Cadence Reports Fourth Quarter and Fiscal Year 2018 Financial Results

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 15, 2019, 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 2019 earnings release is published, which is currently scheduled for April 22, 2019.

 
Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

December 29, 2018 and December 30, 2017
(In thousands)

(Unaudited)

       

December 29, 2018

December 30, 2017
 
Current assets:
Cash and cash equivalents $ 533,298 $ 688,087

Receivables, net of allowances of $3,936 and $0, respectively

297,082 190,426
Inventories 28,162 33,209
Prepaid expenses and other   92,550   68,266
Total current assets 951,092 979,988
 

 

Property, plant and equipment, net of accumulated depreciation of $698,493 and $658,377, respectively

252,630 251,342
Goodwill 662,272 666,009
Acquired intangibles, net of accumulated amortization of
$333,687 and $297,456, respectively 225,457 278,835
Long-term receivables 5,972 12,239
Other assets   371,231   230,301
Total assets $ 2,468,654 $ 2,418,714
 
Current liabilities:
Revolving credit facility $ 100,000 $ 85,000
Accounts payable and accrued liabilities 256,526 221,101
Current portion of deferred revenue   352,456   336,297
Total current liabilities 708,982 642,398
 
Long-term liabilities:
Long-term portion of deferred revenue 48,718 61,513
Long-term debt 345,291 644,369
Other long-term liabilities   77,262   81,232
Total long-term liabilities   471,271   787,114
 
Stockholders' equity   1,288,401   989,202
Total liabilities and stockholders' equity $ 2,468,654 $ 2,418,714
 
 
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Operations
For the Three Months and Years Ended December 29, 2018 and December 30, 2017
(In thousands, except per share amounts)
(Unaudited)
 
 
    Three Months Ended     Years Ended

December 29,

    December 30, December 29,    

December 30,

  2018       2017     2018      

2017

 
 
Revenue:
Product and maintenance $ 534,418 $ 467,504 $ 1,997,887 $ 1,813,987
Services   35,432     34,218     140,135     129,045  
 
Total revenue   569,850     501,722     2,138,022     1,943,032  
 
Costs and expenses:
Cost of product and maintenance 54,748 39,305 173,011 156,676
Cost of services 21,376 20,979 85,736 80,714
Marketing and sales 112,613 107,654 439,669 419,161
Research and development 218,271 203,468 884,816 804,223
General and administrative 31,985 33,289 133,406 134,181
Amortization of acquired intangibles 3,468 3,571 14,086 14,716
Restructuring and other charges   13,699     12,178     11,089     9,406  
 
Total costs and expenses   456,160     420,444     1,741,813     1,619,077  
 

Income from operations

113,690 81,278 396,209 323,955
 
Interest expense (4,318 ) (6,712 ) (23,139 ) (25,664 )
Other income (expense), net   (735 )   2,385     3,320     16,755  
 
Income before provision for income taxes 108,637 76,951 376,390 315,046
 
Provision for income taxes   10,212     91,393     30,613     110,945  
 
Net income (loss) $ 98,425   $ (14,442 ) $ 345,777   $ 204,101  
 
 
Net income (loss) per share - basic $ 0.36   $ (0.05 ) $ 1.26   $ 0.75  
 
Net income (loss) per share - diluted $ 0.35   $ (0.05 ) $ 1.23   $ 0.73  
 
Weighted average common shares outstanding - basic   273,680     273,157     273,729     272,097  
 
Weighted average common shares outstanding - diluted   280,321     273,157     281,144     280,221  
 
 
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended December 29, 2018 and December 30, 2017
(In thousands)
(Unaudited)
 
 
    Years Ended

December 29,

    December 30,
2018 2017
 
Cash and cash equivalents at beginning of year $ 688,087   $ 465,232  
Cash flows from operating activities:
Net income 345,777 204,101
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 118,721 115,524
Amortization of debt discount and fees 1,196 1,211
Stock-based compensation 167,715 130,023
Gain on investments, net (1,261 ) (13,869 )
Deferred income taxes (11,676 ) 79,934
Provisions for losses on receivables 5,102 2,623
Other non-cash items 1,136 5,068
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables (87,083 ) (31,032 )
Inventories 752 5,034
Prepaid expenses and other (19,622 ) (25,793 )
Other assets (16,077 ) (22,336 )
Accounts payable and accrued liabilities 1,553 (25,987 )
Deferred revenue 100,696 33,614
Other long-term liabilities   (2,178 )   12,625  
Net cash provided by operating activities   604,751     470,740  
 
Cash flows from investing activities:
Proceeds from the sale of available-for-sale securities - 833
Purchases of non-marketable investments (115,839 ) -
Proceeds from the sale of non-marketable investments 3,497 9,108
Purchases of property, plant and equipment (61,503 ) (57,901 )
Cash paid in business combinations and asset acquisitions, net of cash acquired   -     (143,249 )
Net cash used for investing activities   (173,845 )   (191,209 )
 
Cash flows from financing activities:
Proceeds from revolving credit facility 100,000 135,000
Payment on revolving credit facility (85,000 ) (100,000 )
Principal payments on term loan (300,000 ) -
Payment of debt issuance costs - (793 )
Proceeds from issuance of common stock 40,908 48,965
Stock received for payment of employee taxes on vesting of restricted stock (69,921 ) (57,161 )
Payments for repurchases of common stock (250,059 ) (100,025 )
Change in book overdraft   (3,867 )   3,867  
Net cash used for financing activities   (567,939 )   (70,147 )
 
Effect of exchange rate changes on cash and cash equivalents   (17,756 )   13,471  
 
Increase (decrease) in cash and cash equivalents   (154,789 )   222,855  
 
Cash and cash equivalents at end of year $ 533,298   $ 688,087  
 
 
Cadence Design Systems, Inc.
(Unaudited)
 
 
 
Revenue Mix by Geography (% of Total Revenue)     ASC 605     ASC 605     ASC 606
2017 2018 2018

GEOGRAPHY

Q1     Q2     Q3     Q4     Year Q1     Q2     Q3     Q4     Year Q1     Q2     Q3     Q4     Year
                                               
Americas 45% 45% 45% 44% 44% 45% 45% 43% 46% 44% 45% 46% 44% 44% 45%
Asia 26% 28% 27% 28% 27% 26% 26% 30% 29% 28% 27% 26% 29% 31% 28%
Europe, Middle East and Africa 20% 19% 19% 20% 20% 21% 21% 19% 17% 20% 20% 20% 19% 17% 19%
Japan 9% 8% 9% 8% 9% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
 
 
Revenue Mix by Product Group (% of Total Revenue) ASC 605 ASC 605 ASC 606
2017 2018 2018

PRODUCT GROUP

Q1     Q2     Q3     Q4     Year Q1     Q2     Q3     Q4     Year Q1     Q2     Q3     Q4     Year
 
Functional Verification, including Emulation and Prototyping Hardware 23% 23% 21% 23% 22% 26% 23% 21% 26% 24% 26% 23% 22% 25% 24%
Digital IC Design and Signoff 29% 30% 30% 29% 29% 29% 29% 30% 27% 29% 30% 30% 30% 28% 29%
Custom IC Design and Simulation 26% 26% 28% 26% 27% 26% 26% 27% 24% 26% 26% 26% 26% 25% 26%
System Interconnect and Analysis 10% 10% 10% 10% 10% 9% 10% 10% 9% 9% 9% 9% 9% 9% 9%
IP 12% 11% 11% 12% 12% 10% 12% 12% 14% 12% 9% 12% 13% 13% 12%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
Cadence Design Systems, Inc.
As of February 19, 2019
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)
 
 
    Three Months Ending     Year Ending
March 30, 2019 December 28, 2019
Forecast Forecast
 
Diluted net income per share on a GAAP basis $0.36 to $0.38 $1.33 to $1.43
 
Amortization of acquired intangibles 0.05 0.19
Stock-based compensation expense 0.15 0.65
Acquisition and integration-related costs 0.01 0.03
Income tax effect of non-GAAP adjustments (0.09) (0.23)
   
Diluted net income per share on a non-GAAP basis�nbsp; $0.48 to $0.50 $1.97 to $2.07
 
 
 
 
Cadence Design Systems, Inc.
As of February 19, 2019
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)
 
 
Three Months Ending Year Ending
March 30, 2019 December 28, 2019

($ in millions)

Forecast Forecast
 
Net income on a GAAP basis $101 to $107 $371 to $399
 
Amortization of acquired intangibles 13 53
Stock-based compensation expense 42 182
Acquisition and integration-related costs 3 8
Income tax effect of non-GAAP adjustments (24) (63)
   
Net income on a non-GAAP basis�nbsp; $135 to $141 $551 to $579
 

�nbsp;

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.

 


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