Cadence reported first quarter 2012 revenue of $316 million, compared to revenue of $266 million reported for the same period in 2011. On a GAAP basis, Cadence recognized net income of $31 million, or $0.11 per share on a diluted basis in the first quarter of 2012, compared to net income of $6 million, or $0.02 per share on a diluted basis in the same period in 2011.
Using Cadence's non-GAAP measure, net income in the first quarter of 2012 was $47 million, or $0.17 per share on a diluted basis, as compared to net income of $23 million, or $0.09 per share on a diluted basis in the same period in 2011.
"Cadence is off to a good start for 2012, with strong operating performance leading to an increase in our outlook," said Lip-Bu Tan, president and chief executive officer. "We continue to roll out new technology, including the newest release of our Encounter digital design platform targeted at the 20-nanometer node, as well as new design IP products for memory, networking and high-performance computing."
"Our operating performance in Q1 gives us confidence that we will achieve our long term profitability and growth objectives," added Geoff Ribar, senior vice president and chief financial officer. "I am also pleased by the reduction in DSOs, accounts receivable and deferred revenue, driven by our ongoing efforts to match cash collections with the timing of revenue recognition."
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Business Outlook
For the second quarter of 2012, the company expects total revenue in the range of $315 million to $325 million. Second quarter GAAP net income per diluted share is expected to be in the range of $0.13 to $0.14. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.17 to $0.18.
For 2012, the company expects total revenue in the range of $1,270 million to $1,300 million. On a GAAP basis, net income per diluted share for 2012 is expected to be in the range of $0.45 to $0.49. Using the non-GAAP measure defined below, net income per diluted share for 2012 is expected to be in the range of $0.66 to $0.70.
A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to non-GAAP net income and diluted net income per share is included with this release.
Audio Webcast Scheduled
Lip-Bu Tan, Cadence's president and chief executive officer, and Geoff Ribar, Cadence's senior vice president and chief financial officer, will host a first quarter 2012 financial results audio webcast today, April 25, 2012, 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 April 25, 2012 at 5 p.m. (Pacific) and ending May 9, 2012 at 5 p.m. (Pacific). Webcast access is available at
www.cadence.com/company/investor_relations.
About Cadence
Cadence enables global electronic design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company and its products and services is available at
www.cadence.com.
Cadence, the Cadence logo and Encounter are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
The statements contained above regarding Cadence's first quarter 2012 results, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar include forward-looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Readers are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and 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 electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence's efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence's products, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer demands, including customer consolidation and the possibility that restructurings and other efforts to improve operational efficiency could result in delays in customers' purchases of products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence's ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires; (ix) the effects of efforts to improve operational efficiency on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) events that affect the reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.
For a detailed discussion of these and other cautionary statements related to Cadence's business, please refer to Cadence's filings with the Securities and Exchange Commission. These include Cadence's most recent reports on Form 10-K and Form 10-Q, including Cadence's future filings.
GAAP to non-GAAP Reconciliation
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 generally accepted accounting principles (GAAP), and is calculated by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, integration and acquisition-related costs, including changes in the fair value of contingent consideration related to prior acquisitions, shareholder litigation costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive and other employee severance costs, restructuring charges and credits, amortization of discount on convertible notes, equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments. Intangible assets consist primarily of purchased or licensed technology, backlog, patents, trademarks, distribution rights, customer contracts and related relationships and non-compete agreements. Non-GAAP net income is adjusted by the amount of additional taxes or tax benefit that Cadence would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability.
Cadence's management believes it is useful in measuring Cadence's operations to exclude amortization of intangible assets and integration and acquisition-related costs, including changes in the fair value of contingent consideration related to prior acquisitions, because these costs are inconsistent in size, are significantly impacted by the timing and valuation of those acquisitions and generally cannot be changed by Cadence's management in the short term. In addition, Cadence's management believes it is useful to exclude stock-based compensation expense, because it is based on many subjective inputs at a point in time and many of these inputs are not necessarily directly attributable to the underlying performance of Cadence's business operations, and such exclusion enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence's management also believes it is useful to exclude costs related to shareholder litigation because these costs are not related to Cadence's core business operations. Cadence's management also believes that it is useful to exclude restructuring charges and credits. Cadence's management believes that in measuring the company's operations, it is useful to exclude any such restructuring charges and credits because exclusion of such charges and credits permits consistent evaluations of Cadence's performance before and after such actions are taken. Cadence's management also believes it is useful to exclude gains or losses and expenses or credits related to the non-qualified deferred compensation plan assets because these gains or losses and expenses or credits are not part of Cadence's direct costs of operations, but reflect changes in the value of assets held in the non-qualified deferred compensation plan. Cadence's management also believes it is useful to exclude executive and other employee severance costs because exclusion of such costs permits consistent evaluations of Cadence's performance. Cadence's management also believes it is useful to exclude the amortization of the discount on convertible notes because this incremental cost recorded as interest expense does not represent a cash obligation of the company and is not part of Cadence's direct cost of operations. Finally, Cadence's management believes it is useful to exclude the equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments because these items are not part of Cadence's direct cost of operations. Rather, these are non-operating items that are included in other income or expense and are part of the company's investment activities.
Cadence's management believes that non-GAAP net income provides useful supplemental information to Cadence's management and investors regarding the performance of the company's business operations and facilitates comparisons to the company's historical operating results. Cadence's management also uses this information internally for forecasting and budgeting. Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors and potential 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.
The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
Net Income Reconciliation Three Months Ended
--------------------------
March 31, April 2,
2012 2011
------------ ------------
(unaudited)
(in thousands)
Net income on a GAAP basis $ 31,104 $ 6,323
Amortization of acquired intangibles 6,685 6,655
Stock-based compensation expense 11,525 9,357
Non-qualified deferred compensation expenses 1,798 1,762
Restructuring and other charges (credits) (51) (41)
Shareholder litigation costs 46 68
Integration and acquisition-related costs 448 474
Amortization of debt discount 5,089 6,519
Other income or expense related to investments
and non-qualified deferred compensation plan
assets* (1,949) (4,391)
Income tax effect of non-GAAP adjustments (8,195) (3,468)
------------ ------------
Net income on a non-GAAP basis $ 46,500 $ 23,258
============ ============
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income, net.
Diluted Net Income per Share Reconciliation Three Months Ended
--------------------------
March 31, April 2,
2012 2011
------------ ------------
(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis $ 0.11 $ 0.02
Amortization of acquired intangibles 0.03 0.03
Stock-based compensation expense 0.04 0.04
Non-qualified deferred compensation expenses 0.01 0.01
Restructuring and other charges (credits) - -
Shareholder litigation costs - -
Integration and acquisition-related costs - -
Amortization of debt discount 0.02 0.02
Other income or expense related to investments
and non-qualified deferred compensation plan
assets* (0.01) (0.02)
Income tax effect of non-GAAP adjustments (0.03) (0.01)
------------ ------------
Diluted net income per share on a non-GAAP basis $ 0.17 $ 0.09
============ ============
Shares used in calculation of diluted net income
per share -- GAAP** 277,733 268,578
Shares used in calculation of diluted net income
per share -- non-GAAP** 277,733 268,578
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income, net.
** Shares used in the calculation of GAAP net income per share are expected
to be the same as shares used in the calculation of non-GAAP net income
per share, except when the company reports a GAAP net loss and non-GAAP
net income, or GAAP net income and a non-GAAP net loss.
Investors are encouraged to look at the GAAP results as the best measure of financial performance.
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 June 15, 2012, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute the company's current expectations. During the Quiet Period, the business outlook in these documents should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to any update by the company. 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 the day when Cadence's Second Quarter 2012 Earnings Release is published, which is currently scheduled for July 25, 2012.
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, 2012 and December 31, 2011
(In thousands)
(Unaudited)
March 31, December 31,
2012 2011
------------- -------------
Current Assets:
Cash and cash equivalents $ 659,687 $ 601,602
Short-term investments 3,287 3,037
Receivables 79,997 136,772
Inventories 41,720 43,243
2015 notes hedges 257,775 215,113
Prepaid expenses and other 69,178 64,216
------------- -------------
Total current assets 1,111,644 1,063,983
Property, plant and equipment, net of
accumulated depreciation of $662,068 and
$658,990, respectively 257,743 262,517
Goodwill 192,445 192,125
Acquired intangibles, net of accumulated
amortization of $82,530 and $91,542,
respectively 166,528 173,234
Long-term receivables 7,555 11,371
Other assets 58,917 58,039
------------- -------------
Total Assets $ 1,794,832 $ 1,761,269
============= =============
Current Liabilities:
Convertible notes $ 297,653 $ 294,061
2015 notes embedded conversion derivative 257,775 215,113
Accounts payable and accrued liabilities 143,760 165,791
Current portion of deferred revenue 312,238 340,401
------------- -------------
Total current liabilities 1,011,426 1,015,366
------------- -------------
Long-Term Liabilities:
Long-term portion of deferred revenue 62,634 73,959
Convertible notes 133,459 131,920
Other long-term liabilities 126,561 128,894
------------- -------------
Total long-term liabilities 322,654 334,773
------------- -------------
Stockholders' Equity 460,752 411,130
------------- -------------
Total Liabilities and Stockholders' Equity $ 1,794,832 $ 1,761,269
============= =============
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended March 31, 2012 and April 2, 2011
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
--------------------------
March 31, April 2,
2012 2011
------------ ------------
Revenue:
Product $ 190,024 $ 141,819
Services 29,542 27,805
Maintenance 96,264 96,478
------------ ------------
Total revenue 315,830 266,102
------------ ------------
Costs and Expenses:
Cost of product 15,401 14,194
Cost of services 19,374 20,075
Cost of maintenance 11,811 10,898
Marketing and sales 83,795 78,372
Research and development 108,594 101,299
General and administrative 27,770 19,302
Amortization of acquired intangibles 3,786 4,459
Restructuring and other charges (credits) (51) (41)
------------ ------------
Total costs and expenses 270,480 248,558
------------ ------------
Income from operations 45,350 17,544
Interest expense (8,537) (10,986)
Other income, net 2,434 4,469
------------ ------------
Income before provision for income
taxes 39,247 11,027
Provision for income taxes 8,143 4,704
------------ ------------
Net income $ 31,104 $ 6,323
============ ============
Basic net income per share $ 0.12 $ 0.02
============ ============
Diluted net income per share $ 0.11 $ 0.02
============ ============
Weighted average common shares outstanding -
basic 267,940 261,533
============ ============
Weighted average common shares outstanding -
diluted 277,733 268,578
============ ============
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2012 and April 2, 2011
(In thousands)
(Unaudited)
Three Months Ended
--------------------------
March 31, April 2,
2012 2011
------------ ------------
Cash and Cash Equivalents at Beginning of Period $ 601,602 $ 557,409
------------ ------------
Cash Flows from Operating Activities:
Net income 31,104 6,323
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,939 22,907
Amortization of debt discount and fees 5,734 7,263
Stock-based compensation 11,525 9,357
Gain on investments, net (1,949) (4,447)
Non-cash restructuring and other charges 63 65
Deferred income taxes 223 65
Provisions (recoveries) for losses (gains)
on trade and installment contract
receivables, net - (5,197)
Other non-cash items 683 488
Changes in operating assets and liabilities,
net of effect of acquired businesses:
Current and long-term receivables 60,172 37,642
Inventories (154) (4,016)
Prepaid expenses and other (5,545) (5,456)
Other assets (577) 1,662
Accounts payable and accrued liabilities (19,582) (20,681)
Deferred revenue (39,315) 15,607
Other long-term liabilities (3,612) (5,217)
------------ ------------
Net cash provided by operating
activities 60,709 56,365
------------ ------------
Cash Flows from Investing Activities:
Proceeds from the sale of available-for-sale
securities - 1,497
Proceeds from the sale of long-term
investments 44 2,677
Purchases of property, plant and equipment (8,201) (5,181)
Investment in venture capital partnerships and
equity investments (250) (608)
Cash paid in business combinations and asset
acquisitions, net of cash acquired, and
acquisition of intangibles (1,041) (2,538)
------------ ------------
Net cash used for investing activities (9,448) (4,153)
------------ ------------
Cash Flows from Financing Activities:
Principal payments on receivable sale
financing - (2,829)
Tax effect related to employee stock
transactions allocated to equity 2,842 160
Payment of acquisition-related contingent
consideration (39) -
Proceeds from issuance of common stock 12,761 8,897
Stock received for payment of employee taxes
on vesting of restricted stock (6,173) (2,854)
------------ ------------
Net cash provided by financing
activities 9,391 3,374
------------ ------------
Effect of exchange rate changes on cash and cash
equivalents (2,567) (787)
------------ ------------
Increase in cash and cash equivalents 58,085 54,799
------------ ------------
Cash and Cash Equivalents at End of Period $ 659,687 $ 612,208
============ ============
Cadence Design Systems, Inc.
As of April 25, 2012
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per
Share
(Unaudited)
Three Months Ending Year Ending
June 30, 2012 December 29, 2012
------------------- -------------------
Forecast Forecast
------------------- -------------------
Diluted net income per share on a
GAAP basis $0.13 to $0.14 $0.45 to $0.49
Amortization of acquired
intangibles 0.02 0.09
Stock-based compensation expense 0.04 0.17
Non-qualified deferred
compensation expenses - 0.01
Integration and acquisition-
related costs - -
Amortization of debt discount 0.02 0.08
Other income or expense related to
investments and non-qualified
deferred compensation plan
assets* - (0.01)
Income tax effect of non-GAAP
adjustments (0.04) (0.13)
------------------- -------------------
Diluted net income per share on a
non-GAAP basis $0.17 to $0.18 $0.66 to $0.70
=================== ===================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income, net.
Cadence Design Systems, Inc.
As of April 25, 2012
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
Three Months Ending Year Ending
June 30, 2012 December 29, 2012
------------------- -------------------
($ in Millions) Forecast Forecast
------------------- -------------------
Net income on a GAAP basis $35 to $40 $126 to $138
Amortization of acquired
intangibles 7 26
Stock-based compensation expense 10 49
Non-qualified deferred
compensation expenses - 2
Integration and acquisition-
related costs - 1
Amortization of debt discount 5 21
Other income or expense related to
investments and non-qualified
deferred compensation plan
assets* - (2)
Income tax effect of non-GAAP
adjustments (10) (37)
------------------- -------------------
Net income on a non-GAAP basis $47 to $52 $186 to $198
=================== ===================
* Includes, as applicable, equity in losses or income from investments,
write-down of investments, gains or losses on sale of investments and
gains or losses on non-qualified deferred compensation plan assets
recorded in Other income, net.
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
2010 2011 2012
------------------------ ------------------------ ----
GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Americas 40% 46% 43% 45% 43% 44% 47% 44% 44% 45% 44%
Europe 22% 23% 20% 23% 22% 21% 20% 21% 20% 20% 19%
Japan 23% 14% 20% 14% 18% 19% 17% 18% 17% 18% 18%
Asia 15% 17% 17% 18% 17% 16% 16% 17% 19% 17% 19%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Revenue Mix by Product Group (% of Total Revenue)
2010 2011 2012
------------------------ ------------------------ ----
PRODUCT GROUP Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Functional
Verification and
Design IP 22% 26% 25% 22% 24% 28% 33% 30% 32% 30% 30%
Digital IC Design 21% 21% 23% 26% 23% 24% 21% 22% 21% 22% 23%
Custom IC Design 27% 26% 24% 27% 26% 20% 22% 23% 23% 22% 23%
Design for
Manufacturing 9% 6% 8% 7% 7% 8% 6% 6% 6% 7% 7%
System Interconnect 9% 10% 10% 8% 9% 10% 8% 9% 8% 9% 8%
Services & Other 12% 11% 10% 10% 11% 10% 10% 10% 10% 10% 9%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Note: Product Group total revenue includes Product + Maintenance
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For more information, please contact: Investors and Shareholders Alan Lindstrom Cadence Design Systems, Inc. 408-944-7100 Email Contact Media and Industry Analysts Nancy Szymanski Cadence Design Systems, Inc. 408-473-8382 Email Contact