10-QPeriod: Q2 FY2021

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q2 Ended Apr 3, 2021

Filed April 26, 2021For Securities:CDNS

Summary

Cadence Design Systems Inc. (CDNS) reported solid financial results for the first quarter of fiscal year 2021, ended April 3, 2021. Total revenue increased by 19% year-over-year to $736.0 million, driven by a strong performance in product and maintenance revenue, which grew 20% to $699.1 million. This growth reflects increased customer investments in complex electronic designs across various industries. Net income saw a substantial increase of 51% to $187.2 million, translating to diluted EPS of $0.67, up from $0.44 in the prior year period. The company also experienced a significant increase in operating margin, rising to 28% from 23% year-over-year, showcasing improved operational efficiency. Cadence continued its strategic investments in research and development and completed the acquisition of NUMECA, aligning with its Intelligent System Design™ strategy, indicating a focus on future growth and innovation.

Financial Highlights

47 data points
Beta

Revenue

$736.03M

Net Income

$187.17M

25.4% Net Margin

EPS (Diluted)

$0.67

Total Assets

$4.00B

Cash & Equivalents

$742.98M

Free Cash Flow

$191.47M

Financial Statements
Beta
Revenue$736.03M
R&D Expenses$270.99M
Operating Expenses$532.09M
Operating Income$203.94M
Interest Expense$4.22M
Net Income$187.17M
EPS (Basic)$0.68
EPS (Diluted)$0.67
Shares Outstanding (Basic)274.02M
Shares Outstanding (Diluted)280.14M

Key Highlights

  • 1Total revenue grew 19% year-over-year to $736.0 million.
  • 2Product and maintenance revenue increased 20% to $699.1 million, signaling strong demand for core offerings.
  • 3Net income surged 51% to $187.2 million, with diluted EPS rising to $0.67 from $0.44.
  • 4Operating margin improved significantly to 28% from 23% in the prior year quarter.
  • 5The company acquired NUMECA, a computational fluid dynamics (CFD) leader, to enhance its System Design and Analysis portfolio.
  • 6Cash flow from operations remained robust at $208.4 million, though slightly down from the prior year.
  • 7The company continued its share repurchase program, with $566 million remaining authorized as of quarter-end.

Frequently Asked Questions

The primary driver of Cadence's revenue growth was the strong performance in its product and maintenance segment, which increased by 20% year-over-year. This growth was attributed to increased customer investments in new and complex electronic designs across various sectors, including consumer, hyperscale computing, 5G communications, automotive, aerospace and defense, industrial, and healthcare.

The acquisition of NUMECA was completed in the first quarter of fiscal 2021. While the financial impact on this specific quarter's results was not material enough to present pro forma financial information, it is highlighted as a strategic move to expand Cadence's System Design and Analysis portfolio and support its Intelligent System Design™ strategy. The company anticipates increased expenses related to acquisitions, including amortization of acquired intangible assets, in future periods.

Cadence expects operating expenses to increase in the remainder of fiscal 2021 compared to fiscal 2020, primarily due to increased employee-related costs from hiring and acquisitions. The company anticipates a more moderate growth in operating margin due to these increased costs and amortization of intangibles. Additionally, if COVID-19 containment measures are lifted, expenses related to travel, meetings, and events are expected to rise.

Cadence ended the quarter with $743.0 million in cash and cash equivalents. The company generated strong cash flow from operations ($208.4 million) and utilized cash for business combinations, stock repurchases, employee taxes on restricted stock vesting, and capital expenditures. Approximately 60% of its cash and cash equivalents were held by foreign subsidiaries. Management expects current liquidity to be sufficient for at least the next 12 months.