CDNS
Cadence Design Systems INC
NASDAQ
8-K: Cadence Design Systems Exceeds Q3 Expectations, Raises Full-Year EPS Outlook
Sentiment:
Quarterly Report
28 October 2024 4:03 PM
Cadence Design Systems reported strong third-quarter results, exceeding revenue and operating margin guidance, and raised its full-year non-GAAP EPS outlook.
Better than expected
Cadence exceeded its Q3 guidance for both revenue and operating margin.
The company raised its full-year non-GAAP EPS outlook.
The company reported strong growth in key areas such as IP and System Design & Analysis.
Summary
- Cadence Design Systems announced its financial results for the third quarter of 2024, with revenue reaching $1.215 billion, a 19% increase compared to $1.023 billion in Q3 2023.
- The company's GAAP operating margin remained steady at 29%, while the non-GAAP operating margin improved to 45% from 41% in the same period last year.
- GAAP diluted net income per share was $0.87, down from $0.93 in Q3 2023, but non-GAAP diluted net income per share rose to $1.64 from $1.26.
- Cadence's quarter-end backlog stood at $5.6 billion, with current remaining performance obligations (cRPO) at $2.9 billion.
- The company is raising the midpoint of its 2024 non-GAAP EPS outlook to $5.90.
- For the full year 2024, Cadence expects revenue between $4.61 billion and $4.65 billion, a GAAP operating margin of 29% to 30%, and a non-GAAP operating margin of 42% to 43%.
Sentiment
Score: 8
Explanation: The document conveys a positive sentiment due to strong revenue growth, increased non-GAAP profitability, and an improved outlook. While there are some minor negatives, the overall tone is optimistic and confident.
Positives
- Cadence exceeded its Q3 guidance for both revenue and operating margin.
- The company is on track to deliver a strong second half of the year.
- Cadence.AI is experiencing rapid adoption and is becoming an integral part of the design workflow.
- The Q4 bookings pipeline is exceptionally strong.
- Recurring revenue growth returned to low teens on a year-over-year basis.
- Cadence's comprehensive multi-physics portfolio is driving growth in the System Design & Analysis business.
- A major deal was signed with a long-term IP partner for hardware, IP, and services.
- Cadence's new hardware systems are fueling growth in Functional Verification.
Negatives
- GAAP diluted net income per share decreased to $0.87 in Q3 2024 from $0.93 in Q3 2023.
- GAAP operating margin remained flat at 29% compared to Q3 2023.
- The company's GAAP EPS outlook for the full year has decreased from $3.82 in 2023 to a range of $3.70 to $3.76 in 2024.
- The GAAP operating margin for the full year is expected to be between 29% and 30%, which is lower than the 31% reported in 2023.
Risks
- The company faces risks related to competition, maintaining operational efficiency, and changes in customer demands.
- Economic, geopolitical, and industry conditions, including those in the semiconductor and electronics industries, could impact results.
- Changes in tax laws, interest rates, and currency exchange rates could affect the company's financial performance.
- The company's increased debt levels and obligations could pose a risk.
- Cybersecurity attacks and litigation could also impact the company.
- The company's ability to meet corporate governance, environmental, and social targets is also a risk.
Future Outlook
Cadence expects strong performance in the second half of 2024, with revenue between $4.61 billion and $4.65 billion, and non-GAAP EPS between $5.87 and $5.93. The company also anticipates using approximately 50% of free cash flow to repurchase shares for the year.
Management Comments
- Anirudh Devgan, president and chief executive officer, stated that Cadence delivered exceptional results for the third quarter of 2024, driven by broad-based strength across the portfolio.
- Anirudh Devgan also noted that customers are achieving outstanding results with Cadence.AI, and he is excited by its accelerating proliferation.
- John Wall, senior vice president and chief financial officer, reported that Cadence delivered strong Q3 results, with total revenue growing 19% year-over-year.
- John Wall also mentioned that the Q4 bookings pipeline looks exceptionally strong, and the company is well positioned to deliver a strong 2024.
Industry Context
Cadence's strong performance reflects the ongoing demand for electronic design automation (EDA) tools and services, particularly in areas like AI, hyperscale computing, and automotive. The company's focus on AI-driven solutions and its comprehensive portfolio positions it well in the competitive landscape.
Comparison to Industry Standards
- Cadence's 19% year-over-year revenue growth in Q3 is strong compared to the broader EDA industry, which typically sees growth in the high single to low double digits.
- The 45% non-GAAP operating margin is also a strong result, indicating efficient operations and pricing power.
- Competitors like Synopsys and Mentor Graphics (now part of Siemens) also report strong results, but Cadence's growth in specific areas like IP and System Design & Analysis is notable.
- Cadence's focus on AI and its integration into its design tools is a key differentiator, aligning with industry trends towards AI-driven design methodologies.
- The company's backlog of $5.6 billion is a positive indicator of future revenue, and is comparable to other large EDA companies.
Stakeholder Impact
- Shareholders will likely react positively to the strong financial results and increased EPS outlook.
- Employees may benefit from the company's continued growth and success.
- Customers will benefit from Cadence's innovative solutions and strong performance.
- Suppliers and creditors will likely view Cadence as a stable and reliable partner.
Next Steps
- Cadence will continue to focus on its Intelligent System Design strategy.
- The company will host a financial results webcast on October 28, 2024.
- Cadence will continue to invest in research and development, particularly in AI.
- The company expects to use approximately 50% of free cash flow to repurchase shares for the year.
Key Dates
- October 28, 2024: Date of the press release and financial results announcement for Q3 2024.
- October 28, 2024: Date of the Q3 2024 financial results audio webcast.
- December 17, 2024: End date for the archive of the Q3 2024 financial results webcast.
Keywords
Cadence, semiconductor, EDA, software, hardware, IP, AI, design, revenue, operating margin, EPS, backlog, financial results, system design, functional verification
CDNS
Cadence Design Systems INC
NASDAQ
Sector: TBD
Filings with Classifications
Better than expected
3 July 2025 8:25 AM
Current Report
- The U.S. Bureau of Industry and Security rescinded the previously imposed export license requirements for Cadence's electronic design automation software and technology to China, removing a significant trade barrier.
- This allows Cadence to restore access to its products for affected customers, which is a positive development for its business operations and revenue potential in the Chinese market.
Worse than expected
29 May 2025 4:08 PM
Current Report
- The imposition of new, complex license requirements for key products (EDA software and technology) when dealing with China or Chinese military end users introduces significant operational and financial uncertainty.
- The company explicitly states it is assessing the 'impact on our business and financial results,' implying potential negative consequences.
- The uncertainty surrounding license grants and the broader effect on customers and the industry indicates a deterioration of the operating environment for a significant market.
Better than expected
29 April 2025 9:44 PM
Quarterly Report (Form 10-Q)
- Revenue growth of 23% exceeded expectations.
- Operating margin improvement indicates better efficiency.
- Net income and EPS increased, surpassing previous year's results.
Better than expected
28 April 2025 4:03 PM
Earnings Release
- Cadence exceeded its Q1 guidance for all key financial metrics, including revenue and EPS.
- The company is raising its full-year revenue and EPS outlook, indicating confidence in future performance.
Better than expected
18 February 2025 4:04 PM
Earnings Release
- Cadence exceeded its Q4 and 2024 outlook for revenue and EPS.
- The company achieved a record backlog of $6.8 billion.
- Cadence's IP business grew 28% year over year in Q4.
Worse than expected
29 October 2024 5:40 PM
Quarterly Report
- Net income decreased in Q3 2024 compared to Q3 2023.
- Operating margin decreased for the nine months ended September 30, 2024, compared to the same period in 2023.
Capital raise
29 October 2024 5:40 PM
Quarterly Report
- Cadence issued $2.5 billion in senior notes in September 2024.
- The company established a new $1.25 billion revolving credit facility in August 2024.
Better than expected
28 October 2024 4:03 PM
Quarterly Report
- Cadence exceeded its Q3 guidance for both revenue and operating margin.
- The company raised its full-year non-GAAP EPS outlook.
- The company reported strong growth in key areas such as IP and System Design & Analysis.
Capital raise
10 September 2024 5:19 PM
Debt Issuance Announcement
- Cadence Design Systems raised $2.5 billion through a public offering of senior notes.
- The offering included three tranches with varying interest rates and maturity dates.
Capital raise
4 September 2024 8:56 PM
Debt Offering Announcement
- Cadence Design Systems is raising $2.5 billion through the issuance of senior notes.
- The offering includes three tranches of notes with different interest rates and maturity dates.
- The proceeds will be used to repay existing debt and for general corporate purposes.
Worse than expected
23 July 2024 6:58 PM
Quarterly Report
- The operating margin decreased to 28% for the quarter and 26% for the six months ended June 30, 2024, compared to 31% for both periods in 2023, indicating worse than expected profitability.
Better than expected
22 July 2024 4:04 PM
Quarterly Report
- Cadence exceeded its outlook on all key financial metrics for Q2 2024.
- The company raised its full-year revenue growth outlook to 13% year-over-year.
Worse than expected
23 April 2024 5:45 PM
Quarterly Report
- The company's total revenue decreased slightly compared to the same quarter last year.
- Product and maintenance revenue declined by 5%.
Capital raise
23 April 2024 5:45 PM
Quarterly Report
- Cadence intends to fund the cash consideration for the BETA CAE Systems acquisition through a combination of cash on hand and borrowings under existing and/or new debt facilities.
- The acquisition of BETA CAE Systems will involve the issuance of Cadence common stock to current BETA CAE shareholders.
Worse than expected
23 April 2024 5:17 PM
8-K Amendment
- The company initially misreported its first quarter bookings as record bookings, which was later corrected to the second highest first quarter bookings.
Worse than expected
22 April 2024 4:02 PM
Quarterly Report
- The company's Q1 2024 revenue was slightly lower than Q1 2023, and both GAAP and non-GAAP operating margins decreased year-over-year.
- Non-GAAP diluted net income per share also decreased compared to the same quarter last year.
Delay expected
21 March 2024 5:41 PM
SEC Form 4 Filing
- The Form 4 filing was submitted late due to an administrative oversight.
Capital raise
5 March 2024 9:10 AM
Merger Announcement
- Cadence intends to fund the cash portion of the acquisition through a combination of cash on hand and borrowings under existing and/or new debt facilities.
- This indicates a potential need for Cadence to raise capital through debt financing.
Delay expected
5 March 2024 9:10 AM
Merger Announcement
- The deal is subject to regulatory approvals, which could delay the closing beyond the expected second quarter of 2024.
- The agreement includes a longstop date of November 29, 2024, indicating a potential for delays.
Better than expected
12 February 2024 4:04 PM
Annual Results
- The company's fiscal year 2023 revenue and EPS growth exceeded expectations.
- Cadence achieved a record year-end backlog and cRPO, indicating strong future performance.
- The company's operating margins and profitability were better than anticipated.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.