Cadence Reports Third Quarter 2023 Financial Results

Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the third quarter of 2023.

Cadence reported third quarter 2023 revenue of $1.023 billion, compared to revenue of $903 million for the same period in 2022. On a GAAP basis, Cadence achieved operating margin of 29 percent and recognized net income of $254 million, or $0.93 per share on a diluted basis, in the third quarter of 2023, compared to operating margin of 29 percent and net income of $186 million, or $0.68 per share on a diluted basis, for the same period in 2022.

Using the non-GAAP measures defined below, operating margin for the third quarter of 2023 was 41 percent and net income was $343 million, or $1.26 per share on a diluted basis, compared to operating margin of 39 percent and net income of $290 million, or $1.06 per share on a diluted basis, for the same period in 2022.

“I’m pleased with our strong Q3 performance and our relentless focus on driving innovation and delighting our customers,” said Anirudh Devgan, president and chief executive officer. “Generational trends including AI, HPC, and autonomous driving continue to fuel robust design activities, and 3D-IC designs are accelerating. We are excited about the momentum of our JedAI platform based Generative AI applications that are delivering breakthrough results for our customers.”

“Cadence delivered yet another strong quarter of top and bottom-line results in Q3, driven by growth across our businesses,” said John Wall, senior vice president and chief financial officer. “Our team’s strong execution and operational efficiency allowed us to raise our outlook for the year.”

CFO Commentary

Commentary on the third quarter 2023 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 fourth quarter of 2023, the company expects total revenue in the range of $1.039 billion to $1.079 billion. Fourth quarter GAAP operating margin is expected to be approximately 31 percent and GAAP net income per diluted share is expected to be in the range of $0.85 to $0.91. Using the non-GAAP measures defined below, operating margin is expected to be approximately 42 percent and net income per diluted share is expected to be in the range of $1.30 to $1.36.

For fiscal year 2023, the company expects total revenue in the range of $4.06 billion to $4.10 billion. On a GAAP basis, operating margin for 2023 is expected to be in the range of 30.5 percent to 31.0 percent and GAAP net income per diluted share for 2023 is expected to be in the range of $3.48 to $3.54. Using the non-GAAP measures defined below, operating margin for 2023 is expected to be in the range of 41.5 percent to 42.0 percent and net income per diluted share for 2023 is expected to be in the range of $5.07 to $5.13.

The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use this normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

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

Audio Webcast Scheduled

Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the third quarter 2023 financial results audio webcast today, October 23, 2023, 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 October 23, 2023 at 5 p.m. (Pacific) and ending December 15, 2023 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 systems 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 products from chips to boards to complete systems for the most dynamic market applications, including hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and healthcare. For nine years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.

© 2023 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 press release contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, 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 deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands or supply constraints 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, geopolitical 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, inflation rates and Cadence’s ability to access capital and debt markets; (vii) the acquisition of other companies, businesses 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, regulatory or other matters; and (ix) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services or properties are subject. In addition, the timing and amount of Cadence’s repurchases of its common stock are 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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.

All forward-looking statements in this press release are based on management's expectations as of the date of this press release and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

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 measures contained within this press release with their most directly comparable GAAP 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 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:

CDNS-IR

Category: Financial, Featured

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