10-KPeriod: FY2010

CADENCE DESIGN SYSTEMS INC Annual Report, Year Ended Jan 2, 2010

Filed February 26, 2010For Securities:CDNS

Summary

Cadence Design Systems, Inc. (CDNS) reported its annual results for the fiscal year ending January 2, 2010. The company experienced a significant revenue decline of approximately 17% year-over-year, from $1,038.6 million in 2008 to $852.6 million in 2009. This downturn was attributed to the challenging macroeconomic environment impacting the semiconductor industry, leading to reduced customer spending on EDA products and services. Despite the revenue decrease, Cadence managed to reduce its operating expenses significantly through restructuring efforts, including workforce reductions, which helped mitigate the impact on its overall financial performance. Financially, the company reported a net loss for the fiscal year, a continuation from the previous year, impacted by a substantial goodwill impairment charge in 2008. Cadence maintained a solid liquidity position with $571.3 million in cash, cash equivalents, and short-term investments at the end of the fiscal year. The company's strategy continued to focus on its core EDA platforms and investing in research and development to address complex design challenges in the evolving electronics industry. Key risks highlighted include the cyclical nature of the semiconductor industry, technological developments, and competitive pressures.

Financial Highlights

52 data points
Beta

Revenue

$852.63M

96.2% Gross Margin

Net Income

-$149.87M

-17.6% Net Margin

EPS (Diluted)

$-0.58

Total Assets

$1.41B

Cash & Equivalents

$569.12M

Free Cash Flow

-$15.67M

Financial Statements
Beta
Revenue$852.63M
Cost of Revenue$32.11M
Gross Profit$820.52M
Operating Expenses$976.22M
Operating Income-$123.59M
Interest Expense$28.87M
Net Income-$149.87M
EPS (Basic)$-0.58
EPS (Diluted)$-0.58
Shares Outstanding (Basic)257.78M
Shares Outstanding (Diluted)257.78M

Key Highlights

  • 1Revenue decreased by 17% to $852.6 million in fiscal year 2009, down from $1,038.6 million in fiscal year 2008, primarily due to macroeconomic pressures on customer R&D budgets.
  • 2The company reported a net loss of $149.9 million for fiscal year 2009, compared to a net loss of $1,856.7 million in fiscal year 2008 (which included significant impairment charges).
  • 3Operating expenses were reduced by 21% to $764.2 million in fiscal year 2009, a decrease from $968.3 million in fiscal year 2008, driven by restructuring plans and cost-saving initiatives.
  • 4Cadence maintained a strong liquidity position, ending the fiscal year with $571.3 million in cash, cash equivalents, and short-term investments.
  • 5Backlog at January 2, 2010, was $1.6 billion, a decrease from $1.8 billion at the start of the fiscal year.
  • 6Product revenue, the largest segment, decreased by 26% year-over-year, while Maintenance revenue decreased by 11% and Services revenue decreased by 20%.

Frequently Asked Questions

The primary driver of the revenue decline was the challenging macroeconomic environment that impacted the semiconductor and electronics industries. This led to reduced customer spending on Electronic Design Automation (EDA) products and services due to pressures on their research and development budgets.

Cadence implemented significant cost-saving initiatives, including workforce reductions through restructuring plans. These efforts resulted in a substantial decrease in operating expenses, helping to mitigate the impact of the revenue shortfall on its financial performance.

While the company reported a net loss, its liquidity remains strong with over half a billion dollars in cash and short-term investments. The company is focused on its R&D efforts and adapting its product offerings to industry trends like System-on-Chip (SoC) integration and low-power design. The outlook anticipates modest growth in the semiconductor industry for 2010, though Cadence expects EDA spending to grow more slowly.

In fiscal year 2008, Cadence recorded a significant goodwill impairment charge of $1,317.2 million and an impairment of intangible and tangible assets of $47.1 million. It also recorded a valuation allowance against its deferred tax assets of $326.0 million. For fiscal year 2009, the company reported $35.1 million in restructuring charges.