10-QPeriod: Q3 FY2020

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q3 Ended Sep 26, 2020

Filed October 19, 2020For Securities:CDNS

Summary

Cadence Design Systems, Inc. (CDNS) reported a strong third quarter for 2020, with total revenue reaching $666.6 million, a 15% increase year-over-year. This growth was driven by robust performance in both product and maintenance revenue, which rose 15%, and services revenue, also up 15%. The company demonstrated significant operational leverage, with income from operations increasing by 40% to $169.3 million compared to the same period in the prior year. Financially, CDNS strengthened its balance sheet, ending the quarter with $1.3 billion in cash and cash equivalents, a substantial increase from $705.2 million at the end of 2019. This was supported by strong operating cash flow. The company also managed its debt effectively, maintaining compliance with financial covenants. Despite the ongoing economic uncertainties due to the COVID-19 pandemic, Cadence's strategic focus on Intelligent System Design and continued investment in R&D positions it well for sustained growth.

Financial Highlights

47 data points
Beta

Revenue

$666.61M

Net Income

$161.63M

24.2% Net Margin

EPS (Diluted)

$0.58

Total Assets

$4.14B

Cash & Equivalents

$1.31B

Free Cash Flow

$186.35M

Financial Statements
Beta
Revenue$666.61M
R&D Expenses$250.93M
Operating Expenses$497.33M
Operating Income$169.27M
Interest Expense$5.33M
Net Income$161.63M
EPS (Basic)$0.59
EPS (Diluted)$0.58
Shares Outstanding (Basic)274.00M
Shares Outstanding (Diluted)280.02M

Key Highlights

  • 1Total revenue increased by 15% to $666.6 million for the three months ended September 26, 2020, compared to $579.6 million for the same period in 2019.
  • 2Product and maintenance revenue grew by 15% to $630.3 million, and services revenue increased by 15% to $36.3 million.
  • 3Income from operations saw a significant jump of 40%, reaching $169.3 million compared to $120.8 million in the prior year's quarter.
  • 4Net income increased by 59% to $161.6 million, or $0.58 per diluted share, up from $101.5 million, or $0.36 per diluted share, in Q3 2019.
  • 5Cash and cash equivalents more than doubled, growing from $705.2 million at the end of 2019 to $1.3 billion at the end of Q3 2020.
  • 6The company repurchased $75 million of its common stock during the quarter.
  • 7Cadence completed two acquisitions (AWR and Integrand) in early 2020 to enhance its radio frequency design capabilities.

Frequently Asked Questions

The primary driver was strong performance across both product and maintenance revenue, as well as services revenue. This growth reflects increased customer investment in new, complex product designs, particularly in key markets like China and the United States.

Cadence significantly increased its cash and cash equivalents, ending the quarter with $1.3 billion, up from $705.2 million at the end of 2019. This was supported by robust operating cash flows, demonstrating strong liquidity and financial flexibility.

Cadence acknowledges the ongoing uncertainties due to COVID-19, which has impacted delivery timing for some hardware and IP products and led to customer requests for payment delays. However, the company has prudently managed its liquidity by borrowing $350 million under its credit facility and believes its current cash and operating cash flows are sufficient to meet its needs for at least the next 12 months. Despite these challenges, revenue and profitability have grown, indicating resilience.

In early 2020, Cadence acquired AWR Corporation and Integrand Software, Inc. These acquisitions are aimed at enhancing Cadence's technology portfolio, particularly for radio frequency design activities driven by the expansion of 5G communications.