Cadence Reports Fourth Quarter and Fiscal Year 2022 Financial Results

Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the fourth quarter and fiscal year 2022.

Cadence reported 2022 revenue of $3.562 billion, compared to revenue of $2.988 billion for 2021. On a GAAP basis, Cadence achieved operating margin of 30 percent and recognized net income of $849 million, or $3.09 per share on a diluted basis, in 2022, compared to operating margin of 26 percent and net income of $696 million, or $2.50 per share on a diluted basis for 2021. Revenue for the fourth quarter of 2022 totaled $900 million, compared to revenue of $773 million for the same period in 2021. Cadence achieved operating margin of 23 percent and recognized net income of $240 million, or $0.88 per share on a diluted basis, in the fourth quarter of 2022, compared to operating margin of 25 percent and net income of $177 million, or $0.63 per share on a diluted basis, for the same period in 2021.

Using the non-GAAP measures defined below, operating margin for 2022 was 40 percent and net income was $1.173 billion, or $4.27 per share on a diluted basis, compared to operating margin of 37 percent and net income of $918 million, or $3.29 per share on a diluted basis, for the same period in 2021. For the fourth quarter of 2022, operating margin was 36 percent and net income was $262 million, or $0.96 per share on a diluted basis, compared to operating margin of 36 percent and net income of $227 million, or $0.82 per share on a diluted basis, for the same period in 2021.

“Cadence delivered record results for 2022 driven by our innovative solutions and strong execution to our Intelligent System Design™ strategy,” said Anirudh Devgan, president and chief executive officer. “I remain confident in the long-term secular mega-trends that continue to fuel robust design activity across semi and system companies. As we start off 2023, I’m excited about our momentum and look forward to driving further innovation and customer success.”

“We delivered another year of strong financial results,” said John Wall, senior vice president and chief financial officer. “I am pleased that we exceeded all key operating metrics for 2022, and look forward to building on that strength in 2023.”

CFO Commentary

Commentary on the fourth quarter and fiscal year 2022 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 2023, the company expects total revenue in the range of $1.00 billion to $1.02 billion. First quarter GAAP operating margin is expected to be in the range of 31 percent to 32 percent and GAAP net income per diluted share is expected to be in the range of $0.84 to $0.88. Using the non-GAAP measures defined below, operating margin is expected to be in the range of 41 percent to 42 percent and net income per diluted share is expected to be in the range of $1.23 to $1.27.

For fiscal year 2023, the company expects total revenue in the range of $4.00 billion to $4.06 billion. On a GAAP basis, operating margin for 2023 is expected to be in the range of 30.5 percent to 32.0 percent and GAAP net income per diluted share for 2023 is expected to be in the range of $3.24 to $3.34. Using the non-GAAP measures defined below, operating margin for 2023 is expected to be in the range of 40.5 percent to 42.0 percent and net income per diluted share for 2023 is expected to be in the range of $4.90 to $5.00.

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 fourth quarter and fiscal year 2022 financial results audio webcast today, February 13, 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 February 13, 2023 at 5 p.m. (Pacific) and ending March 17, 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 eight 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; (ix) the effects of any litigation, regulatory or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services or properties are subject; 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 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 reports on Form 10-K and Form 10-Q and 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 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:

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 17, 2023, 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 2023 earnings release is published, which is currently scheduled for April 24, 2023.

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Category: Financial, Featured

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