SAN JOSE, Calif.--(BUSINESS WIRE)--Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the fourth quarter and fiscal year 2020.


Cadence reported 2020 revenue of $2.683 billion, compared to revenue of $2.336 billion for 2019. On a GAAP basis, Cadence achieved operating margin of 24 percent and recognized net income of $591 million, or $2.11 per share on a diluted basis, in 2020, compared to operating margin of 21 percent and net income of $989 million, or $3.53 per share on a diluted basis for 2019. Revenue for the fourth quarter of 2020 totaled $760 million, compared to revenue of $600 million for the same period in 2019. Cadence achieved operating margin of 24 percent and recognized net income of $174 million, or $0.62 per share on a diluted basis, in the fourth quarter of 2020, compared to operating margin of 18 percent and net income of $660 million, or $2.36 per share on a diluted basis, for the same period in 2019. GAAP net income for the fourth quarter of 2019 and fiscal 2019 included a one-time non-cash tax benefit of $576 million related to intercompany transfers of certain intellectual property rights to Cadence's Irish subsidiary.

Using the non-GAAP measure defined below, operating margin for 2020 was 35 percent and net income was $782 million, or $2.80 per share on a diluted basis, compared to operating margin of 32 percent and net income of $618 million, or $2.20 per share on a diluted basis, for 2019. For the fourth quarter of 2020, operating margin was 37 percent and net income was $234 million, or $0.83 per share on a diluted basis, compared to operating margin of 31 percent and net income of $152 million, or $0.54 per share on a diluted basis, for the same period in 2019.

I am very pleased that against the backdrop of an unprecedented year, Cadence delivered outstanding results for 2020, driven by our highly innovative solutions and strong execution,” said Lip-Bu Tan, chief executive officer. “Generational industry drivers continue to fuel robust design activity and I am especially excited by the momentum in our system design and analysis segment as we further our Intelligent System Design strategy with the pending acquisition of NUMECA.”

Many unique factors contributed to Cadence’s solid 2020 results of 15% revenue growth, 35% non-GAAP operating margin and over $900 million of operating cash flow. I am pleased that we can follow-up on 2020 with a strong outlook for 2021,” said John Wall, senior vice president and chief financial officer.

CFO Commentary

Commentary on the fourth quarter and fiscal year 2020 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

Business Outlook

For the first quarter of 2021, the company expects total revenue in the range of $710 million to $730 million. First quarter GAAP operating margin is expected to be approximately 25 percent and GAAP net income per diluted share is expected to be in the range of $0.55 to $0.59. Using the non-GAAP measure defined below, operating margin is expected to be approximately 35 percent and net income per diluted share is expected to be in the range of $0.72 to $0.76.

For 2021, the company expects total revenue in the range of $2.86 billion to $2.92 billion. On a GAAP basis, operating margin is expected to be in the range of 24.5 percent to 26 percent and GAAP net income per diluted share for 2021 is expected to be in the range of $2.09 to $2.19. Using the non-GAAP measure defined below, operating margin for 2021 is expected to be in the range of 34.5 percent to 36 percent and net income per diluted share for 2021 is expected to be in the range of $2.95 to $3.05.

Our fiscal years are 52- or 53-week periods ending on the Saturday closest to December 31. Fiscal 2020 was a 53-week fiscal year, with an additional week in our fourth quarter of 2020. Fiscal 2019 was a 52-week fiscal year and fiscal 2021 will be a 52-week fiscal year.

A schedule showing a reconciliation of the business outlook from GAAP operating margin, GAAP net income and diluted net income per share to non-GAAP operating margin and non-GAAP net income and diluted net income per share is included in this release.

Audio Webcast Scheduled

Lip-Bu Tan, chief executive officer, and John Wall, senior vice president and chief financial officer, will host the fourth quarter and fiscal year 2020 financial results audio webcast today, February 22, 2021, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting February 22, 2021 at 5 p.m. (Pacific) and ending March 19, 2021 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.

About Cadence

Cadence is a pivotal leader in electronic design, building upon more than 30 years of computational software expertise. The company applies its underlying Intelligent System Design strategy to deliver software, hardware and IP that turn design concepts into reality. Cadence customers are the world’s most innovative companies, delivering extraordinary electronic products from chips to boards to systems for the most dynamic market applications including consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, industrial and healthcare. For six years in a row, Fortune Magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at cadence.com.

© 2021 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

This document includes forward-looking statements which are based on current expectations and preliminary assumptions that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands that could result in delays in purchases, development, installations or deliveries of Cadence's products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations and Cadence’s ability to access capital and debt markets; (vii) the acquisition of other companies or technologies or the failure to successfully integrate and operate them; (viii) events that affect cash flow, liquidity, or reserves, or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation or other matters; (ix) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (x) the duration, severity and effects of the COVID-19 pandemic and containment measures on Cadence, its employees, and its suppliers and customers, which may also have the effect of heightening the other risks described in this paragraph. In addition, the timing and amount of Cadence's repurchase of its common stock under the authorizations will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, which include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.

GAAP to Non-GAAP Reconciliation

Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance.

To supplement Cadence’s financial results presented on a GAAP basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP. Non-GAAP net income is calculated by Cadence management by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, acquisition and integration-related costs including retention expenses, investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring, executive severance and other significant items not directly related to Cadence’s core business operations, and the income tax effect of non-GAAP pre-tax adjustments.

Cadence management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of Cadence’s core business operations and therefore provides supplemental information to Cadence management and investors regarding the performance of the business operations, facilitates comparisons to the historical operating results and allows the review of Cadence's business from the same perspective as Cadence management, including forecasting and budgeting.

The following tables reconcile the specific items excluded from GAAP operating margin, GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

Operating Margin Reconciliation

 

Three Months Ended

 

 

January 2, 2021

 

December 28, 2019

 

 

(unaudited)

GAAP operating margin as a percent of total revenue

 

24%

 

18%

Reconciling items to non-GAAP operating margin as a percent of total revenue:

 

 

 

 

Stock-based compensation expense

 

8%

 

8%

Amortization of acquired intangibles

 

2%

 

2%

Acquisition and integration-related costs

 

1%

 

1%

Restructuring and other charges

 

1%

 

2%

Non-qualified deferred compensation expenses

 

1%

 

0%

Special charges

 

0%

 

0%

Non-GAAP operating margin as a percent of total revenue

 

37%

 

31%

Operating Margin Reconciliation

 

Years Ended

 

 

January 2, 2021

 

December 28, 2019

 

 

(unaudited)

GAAP operating margin as a percent of total revenue

 

24%

 

21%

Reconciling items to non-GAAP operating margin as a percent of total revenue:

 

 

 

 

Stock-based compensation expense

 

7%

 

8%

Amortization of acquired intangibles

 

3%

 

2%

Acquisition and integration-related costs

 

1%

 

0%

Restructuring and other charges

 

0%

 

1%

Non-qualified deferred compensation expenses

 

0%

 

0%

Special charges

 

0%

 

0%

Non-GAAP operating margin as a percent of total revenue

 

35%

 

32%

Net Income Reconciliation

 

Three Months Ended

 

 

January 2, 2021

 

December 28, 2019

(in thousands)

 

(unaudited)

Net income on a GAAP basis

 

$

173,738

 

 

$

659,675

 

Stock-based compensation expense

 

58,545

 

 

46,758

 

Amortization of acquired intangibles

 

17,168

 

 

12,660

 

Acquisition and integration-related costs

 

6,556

 

 

3,466

 

Restructuring and other charges

 

10,544

 

 

9,809

 

Non-qualified deferred compensation expenses

 

4,280

 

 

1,948

 

Special charges

 

 

 

875

 

Other income or expense related to investments and non-qualified deferred compensation plan assets*

 

(4,860

)

 

(513

)

Income tax benefit related to intercompany transfers of certain intellectual property rights

 

 

 

(575,618

)

Income tax effect of non-GAAP adjustments

 

(32,097

)

 

(7,500

)

Net income on a non-GAAP basis

 

$

233,874

 

 

$

151,560

 

*

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.

Net Income Reconciliation

 

Years Ended

 

 

January 2, 2021

 

December 28, 2019

(in thousands)

 

(unaudited)

Net income on a GAAP basis

 

$

590,644

 

 

$

988,979

 

Stock-based compensation expense

 

197,268

 

 

181,547

 

Amortization of acquired intangibles

 

64,193

 

 

53,079

 

Acquisition and integration-related costs

 

22,580

 

 

8,107

 

Restructuring and other charges

 

9,215

 

 

8,621

 

Non-qualified deferred compensation expenses

 

4,881

 

 

5,402

 

Special charges

 

394

 

 

875

 

Other income or expense related to investments and non-qualified deferred compensation plan assets*

 

(522

)

 

(1,314

)

Income tax benefit related to intercompany transfers of certain intellectual property rights

 

 

 

(575,618

)

Income tax effect of non-GAAP adjustments

 

(106,817

)

 

(52,037

)

Net income on a non-GAAP basis

 

$

781,836

 

 

$

617,641

 

*

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.

Diluted Net Income Per Share Reconciliation

 

Three Months Ended

 

 

January 2, 2021

 

December 28, 2019

(in thousands, except per share data)

 

(unaudited)

Diluted net income per share on a GAAP basis

 

$

0.62

 

 

$

2.36

 

Stock-based compensation expense

 

0.21

 

 

0.17

 

Amortization of acquired intangibles

 

0.06

 

 

0.05

 

Acquisition and integration-related costs

 

0.02

 

 

0.01

 

Restructuring and other charges

 

0.04

 

 

0.03

 

Non-qualified deferred compensation expenses

 

0.01

 

 

0.01

 

Special charges

 

 

 

 

Other income or expense related to investments and non-qualified deferred compensation plan assets*

 

(0.02

)

 

 

Income tax benefit related to intercompany transfers of certain intellectual property rights

 

 

 

(2.06

)

Income tax effect of non-GAAP adjustments

 

(0.11

)

 

(0.03

)

Diluted net income per share on a non-GAAP basis

 

$

0.83

 

 

$

0.54

 

Shares used in calculation of diluted net income per share

 

280,173

 

 

279,557

 

*

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.

Diluted Net Income Per Share Reconciliation

 

Years Ended

 

 

January 2, 2021

 

December 28, 2019

(in thousands, except per share data)

 

(unaudited)

Diluted net income per share on a GAAP basis

 

$

2.11

 

 

$

3.53

 

Stock-based compensation expense

 

0.71

 

 

0.65

 

Amortization of acquired intangibles

 

0.23

 

 

0.19

 

Acquisition and integration-related costs

 

0.08

 

 

0.03

 

Restructuring and other charges

 

0.03

 

 

0.03

 

Non-qualified deferred compensation expenses

 

0.02

 

 

0.02

 

Special charges

 

 

 

 

Other income or expense related to investments and non-qualified deferred compensation plan assets*

 

 

 

(0.01

)

Income tax benefit related to intercompany transfers of certain intellectual property rights

 

 

 

(2.05

)

Income tax effect of non-GAAP adjustments

 

(0.38

)

 

(0.19

)

Diluted net income per share on a non-GAAP basis

 

$

2.80

 

 

$

2.20

 

Shares used in calculation of diluted net income per share

 

279,641

 

 

280,515

 

*

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.

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 March 19, 2021, 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 first quarter 2021 earnings release is published, which is currently scheduled for April 26, 2021.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
January 2, 2021 and December 28, 2019
(In thousands)
(Unaudited)
 
January 2, 2021 December 28, 2019
 
Current assets:
Cash and cash equivalents

$

928,432

$

705,210

Receivables, net

 

338,487

 

304,546

Inventories

 

75,956

 

55,802

Prepaid expenses and other

 

135,712

 

103,785

Total current assets

 

1,478,587

 

1,169,343

 
Property, plant and equipment, net

 

311,125

 

275,855

Goodwill

 

782,087

 

661,856

Acquired intangibles, net

 

210,590

 

172,375

Deferred taxes

 

732,290

 

732,367

Other assets

 

436,106

 

345,429

Total assets

$

3,950,785

$

3,357,225

 
Current liabilities:
Accounts payable and accrued liabilities

$

349,951

$

316,908

Current portion of deferred revenue

 

446,857

 

355,483

Total current liabilities

 

796,808

 

672,391

 
Long-term liabilities:
Long-term portion of deferred revenue

 

107,064

 

73,400

Long-term debt

 

346,793

 

346,019

Other long-term liabilities

 

207,102

 

162,521

Total long-term liabilities

 

660,959

 

581,940

 
Stockholders' equity

 

2,493,018

 

2,102,894

Total liabilities and stockholders' equity

$

3,950,785

$

3,357,225

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended January 2, 2021 and December 28, 2019
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended Years Ended
January 2,
2021
December 28,
2019
January 2,
2021
December 28,
2019
 
Revenue:
Product and maintenance

$

723,233

 

$

564,964

 

$

2,536,617

 

$

2,204,615

 

Services

 

36,676

 

 

34,591

 

 

146,274

 

 

131,704

 

 
Total revenue

 

759,909

 

 

599,555

 

 

2,682,891

 

 

2,336,319

 

 
Costs and expenses:
Cost of product and maintenance

 

55,111

 

 

53,521

 

 

231,026

 

 

189,146

 

Cost of services

 

18,425

 

 

19,807

 

 

74,472

 

 

77,211

 

Marketing and sales

 

146,502

 

 

127,267

 

 

516,460

 

 

481,673

 

Research and development

 

290,309

 

 

235,372

 

 

1,033,732

 

 

935,938

 

General and administrative

 

49,264

 

 

42,093

 

 

154,425

 

 

139,806

 

Amortization of acquired intangibles

 

4,775

 

 

2,787

 

 

18,009

 

 

12,128

 

Restructuring and other charges

 

10,544

 

 

9,809

 

 

9,215

 

 

8,621

 

 
Total costs and expenses

 

574,930

 

 

490,656

 

 

2,037,339

 

 

1,844,523

 

 
Income from operations

 

184,979

 

 

108,899

 

 

645,552

 

 

491,796

 

 
Interest expense

 

(4,873

)

 

(4,222

)

 

(20,749

)

 

(18,829

)

Other income, net

 

6,083

 

 

748

 

 

7,945

 

 

6,001

 

 
Income before provision (benefit) for income taxes

 

186,189

 

 

105,425

 

 

632,748

 

 

478,968

 

 
Provision (benefit) for income taxes

 

12,451

 

 

(554,250

)

 

42,104

 

 

(510,011

)

 
Net income

$

173,738

 

$

659,675

 

$

590,644

 

$

988,979

 

 
 
Net income per share - basic

$

0.63

 

$

2.41

 

$

2.16

 

$

3.62

 

 
Net income per share - diluted

$

0.62

 

$

2.36

 

$

2.11

 

$

3.53

 

 
Weighted average common shares outstanding - basic

 

273,985

 

 

273,234

 

 

273,728

 

 

273,239

 

 
Weighted average common shares outstanding - diluted

 

280,173

 

 

279,557

 

 

279,641

 

 

280,515

 

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended January 2, 2021 and December 28, 2019
(In thousands)
(Unaudited)
 
Years Ended
January 2, December, 28

2021

2019

 
Cash and cash equivalents at beginning of year

$

705,210

 

$

533,298

 

Cash flows from operating activities:
Net income

 

590,644

 

 

988,979

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

145,653

 

 

122,789

 

Amortization of debt discount and fees

 

1,053

 

 

1,001

 

Stock-based compensation

 

197,268

 

 

181,547

 

Loss on investments, net

 

4,954

 

 

4,090

 

Deferred income taxes

 

(26,117

)

 

(576,738

)

Provisions for losses on receivables

 

1,628

 

 

632

 

ROU asset amortization and change in operating lease liabilities

 

4,483

 

 

562

 

Other non-cash items

 

773

 

 

428

 

Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables

 

(25,934

)

 

(4,718

)

Inventories

 

(25,685

)

 

(33,024

)

Prepaid expenses and other

 

(31,167

)

 

(11,031

)

Other assets

 

(71,606

)

 

(8,011

)

Accounts payable and accrued liabilities

 

18,394

 

 

33,915

 

Deferred revenue

 

110,173

 

 

27,498

 

Other long-term liabilities

 

10,408

 

 

1,681

 

Net cash provided by operating activities

 

904,922

 

 

729,600

 

 
Cash flows from investing activities:
Purchases of non-marketable investments

 

-

 

 

(33,717

)

Proceeds from the sale of non-marketable investments

 

217

 

 

2,952

 

Purchases of property, plant and equipment

 

(94,813

)

 

(74,605

)

Cash paid in business combinations, net of cash acquired

 

(197,562

)

 

(338

)

Net cash used for investing activities

 

(292,158

)

 

(105,708

)

 
Cash flows from financing activities:
Proceeds from revolving credit facility

 

350,000

 

 

150,000

 

Payment on revolving credit facility

 

(350,000

)

 

(250,000

)

Proceeds from issuance of common stock

 

74,803

 

 

52,842

 

Stock received for payment of employee taxes on vesting of restricted stock

 

(110,028

)

 

(90,580

)

Payments for repurchases of common stock

 

(380,064

)

 

(306,148

)

Net cash used for financing activities

 

(415,289

)

 

(443,886

)

 
Effect of exchange rate changes on cash and cash equivalents

 

25,747

 

 

(8,094

)

 
Increase in cash and cash equivalents

 

223,222

 

 

171,912

 

 
Cash and cash equivalents at end of year

$

928,432

 

$

705,210

 

Cadence Design Systems, Inc.
(Unaudited)
 
 
 
Revenue Mix by Geography (% of Total Revenue)

2019

2020

GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
 
Americas

44%

42%

44%

46%

44%

43%

44%

42%

41%

42%

China

10%

12%

10%

9%

10%

13%

12%

17%

17%

15%

Other Asia

19%

19%

21%

20%

20%

18%

19%

19%

18%

18%

Europe, Middle East and Africa

18%

20%

18%

18%

18%

19%

18%

16%

17%

18%

Japan

9%

7%

7%

7%

8%

7%

7%

6%

7%

7%

Total

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

 
 
 
 
Revenue Mix by Product Category (% of Total Revenue)

2019

2020

PRODUCT CATEGORY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
 
Custom IC Design and Simulation

25%

26%

26%

25%

25%

25%

24%

24%

26%

25%

Digital IC Design and Signoff

30%

31%

30%

29%

30%

29%

28%

27%

31%

29%

Functional Verification, including Emulation and Prototyping Hardware

24%

22%

20%

24%

23%

23%

24%

23%

19%

22%

IP

12%

11%

15%

13%

13%

14%

14%

15%

13%

14%

System Design and Analysis

9%

10%

9%

9%

9%

9%

10%

11%

11%

10%

Total

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%


Contacts

Cadence Investor Relations
408-944-7100
investor_relations@cadence.com

Cadence Newsroom
408-944-7039
newsroom@cadence.com


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