Cadence (CDNS) Beats on Q1 Earnings & Revenues, Ups '19 View
Cadence Design Systems, Inc.
CDNS delivered first-quarter 2019 non-GAAP earnings of 54 cents per
share, surpassing the Zacks Consensus Estimate by 4 cents. The
figure surged 35% from the year-ago quarter. Management had
predicted earnings between 48 cents and 50 cents.
Revenues of $576.7 million outpaced the Zacks Consensus Estimate of
$560 million and improved 11.5% on a year-over-year basis.
Moreover, the top line fared better than the high end of
management’s expectation of $565-$575 million.
Robust adoption of the company’s digital and signoff, IP solutions,
and solid order renewal drove earnings outperformance.
Shares of Cadence are up 5.6% in the pre-market. This can primarily
be attributed to optimism regarding outlook for the second quarter
and fiscal 2019. Notably, Cadence stock has returned 60.2% in past
year, substantially outperforming the industry’s rally of
30.1%.
Quarter in Detail
Product & Maintenance revenues (94.2% of total revenues) of
$543.5 million beat the Zacks Consensus Estimate of $534 million
and surged 13.1% year over year.
Meanwhile, Services revenues (5.8%) of $33.2 million lagged the
Zacks Consensus Estimate of $34.7 million and were down 9.5% from
the year-ago quarter.
Geographically, Americas, China, Other Asia, Europe, Middle East
and Africa (EMEA) and Japan contributed 44%, 10%, 19%, 18% and 9%,
respectively to total revenues.
Product-wise, Functional Verification, Digital IC &Signoff,
Custom IC Design& Simulation, Systems Interconnect &
Analysis, and IP, comprised 24%, 30%, 25%, 9% and 12% of total
revenues, respectively.
Cadence Design Systems, Inc. Revenue (Quarterly)
Cadence Design Systems, Inc. Revenue (Quarterly) | Cadence Design Systems, Inc. Quote
Considering Verification Suite, the company’s
flagship emulation platform Palladium Z1, witnessed two new
customer wins which included SambaNova Systems. The platform
garnered 13 repeat orders, including Annapurna Labs, which has been
acquired by Amazon AMZN.
Momentum witnessed by Protium S1 prototyping platform and Palladium
Cloud was noteworthy.
IP segment also witnessed strong quarter driven by high demand for
Tensilica, registering eight new customer additions. In the first
quarter, the company rolled out silicon-based LPDDR5 solution with
an aim to enhance presence in IP domain. Cadence’s latest 112G
long-reach SerDes IP is also witnessing adoption.
Furthermore, management is elated with growing clout of the
company’s innovative cloud-ready solutions.
In the reported quarter, Cadence formed an alliance with Green
Hills Software, in a bid to explore embedded system security and
safety end-market, which is estimated around $3 billion.
Operating Margin Expansion Noteworthy
Non-GAAP gross margin of 89.7% contracted 30 basis points (bps)
from the year-ago figure.
In the first quarter, non-GAAP costs and expenses totaled $390.2
million, increasing 4.4% year over year. As a percentage of
revenues, the figure contracted approximately 450 bps to
67.7%.
Consequently, non-GAAP operating margin expanded 450 bps to 32.3%
in the reported quarter.
Balance Sheet & Cash Flow
The company ended the reported quarter with cash and cash
equivalents of approximately $538.9 million compared with the
previous-quarter’s figure of $533.3 million. The company noted that
at the end of the reported quarter, the United States comprised 16%
of cash and cash equivalents.
Cadence’s long-term debt as on Mar 30, 2019, was $345.5 million
compared with $345.3 million, as on Dec 29, 2018.
The company generated operating cash flow of $185.4 million in the
reported quarter compared with previous quarter’s figure of $131.9
million.
The company repurchased shares worth approximately $81 million in
the first quarter.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise | Cadence Design Systems, Inc. Quote
Guidance for Q2 Holds
Promise
For second-quarter 2019, Cadence expects total revenues in the
range of $575-$585 million, higher than the current Zacks Consensus
Estimate of $562.08 million.
Management guided non-GAAP earnings in the range of 52-54 cents per
share, above the current Zacks Consensus Estimate of 50
cents.
Elevated 2019 View Raises Optimism
For fiscal 2019, Cadence raised outlook. Revenues are now projected
in the range of $2.305-$2.335 billion compared with the previously
guided range of $2.270-$2.310 billion. The Zacks Consensus Estimate
for 2019 revenues is currently pegged at $2.28 billion.
Non-GAAP earnings are now guided in the range of $2.04-$2.12 per
share (mid-point of $2.08) compared with the earlier predicted
range of $1.97-$2.07. Notably, the mid-point of the guided range is
above the current Zacks Consensus Estimate of $2.05.
Further, non-GAAP operating margin for 2019 is expected at around
31%. Operating cash flow is now anticipated in the range of
$665-$705 million, compared with previously predicted range of
$640-$690 million.
Conclusion
Cadence is evolving its silicon-based design strategy with an aim
to meet complex computing demands of 5G and AI applications. In
fact, the company has carved a new System Analysis Group to focus
exclusively on system analysis and design.
Increasing digital transformation across aerospace, automotive
andmedicaldomains is fueling demand for robust computational
software and developer tools, which enhances growth prospects of
the company.
Cadence recently unveiled CloudBurst Platform, which offers access
to the company’s design tools in hybrid cloud infrastructure. It
was recently utilized by Barefoot Networks.
Moreover, Cadence’s association with Northrop Grumman NOC, which is
utilizing the company’s IP and EDA solutions, is noteworthy. We
believe the deal will aid the company enhance presence in aerospace
and defense end market.
Furthermore, the company recently rolled out Clarity 3D Solver,
marking its foray into the 3D modeling software market. The fact
that Clarity 3D Solver can be integrated with Cadence’s
implementation platforms to enhance performance provides leverage
to its 3D modeling goals. Notably, the company noted that the
product has been approved by Teradyne TER and HiSilicon.
Cadence is anticipated to benefit considerably from latest customer
wins and product roll outs in strategic growth markets,
consequently, favoring its top line.
Zacks Rank
Currently, Cadence carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy)
stocks here.
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