10-QPeriod: Q2 FY2016

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q2 Ended Apr 2, 2016

Filed April 25, 2016For Securities:CDNS

Summary

Cadence Design Systems, Inc. reported solid financial performance for the first quarter of fiscal year 2016, ending April 2, 2016. Total revenue increased by 9% year-over-year to $447.9 million, driven by a 7% rise in product and maintenance revenue and a significant 30% surge in services revenue. Net income grew substantially to $50.6 million, or $0.17 per diluted share, compared to $36.3 million, or $0.12 per diluted share, in the prior year's first quarter. The company also demonstrated strong operational cash flow generation and a significant increase in its cash and cash equivalents, reaching $810.4 million at quarter-end. A notable strategic move during the quarter was the securing of a new $300 million term loan, alongside increased activity under its revolving credit facility, indicating proactive capital management to support growth initiatives, including substantial share repurchases.

Financial Highlights

48 data points
Beta

Revenue

$447.86M

Net Income

$50.56M

11.3% Net Margin

EPS (Diluted)

$0.17

Total Assets

$2.54B

Cash & Equivalents

$810.40M

Free Cash Flow

$71.08M

Financial Statements
Beta
Revenue$447.86M
Operating Expenses$389.83M
Operating Income$58.04M
Interest Expense$5.36M
Net Income$50.56M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)296.62M
Shares Outstanding (Diluted)303.43M

Key Highlights

  • 1Total revenue for the quarter rose by 9% year-over-year to $447.9 million.
  • 2Net income increased by 39% to $50.6 million, with diluted EPS growing to $0.17 from $0.12.
  • 3Cash and cash equivalents significantly increased by $193.7 million to $810.4 million.
  • 4The company secured a new $300 million term loan and utilized its revolving credit facility, increasing total debt.
  • 5Aggressive share repurchase activity continued, with $240 million spent in the quarter.
  • 6Research and development expenses increased by 10% to $179.9 million, reflecting ongoing investment in innovation.

Frequently Asked Questions

Revenue growth was driven by increases in both product and maintenance revenue (up 7%) and a significant surge in services revenue (up 30%). This indicates strong demand across Cadence's software, hardware, and service offerings.

Cadence took on new debt during the quarter, securing a $300 million term loan and borrowing $50 million under its revolving credit facility. This increased its total outstanding debt from $343.3 million to $692.9 million (carrying value). These borrowings are intended for general corporate purposes, including stock repurchases.

Cadence is actively returning capital to shareholders through significant share repurchases, spending $240 million in the quarter alone, and continuing to invest in research and development, with R&D expenses increasing by 10% year-over-year. The company also saw a substantial increase in its cash and cash equivalents balance.

Cadence early adopted a new accounting standard for stock-based compensation, which impacts how income tax effects are recognized and classified in the cash flow statement. This resulted in a cumulative effect adjustment to opening accumulated deficit and a change in cash flow presentation for excess tax benefits.