Cadence Reports Third Quarter 2013 Financial Results

SAN JOSE, Calif., 23 Oct 2013

Click here for the  Q3 2013 Financial Schedules

Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter of fiscal year 2013. 

Cadence reported third quarter 2013 revenue of $367 million, compared to revenue of $339 million reported for the same period in 2012. On a GAAP basis, Cadence recognized net income of $39 million, or $0.13 per share on a diluted basis, in the third quarter of 2013, compared to net income of $59 million, or $0.21 per share on a diluted basis, in the same period in 2012. 

Using the non-GAAP measure defined below, net income in the third quarter of 2013 was $63 million, or $0.21 per share on a diluted basis, as compared to net income of $59 million, or $0.21 per share on a diluted basis, in the same period in 2012. 

“In Q3, Cadence posted solid results and continued to announce new products. Palladium XP II, the latest emulator in our market leading product family, offers a significant performance improvement and contributed to strong Q3 hardware sales,” said Lip-Bu Tan, president and chief executive officer. “Our talented development teams also delivered Spectre XPS, a new FastSPICE simulator which can deliver up to 10-times faster throughput than competing solutions.” 

“I am pleased with our financial performance in Q3 with profitability and cash flow both at the high end of our expectations,” added Geoff Ribar, senior vice president and chief financial officer. 

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. 

Business Outlook
For the fourth quarter of 2013, the company expects total revenue in the range of $370 million to $380 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.11 to $0.13. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.22 to $0.24. 

For 2013, the company expects total revenue in the range of $1.453 billion to $1.463 billion. On a GAAP basis, net income per diluted share for 2013 is expected to be in the range of $0.55 to $0.56. Using the non-GAAP measure defined below, net income per diluted share for 2013 is expected to be in the range of $0.85 to $0.86.

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, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a third quarter 2013 financial results audio webcast today, October 23, 2013, 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, 2013 at 5 p.m. (Pacific) and ending November 6, 2013 at 5 p.m. (Pacific). Webcast access is available at

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

The statements contained above regarding Cadence’s third quarter 2013 financial 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 and 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. 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 on Cadence's 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 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 GAAP, and is calculated by taking GAAP net income and excluding, as applicable, amortization and sale of intangible assets and debt discount related to our 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 acquisitions, 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. 

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 useful supplemental information to Cadence’s management and investors regarding the performance of the company’s business operations, facilitates comparisons to the company’s historical operating results and enhances investors' ability to review Cadence's business from the same perspective as Cadence's management. Cadence’s management also uses non-GAAP net income 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. Investors are encouraged to look at the GAAP results as the best measure of financial performance. 

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
September 28, 2013 September 29,
(in thousands) (unaudited)
Net income on a GAAP basis $38,500 $58,584
Amortization and sale of acquired intangibles 13,027 7,750
Stock-based compensation expense 18,566 12,399
Non-qualified deferred compensation expenses (credits) 186 (839)
Restructuring and other charges 86 57
Integration and acquisition-related costs 8,041 3,016
Executive severance costs 745 -
Amortization of debt discount 5,693 5,279
Other income or expense related to investments and non-qualified deferred compensation plan assets* (1,544) 1,954
Acquisition-related income tax benefit - (14,806)
Income tax effect of non-GAAP adjustments (19,895) (14,054)
Net income on a non-GAAP basis $63,405 $59,340

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