Cadence Reports Second Quarter 2020 Financial Results

Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its website.

Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence’s current expectations on matters covered unless Cadence publishes a notice stating otherwise.

Beginning September 11, 2020, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute Cadence’s current expectations. During the Quiet Period, the business outlook in these documents should be considered historical, speaking as of prior to the Quiet Period only and not subject to any update by Cadence. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until Cadence’s third quarter 2020 earnings release is published, which is currently scheduled for October 19, 2020.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
June 27, 2020 and December 28, 2019
(In thousands)
(Unaudited)

	June 27, 2020		December 28, 2019

Current assets:
Cash and cash equivalents	$	1,189,186	$	705,210
Receivables, net		312,758		304,546
Inventories		43,924		55,802
Prepaid expenses and other		93,915		103,785
Total current assets		1,639,783		1,169,343

Property, plant and equipment, net		282,738		275,855
Goodwill		778,857		661,856
Acquired intangibles, net		242,543		172,375
Deferred taxes		704,882		732,367
Other assets		350,694		345,429
Total assets	$	3,999,497	$	3,357,225

Current liabilities:
Revolving credit facility	$	350,000	$	-
Accounts payable and accrued liabilities		306,948		316,908
Current portion of deferred revenue		494,939		355,483
Total current liabilities		1,151,887		672,391

Long-term liabilities:
Long-term portion of deferred revenue		87,437		73,400
Long-term debt		346,394		346,019
Other long-term liabilities		157,148		162,521
Total long-term liabilities		590,979		581,940

Stockholders' equity		2,256,631		2,102,894
Total liabilities and stockholders' equity	$	3,999,497	$	3,357,225

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Six Months Ended June 27, 2020 and June 29, 2019
(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended						Six Months Ended
	June 27, 2020			June 29, 2019			June 27, 2020			June 29, 2019

Revenue:
Product and maintenance	$	601,356		$	548,028		$	1,183,055		$	1,091,546
Services		37,062			32,391			73,320			65,615

Total revenue		638,418			580,419			1,256,375			1,157,161

Costs and expenses:
Cost of product and maintenance		55,669			43,388			111,115			93,910
Cost of services		19,546			18,081			38,563			38,144
Marketing and sales		120,476			116,208			246,220			233,038
Research and development		250,821			231,814			492,489			460,024
General and administrative		35,641			34,407			69,233			64,509
Amortization of acquired intangibles		4,590			3,159			8,796			6,467
Restructuring and other credits		(275	)		(313	)		(1,342	)		(1,002	)

Total costs and expenses		486,468			446,744			965,074			895,090

Income from operations		151,950			133,675			291,301			262,071

Interest expense		(5,914	)		(4,976	)		(10,551	)		(10,367	)
Other income (expense), net		4,630			(110	)		96			5,131

Income before provision for income taxes		150,666			128,589			280,846			256,835

Provision for income taxes		19,378			21,354			25,570			29,045

Net income	$	131,288		$	107,235		$	255,276		$	227,790


Net income per share - basic	$	0.48		$	0.39		$	0.93		$	0.83

Net income per share - diluted	$	0.47		$	0.38		$	0.91		$	0.81

Weighted average common shares outstanding - basic		273,432			273,159			273,488			273,155

Weighted average common shares outstanding - diluted		279,080			281,054			279,207			280,877

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 27, 2020 and June 29, 2019
(In thousands)
(Unaudited)

	Six Months Ended
	June 27,			June 29,
	2020			2019

Cash and cash equivalents at beginning of period	$	705,210		$	533,298
Cash flows from operating activities:
Net income		255,276			227,790
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		69,902			61,197
Amortization of debt discount and fees		512			497
Stock-based compensation		93,389			86,510
Loss on investments, net		4,036			259
Deferred income taxes		(1,609	)		(8,159	)
Provisions for losses (recoveries) on receivables		922			(386	)
ROU asset amortization and change in operating lease liabilities		1,502			2,504
Other non-cash items		296			160
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		(2,497	)		63,876
Inventories		11,020			(25,689	)
Prepaid expenses and other		9,910			33,055
Other assets		(17,687	)		2,547
Accounts payable and accrued liabilities		(11,141	)		(34,670	)
Deferred revenue		148,508			19,707
Other long-term liabilities		504			2,576
Net cash provided by operating activities		562,843			431,774

Cash flows from investing activities:
Purchases of non-marketable investments		-			(33,717	)
Proceeds from the sale of non-marketable investments		-			2,952
Purchases of property, plant and equipment		(43,535	)		(30,562	)
Cash paid in business combinations, net of cash acquired		(195,118	)		(338	)
Net cash used for investing activities		(238,653	)		(61,665	)

Cash flows from financing activities:
Proceeds from revolving credit facility		350,000			150,000
Payment on revolving credit facility		-			(250,000	)
Proceeds from issuance of common stock		43,667			32,855
Stock received for payment of employee taxes on vesting of restricted stock		(53,657	)		(45,698	)
Payments for repurchases of common stock		(175,036	)		(156,120	)
Net cash provided by (used for) financing activities		164,974			(268,963	)

Effect of exchange rate changes on cash and cash equivalents		(5,188	)		(1,029	)

Increase in cash and cash equivalents		483,976			100,117

Cash and cash equivalents at end of period	$	1,189,186		$	633,415

Cadence Design Systems, Inc.
(Unaudited)

Revenue Mix by Geography (% of Total Revenue)
	2019										2020
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1		Q2

Americas	44	%	42	%	44	%	46	%	44	%	43	%	44	%
China	10	%	12	%	10	%	9	%	10	%	13	%	12	%
Other Asia	19	%	19	%	21	%	20	%	20	%	18	%	19	%
Europe, Middle East and Africa	18	%	20	%	18	%	18	%	18	%	19	%	18	%
Japan	9	%	7	%	7	%	7	%	8	%	7	%	7	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%


Revenue Mix by Product Category (% of Total Revenue)
	2019										2020
PRODUCT CATEGORY	Q1		Q2		Q3		Q4		Year		Q1		Q2

Custom IC Design and Simulation	25	%	26	%	26	%	25	%	25	%	25	%	24	%
Digital IC Design and Signoff	30	%	31	%	30	%	29	%	30	%	29	%	28	%
Functional Verification, including Emulation and Prototyping Hardware	24	%	22	%	20	%	24	%	23	%	23	%	24	%
IP	12	%	11	%	15	%	13	%	13	%	14	%	14	%
System Interconnect and Analysis	9	%	10	%	9	%	9	%	9	%	9	%	10	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of July 20, 2020
(Unaudited)

	Three Months Ending	Year Ending
	September 26, 2020	January 2, 2021
	Forecast	Forecast

GAAP operating margin as a percent of total revenue	~22%	~22%

Reconciling items to non-GAAP operating margin as a percent of total revenue:
Amortization of acquired intangibles	2%	2%
Stock-based compensation expense	7%	8%
Acquisition and integration-related costs	1%	1%

Non-GAAP operating margin as a percent of total revenue�nbsp;	~32%	~33%

�nbsp;

The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of July 20, 2020
(Unaudited)

	Three Months Ending	Year Ending
	September 26, 2020	January 2, 2021
	Forecast	Forecast

Diluted net income per share on a GAAP basis	$0.49 to $0.51	$1.84 to $1.90

Amortization of acquired intangibles	0.06	0.23
Stock-based compensation expense	0.16	0.70
Non-qualified deferred compensation expenses (credits)	-	-
Restructuring and other charges (credits)	-	-
Acquisition and integration-related costs	0.02	0.07
Other income or expense related to investments and non-qualified deferred compensation plan assets*	-	0.02
Income tax effect of non-GAAP adjustments	(0.14)	(0.36)

Diluted net income per share on a non-GAAP basis�nbsp;	$0.59 to $0.61	$2.50 to $2.56


Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of July 20, 2020
(Unaudited)

	Three Months Ending	Year Ending
	September 26, 2020	January 2, 2021
($ in millions)	Forecast	Forecast

Net income on a GAAP basis	$138 to $144	$516 to $533

Amortization of acquired intangibles	16	64
Stock-based compensation expense	45	197
Non-qualified deferred compensation expenses (credits)	-	(1)
Restructuring and other charges (credits)	-	(1)
Acquisition and integration-related costs	5	19
Other income or expense related to investments and non-qualified deferred compensation plan assets*	1	6
Income tax effect of non-GAAP adjustments	(40)	(100)

Net income on a non-GAAP basis�nbsp;	$165 to $171	$700 to $717

�nbsp;

The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

« Previous Page 1 | 2 | 3 | 4 Next Page »