CADENCE REPORTS FIRST QUARTER 2020 | ||||
CADENCE DESIGN SYSTEMS, INC. | ||||
CFO COMMENTARY | ||||
Key Takeaways • Q1 results met or exceeded our expectations for key financial metrics. • Repurchased $100 million of Cadence stock in Q1. | Q2 2020 Outlook • Revenue : $580 - $600 million. • GAAP operating margin: ~18%. • Non-GAAP operating margin: ~30%. • GAAP EPS: $0.28 - $0.32 • Non-GAAP EPS: $0.50 - $0.54 | Q1 2020 KEY METRICS | ||
• Revenue $618 million • GAAP operating margin 23% • Non-GAAP operating margin 32% • GAAP EPS $0.44 • Non-GAAP EPS $0.60 • Operating cash flow $218 million | ||||
FY 2020 Outlook • Revenue: $2.545 - $2.585 billion. • GAAP operating margin: 21% - 22%. • Non-GAAP operating margin: 32% - 33%. • GAAP EPS: $1.58 - $1.68 • Non-GAAP EPS $2.40 - $2.50 • Operating cash flow: $775 - $825 million. • Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year. | Financial Results Webcast | |||
Our Q1 2020 financial results webcast will begin April 20, 2020 at 2:00 p.m. (Pacific). The webcast may be accessed at www.cadence.com/cadence/investor_relations. An archive of the webcast will be available on April 20, 2020 until 5:00 p.m. (Pacific) on June 12, 2020. | ||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 1 |
Cadence Design Systems, Inc. | ||
(In Millions, except per share data) | 2016* | 2017* | 2018 | 2019 | 2020E | ||||||
Revenue | $1,816 | $1,943 | $2,138 | $2,336 | $2,545 - $2,585 | ||||||
Revenue growth | 7% | 10% | 9% | 9% - 11% | |||||||
GAAP operating expenses | 1,571 | 1,619 | 1,742 | 1,845 | ~2,002 | ||||||
Non-GAAP operating expenses | 1,348 | 1,409 | 1,491 | 1,587 | ~1,728 | ||||||
Non-GAAP operating expense growth | 5% | 6% | 6% | ~9% | |||||||
GAAP operating margin | 13% | 17% | 19% | 21% | |||||||
Implied GAAP operating margin** | 21.5% | ||||||||||
Non-GAAP operating margin | 26% | 28% | 30% | 32% | |||||||
Implied Non-GAAP operating margin** | 32.5% | ||||||||||
GAAP earnings per share | $0.70 | $0.73 | $1.23 | $3.53 | $1.58 - $1.68 | ||||||
Non-GAAP earning per share | $1.21 | $1.40 | $1.87 | $2.20 | $2.40 - $2.50 | ||||||
Weighted average shares diluted outstanding | 291.3 | 280.2 | 281.1 | 280.5 | 278 - 281 | ||||||
Cash flow from operations | 445 | 471 | 605 | 730 | $775 - $825 | ||||||
Capital expenditures | 54 | 58 | 62 | 75 | ~$80 |
Q2 2019A | Q1 2020A | Q2 2020E | |||||
Total Revenue ($ Million) | $580.4 | $618.0 | $580 - $600 | ||||
Q/Q Growth | 3% | (6)% - (3)% | |||||
Y/Y Growth | 7% | (0)% - 3% | |||||
GAAP Operating Margin | 23% | 23% | ~18% | ||||
Non-GAAP Operating Margin | 34% | 32% | ~30% | ||||
GAAP EPS | $0.38 | $0.44 | $0.28 - $0.32 | ||||
Non-GAAP EPS | $0.57 | $0.60 | $0.50 - $0.54 | ||||
Q/Q Growth | 11% | (17)% - (10)% | |||||
Y/Y Growth | 11% | (12)% - (5)% | |||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 2 |
Cadence Design Systems, Inc. | ||
Previous | Current | ||||||
FY 2019A | FY 2020E | FY 2020E | |||||
Recurring Revenue | 85% - 90% | 85% - 90% | 85% - 90% | ||||
Total Revenue ($ Billion) | $2.336 | $2.545 - $2.585 | $2.545 - $2.585 | ||||
Y/Y Growth | 9% | 9% - 11% | 9% - 11% | ||||
Revenue from Beginning Remaining Performance Obligations | ~75% | ~75% | ~75% | ||||
GAAP Operating Margin | 21.1% | 21% - 22% | 21% - 22% | ||||
Non-GAAP Operating Margin | 32.1% | 32% - 33% | 32% - 33% | ||||
GAAP Other Income & Expense ($ Million) | $(12.8) | $(16) - $(25) | $(29) - $(33) | ||||
Non-GAAP Other Income & Expense ($ Million) | $(14.1) | $(12) - $(21) | $(19) - $(23) | ||||
GAAP Tax Rate | -106% | ~20% | ~14% | ||||
Non-GAAP Tax Rate | 16% | 16% | 16% | ||||
Weighted Average Diluted Shares Outstanding (Million) | 280.5 | 279 - 282 | 278 - 281 | ||||
GAAP EPS | $3.53 | $1.46 - $1.56 | $1.58 - $1.68 | ||||
Non-GAAP EPS | $2.20 | $2.40 - $2.50 | $2.40 - $2.50 | ||||
Y/Y Growth | 18% | 9% - 14% | 9% - 14% | ||||
Cash Flow from Operations ($ Million) | $730 | $775 - $825 | $775 - $825 | ||||
DSO | 47 | ~45 | ~45 | ||||
Capital Expenditures ($ Million) | $75 | ~$90 | ~$80 | ||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 3 |
Cadence Design Systems, Inc. | ||
(In Billions) | 2018 | 2019 | Q1 2020 | ||||||||
Backlog* | $3.0 | $3.6 | $3.7 | ||||||||
(In Thousands) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||
Product and Maintenance | $543,518 | $548,028 | $548,105 | $564,964 | $581,699 | ||||||
Services | 33,224 | 32,391 | 31,498 | 34,591 | 36,258 | ||||||
Total Revenue | $576,742 | $580,419 | $579,603 | $599,555 | $617,957 |
(% of Total Revenue) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||||||
Americas | 44 | % | 42 | % | 44 | % | 46 | % | 43 | % | ||||||
China | 10 | % | 12 | % | 10 | % | 9 | % | 13 | % | ||||||
Other Asia | 19 | % | 19 | % | 21 | % | 20 | % | 18 | % | ||||||
Europe, Middle East and Africa | 18 | % | 20 | % | 18 | % | 18 | % | 19 | % | ||||||
Japan | 9 | % | 7 | % | 7 | % | 7 | % | 7 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
(% of Total Revenue) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||||||
Functional Verification | 24 | % | 22 | % | 20 | % | 24 | % | 23 | % | ||||||
Digital IC Design and Signoff | 30 | % | 31 | % | 30 | % | 29 | % | 29 | % | ||||||
Custom IC Design and Simulation | 25 | % | 26 | % | 26 | % | 25 | % | 25 | % | ||||||
System Interconnect and Analysis | 9 | % | 10 | % | 9 | % | 9 | % | 9 | % | ||||||
IP | 12 | % | 11 | % | 15 | % | 13 | % | 14 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||||||||
GAAP Gross Margin | 87.8 | % | 89.4 | % | 89.5 | % | 87.8 | % | 88.0 | % | ||||||
Non-GAAP Gross Margin | 89.7 | % | 91.6 | % | 91.5 | % | 89.7 | % | 89.9 | % | ||||||
(In Thousands) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||
Total GAAP Costs and Expenses | $448,346 | $446,744 | $458,777 | $490,656 | $478,606 | ||||||
Total Non-GAAP Costs and Expenses | $390,166 | $385,591 | $395,995 | $415,140 | $418,827 | ||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 4 |
Cadence Design Systems, Inc. | ||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||||||||
GAAP Operating Margin | 22.3 | % | 23.0 | % | 20.8 | % | 18.2 | % | 22.6 | % | ||||||
Non-GAAP Operating Margin | 32.3 | % | 33.6 | % | 31.7 | % | 30.8 | % | 32.2 | % | ||||||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||
GAAP Net Income Per Share | $0.43 | $0.38 | $0.36 | $2.36 | $0.44 | ||||||
Non-GAAP Net Income Per Share | $0.54 | $0.57 | $0.54 | $0.54 | $0.60 | ||||||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||
DSO | 42 | 38 | 43 | 47 | 42 | ||||||
(In Thousands) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||
Net Cash from Operating Activities | $185,414 | $246,360 | $138,530 | $159,296 | $217,719 | ||||||
(In Thousands) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||
Capital Expenditures | $15,275 | $15,287 | $16,965 | $27,078 | $22,179 | ||||||
(In Thousands) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||
Cash and Cash Equivalents | $538,898 | $633,415 | $655,216 | $705,210 | $946,285 | ||||||
• | Approximately 53 percent of our cash and cash equivalents were in the U.S. at quarter-end. |
(In Thousands, Except Share Price) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||||||
Share Repurchase | $81,114 | $75,006 | $75,011 | $75,017 | $100,022 | |||||||||||
Number of Shares | 1,529 | 1,125 | 1,065 | 1,122 | 1,488 | |||||||||||
Average Share Price | $53.05 | $66.67 | $70.43 | $66.86 | $67.22 | |||||||||||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | ||||||||||||
Headcount | 7,570 | 7,743 | 8,016 | 8,078 | 8,205 | |||||||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 5 |
Cadence Design Systems, Inc. | ||
April 20, 2020 | Cadence Q1 2020 Financial Results | 6 |
Cadence Design Systems, Inc. | ||
(In Thousands) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||||||
GAAP total costs and expenses | $448,346 | $446,744 | $458,777 | $490,656 | $478,606 | |||||||||||
Reconciling items to non-GAAP total costs and expenses | ||||||||||||||||
Amortization of acquired intangibles | (13,162 | ) | (14,458 | ) | (12,799 | ) | (12,660 | ) | (15,066 | ) | ||||||
Stock-based compensation expense | (42,253 | ) | (44,257 | ) | (48,279 | ) | (46,758 | ) | (46,482 | ) | ||||||
Non-qualified deferred compensation (expenses) credits | (2,540 | ) | (862 | ) | (52 | ) | (1,948 | ) | 4,796 | |||||||
Restructuring and other (charges) credits | 689 | 313 | 186 | (9,809 | ) | 1,067 | ||||||||||
Acquisition and integration-related costs | (914 | ) | (1,889 | ) | (1,838 | ) | (3,466 | ) | (3,970 | ) | ||||||
Special charges | — | — | — | (875 | ) | (124 | ) | |||||||||
Non-GAAP total costs and expenses† | $390,166 | $385,591 | $395,995 | $415,140 | $418,827 | |||||||||||
(In Millions) | 2016 | 2017 | 2018 | 2019 | 2020E | |||||||||||
GAAP total costs and expenses | $1,571 | $1,619 | $1,742 | $1,845 | ~$2,002 | |||||||||||
Reconciling items to non-GAAP total costs and expenses | ||||||||||||||||
Amortization of acquired intangibles | (60 | ) | (57 | ) | (53 | ) | (53 | ) | ~(64) | |||||||
Stock-based compensation expense | (109 | ) | (130 | ) | (168 | ) | (182 | ) | ~(200) | |||||||
Non-qualified deferred compensation (expenses) credits | (2 | ) | (6 | ) | 1 | (5 | ) | ~5 | ||||||||
Restructuring and other (charges) credits | (41 | ) | (9 | ) | (11 | ) | (9 | ) | ~1 | |||||||
Acquisition and integration-related costs | (11 | ) | (8 | ) | (20 | ) | (8 | ) | ~(16) | |||||||
Special charges | — | — | — | (1 | ) | — | ||||||||||
Non-GAAP total costs and expenses† | $1,348 | $1,409 | $1,491 | $1,587 | ~$1,728 | |||||||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 7 |
Cadence Design Systems, Inc. | ||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | |||||||
GAAP gross margin as percent of total revenue | 87.8% | 89.4% | 89.5% | 87.8% | 88.0% | ||||||
Reconciling items to non-GAAP gross margin as a percent of total revenue | |||||||||||
Amortization of acquired intangibles | 1.7% | 1.9% | 1.7% | 1.6% | 1.7% | ||||||
Stock-based compensation expense | 0.2% | 0.3% | 0.3% | 0.3% | 0.2% | ||||||
Non-qualified deferred compensation expenses (credits) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | ||||||
Non-GAAP gross margin as percent of total revenue† | 89.7% | 91.6% | 91.5% | 89.7% | 89.9% | ||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 8 |
Cadence Design Systems, Inc. | ||
Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020E | |||||||||
GAAP operating margin as percent of total revenue | 22% | 23% | 21% | 18% | 23% | ~18% | ||||||||
Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||
Amortization of acquired intangibles | 2% | 3% | 2% | 2% | 2% | 3% | ||||||||
Stock-based compensation expense | 7% | 8% | 9% | 8% | 7% | 8% | ||||||||
Non-qualified deferred compensation expenses (credits) | 1% | 0% | 0% | 0% | (1)% | 0% | ||||||||
Restructuring and other charges (credits) | 0% | 0% | 0% | 2% | 0% | 0% | ||||||||
Acquisition and integration-related costs | 0% | 0% | 0% | 1% | 1% | 1% | ||||||||
Special charges | 0% | 0% | 0% | 0% | 0% | 0% | ||||||||
Non-GAAP operating margin as percent of total revenue† | 32% | 34% | 32% | 31% | 32% | ~30% | ||||||||
2016 | 2017 | 2018 | 2019 | 2020E | ||||||||
GAAP operating margin as percent of total revenue | 13% | 17% | 19% | 21% | 21% - 22% | |||||||
Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||
Amortization of acquired intangibles | 4% | 3% | 2% | 2% | 2% | |||||||
Stock-based compensation expense | 6% | 7% | 8% | 8% | 8% | |||||||
Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | 0% | 0% | |||||||
Restructuring and other charges (credits) | 2% | 1% | 0% | 1% | 0% | |||||||
Acquisition and integration-related costs | 1% | 0% | 1% | 0% | 1% | |||||||
Special charges | 0% | 0% | 0% | 0% | 0% | |||||||
Non-GAAP operating margin as percent of total revenue† | 26% | 28% | 30% | 32% | 32% - 33% | |||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 9 |
Cadence Design Systems, Inc. | ||
(In Thousands, Except Per Share Data) | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020E | ||||||||||||||
Diluted net income per share on a GAAP basis | $0.43 | $0.38 | $0.36 | $2.36 | $0.44 | $0.28 - $0.32 | ||||||||||||||
Amortization of acquired intangibles | 0.05 | 0.05 | 0.04 | 0.05 | 0.05 | 0.06 | ||||||||||||||
Stock-based compensation expense | 0.15 | 0.16 | 0.17 | 0.17 | 0.17 | 0.17 | ||||||||||||||
Non-qualified deferred compensation expenses (credits) | 0.01 | — | — | 0.01 | (0.02 | ) | — | |||||||||||||
Restructuring and other charges (credits) | — | — | — | 0.03 | — | — | ||||||||||||||
Acquisition and integration-related costs | — | — | 0.01 | 0.01 | 0.02 | 0.02 | ||||||||||||||
Special charges | — | — | — | — | — | — | ||||||||||||||
Other income or expense related to investments and non-qualified deferred compensation plan assets * | (0.02 | ) | 0.01 | 0.01 | — | 0.03 | — | |||||||||||||
Income tax benefit related to intercompany transfers of certain intellectual property rights | — | — | — | (2.06 | ) | — | — | |||||||||||||
Income tax effect of non-GAAP adjustments | (0.08 | ) | (0.03 | ) | (0.05 | ) | (0.03 | ) | (0.09 | ) | (0.03 | ) | ||||||||
Diluted net income per share on a non-GAAP basis † | $0.54 | $0.57 | $0.54 | $0.54 | $0.60 | $0.50 - $0.54 | ||||||||||||||
Shares used in calculation of diluted net income per share - GAAP ** | 280,615 | 281,054 | 280,666 | 279,557 | 279,265 | |||||||||||||||
Shares used in calculation of diluted net income per share - non-GAAP ** | 280,615 | 281,054 | 280,666 | 279,557 | 279,265 | |||||||||||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 10 |
Cadence Design Systems, Inc. | ||
(In Thousands, Except Per Share Data) | 2016 | 2017 | 2018 | 2019 | 2020E | ||||||||||||
Diluted net income per share on a GAAP basis | $0.70 | $0.73 | $1.23 | $3.53 | $1.58 - $1.68 | ||||||||||||
Amortization of acquired intangibles | 0.21 | 0.20 | 0.19 | 0.19 | 0.23 | ||||||||||||
Stock-based compensation expense | 0.37 | 0.46 | 0.60 | 0.65 | 0.71 | ||||||||||||
Non-qualified deferred compensation expenses (credits) | 0.01 | 0.02 | (0.01 | ) | 0.02 | (0.02 | ) | ||||||||||
Restructuring and other charges (credits) | 0.14 | 0.03 | 0.04 | 0.03 | — | ||||||||||||
Acquisition and integration-related costs | 0.04 | 0.03 | 0.07 | 0.03 | 0.06 | ||||||||||||
Special charges | — | — | — | — | — | ||||||||||||
Other income or expense related to investments and non-qualified deferred compensation plan assets * | (0.02 | ) | (0.05 | ) | — | (0.01 | ) | 0.03 | |||||||||
Income tax benefit related to intercompany transfers of certain intellectual property rights | — | — | — | (2.05 | ) | — | |||||||||||
Income tax related to transition tax | — | 0.24 | — | — | — | ||||||||||||
Income tax related to tax rate change | — | 0.09 | — | — | — | ||||||||||||
Income tax effect of non-GAAP adjustments | (0.24 | ) | (0.35 | ) | (0.25 | ) | (0.19 | ) | (0.19 | ) | |||||||
Diluted net income per share on a non-GAAP basis † | $1.21 | $1.40 | $1.87 | $2.20 | $2.40 - $2.50 | ||||||||||||
Shares used in calculation of diluted net income per share - GAAP ** | 291,256 | 280,221 | 281,144 | 280,515 | 278 - 281M | ||||||||||||
Shares used in calculation of diluted net income per share - non-GAAP ** | 291,256 | 280,221 | 281,144 | 280,515 | 278 - 281M | ||||||||||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 11 |
Cadence Design Systems, Inc. | ||
(In Millions) | FY 2018 | FY 2019 | FY 2020E | |||||
GAAP total other income and expense | $(19.8) | $(12.8) | $(29) - $(33) | |||||
Reconciling items to non-GAAP total income and expense | ||||||||
Other income or expense related to investments and non-qualified deferred compensation plan assets* | (1.3) | (1.3) | 10 | |||||
Non-GAAP total other income and expense† | $(21.1) | $(14.1) | $(19) - $(23) | |||||
April 20, 2020 | Cadence Q1 2020 Financial Results | 12 |