Cadence Reports Fourth Quarter and Fiscal Year 2018 Financial Results

SAN JOSE, Calif. -- February 19, 2019 -- Cadence Design Systems, Inc. (NASDAQ: CDNS) today reported its results under new revenue rules, ASC Topic 606. For the fourth quarter of 2018, Cadence reported revenue of $570 million, GAAP net income of $98 million, or $0.35 per share on a diluted basis, and non-GAAP net income (as defined below) of $147 million, or $0.52 per share on a diluted basis. For 2018, Cadence reported revenue of $2.138 billion, GAAP net income of $346 million, or $1.23 per share on a diluted basis, and non-GAAP net income of $526 million, or $1.87 per share on a diluted basis.

Cadence also reported its results under the old revenue rules, ASC Topic 605, for easier comparison with prior results, all of which were reported under ASC Topic 605.

Under ASC Topic 605, for the fourth quarter of 2018, Cadence reported revenue of $579 million, compared to revenue of $502 million reported for the same period in 2017. On a GAAP basis, Cadence recognized net income of $100 million, or $0.36 per share on a diluted basis, in the fourth quarter of 2018, compared to a net loss of $14 million, or $(0.05) per share on a diluted basis for the same period in 2017. Using the non-GAAP measure defined below, net income for the fourth quarter of 2018 was $144 million, or $0.51 per share on a diluted basis, compared to net income of $111 million, or $0.39 per share on a diluted basis, for the same period in 2017.

Due to the U.S. Tax Cuts and Jobs Act enacted in December 2017, GAAP net loss for the fourth quarter of 2017 included a $67 million income tax expense for a one time transition tax on previously untaxed foreign earnings and a $25 million income tax expense for the reduction in the value of Cadence’s U.S. deferred tax assets caused by the U.S. corporate tax rate reduction.

Under ASC Topic 605, Cadence reported 2018 revenue of $2.146 billion, compared to revenue of $1.943 billion for 2017. On a GAAP basis, Cadence recognized net income of $351 million, or $1.25 per share on a diluted basis, in 2018, compared to net income of $204 million, or $0.73 per share on a diluted basis, in 2017. Using the non-GAAP measure defined below, net income for 2018 was $528 million, or $1.88 per share on a diluted basis, as compared to net income of $393 million, or $1.40 per share on a diluted basis, in 2017.

“Cadence achieved excellent operating results for 2018 as technology trends like AI, cloud/datacenter and 5G drove strong design activity,” said Lip-Bu Tan, chief executive officer. “We continued to execute our System Design Enablement strategy, leading to broad strength across our product lines, as well as in the aerospace/defense vertical, and we announced our partnership with Green Hills Software, the leader in embedded safety and security software.”

“I’d like to thank the entire Cadence team for their strong execution across all lines of business for 2018,” said John Wall, senior vice president and chief financial officer. “I am pleased with our results and look forward to building on our success in 2019.”

As of the end of the fourth quarter of 2018, $175 million remained available under the previously announced authorization to repurchase Cadence common stock. In February 2019, the Board of Directors authorized the repurchase of an additional $500 million of Cadence common stock. The timing and amount of repurchases will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

Click here for the Q4 2018 Financial Schedules.

CFO Commentary

Commentary on the fourth quarter and fiscal year 2018 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 2019, the company expects total revenue in the range of $565 million to $575 million. First quarter GAAP net income per diluted share is expected to be in the range of $0.36 to $0.38. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.48 to $0.50.

For 2019, the company expects total revenue in the range of $2.270 billion to $2.310 billion. On a GAAP basis, net income per diluted share for 2019 is expected to be in the range of $1.33 to $1.43. Using the non-GAAP measure defined below, net income per diluted share for 2019 is expected to be in the range of $1.97 to $2.07.

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 in this release.

Audio Webcast Scheduled

Lip-Bu Tan, chief executive officer, and John Wall, senior vice president and chief financial officer, will host the fourth quarter and fiscal year 2018 financial results audio webcast today, February 19, 2019, 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 19, 2019 at 5 p.m. (Pacific) and ending March 15, 2019 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/investor_relations.

About Cadence

Cadence enables electronic systems and semiconductor companies to create the innovative end products that are transforming the way people live, work and play. Cadence^® software, hardware and semiconductor IP are used by customers to deliver products to market faster. The company’s System Design Enablement strategy helps customers develop differentiated products—from chips to boards to systems—in mobile, consumer, cloud datacenter, automotive, aerospace, IoT, industrial and other market segments. Cadence is listed as one of Fortune Magazine's 100 Best Companies to Work For. Learn more at www.cadence.com.