10-QPeriod: Q2 FY2013

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q2 Ended Jun 29, 2013

Filed July 25, 2013For Securities:CDNS

Summary

Cadence Design Systems Inc. reported solid revenue growth for the six months ended June 29, 2013, driven by a strong performance in its product and maintenance segment, which saw a 14% increase year-over-year. This growth was fueled by increased business levels, revenue recognized from prior period bookings, and contributions from recent acquisitions, notably Tensilica and Cosmic Circuits. While service revenue saw a decline, the overall revenue increase demonstrates continued demand for Cadence's core offerings in the semiconductor and electronics design space. The company also made significant strategic moves, including the acquisition of Tensilica for $319.3 million and Cosmic Circuits for $59.5 million, aimed at expanding its intellectual property (IP) solutions. These acquisitions have notably increased the company's goodwill and acquired intangibles on the balance sheet. Despite these investments and increased operating expenses, particularly in R&D and sales & marketing, the company generated positive cash flow from operations, indicating robust business activity.

Financial Highlights

48 data points
Beta

Revenue

$362.48M

Net Income

$9.43M

2.6% Net Margin

EPS (Diluted)

$0.03

Total Assets

$2.56B

Cash & Equivalents

$577.23M

Free Cash Flow

$57.73M

Financial Statements
Beta
Revenue$362.48M
Operating Expenses$317.34M
Operating Income$45.14M
Interest Expense$9.53M
Net Income$9.43M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)277.15M
Shares Outstanding (Diluted)294.44M

Key Highlights

  • 1Total revenue increased by 12% to $716.8 million for the first six months of 2013 compared to the same period in 2012.
  • 2Product and maintenance revenue, the primary revenue driver, grew by 14% year-over-year for the six-month period.
  • 3Significant strategic acquisitions were completed, including Tensilica for $319.3 million and Cosmic Circuits for $59.5 million, bolstering the company's IP portfolio.
  • 4Operating expenses increased by 15% to $510.5 million for the first six months of 2013, largely due to investments in R&D and sales & marketing, partly driven by acquisitions.
  • 5Cash flow from operating activities saw a healthy increase of $22.0 million to $150.2 million for the first six months of 2013.
  • 6The company had $678.5 million in cash, cash equivalents, and short-term investments as of June 29, 2013, though this represented a decrease from the prior year-end due to acquisition spending.
  • 7The 2015 convertible notes became classified as a current liability as early conversion conditions were met, though the company does not anticipate conversion at this time.

Frequently Asked Questions

Cadence's revenue growth was primarily driven by its Product and Maintenance segment, which increased by 14% year-over-year for the six months ended June 29, 2013. This growth was attributed to increased business levels, revenue recognized from prior bookings, and the impact of recent acquisitions like Tensilica and Cosmic Circuits.

The acquisitions significantly increased Cadence's assets, particularly goodwill and acquired intangibles, as reflected on the balance sheet. These acquisitions were strategic investments to enhance the company's intellectual property (IP) solutions and are expected to contribute to future growth, although they also led to increased operating expenses.

The 2015 Convertible Senior Notes, with a principal amount of $350 million, had met the conditions for early conversion into cash. Consequently, the net liability of $316.7 million was reclassified as a current liability as of June 29, 2013. While the company does not expect noteholders to convert due to current market conditions, it has secured its revolving credit facility to manage potential cash requirements if conversion were to occur.

Cadence maintained a solid liquidity position with $678.5 million in cash, cash equivalents, and short-term investments as of June 29, 2013. The company generated $150.2 million in operating cash flow during the first six months of the year and has access to a $250 million revolving credit facility, which had $100 million drawn. These resources are expected to cover operating needs, including the maturity of the 2013 Notes in December 2013.