Cadence Reports Third Quarter 2019 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 December 13, 2019, 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 fourth quarter 2019 earnings release is published, which is currently scheduled for February 12, 2020.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
September 28, 2019 and December 29, 2018
(In thousands)
(Unaudited)

	September 28, 2019		December 29, 2018

Current assets:
Cash and cash equivalents	$	655,216	$	533,298
Receivables, net of allowances of $310 and $3,936, respectively		274,914		297,082
Inventories		66,745		28,162
Prepaid expenses and other		53,074		92,550
Total current assets		1,049,949		951,092

Property, plant and equipment, net of accumulated depreciation of $730,067 and $698,493, respectively		259,453		252,630
Goodwill		661,678		662,272
Acquired intangibles, net of accumulated amortization of $351,619 and $333,687, respectively		185,037		225,457
Long-term receivables		1,204		5,972
Other assets		504,877		371,231
Total assets	$	2,662,198	$	2,468,654

Current liabilities:
Revolving credit facility	$	-	$	100,000
Accounts payable and accrued liabilities		274,882		256,526
Current portion of deferred revenue		344,100		352,456
Total current liabilities		618,982		708,982

Long-term liabilities:
Long-term portion of deferred revenue		48,036		48,718
Long-term debt		345,833		345,291
Other long-term liabilities		169,085		77,262
Total long-term liabilities		562,954		471,271

Stockholders' equity		1,480,262		1,288,401
Total liabilities and stockholders' equity	$	2,662,198	$	2,468,654

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Nine Months Ended September 28, 2019 and September 29, 2018
(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018

Revenue:
Product and maintenance	$	548,105		$	494,990		$	1,639,651		$	1,463,469
Services		31,498			37,478			97,113			104,703

Total revenue		579,603			532,468			1,736,764			1,568,172

Costs and expenses:
Cost of product and maintenance		41,715			36,406			135,625			118,263
Cost of services		19,260			24,048			57,404			64,360
Marketing and sales		121,368			108,608			354,406			327,056
Research and development		240,542			223,231			700,566			666,545
General and administrative		33,204			33,247			97,713			101,421
Amortization of acquired intangibles		2,874			3,470			9,341			10,618
Restructuring and other credits		(186	)		(172	)		(1,188	)		(2,610	)

Total costs and expenses		458,777			428,838			1,353,867			1,285,653

Income from operations		120,826			103,630			382,897			282,519

Interest expense		(4,240	)		(5,177	)		(14,607	)		(18,821	)
Other income, net		122			1,106			5,253			4,055

Income before provision for income taxes		116,708			99,559			373,543			267,753

Provision for income taxes		15,194			241			44,239			20,401

Net income	$	101,514		$	99,318		$	329,304		$	247,352


Net income per share - basic	$	0.37		$	0.36		$	1.21		$	0.90

Net income per share - diluted	$	0.36		$	0.35		$	1.17		$	0.88

Weighted average common shares outstanding - basic		273,329			273,716			273,224			273,718

Weighted average common shares outstanding - diluted		280,666			281,646			280,817			281,391

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 28, 2019 and September 29, 2018
(In thousands)
(Unaudited)


	Nine Months Ended
	September 28,			September 29,
	2019			2018

Cash and cash equivalents at beginning of period	$	533,298		$	688,087
Cash flows from operating activities:
Net income		329,304			247,352
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		91,400			89,003
Amortization of debt discount and fees		747			950
Stock-based compensation		134,789			125,121
(Gain) loss on investments, net		2,655			(902	)
Deferred income taxes		(10,938	)		(3,221	)
Provisions for losses (recoveries) on receivables		(358	)		4,790
ROU asset amortization and change in operating lease liabilities		4,285			-
Other non-cash items		197			(126	)
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		26,553			(28,471	)
Inventories		(43,781	)		(1,455	)
Prepaid expenses and other		38,703			2,018
Other assets		3,554			1,856
Accounts payable and accrued liabilities		(4,001	)		(41,718	)
Deferred revenue		(6,968	)		77,370
Other long-term liabilities		4,163			300
Net cash provided by operating activities		570,304			472,867

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		(47,527	)		(41,761	)
Cash paid in business combinations		(338	)		-
Net cash used for investing activities		(78,630	)		(41,761	)

Cash flows from financing activities:
Proceeds from revolving credit facility		150,000			-
Payment on revolving credit facility		(250,000	)		(85,000	)
Principal payments on term loan		-			(300,000	)
Proceeds from issuance of common stock		49,127			38,190
Stock received for payment of employee taxes on vesting of restricted stock		(75,016	)		(59,619	)
Payments for repurchases of common stock		(231,131	)		(150,036	)
Change in book overdraft		-			(3,867	)
Net cash used for financing activities		(357,020	)		(560,332	)

Effect of exchange rate changes on cash and cash equivalents		(12,736	)		(14,276	)

Increase (decrease) in cash and cash equivalents		121,918			(143,502	)

Cash and cash equivalents at end of period	$	655,216		$	544,585

Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
	2018					2019
GEOGRAPHY	Q1	Q2	Q3	Q4	Year	Q1	Q2	Q3

Americas	45%	46%	44%	44%	45%	44%	42%	44%
China	9%	8%	9%	13%	10%	10%	12%	10%
Other Asia	18%	18%	20%	18%	18%	19%	19%	21%
Europe, Middle East and Africa	20%	20%	19%	17%	19%	18%	20%	18%
Japan	8%	8%	8%	8%	8%	9%	7%	7%
Total	100%	100%	100%	100%	100%	100%	100%	100%

Revenue Mix by Product Group (% of Total Revenue)
	2018					2019
PRODUCT GROUP	Q1	Q2	Q3	Q4	Year	Q1	Q2	Q3

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

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of October 21, 2019
(Unaudited)

	Three Months Ending	Year Ending
	December 28, 2019	December 28, 2019
	Forecast	Forecast

GAAP operating margin as a percent of total revenue	~20%	21.3% - 21.8%

Reconciling items to non-GAAP operating margin as a percent of total revenue:
Amortization of acquired intangibles	2%	2.2%
Stock-based compensation expense	8%	7.8%
Non-qualified deferred compensation expenses	0%	0.1%
Restructuring and other charges (credits)	0%	-0.1%
Acquisition and integration-related costs	0%	0.2%

Non-GAAP operating margin as a percent of total revenue�nbsp;	~30%	31.5% - 32.0%

�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 October 21, 2019
(Unaudited)

	Three Months Ending	Year Ending
	December 28, 2019	December 28, 2019
	Forecast	Forecast

Diluted net income per share on a GAAP basis	$0.33 to $0.35	$1.50 to $1.52

Amortization of acquired intangibles	0.04	0.19
Stock-based compensation expense	0.17	0.65
Non-qualified deferred compensation expenses	-	0.01
Restructuring and other charges (credits)	-	-
Acquisition and integration-related costs	-	0.02
Other income or expense related to investments and non-qualified deferred compensation plan assets*	0.01	-
Income tax effect of non-GAAP adjustments	(0.03)	(0.19)

Diluted net income per share on a non-GAAP basis�nbsp;	$0.52 to $0.54	$2.18 to $2.20


Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of October 21, 2019
(Unaudited)

	Three Months Ending	Year Ending
	December 28, 2019	December 28, 2019
($ in millions)	Forecast	Forecast

Net income on a GAAP basis	$92 to $98	$421 to $427

Amortization of acquired intangibles	13	53
Stock-based compensation expense	47	182
Non-qualified deferred compensation expenses	-	3
Restructuring and other charges (credits)	-	(1)
Acquisition and integration-related costs	1	6
Other income or expense related to investments and non-qualified deferred compensation plan assets*	2	1
Income tax effect of non-GAAP adjustments	(9)	(53)

Net income on a non-GAAP basis�nbsp;	$146 to $152	$612 to $618

�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 »