10-QPeriod: Q3 FY2017

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q3 Ended Jul 1, 2017

Filed July 24, 2017For Securities:CDNS

Summary

Cadence Design Systems, Inc. (CDNS) reported its second-quarter 2017 financial results, showcasing a solid increase in revenue and profitability compared to the prior year. Total revenue for the quarter ended July 1, 2017, rose by 6% to $479 million, driven by a 6% increase in product and maintenance revenue. This growth was primarily fueled by the company's software and IP business, with a notable expansion in the Asian market. The company demonstrated strong operational efficiency, with research and development expenses increasing by 7% to support ongoing innovation, while general and administrative expenses saw a slight decrease. Financially, Cadence maintained a healthy liquidity position, with cash, cash equivalents, and short-term investments increasing significantly to $659.2 million from $468.3 million at the end of the previous year. This was supported by robust cash flow from operations, which improved by $91 million year-over-year. The company's strategic focus on innovation and market expansion, particularly in Asia, combined with a commitment to disciplined expense management, positions it for continued growth. Investors should note the company's ongoing investment in R&D as a key driver for future competitiveness and market leadership in the electronic design automation space.

Financial Highlights

48 data points
Beta

Revenue

$479.00M

Net Income

$81.16M

16.9% Net Margin

EPS (Diluted)

$0.29

Total Assets

$2.31B

Cash & Equivalents

$678.28M

Free Cash Flow

$226.62M

Financial Statements
Beta
Revenue$479.00M
Operating Expenses$405.01M
Operating Income$80.39M
Interest Expense$6.22M
Net Income$81.16M
EPS (Basic)$0.30
EPS (Diluted)$0.29
Shares Outstanding (Basic)273.16M
Shares Outstanding (Diluted)281.40M

Key Highlights

  • 1Total revenue for the quarter grew 6% year-over-year to $479 million, driven by product and maintenance revenue.
  • 2Product and maintenance revenue increased by 6% to $443.9 million, with growth attributed to the software and IP business, especially in Asia.
  • 3Operating income saw a significant increase of 24% to $82.7 million, indicating improved profitability.
  • 4Net income rose by 40% to $69.1 million, and diluted EPS increased to $0.25 from $0.17.
  • 5Cash, cash equivalents, and short-term investments increased substantially to $659.2 million, up from $468.3 million at the end of 2016.
  • 6Cash flow from operating activities for the six months ended July 1, 2017, was $254.6 million, a significant improvement from $163.6 million in the prior year.
  • 7The company continued to invest in Research and Development, increasing expenses by 7% to $195.9 million for the quarter, supporting its System Design Enablement (SDE) strategy.

Frequently Asked Questions

Cadence's revenue growth in the second quarter of 2017 was primarily driven by an increase in product and maintenance revenue, which rose by 6% year-over-year. This growth was particularly strong in its software and IP business and was supported by expansion in the Asian market.

Cadence's financial position has strengthened considerably. Cash, cash equivalents, and short-term investments increased significantly to $659.2 million as of July 1, 2017, compared to $468.3 million at the end of 2016. This improvement was supported by robust cash flow from operations, which saw a substantial increase of $91 million for the six-month period ended July 1, 2017.

Cadence's strategy, known as System Design Enablement (SDE), focuses on providing the technologies necessary for customers to develop complete electronic products. The company continues to invest heavily in research and development, with R&D expenses increasing by 7% in the quarter. This investment is aimed at creating and enhancing its software, hardware, services, and IP offerings to address evolving customer needs and technological trends in the semiconductor and electronics industries.

During the period, Cadence had $643.9 million in total outstanding debt. Notably, as of July 1, 2017, there were no outstanding borrowings under its $350 million revolving credit facility, which was renewed in January 2017 and has a maturity date of January 28, 2022. The company was in compliance with all financial covenants associated with its debt facilities.