CDNS
Cadence Design Systems INC
NASDAQ
10-Q: Cadence Design Systems Reports Mixed Q1 Results Amidst Acquisition Activity
Sentiment:
Quarterly Report
23 April 2024 5:45 PM
Cadence Design Systems' first quarter saw a slight revenue decrease offset by growth in services, while also completing the acquisition of Invecas and announcing a deal to acquire BETA CAE Systems.
Worse than expected
The company's total revenue decreased slightly compared to the same quarter last year.
Product and maintenance revenue declined by 5%.
Capital raise
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.
Summary
- Cadence Design Systems reported a total revenue of $1,009.1 million for the first quarter of 2024, a slight decrease from $1,021.7 million in the same period last year.
- Product and maintenance revenue decreased by 5% to $913.4 million, while services revenue increased significantly by 65% to $95.7 million.
- The company's net income was $247.6 million, compared to $241.8 million in the first quarter of 2023.
- Recurring revenue accounted for 90% of total revenue, while up-front revenue made up the remaining 10%.
- Operating expenses increased by 10% to $628.3 million, driven by investments in research and development and sales support.
- Cadence completed the acquisition of Invecas for $71.5 million in cash and announced a definitive agreement to acquire BETA CAE Systems for $1.24 billion.
- The company's remaining performance obligations were approximately $6.0 billion as of March 31, 2024.
Sentiment
Score: 6
Explanation: The sentiment is moderately positive due to the company's strategic acquisitions and growth in services revenue, but tempered by the slight revenue decrease and increased operating expenses. The company is making strategic moves but the results are mixed.
Positives
- Services revenue experienced strong growth, increasing by 65% year-over-year.
- Net income saw a slight increase compared to the same quarter last year.
- The company maintains a high percentage of recurring revenue, providing stability.
- Cadence is actively expanding its capabilities through strategic acquisitions.
Negatives
- Total revenue experienced a slight decrease compared to the first quarter of 2023.
- Product and maintenance revenue declined by 5%.
- Operating expenses increased by 10%, impacting operating margin.
- Revenue in China decreased by 34%.
Risks
- The company is subject to the effects of economic downturns, currency fluctuations, and geopolitical conflicts.
- Expanded trade control laws and regulations could impact the business.
- The acquisition of BETA CAE Systems is subject to regulatory approvals and could be terminated.
- The company's future effective tax rates may be impacted by various factors, including foreign earnings and changes in tax law.
Future Outlook
The company expects that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of its domestic and international operating activities and other capital and liquidity requirements, including acquisitions, investments and share repurchases, for at least the next 12 months and thereafter for the foreseeable future.
Management Comments
- Management uses certain performance indicators to manage our business, including revenue, certain elements of operating expenses and cash flow from operations.
- We believe the addition of a skilled engineering team with vast experience in delivering end-to-end system solutions with deep expertise in advanced nodes, mixed-signal, verification, embedded software, packaging and turnkey custom silicon production will enhance our ability to pursue attractive opportunities in the markets we serve.
Industry Context
The announcement reflects the ongoing trend of consolidation and strategic acquisitions in the electronic design automation (EDA) and related technology sectors, as companies seek to expand their capabilities and market reach. Cadence's focus on system design and analysis aligns with the increasing complexity of electronic systems and the need for integrated solutions.
Comparison to Industry Standards
- Cadence's revenue mix, with a high percentage of recurring revenue, is consistent with other established software and IP providers in the EDA industry, such as Synopsys and Mentor Graphics (now part of Siemens).
- The company's investment in R&D is also in line with industry standards, as innovation is crucial for maintaining a competitive edge in this sector.
- The acquisition of Invecas and the planned acquisition of BETA CAE Systems are similar to other strategic moves by competitors to expand their product portfolios and address new market segments.
- The slight decrease in revenue and increase in operating expenses are not uncommon in the industry, as companies often face fluctuations in demand and increased investment costs.
Stakeholder Impact
- Shareholders may be impacted by the slight decrease in revenue and increased operating expenses, but also by the potential for future growth through acquisitions.
- Employees may be affected by the integration of acquired companies and potential changes in roles and responsibilities.
- Customers may benefit from the expanded product and service offerings resulting from the acquisitions.
- Suppliers may see changes in their relationships with Cadence as the company integrates new businesses.
Next Steps
- The acquisition of BETA CAE Systems is expected to close during the second quarter of fiscal 2024.
- Cadence will continue to evaluate certain estimates and assumptions related to the Invecas acquisition during the measurement period.
- The company will continue to monitor the impact of macroeconomic and geopolitical conditions on its business.
Legal Proceedings
- In March 2024, Cadence received a best judgment tax audit assessment of approximately $24.5 million from the Israel Tax Authority (ITA) for the tax years 2017 and 2018.
- Cadence intends to appeal the tax assessment from the Israel Tax Authority.
Key Dates
- 2014-10-09: Cadence issued $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024.
- 2022-09-07: Cadence entered into a $300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025.
- 2024-01-08: Cadence acquired all of the outstanding equity of Invecas, Inc.
- 2024-03-02: Cadence entered into a definitive agreement to acquire all of the outstanding equity of BETA CAE Systems International AG.
- 2024-03-31: End of the first quarter of 2024.
Keywords
Cadence Design Systems, revenue, acquisition, semiconductor, software, Intellectual Property, EDA, BETA CAE Systems, Invecas, financial results
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.
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.
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.
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.