CDNS
Cadence Design Systems INC
NASDAQ
8-K: Cadence Design Systems Reports Strong Q2 2024 Results, Raises Full-Year Revenue Outlook
Sentiment:
Quarterly Report
22 July 2024 4:04 PM
Cadence Design Systems announced strong second-quarter 2024 results, exceeding expectations and raising its full-year revenue growth outlook to 13%.
Better than expected
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.
Summary
- Cadence Design Systems reported revenue of $1.061 billion for the second quarter of 2024, compared to $977 million in the same quarter of 2023.
- The company's GAAP operating margin was 28%, down from 31% in Q2 2023, while non-GAAP operating margin was 40%, compared to 42% in the prior year's quarter.
- GAAP diluted net income per share was $0.84, up from $0.81 in Q2 2023, and non-GAAP diluted net income per share was $1.28, compared to $1.22 in Q2 2023.
- Cadence's quarter-end backlog reached $6.0 billion, and current remaining performance obligations (cRPO) were $3.1 billion.
- The company has updated its full-year 2024 revenue outlook to a range of $4.60 billion to $4.66 billion, representing a 13% year-over-year growth.
- For the third quarter of 2024, Cadence expects revenue between $1.165 billion and $1.195 billion.
- The company anticipates using approximately $150 million to repurchase shares in Q3 2024 and about 50% of free cash flow for the year.
Sentiment
Score: 8
Explanation: The document conveys a positive sentiment due to strong financial results, increased revenue outlook, and strategic growth initiatives. However, there are some minor concerns about margin compression.
Positives
- Cadence exceeded its outlook on all key financial metrics for Q2 2024.
- The company experienced robust demand for its technologies from AI, hyperscale, and automotive customers.
- The Cadence.AI portfolio is showing strong momentum.
- The IP business is performing well, driven by demand for AI, 3D-IC, and HPC applications.
- The company has successfully closed the BETA CAE acquisition.
- Cadence has a strong backlog of approximately $6 billion.
- The company is experiencing strong growth in the second half of 2024.
- Cadence is a leader in verification with the deployment of Palladium Z3 by a major partner.
Negatives
- The GAAP operating margin decreased to 28% in Q2 2024 from 31% in Q2 2023.
- The non-GAAP operating margin decreased to 40% in Q2 2024 from 42% in Q2 2023.
- Operating cash flow for Q2 2024 was $156 million, which is lower than previous quarters.
Risks
- Cadence faces competition in the industries it operates in.
- The company's performance is subject to economic, geopolitical, and industry conditions.
- Changes in customer demands or supply constraints could impact the company's results.
- The company's ability to integrate acquisitions successfully is a risk.
- Cybersecurity attacks pose a potential threat to the company.
- The company's financial results are subject to various risks and uncertainties, including litigation and regulatory matters.
- The company's share repurchase program is subject to business and market conditions.
Future Outlook
Cadence expects full-year 2024 revenue to grow by 13% year-over-year, with revenue between $4.60 billion and $4.66 billion. The company also provided guidance for Q3 2024, with revenue expected to be between $1.165 billion and $1.195 billion.
Management Comments
- Anirudh Devgan, president and chief executive officer, stated that Cadence delivered strong results for the second quarter of 2024, with robust demand for their cutting-edge technologies.
- Anirudh Devgan also expressed pleasure with the strong momentum of the Cadence.AI portfolio and the next-generation Z3 / X3 hardware systems.
- John Wall, senior vice president and chief financial officer, mentioned that the company exceeded its outlook on all key financial metrics and closed Q2 with a backlog of approximately $6 billion.
- John Wall also noted that the strong first half of the year, combined with ongoing demand, sets the company up for strong growth in the second half of 2024.
Industry Context
Cadence's strong results reflect the ongoing demand for electronic design automation solutions, particularly in high-growth areas like AI, hyperscale computing, and automotive. The company's focus on advanced technologies and strategic acquisitions positions it well to capitalize on these trends.
Comparison to Industry Standards
- Cadence's revenue growth of 13% year-over-year is strong compared to the overall EDA industry growth, which is estimated to be in the high single digits.
- Competitors like Synopsys and Mentor Graphics (now part of Siemens) also report strong demand for their solutions, but Cadence's focus on AI and its acquisition of BETA CAE give it a competitive edge.
- Cadence's backlog of $6 billion is a significant indicator of future revenue and is comparable to the backlogs of other major EDA players.
- The company's non-GAAP operating margin of 40% is in line with industry standards for established EDA companies, but the slight decrease from the previous year indicates increased investment in growth initiatives.
Stakeholder Impact
- Shareholders will likely react positively to the strong financial results and increased revenue outlook.
- Employees may benefit from the company's growth and success.
- Customers will have access to advanced technologies and solutions.
- Suppliers may see increased demand for their products and services.
- Creditors will likely view the company's financial health favorably.
Next Steps
- Cadence will continue to focus on its Cadence.AI portfolio and IP business.
- The company will integrate the BETA CAE acquisition.
- Cadence will host a financial results webcast on July 22, 2024.
- The company plans to repurchase approximately $150 million of shares in Q3 2024.
Key Dates
- July 22, 2024: Date of the press release and financial results announcement for Q2 2024.
- July 22, 2024: Date of the Q2 2024 financial results audio webcast.
- September 16, 2024: End date for the archive of the Q2 2024 financial results webcast.
Keywords
Cadence, Financial Results, Semiconductor, Electronic Design Automation, EDA, AI, Hyperscale, Automotive, Backlog, Revenue, Operating Margin, Net Income, EPS, IP, Verification, BETA CAE, Share Repurchase
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.