10-QPeriod: Q1 FY2024

CADENCE DESIGN SYSTEMS INC Quarterly Report for Q1 Ended Mar 31, 2024

Filed April 24, 2024For Securities:CDNS

Summary

Cadence Design Systems, Inc. (CDNS) reported its first-quarter 2024 financial results, showing a slight decrease in total revenue to $1,009.1 million from $1,021.7 million in the prior year's quarter. This decline was primarily driven by a reduction in product and maintenance revenue, specifically from emulation and prototyping hardware, which saw a decrease compared to a strong performance in Q1 2023. However, services revenue experienced significant growth, increasing by 65% to $95.7 million. Despite the top-line dip, the company demonstrated strong operational performance with increased investment in research and development (R&D) and marketing and sales. Net income rose to $247.6 million, or $0.91 per diluted share, compared to $241.8 million, or $0.89 per diluted share, in the prior year. The company also announced a significant acquisition of BETA CAE Systems International AG for $1.24 billion, expected to close in Q2 2024, which will be funded through cash and debt. Cadence maintains a healthy cash position and continues to execute its share repurchase program.

Financial Highlights

48 data points
Beta

Revenue

$1.01B

Net Income

$247.64M

24.5% Net Margin

EPS (Diluted)

$0.91

Total Assets

$5.72B

Cash & Equivalents

$1.01B

Free Cash Flow

$203.63M

Financial Statements
Beta
Revenue$1.01B
R&D Expenses$378.96M
Operating Expenses$759.15M
Operating Income$249.96M
Interest Expense$8.69M
Net Income$247.64M
EPS (Basic)$0.92
EPS (Diluted)$0.91
Shares Outstanding (Basic)269.61M
Shares Outstanding (Diluted)273.54M

Key Highlights

  • 1Total revenue for Q1 2024 was $1,009.1 million, a slight decrease of 1% year-over-year, mainly due to lower product and maintenance revenue.
  • 2Services revenue saw robust growth, increasing by 65% to $95.7 million, indicating strong demand for Cadence's service offerings.
  • 3Net income increased to $247.6 million, up 2.4% year-over-year, with diluted EPS of $0.91, up from $0.89 in Q1 2023.
  • 4The company announced a definitive agreement to acquire BETA CAE Systems International AG for $1.24 billion, expanding its system analysis capabilities.
  • 5Research and Development (R&D) expenses increased by 8% to $379.0 million, reflecting continued investment in innovation.
  • 6Operating margin decreased to 25% from 32% in the prior year, impacted by revenue mix and incremental acquisition-related expenses.
  • 7Cadence ended the quarter with $1,012.4 million in cash and cash equivalents, maintaining a strong liquidity position.

Frequently Asked Questions

The decrease in total revenue to $1,009.1 million was primarily driven by a 5% decline in product and maintenance revenue, largely attributable to a year-over-year decrease in sales of emulation and prototyping hardware. This was a comparison against a strong hardware performance in Q1 2023.

Cadence plans to fund the $1.24 billion acquisition of BETA CAE with 60% cash and 40% stock. The cash portion will be financed through a combination of existing cash on hand and borrowings under its current and/or new debt facilities.

Services revenue has shown significant strength, growing by 65% year-over-year to $95.7 million in Q1 2024. This growth is attributed to increased revenue from Cadence-managed cloud-based and design service offerings.

The company completed the acquisition of Invecas, Inc. in Q1 2024. While not presented with pro forma financials due to materiality, acquisition-related transaction costs were $9.0 million in Q1 2024. Incremental expenses related to acquisitions, including amortization of acquired intangibles, contributed to the decrease in operating margin.