Cadence Reports Fourth Quarter and Fiscal Year 2015 Financial Results

03 Feb, 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

Logo - http://photos.prnewswire.com/prnh/20140102/SF39436LOGO

 

SOURCE Cadence Design Systems, Inc.



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