10-QPeriod: Q3 FY2017

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 26, 2017For Securities:CDNS

Summary

Cadence Design Systems, Inc. reported solid financial results for the nine months ended September 30, 2017, with total revenue increasing by 7% to $1.44 billion, driven by an 8% rise in product and maintenance revenue. The company demonstrated strong operational performance, with income from operations increasing by 27% to $242.7 million and net income growing by 32% to $218.5 million for the same period. This growth was fueled by continued investment in research and development and expansion of its software and IP business. Financially, Cadence ended the period with a significantly improved cash position, holding $678.3 million in cash and cash equivalents, a substantial increase from $465.2 million at the end of 2016. This was supported by robust cash flow from operations. The company also had substantial remaining authorization for its stock repurchase program, with $475 million available for future share buybacks, indicating a commitment to returning value to shareholders. The company remains compliant with its debt covenants, showcasing a stable financial footing.

Key Highlights

  • 1Total revenue for the nine months ended September 30, 2017, increased by 7% year-over-year to $1.44 billion.
  • 2Product and maintenance revenue grew by 8% to $1.35 billion for the nine months ended September 30, 2017.
  • 3Income from operations increased by 27% to $242.7 million for the nine months ended September 30, 2017.
  • 4Net income rose by 32% to $218.5 million for the nine months ended September 30, 2017.
  • 5Cash and cash equivalents significantly increased to $678.3 million as of September 30, 2017, compared to $465.2 million as of December 31, 2016.
  • 6The company had $475 million remaining under its stock repurchase authorization as of September 30, 2017.
  • 7Cadence Design Systems reported compliance with all financial covenants associated with its revolving credit facility and term loan.

Frequently Asked Questions

The primary driver of revenue growth was the increase in product and maintenance revenue, which grew by 8% year-over-year. This was attributed to the overall growth in Cadence's software and IP business, particularly in Asia, which helped offset a slight decrease in emulation and prototyping hardware revenue.

Cadence experienced a significant strengthening of its cash position. As of September 30, 2017, cash and cash equivalents stood at $678.3 million, a substantial increase from $465.2 million at the end of the prior fiscal year (December 31, 2016). This improvement was largely due to strong cash flow generated from operations.

Cadence has an active stock repurchase program. In January 2017, the Board of Directors authorized up to $525.0 million in repurchases. As of September 30, 2017, approximately $475.0 million remained available under this authorization, indicating continued commitment to returning capital to shareholders.

The company maintained compliance with all financial covenants associated with its revolving credit facility and 2019 Term Loan as of September 30, 2017. While Cadence has substantial debt, the company's strong liquidity, solid operating performance, and compliance with covenants suggest a stable financial footing at the end of this reporting period.