Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the first quarter of 2021.

Cadence reported first quarter 2021 revenue of $736 million, compared to revenue of $618 million for the same period in 2020. On a GAAP basis, Cadence achieved operating margin of 28 percent and recognized net income of $187 million, or $0.67 per share on a diluted basis, in the first quarter of 2021, compared to operating margin of 23 percent and net income of $124 million, or $0.44 per share on a diluted basis for the same period in 2020.

Using the non-GAAP measure defined below, operating margin for the first quarter of 2021 was 38 percent and net income was $231 million, or $0.83 per share on a diluted basis, compared to operating margin of 32 percent and net income of $166 million, or $0.60 per share on a diluted basis, for the same period in 2020.

“Cadence delivered excellent financial results for the first quarter driven by strong execution and ongoing momentum in our core business and accelerating growth in our systems businesses,” said Lip-Bu Tan, chief executive officer. “Innovation is foundational to our Intelligent System Design strategy and since the start of 2021 we introduced several exciting new products, including the Palladium Z2 emulation platform, Protium X2 prototyping platform and next-generation Sigrity X for systems analysis. We broadened our systems analysis portfolio with the successful completion of the NUMECA and Pointwise acquisitions, enabling us to provide more capabilities and value to our customers while increasing our TAM.”

“I am pleased to report that we exceeded all of our key operating metrics for the quarter,” said John Wall, senior vice president and chief financial officer. “We are raising our outlook for revenue, non-GAAP operating margin and non-GAAP earnings for the year while we continue to invest in our expanding multiphysics platform.”

CFO Commentary

Commentary on the first quarter 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 second quarter of 2021, the company expects total revenue in the range of $705 million to $725 million. Second quarter GAAP operating margin is expected to be approximately 22 percent and GAAP net income per diluted share is expected to be in the range of $0.44 to $0.48. Using the non-GAAP measure defined below, operating margin is expected to be approximately 36 percent and net income per diluted share is expected to be in the range of $0.74 to $0.78.

For 2021, the company expects total revenue in the range of $2.88 billion to $2.93 billion. On a GAAP basis, operating margin is expected to be in the range of 23 percent to 24 percent and GAAP net income per diluted share for 2021 is expected to be in the range of $2.01 to $2.09. Using the non-GAAP measure defined below, operating margin for 2021 is expected to be in the range of 35 percent to 36 percent and net income per diluted share for 2021 is expected to be in the range of $2.99 to $3.07.

Our fiscal years are 52- or 53-week periods ending on the Saturday closest to December 31. Fiscal 2021 will be a 52-week fiscal year. Fiscal 2020 was a 53-week fiscal year, with an additional week in our fourth quarter of 2020.

A schedule showing a reconciliation of the business outlook from GAAP operating margin, GAAP net income and diluted net income per share to non-GAAP operating margin and non-GAAP net income and diluted net income per share is included in this release.

Audio Webcast Scheduled

Lip-Bu Tan, chief executive officer, Anirudh Devgan, president and John Wall, senior vice president and chief financial officer, will host the first quarter 2021 financial results audio webcast today, April 26, 2021, 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 April 26, 2021 at 5 p.m. (Pacific) and ending June 18, 2021 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 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 electronic products from chips to boards to systems for the most dynamic market applications, including consumer, hyperscale computing, 5G communications, automotive, mobile, aerospace, 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 cadence.com.

© 2021 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 the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands 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 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 or other matters; (ix) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (x) the duration, severity 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:

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 June 18, 2021, 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 second quarter 2021 earnings release is published, which is currently scheduled for July 26, 2021.

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