Reconciliation of GAAP Diluted Net Income Per Share to Non-GAAP Diluted Net Income Per Share
| (In Thousands, Except Per Share Data) | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024E | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Diluted net income per share on a GAAP basis | $ | 1.23 | $ | 3.53 | $ | 2.11 | $ | 2.50 | $ | 3.09 | $ | 3.82 | $4.04 - $4.14 |
| Stock-based compensation expense | 0.60 | 0.65 | 0.71 | 0.75 | 0.98 | 1.19 | 1.41 | ||||||
| Amortization of acquired intangibles | 0.19 | 0.19 | 0.23 | 0.24 | 0.22 | 0.23 | 0.25 | ||||||
| Acquisition and integration-related costs | 0.07 | 0.03 | 0.08 | 0.08 | 0.15 | 0.21 | 0.20 | ||||||
| Restructuring | 0.04 | 0.03 | 0.03 | — | — | 0.04 | — | ||||||
| Non-qualified deferred compensation expenses (credits) | (0.01) | 0.02 | 0.02 | 0.02 | (0.03) | 0.04 | 0.02 | ||||||
| Special charges** | — | — | — | 0.10 | — | — | — | ||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets*** | — | (0.01) | — | (0.03) | 0.05 | (0.17) | (0.22) | ||||||
| Income tax benefit related to intercompany transfers of certain intellectual property rights | — | (2.05) | — | — | — | — | — | ||||||
| Income tax effect of non-GAAP adjustments | (0.25) | (0.19) | (0.38) | (0.37) | (0.19) | (0.21) | 0.18 | ||||||
| Diluted net income per share on a non-GAAP basis* | $ | 1.87 | $ | 2.20 | $ | 2.80 | $ | 3.29 | $ | 4.27 | $ | 5.15 | $5.88 - $5.98 |
| Shares used in calculation of diluted net income per share | 281,144 | 280,515 | 279,641 | 278,858 | 275,011 | 272,748 | 272.5 - 274.5M | ||||||
| * | 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. | ||||||||||||
| --- | --- | ||||||||||||
| ** | 2021 includes 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. | ||||||||||||
| April 22, 2024 | Cadence Q1 2024 Financial Results | 13 | |||||||||||
| --- | --- | --- | Cadence Design Systems, Inc. | ||||||||||
| --- |
Reconciliation of GAAP Total Other Income and Expense to Non-GAAP Total Other Income and Expense
| (In Millions) | FY 2022 | FY 2023 | FY 2024E | ||
|---|---|---|---|---|---|
| GAAP total other income and expense | $ | (28) | $ | 31 | $49 - $55 |
| Reconciling items to non-GAAP total income and expense | |||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets** | 14 | (46) | (60) | ||
| Non-GAAP total other income and expense* | $ | (14) | $ | (15) | $(5) - $(11) |
| * | 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. | ||||
| April 22, 2024 | Cadence Q1 2024 Financial Results | 14 | |||
| --- | --- | --- |