Cadence Reports Fourth Quarter and Fiscal Year 2015 Financial Results

Feb 03, 2016, 16:05 ET from Cadence Design Systems, Inc.

SAN JOSE, Calif., Feb. 3, 2016 /PRNewswire/ -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2015.

Cadence reported fourth quarter 2015 revenue of $441 million, compared to revenue of $423 million reported for the same period in 2014.  On a GAAP basis, Cadence recognized net income of $80 million, or $0.26 per share on a diluted basis, in the fourth quarter of 2015, compared to net income of $65 million, or $0.21 per share on a diluted basis, for the same period in 2014.  Revenue for 2015 totaled $1.702 billion, compared to revenue of $1.581 billion for 2014.  Net income for 2015 was $252 million, or $0.81 per share on a diluted basis, compared to net income of $159 million, or $0.52 per share on a diluted basis, for 2014.

Using the non-GAAP measure defined below, net income in the fourth quarter of 2015 was $95 million, or $0.31 per share on a diluted basis, as compared to net income of $84 million, or $0.27 per share on a diluted basis, for the same period in 2014.  For 2015, non-GAAP net income was $341 million, or $1.09 per share on a diluted basis, compared to non-GAAP net income of $287 million, or $0.94 per share on a diluted basis, in 2014.

"In 2015, Cadence produced excellent financial results and continued innovating with the launch of nine new products, including Genus Synthesis, Innovus Implementation, the Palladium® Z1 Enterprise Emulation Platform and the Tensilica® Vision P5 processor.  We expanded our digital business with additional market-shaping customers, and conducted pioneering work at the advanced nodes." said Lip-Bu Tan, president and chief executive officer.  "Strong customer demand for the new Palladium Z1 helped drive robust hardware sales in the fourth quarter.  Looking ahead to 2016, while we face many industry challenges, we are confident that our innovative technologies and the execution of our strategies will enable us to continue to drive growth and deliver enhanced shareholder value."

"Superb execution led to strong results for Q4 and fiscal 2015 in what continues to be a challenging environment." said Geoff Ribar, senior vice president and chief financial officer.  "In 2015, we achieved strong revenue growth, profitability and cash flow that exceeded our expectations, and we initiated a $1.2 billion capital return program."

On January 28, 2016, Cadence entered into a $300 million three-year senior unsecured non-amortizing term loan facility with a group of seven lending institutions.  The interest rate will float at a margin of 112.5 basis points over LIBOR, and the initial interest rate is approximately 1.75%.  The proceeds from the term loan facility will be used for general corporate purposes, including the repurchase of our common stock.  At the same time, Cadence also drew down $50 million on its existing revolving credit facility.

CFO Commentary

Commentary on the fourth quarter and fiscal year 2015 financial results by Geoff Ribar, senior vice president and chief financial officer, is available at www.cadence.com/company/investor_relations.

Business Outlook

For the first quarter of 2016, the company expects total revenue in the range of $440 million to $450 million.  First quarter GAAP net income per diluted share is expected to be in the range of $0.17 to $0.19.  Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.26 to $0.28.

For 2016, the company expects total revenue in the range of $1.790 billion to $1.840 billion.  On a GAAP basis, net income per diluted share for 2016 is expected to be in the range of $0.72 to $0.82.  Using the non-GAAP measure defined below, net income per diluted share for 2016 is expected to be in the range of $1.15 to $1.25.

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 in this release.

Audio Webcast Scheduled

Lip-Bu Tan, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a fourth quarter and fiscal year 2015 financial results audio webcast today, February 3, 2016, 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 3, 2016 at 5 p.m. (Pacific) and ending March 18, 2016 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, Genus, Innovus, Palladium and Tensilica are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding Cadence's fourth quarter and fiscal year 2015 financial results and term loan facility, as well as the information in the Business Outlook section and the statements by Lip-Bu Tan and Geoff Ribar, are or include forward-looking statements based on current expectations or beliefs and 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.  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 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; (iv) change in customer demands, including those resulting from consolidation among Cadence's customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence's customers could result in delays in purchases of Cadence's 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, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence's efforts to improve operational efficiency in its business, including strategic, customer and supplier relationships, and its ability to retain key employees; (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 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 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 generally accepted accounting principles, or 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 and debt discount related to convertible notes, stock-based compensation expense, acquisition and integration-related costs including changes in fair value of contingent consideration and retention expenses for employees added from our 2013 and 2014 acquisitions, special charges (comprised of costs related to a voluntary retirement program and executive severance costs), investment gains or losses, income or expenses related to Cadence's non-qualified deferred compensation plan, restructuring and other significant items not directly related to Cadence's core business operations, and the income tax effect of non-GAAP pre-tax adjustments.  For 2015, Cadence is applying a non-GAAP income tax rate of 23 percent, down from 26 percent used in fiscal 2014, based on forecasted increases in foreign earnings that are expected to lower Cadence's long-term non-GAAP effective income tax rate.

Cadence's management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company's core business operations and therefore provides supplemental information to Cadence's 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's management, including forecasting and budgeting.

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



January 2, 2016


January 3, 2015



(unaudited)

(in thousands)





Net income on a GAAP basis


$

80,374


$

65,030

Amortization of acquired intangibles


15,826


17,559

Stock-based compensation expense


24,660


22,974

Non-qualified deferred compensation expenses


575


409

Restructuring and other charges (credits)


347


(1,145)

Acquisition and integration-related costs


1,596


4,280

Special charges*


916


Amortization of debt discount on convertible notes



4,782

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


(579)


(1,484)

Income tax effect of non-GAAP adjustments


(28,627)


(27,987)

Net income on a non-GAAP basis


$

95,088


$

84,418



*

Comprised of executive severance costs.



**

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 or expense.

 

 

Net Income Reconciliation


Years Ended



January 2, 2016


January 3, 2015



(unaudited)

(in thousands)





Net income on a GAAP basis


$

252,417


$

158,898

Amortization of acquired intangibles


64,248


60,924

Stock-based compensation expense


92,341


83,792

Non-qualified deferred compensation expenses (credits)


(369)


3,415

Restructuring and other charges


4,511


10,252

Acquisition and integration-related costs


7,975


24,620

Special charges*


916


10,816

Amortization of debt discount on convertible notes


7,496


17,602

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


(1,979)


(4,629)

Income tax effect of non-GAAP adjustments


(86,650)


(78,723)

Net income on a non-GAAP basis


$

340,906


$

286,967



*

Comprised of costs related to a voluntary retirement program and executive severance costs.



**

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 or expense.

 

 

Diluted Net Income per Share Reconciliation


Three Months Ended



January 2, 2016


January 3, 2015



(unaudited)

(in thousands, except per share data)





Diluted net income per share on a GAAP basis


$

0.26


$

0.21

Amortization of acquired intangibles


0.05


0.06

Stock-based compensation expense


0.08


0.07

Non-qualified deferred compensation expenses



Restructuring and other charges (credits)



Acquisition and integration-related costs


0.01


0.01

Special charges*



Amortization of debt discount on convertible notes



0.01

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



Income tax effect of non-GAAP adjustments


(0.09)


(0.09)

Diluted net income per share on a non-GAAP basis


$

0.31


$

0.27

Shares used in calculation of diluted net income per share — GAAP***


310,512


310,273

Shares used in calculation of diluted net income per share — non-GAAP***


310,512


310,273



*

Comprised of executive severance costs.



**

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 or expense.



***

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.

 

 

Diluted Net Income per Share Reconciliation


Years Ended



January 2, 2016


January 3, 2015



(unaudited)

(in thousands, except per share data)





Diluted net income per share on a GAAP basis


$

0.81


$

0.52

Amortization of acquired intangibles


0.21


0.20

Stock-based compensation expense


0.30


0.27

Non-qualified deferred compensation expenses (credits)



0.01

Restructuring and other charges


0.01


0.03

Acquisition and integration-related costs


0.03


0.08

Special charges*



0.04

Amortization of debt discount on convertible notes


0.02


0.06

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


(0.01)


(0.01)

Income tax effect of non-GAAP adjustments


(0.28)


(0.26)

Diluted net income per share on a non-GAAP basis


$

1.09


$

0.94

Shares used in calculation of diluted net income per share — GAAP***


312,302


306,775

Shares used in calculation of diluted net income per share — non-GAAP***


312,302


306,775



*

Comprised of costs related to a voluntary retirement program and executive severance costs.



**

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 or expense.



***

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.

 

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 18, 2016, 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 the company'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 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 first quarter 2016 earnings release is published, which is currently scheduled for April 25, 2016.

For more information, please contact:

Investors and Shareholders
Alan Lindstrom
Cadence Design Systems, Inc.
408-944-7100
investor_relations@cadence.com

Media and Industry Analysts
Craig Cochran
Cadence Design Systems, Inc.
408-944-7039
newsroom@cadence.com

 

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

January 2, 2016 and January 3, 2015

(In thousands)

(Unaudited)










January 2, 2016


January 3, 2015







Current assets:





Cash and cash equivalents

$             616,686


$             932,161


Short-term investments

94,498


90,445


Receivables, net

164,848


122,492


Inventories

56,762


56,394


2015 notes hedges

-


523,930


Prepaid expenses and other

31,967


126,313



Total current assets

964,761


1,851,735







Property, plant and equipment, net of accumulated





depreciation of $581,345 and $552,551, respectively

228,599


230,112

Goodwill

551,772


553,767

Acquired intangibles, net of accumulated amortization of 





$216,589 and $154,814, respectively

296,482


360,932

Long-term receivables

4,498


3,644

Other assets

304,903


209,366

Total assets

$          2,351,015


$          3,209,556







Current liabilities:





Convertible notes

$                       -


$             342,499


2015 notes embedded conversion derivative

-


523,930


Accounts payable and accrued liabilities

238,022


225,375


Current portion of deferred revenue

298,285


301,287



Total current liabilities

536,307


1,393,091







Long-term liabilities:





Long-term portion of deferred revenue

30,209


54,726


Long-term debt

348,788


348,676


Other long-term liabilities

59,596


79,489



Total long-term liabilities

438,593


482,891







Stockholders' equity

1,376,115


1,333,574

Total liabilities and stockholders' equity

$          2,351,015


$          3,209,556

 

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three Months and Years Ended January 2, 2016 and January 3, 2015

(In thousands, except per share amounts)

(Unaudited)



























Three Months Ended


Years Ended





January 2, 2016


January 3, 2015


January 2, 2016


January 3, 2015












Revenue:









Product and maintenance

$             413,489


$             393,223


$          1,578,944


$          1,479,151


Services

27,590


29,875


123,147


101,781














Total revenue

441,079


423,098


1,702,091


1,580,932












Costs and expenses:









Cost of product and maintenance

40,679


39,475


155,659


156,333


Cost of services

20,223


18,640


82,794


67,373


Marketing and sales

103,552


102,367


402,432


399,688


Research and development

161,970


155,124


637,567


603,006


General and administrative

26,789


26,939


109,982


113,619


Amortization of acquired intangibles

5,679


6,912


23,716


24,017


Restructuring and other charges (credits)

347


(1,145)


4,511


10,252














Total costs and expenses

359,239


348,312


1,416,661


1,374,288















Income from operations

81,840


74,786


285,430


206,644













Interest expense

(4,200)


(11,961)


(28,311)


(34,121)


Other income, net

2,510


3,879


10,477


8,479















Income before provision (benefit) for income taxes

80,150


66,704


267,596


181,002













Provision (benefit) for income taxes

(224)


1,674


15,179


22,104















Net income 

$               80,374


$               65,030


$             252,417


$             158,898























Net income per share - basic

$                   0.27


$                   0.23


$                   0.88


$                   0.56












Net income per share - diluted

$                   0.26


$                   0.21


$                   0.81


$                   0.52












Weighted average common shares outstanding - basic

297,433


283,928


288,018


283,349












Weighted average common shares outstanding - diluted

310,512


310,273


312,302


306,775

 

Cadence Design Systems, Inc. 

Condensed Consolidated Statements of Cash Flows

For the Years Ended January 2, 2016 and January 3, 2015

(In thousands)

(Unaudited)









Years Ended



January 2, 


January 3,



2016


2015






Cash and cash equivalents at beginning of year


$    932,161


$   536,260

Cash flows from operating activities:





   Net income


252,417


158,898

   Adjustments to reconcile net income to net cash provided by operating activities:





      Depreciation and amortization


118,165


115,634

      Amortization of debt discount and fees


9,402


20,529

      Stock-based compensation


92,341


83,792

      Gain on investments, net


(2,124)


(4,707)

      Deferred income taxes


(13,148)


12,478

      Other non-cash items


646


6,854

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





         Receivables


(44,732)


(17,925)

         Inventories


(1,120)


(11,708)

         Prepaid expenses and other


(1,380)


(2,501)

         Other assets


(1,558)


(42,181)

         Accounts payable and accrued liabilities


15,321


3,856

         Deferred revenue


(27,019)


(11,860)

         Other long-term liabilities


(19,011)


5,563

            Net cash provided by operating activities


378,200


316,722






Cash flows from investing activities:





  Purchases of available-for-sale securities


(96,531)


(124,165)

  Proceeds from the sale of available-for-sale securities


60,949


85,384

  Proceeds from the maturity of available-for-sale securities


31,316


46,612

  Proceeds from the sale of long-term investments


4,570


1,085

  Purchases of property, plant and equipment


(44,808)


(39,810)

  Cash paid in business combinations and asset acquisitions, net of cash acquired


-


(167,121)

           Net cash used for investing activities


(44,504)


(198,015)






Cash flows from financing activities:





  Proceeds from issuance of debt


-


348,649

  Proceeds from revolving credit facility


-


100,000

  Payment on revolving credit facility


-


(100,000)

  Payment of convertible notes


(349,999)


(1)

  Payment of convertible notes embedded conversion derivative liability


(530,643)


(1)

  Proceeds from convertible notes hedges


530,643


1

  Payment of debt issuance costs


-


(6,500)

  Payment of acquisition-related contingent consideration


-


(1,835)

  Excess tax benefits from stock-based compensation


15,591


7,583

  Proceeds from issuance of common stock 


74,938


65,913

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


(33,651)


(24,727)

  Payments for repurchases of common stock


(333,189)


(100,117)

           Net cash provided by (used for) financing activities


(626,310)


288,965






Effect of exchange rate changes on cash and cash equivalents


(22,861)


(11,771)






Increase (decrease) in cash and cash equivalents 


(315,475)


395,901






Cash and cash equivalents at end of year


$    616,686


$   932,161

 

Cadence Design Systems, Inc.



(Unaudited)










































Revenue Mix by Geography (% of Total Revenue)















2014




2015



GEOGRAPHY


 Q1 

 Q2 

 Q3 

 Q4 

 Year 


 Q1 

 Q2 

 Q3 

 Q4 

 Year 














 Americas 


45%

44%

46%

47%

45%


47%

48%

48%

48%

47%

 Asia 


23%

23%

22%

22%

23%


24%

23%

25%

25%

24%

 Europe, Middle East and Africa 


20%

22%

21%

21%

21%


19%

20%

18%

17%

19%

 Japan 


12%

11%

11%

10%

11%


10%

9%

9%

10%

10%

Total


100%

100%

100%

100%

100%


100%

100%

100%

100%

100%





















































Revenue Mix by Product Group (% of Total Revenue)














2014




2015



PRODUCT GROUP


 Q1 

 Q2 

 Q3 

 Q4 

 Year 


 Q1 

 Q2 

 Q3 

 Q4 

 Year 














 Functional Verification, including Emulation Hardware 


23%

21%

23%

21%

22%


23%

21%

23%

25%

23%

 Digital IC Design and Signoff 


30%

30%

29%

28%

29%


28%

29%

28%

28%

28%

 Custom IC Design 


27%

28%

27%

28%

27%


27%

27%

26%

25%

26%

 System Interconnect and Analysis 


10%

11%

10%

11%

11%


11%

11%

10%

10%

11%

 IP 


10%

10%

11%

12%

11%


11%

12%

13%

12%

12%

Total


100%

100%

100%

100%

100%


100%

100%

100%

100%

100%

 

Cadence Design Systems, Inc.

As of February 3, 2016

Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share 

(Unaudited)













Three Months Ending


Year Ending



April 2, 2016


December 31, 2016



Forecast


Forecast






Diluted net income per share on a GAAP basis

 $0.17 to $0.19 


 $0.72 to $0.82 







Amortization of acquired intangibles

0.05


0.20


Stock-based compensation expense

0.08


0.38


Acquisition and integration-related costs

-


-


Other income or expense related to investments and non-qualified 





    deferred compensation plan assets*

(0.01)


(0.01)


Income tax effect of non-GAAP adjustments

(0.03)


(0.14)






Diluted net income per share on a non-GAAP basis†

 $0.26 to $0.28 


 $1.15 to $1.25 





















Cadence Design Systems, Inc.

As of February 3, 2016

Impact of Non-GAAP Adjustments on Forward Looking Net Income

(Unaudited)













Three Months Ending


Year Ending



April 2, 2016


December 31, 2016

($ in millions)

Forecast


Forecast






Net income on a GAAP basis

 $50 to $56 


 $206 to $235 







Amortization of acquired intangibles

16


58


Stock-based compensation expense

25


109


Acquisition and integration-related costs

-


1


Other income or expense related to investments and non-qualified 





    deferred compensation plan assets*

(2)


(2)


Income tax effect of non-GAAP adjustments

(10)


(41)






Net income on a non-GAAP basis†

 $79 to $85 


 $331 to $360 


†The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP. 


 * 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 or expense. 

 

SOURCE CDNS-IR

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SOURCE Cadence Design Systems, Inc.



RELATED LINKS

http://www.cadence.com