EX-99.01 2 cdns02222022ex9901.htm PRESS RELEASE Document

Exhibit 99.01
Cadence Reports Fourth Quarter and Fiscal Year 2021 Financial Results
SAN JOSE, Calif. — February 22, 2022 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the fourth quarter and fiscal year 2021.

Cadence reported 2021 revenue of $2.988 billion, compared to revenue of $2.683 billion for 2020. On a GAAP basis, Cadence achieved operating margin of 26 percent and recognized net income of $696 million, or $2.50 per share on a diluted basis, in 2021, compared to operating margin of 24 percent and net income of $591 million, or $2.11 per share on a diluted basis, for 2020. Revenue for the fourth quarter of 2021 totaled $773 million, compared to revenue of $760 million for the same period in 2020. Cadence achieved operating margin of 25 percent and recognized net income of $177 million, or $0.63 per share on a diluted basis, in the fourth quarter of 2021, compared to operating margin of 24 percent and net income of $174 million, or $0.62 per share on a diluted basis, for the same period in 2020.

Using the non-GAAP measures defined below, operating margin for 2021 was 37 percent and net income was $918 million, or $3.29 per share on a diluted basis, compared to operating margin of 35 percent and net income of $782 million, or $2.80 per share on a diluted basis, for 2020. For the fourth quarter of 2021, operating margin was 36 percent and net income was $227 million, or $0.82 per share on a diluted basis, compared to operating margin of 37 percent and net income of $234 million, or $0.83 per share on a diluted basis, for the same period in 2020.

“Cadence delivered exceptional business results for 2021, driven by our highly innovative solutions and outstanding execution by the Cadence team,” said Anirudh Devgan, president and chief executive officer. “We accelerated our Intelligent System Design strategy, introducing over a dozen significant innovative products and making key strategic acquisitions. With generational industry trends continuing to drive robust design activity at both semiconductor and system companies, I excitedly look forward to Cadence driving further customer and shareholder success this year.”

“2021 was another year of continuous improvement at Cadence. Steady growth in our three year revenue growth CAGR continues to drive operating margin expansion, and the quality of those improvements in earnings are showing up in our operating cash, which hit $1.1 billion for the year,” said John Wall, senior vice president and chief financial officer. “I am pleased that we can build on 2021 with a strong outlook for 2022.”
CFO Commentary
Commentary on the fourth quarter and fiscal year 2021 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 first quarter of 2022, the company expects total revenue in the range of $850 million to $870 million. First quarter GAAP operating margin is expected to be in the range of 30 percent to 31 percent and GAAP net income per diluted share is expected to be in the range of $0.70 to $0.74. Using the non-GAAP measures defined below, operating margin is expected to be in the range of 40 percent to 41 percent and net income per diluted share is expected to be in the range of $1.00 to $1.04.
For fiscal year 2022, the company expects total revenue in the range of $3.32 billion to $3.38 billion. On a GAAP basis, operating margin is expected to be in the range of 27.5 percent to 29 percent and GAAP net income per diluted share for 2022 is expected to be in the range of $2.46 to $2.56. Using the non-GAAP measures defined below, operating margin for 2022 is expected to be in the range of 37.5 percent to 39 percent and net income per diluted share for 2022 is expected to be in the range of $3.70 to $3.80.
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 release.
Audio Webcast Scheduled
Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the fourth quarter and fiscal year 2021 financial results audio webcast today, February 22, 2022, 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 22, 2022 at 5 p.m. (Pacific) and ending March 18, 2022 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 seven years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.

© 2022 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 document includes forward-looking statements which are based on current expectations and preliminary assumptions 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 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 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 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; (ix) the effects of any litigation, regulatory or other proceedings to which Cadence is or may become a party; and (x) the duration, severity, volatility and effects of the COVID-19 pandemic and containment measures on Cadence, its employees, and its suppliers and customers, which may also have the effect of heightening the other risks described in this paragraph. In addition, the timing and amount of Cadence's repurchase of its common stock under the authorizations will be 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, 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 generally accepted accounting principles, or 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 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, executive severance 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:
 
Operating Margin ReconciliationThree Months Ended
January 1, 2022January 2, 2021
 (unaudited)
GAAP operating margin as a percent of total revenue25%24%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense7%8%
Amortization of acquired intangibles2%2%
Acquisition and integration-related costs1%1%
Restructuring 0%1%
Non-qualified deferred compensation expenses 1%1%
Non-GAAP operating margin as a percent of total revenue36%37%



 
Operating Margin ReconciliationYears Ended
January 1, 2022January 2, 2021
 (unaudited)
GAAP operating margin as a percent of total revenue26%24%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense7%7%
Amortization of acquired intangibles2%3%
Acquisition and integration-related costs1%1%
Restructuring 0%0%
Non-qualified deferred compensation expenses0%0%
Special charges*1%0%
Non-GAAP operating margin as a percent of total revenue37%35%

*Includes costs related to a voluntary retirement program in the second quarter of 2021.

Net Income ReconciliationThree Months Ended
January 1, 2022January 2, 2021
(in thousands)(unaudited)
Net income on a GAAP basis$176,579 $173,738 
Stock-based compensation expense54,230 58,545 
Amortization of acquired intangibles16,781 17,168 
Acquisition and integration-related costs5,946 6,556 
Restructuring (80)10,544 
Non-qualified deferred compensation expenses 2,205 4,280 
Other income or expense related to investments and non-qualified deferred compensation plan assets*(2,454)(4,860)
Income tax effect of non-GAAP adjustments(25,834)(32,097)
Net income on a non-GAAP basis$227,373 $233,874 

*Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.




Net Income ReconciliationYears Ended
January 1, 2022January 2, 2021
(in thousands)(unaudited)
Net income on a GAAP basis$695,955 $590,644 
Stock-based compensation expense210,090 197,268 
Amortization of acquired intangibles67,216 64,193 
Acquisition and integration-related costs22,413 22,580 
Restructuring (1,048)9,215 
Non-qualified deferred compensation expenses 6,163 4,881 
Special charges*26,832 394 
Other income or expense related to investments and non-qualified deferred compensation plan assets**(6,745)(522)
Income tax effect of non-GAAP adjustments(102,456)(106,817)
Net income on a non-GAAP basis$918,420 $781,836 

*Includes costs related to a voluntary retirement program in the second quarter of 2021.

**Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

Diluted Net Income Per Share ReconciliationThree Months Ended
January 1, 2022January 2, 2021
(in thousands, except per share data)(unaudited)
Diluted net income per share on a GAAP basis$0.63 $0.62 
Stock-based compensation expense0.20 0.21 
Amortization of acquired intangibles0.06 0.06 
Acquisition and integration-related costs0.02 0.02 
Restructuring — 0.04 
Non-qualified deferred compensation expenses 0.01 0.01 
Other income or expense related to investments and non-qualified deferred compensation plan assets*(0.01)(0.02)
Income tax effect of non-GAAP adjustments(0.09)(0.11)
Diluted net income per share on a non-GAAP basis$0.82 $0.83 
Shares used in calculation of diluted net income per share278,253 280,173 
*Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.




Diluted Net Income Per Share ReconciliationYears Ended
January 1, 2022January 2, 2021
(in thousands, except per share data)(unaudited)
Diluted net income per share on a GAAP basis$2.50 $2.11 
Stock-based compensation expense0.75 0.71 
Amortization of acquired intangibles0.24 0.23 
Acquisition and integration-related costs0.08 0.08 
Restructuring — 0.03 
Non-qualified deferred compensation expenses 0.02 0.02 
Special charges*0.10 — 
Other income or expense related to investments and non-qualified deferred compensation plan assets**(0.03)— 
Income tax effect of non-GAAP adjustments(0.37)(0.38)
Diluted net income per share on a non-GAAP basis$3.29 $2.80 
Shares used in calculation of diluted net income per share278,858 279,641 

*Includes costs related to a voluntary retirement program in the second quarter of 2021.

**Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.




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, 2022, 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 2022 earnings release is published, which is currently scheduled for April 25, 2022.

For more information, please contact:
Cadence Investor Relations
408-944-7100
investor_relations@cadence.com
Cadence Newsroom
408-944-7039
newsroom@cadence.com



Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
January 1, 2022 and January 2, 2021
(In thousands)
(Unaudited)
 
January 1, 2022January 2, 2021
Current assets:
Cash and cash equivalents$1,088,940 $928,432 
Receivables, net 337,596 338,487 
Inventories115,721 75,956 
Prepaid expenses and other173,512 135,712 
Total current assets1,715,769 1,478,587 
Property, plant and equipment, net 305,911 311,125 
Goodwill928,358 782,087 
Acquired intangibles, net 233,265 210,590 
Deferred taxes763,770 732,290 
Other assets439,226 436,106 
Total assets$4,386,299 $3,950,785 
Current liabilities:
Accounts payable and accrued liabilities$417,283 $349,951 
Current portion of deferred revenue553,942 446,857 
Total current liabilities971,225 796,808 
Long-term liabilities:
Long-term portion of deferred revenue101,148 107,064 
Long-term debt347,588 346,793 
Other long-term liabilities225,663 207,102 
Total long-term liabilities674,399 660,959 
Stockholders’ equity2,740,675 2,493,018 
Total liabilities and stockholders’ equity$4,386,299 $3,950,785 




Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended January 1, 2022 and January 2, 2021
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended Years Ended
 January 1, 2022January 2, 2021January 1, 2022January 2, 2021
Revenue:
Product and maintenance$719,849 $723,233 $2,812,947 $2,536,617 
Services53,187 36,676 175,297 146,274 
Total revenue773,036 759,909 2,988,244 2,682,891 
Costs and expenses:
Cost of product and maintenance47,714 55,111 222,647 231,026 
Cost of services21,979 18,425 84,359 74,472 
Marketing and sales148,068 146,502 560,262 516,460 
Research and development288,953 290,309 1,134,277 1,033,732 
General and administrative65,743 49,264 189,018 154,425 
Amortization of acquired intangibles4,979 4,775 19,640 18,009 
Restructuring (80)10,544 (1,048)9,215 
Total costs and expenses577,356 574,930 2,209,155 2,037,339 
Income from operations195,680 184,979 779,089 645,552 
Interest expense(4,251)(4,873)(16,980)(20,749)
Other income, net2,625 6,083 6,326 7,945 
Income before provision for income taxes194,054 186,189 768,435 632,748 
Provision for income taxes17,475 12,451 72,480 42,104 
Net income$176,579 $173,738 $695,955 $590,644 
Net income per share - basic$0.65 $0.63 $2.54 $2.16 
Net income per share - diluted$0.63 $0.62 $2.50 $2.11 
Weighted average common shares outstanding - basic273,066 273,985 273,504 273,728 
Weighted average common shares outstanding - diluted278,253 280,173 278,858 279,641 



Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended January 1, 2022 and January 2, 2021
(In thousands)
(Unaudited) 
Years Ended
 January 1, 2022January 2, 2021
Cash and cash equivalents at beginning of year$928,432 $705,210 
Cash flows from operating activities:
Net income695,955 590,644 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization142,308 145,653 
Amortization of debt discount and fees1,219 1,053 
Stock-based compensation210,090 197,268 
(Gain) loss on investments, net(580)4,954 
Deferred income taxes(43,178)(26,117)
Provisions for losses on receivables525 1,628 
ROU asset amortization and change in operating lease liabilities(11,606)4,483 
Other non-cash items427 773 
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables2,014 (25,934)
Inventories(39,027)(25,685)
Prepaid expenses and other(34,342)(31,167)
Other assets(7,133)(71,606)
Accounts payable and accrued liabilities67,356 18,394 
Deferred revenue100,731 110,173 
Other long-term liabilities16,199 10,408 
Net cash provided by operating activities1,100,958 904,922 
Cash flows from investing activities:
Proceeds from the sale of non-marketable investments128 217 
Purchases of property, plant and equipment(65,298)(94,813)
Purchases of intangible assets(1,583)— 
Cash paid in business combinations, net of cash acquired (226,201)(197,562)
Net cash used for investing activities(292,954)(292,158)
Cash flows from financing activities:
Proceeds from revolving credit facility— 350,000 
Payment on revolving credit facility— (350,000)
Payment of debt issuance costs(1,285)— 
Proceeds from issuance of common stock87,772 74,803 
Stock received for payment of employee taxes on vesting of restricted stock(117,982)(110,028)
Payments for repurchases of common stock(612,297)(380,064)
Net cash used for financing activities(643,792)(415,289)
Effect of exchange rate changes on cash and cash equivalents(3,704)25,747 
Increase in cash and cash equivalents160,508 223,222 
Cash and cash equivalents at end of year$1,088,940 $928,432 






Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
 
 20202021
GEOGRAPHYQ1Q2Q3Q4YearQ1Q2Q3Q4Year
Americas43 %44 %42 %41 %42 %46 %44 %46 %43 %45 %
China13 %12 %17 %17 %15 %12 %14 %13 %12 %13 %
Other Asia18 %19 %19 %18 %18 %18 %19 %18 %21 %19 %
Europe, Middle East and Africa19 %18 %16 %17 %18 %18 %17 %17 %18 %17 %
Japan7 %7 %6 %7 %7 %6 %6 %6 %6 %6 %
Total100 %100 %100 %100 %100 %100 %100 %100 %100 %100 %

Revenue Mix by Product Category (% of Total Revenue)
 
 20202021
PRODUCT CATEGORYQ1Q2Q3Q4YearQ1Q2Q3Q4Year
Custom IC Design and Simulation25 %24 %24 %26 %25 %23 %23 %23 %24 %23 %
Digital IC Design and Signoff29 %28 %27 %31 %29 %27 %28 %29 %29 %29 %
Functional Verification, including Emulation and Prototyping Hardware23 %24 %23 %19 %22 %26 %25 %23 %21 %24 %
IP14 %14 %15 %13 %14 %14 %13 %14 %14 %13 %
System Design and Analysis9 %10 %11 %11 %10 %10 %11 %11 %12 %11 %
Total100 %100 %100 %100 %100 %100 %100 %100 %100 %100 %

















Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of February 22, 2022
(Unaudited)
 
Three Months Ending
April 2, 2022		Year Ending
December 31, 2022
 ForecastForecast
GAAP operating margin as a percent of total revenue30% - 31%27.5% - 29%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense7%8%
Amortization of acquired intangibles2%2%
Acquisition and integration-related costs1%0%
Non-GAAP operating margin as a percent of total revenue†40% - 41%37.5% - 39%
†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.









































Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of February 22, 2022
(Unaudited)
 
Three Months Ending
April 2, 2022		Year Ending
December 31, 2022
 ForecastForecast
Diluted net income per share on a GAAP basis$0.70 to $0.74$2.46 to $2.56
Stock-based compensation expense0.220.97
Amortization of acquired intangibles0.060.19
Acquisition and integration-related costs0.010.03
Income tax effect of non-GAAP adjustments0.010.05
Diluted net income per share on a non-GAAP basis†$1.00 to $1.04$3.70 to $3.80


Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of February 22, 2022
(Unaudited)
 
Three Months Ending
April 2, 2022		Year Ending
December 31, 2022
($ in millions)ForecastForecast
Net income on a GAAP basis$193 to $204$685 to $713
Stock-based compensation expense61268
Amortization of acquired intangibles1752
Acquisition and integration-related costs48
Income tax effect of non-GAAP adjustments315
Net income on a non-GAAP basis†$278 to $289$1,028 to $1,056
†
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.