10-QPeriod: Q3 FY2000

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q3 Ended Jul 1, 2000

Filed August 15, 2000For Securities:CDNS

Summary

Cadence Design Systems, Inc. (CDNS) reported its financial results for the second quarter and first half of fiscal year 2000. For the three months ended July 1, 2000, the company generated total revenue of $298.7 million, an increase of 13% compared to the same period in the prior year. For the six months ended July 1, 2000, total revenue was $556.2 million, a decrease of 7% year-over-year. This revenue decline was primarily driven by a significant drop in product revenue, attributed to lower sales volumes of integrated circuit implementation products and the transition to a software subscription licensing model. The company reported a net income of $5.6 million ($0.02 per share) for the second quarter of 2000, a significant improvement from a net loss of $3.0 million ($0.01 per share) in the prior year's comparable quarter. However, for the first six months of 2000, Cadence reported a net loss of $6.2 million ($0.03 per share), compared to a net income of $49.9 million ($0.21 per share) in the first half of 1999. The increase in operating expenses, particularly in R&D and marketing, along with amortization of acquired intangibles, contributed to the net loss for the year-to-date period. Cadence is also undergoing a significant strategic initiative to separate its electronics design services group into a new publicly traded company, Tality Corporation.

Key Highlights

  • 1Total revenue for the second quarter of 2000 increased by 13% to $298.7 million compared to Q2 1999, driven by growth in product and maintenance revenues.
  • 2However, total revenue for the first six months of 2000 decreased by 7% to $556.2 million compared to the same period in 1999, primarily due to a 19% decline in product revenue.
  • 3The company reported a net income of $5.6 million for the second quarter of 2000, a positive shift from a net loss of $3.0 million in Q2 1999.
  • 4Despite the quarterly improvement, the company incurred a net loss of $6.2 million for the first six months of 2000, compared to a net income of $49.9 million in the prior year's period.
  • 5Operating expenses, particularly in Research and Development (R&D) and Marketing & Sales, saw significant increases year-over-year, contributing to the overall profitability challenges.
  • 6Amortization of acquired intangibles increased significantly, reflecting recent acquisitions.
  • 7Cadence is planning to separate its electronics design services group into a new entity, Tality Corporation, which will conduct an initial public offering.

Frequently Asked Questions

For the second quarter of 2000, Cadence reported a total revenue of $298.7 million, a 13% increase year-over-year, and a net income of $5.6 million ($0.02 per share). However, for the first six months of 2000, total revenue decreased by 7% to $556.2 million, and the company reported a net loss of $6.2 million ($0.03 per share), compared to a net income of $49.9 million in the same period of 1999.

The revenue increase in the second quarter was driven by growth in product and maintenance revenues. However, the decline in revenue for the first six months was primarily due to a significant decrease in product revenue, impacted by lower sales volumes of integrated circuit implementation products and the company's transition to a software subscription licensing model.

Cadence announced its plan to separate its electronics design services group into a new, publicly traded company named Tality Corporation. This strategic move is expected to allow each business to focus on its core strengths and potentially unlock value. Cadence will initially retain an approximately 80% ownership stake.

Operating expenses saw increases, with Marketing and Sales expenses up 15% for the quarter and 11% for the half-year, and Research & Development expenses up 31% for the quarter and 27% for the half-year. Amortization of acquired intangibles also increased significantly due to recent acquisitions, impacting overall profitability.