10-QPeriod: Q1 FY2020

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q1 Ended Mar 28, 2020

Filed April 20, 2020For Securities:CDNS

Summary

Cadence Design Systems, Inc. reported solid financial results for the first quarter of fiscal year 2020, ending March 28, 2020. Total revenue increased by 7% year-over-year to $618.0 million, driven by a 7% rise in product and maintenance revenue and a 9% increase in services revenue. Net income grew slightly to $123.988 million from $120.555 million in the prior year, while diluted EPS remained stable at $0.44. The company demonstrated strong operational cash flow generation of $217.7 million. Significant strategic moves included the completion of acquisitions for AWR Corporation and Integrand Software, Inc. for approximately $195 million, aimed at enhancing its RF/microwave design capabilities for 5G communications. Despite the overall positive performance, the report highlighted the emerging impact of the COVID-19 pandemic. While not materially impacting Q1 results, management anticipated potential revenue softness in Q2 2020 due to logistical challenges in hardware and IP product delivery. As a precautionary measure against economic uncertainty, Cadence drew down its full $350 million revolving credit facility. The company's balance sheet remained robust, with cash and cash equivalents increasing to $946.3 million. The company emphasized continued investment in R&D and sales support, aligning with its Intelligent System Design strategy.

Financial Highlights

47 data points
Beta

Revenue

$617.96M

Net Income

$123.99M

20.1% Net Margin

EPS (Diluted)

$0.44

Total Assets

$3.77B

Cash & Equivalents

$946.28M

Free Cash Flow

$195.54M

Financial Statements
Beta
Revenue$617.96M
R&D Expenses$241.67M
Operating Expenses$478.61M
Operating Income$139.35M
Interest Expense$4.64M
Net Income$123.99M
EPS (Basic)$0.45
EPS (Diluted)$0.44
Shares Outstanding (Basic)273.48M
Shares Outstanding (Diluted)279.26M

Key Highlights

  • 1Total revenue grew 7% to $618.0 million, compared to $576.7 million in the prior year.
  • 2Net income increased to $123.988 million ($0.44 diluted EPS) from $120.555 million ($0.43 diluted EPS) year-over-year.
  • 3Strong operating cash flow of $217.7 million generated during the quarter.
  • 4Acquired AWR Corporation and Integrand Software for approximately $195 million to bolster RF/microwave design capabilities for 5G.
  • 5Ended the quarter with $946.3 million in cash and cash equivalents, an increase from $705.2 million at the end of the prior year.
  • 6Drew $350 million on its revolving credit facility as a precautionary measure due to COVID-19 uncertainty.
  • 7Anticipates potential Q2 2020 revenue impact due to COVID-19 related logistical challenges in hardware and IP fulfillment.

Frequently Asked Questions

Cadence reported a 7% increase in total revenue, reaching $618.0 million in the first quarter of fiscal year 2020, up from $576.7 million in the same period of fiscal year 2019. This growth was driven by both product and maintenance revenue, which increased by 7%, and services revenue, which rose by 9%.

For the three months ended March 28, 2020, Cadence reported a net income of $123.988 million, or $0.44 per diluted share. This represents a slight increase from the $120.555 million net income, or $0.43 per diluted share, reported for the same period in the prior year.

While the pandemic did not materially affect the first quarter results, Cadence anticipates potential revenue softness in the second quarter of fiscal 2020. This is primarily due to logistical challenges in fulfilling hardware and IP product orders caused by shelter-in-place orders and remote work policies affecting employees, customers, and suppliers. As a proactive measure, the company drew down its full $350 million revolving credit facility to ensure liquidity.

Cadence completed two acquisitions: AWR Corporation and Integrand Software, Inc. The aggregate cash consideration was approximately $195 million. These acquisitions are intended to enhance Cadence's technology portfolio, particularly in RF/microwave design, to support the growing demand for 5G communications.