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Cadence Design Systems, Inc. (CDNS - Free Report) reported first-quarter 2020 non-GAAP earnings of 60 cents per share, which beat the Zacks Consensus Estimate by 11.1%. Also, the bottom line increased 11.1% year over year.
Revenues of $618 million outpaced the Zacks Consensus Estimate by 0.8% and improved 7.1% on a year-over-year basis.
The upside can be attributed to robust adoption of the company’s digital & signoff and IP solutions as well as expanding customer base. Moreover, better-than-expected demand for Tensilica products and the Cadence Verification Suite that includes Xcelium, Palladium, Jasper, and Protium drove revenues.
Increasing popularity of the company's products instill confidence in the stock. Notably, shares of have returned 12.2% in the year-to-date period, outperforming the industry’s rally of 5.3%.
Quarter Details
Product & Maintenance revenues (94.1% of total revenues) of $581.7 million increased 7% year over year.
Services revenues (5.9%) of $36.3 million increased 9.1% from the year-ago quarter’s reported figure.
Geographically, Americas, China, Other Asia, Europe, Middle East and Africa (EMEA), and Japan contributed 43%, 13%, 18%, 19% and 7%, respectively, to total revenues.
Product-wise, Functional Verification, Digital IC & Signoff, Custom IC Design & Simulation, Systems Interconnect & Analysis, and IP contributed 23%, 29%, 25%, 9% and 14% to total revenues, respectively.
Cadence Verification Suite saw robust traction in the first quarter, with the company’s flagship emulation platform Palladium Z1, witnessing four new client wins and nine expansions while Protium X1 witnessed six new deals and six repeat orders.
The Protium X1’s adoption was driven by increased deployment in Palladium accounts as it shares a common front-end complier with the Palladium Z1.
Meanwhile, total non-GAAP costs and expenses increased 7.3% year over year to $418.8 million.
Non-GAAP operating margin was 32%, which was flat year over year.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
As of Mar 28, 2020, the company had cash and cash equivalents of approximately $946.3 million compared with $705.2 million as on Dec 28, 2019.
Moreover, the company’s long-term debt came in at $346.2 million as of Mar 28, 2020, compared with $346 million in the previous quarter.
The company generated operating cash flow of $217.7 million in the reported quarter compared with prior-quarter’s figure of $159.3 million.
The company repurchased shares worth approximately $100 million in the first quarter.
Bleak Guidance for Q2
For second-quarter 2020, Cadence expects total revenues in the range of $580-$600 million. The Zacks Consensus Estimate for revenues is pegged at $613.8 million.
Management guided non-GAAP earnings in the range of 50-54 cents per share. The Zacks Consensus Estimate for second-quarter earnings is pegged at 58 cents.
Non-GAAP operating margin for second-quarter 2020 is expected at around 30%.
Maintains 2020 View
Cadence reaffirmed its guidance for 2020, amid coronavirus-related headwinds.
Notably, revenues are projected in the range of $2.545-$2.585 billion. The Zacks Consensus Estimate for 2020 revenues is currently pegged at $2.53 billion.
Non-GAAP earnings are expected in the range of $2.40-$2.50 per share. Notably, the Zacks Consensus Estimate for 2020 earnings is pegged at $2.43 per share.
Further, non-GAAP operating margin for 2020 is expected in the range of 32-33%. Operating cash flow is anticipated in the range of $775-$825 million.
Notably, the guidance for 2020 takes into account the export limitations for certain Chinese customers as well as two recent acquisitions of AWR and Integrand that is expected to generate additional revenues.
The long-term earnings growth rate for Avid, Netlist and Zoom is currently pegged at 20%, 15% and 26.6%, respectively.
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Cadence (CDNS) Q1 Earnings Beat Estimates, Revenues Rise Y/Y
Cadence Design Systems, Inc. (CDNS - Free Report) reported first-quarter 2020 non-GAAP earnings of 60 cents per share, which beat the Zacks Consensus Estimate by 11.1%. Also, the bottom line increased 11.1% year over year.
Revenues of $618 million outpaced the Zacks Consensus Estimate by 0.8% and improved 7.1% on a year-over-year basis.
The upside can be attributed to robust adoption of the company’s digital & signoff and IP solutions as well as expanding customer base. Moreover, better-than-expected demand for Tensilica products and the Cadence Verification Suite that includes Xcelium, Palladium, Jasper, and Protium drove revenues.
Increasing popularity of the company's products instill confidence in the stock. Notably, shares of have returned 12.2% in the year-to-date period, outperforming the industry’s rally of 5.3%.
Quarter Details
Product & Maintenance revenues (94.1% of total revenues) of $581.7 million increased 7% year over year.
Services revenues (5.9%) of $36.3 million increased 9.1% from the year-ago quarter’s reported figure.
Geographically, Americas, China, Other Asia, Europe, Middle East and Africa (EMEA), and Japan contributed 43%, 13%, 18%, 19% and 7%, respectively, to total revenues.
Product-wise, Functional Verification, Digital IC & Signoff, Custom IC Design & Simulation, Systems Interconnect & Analysis, and IP contributed 23%, 29%, 25%, 9% and 14% to total revenues, respectively.
Cadence Verification Suite saw robust traction in the first quarter, with the company’s flagship emulation platform Palladium Z1, witnessing four new client wins and nine expansions while Protium X1 witnessed six new deals and six repeat orders.
The Protium X1’s adoption was driven by increased deployment in Palladium accounts as it shares a common front-end complier with the Palladium Z1.
Meanwhile, total non-GAAP costs and expenses increased 7.3% year over year to $418.8 million.
Non-GAAP operating margin was 32%, which was flat year over year.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
Balance Sheet & Cash Flow
As of Mar 28, 2020, the company had cash and cash equivalents of approximately $946.3 million compared with $705.2 million as on Dec 28, 2019.
Moreover, the company’s long-term debt came in at $346.2 million as of Mar 28, 2020, compared with $346 million in the previous quarter.
The company generated operating cash flow of $217.7 million in the reported quarter compared with prior-quarter’s figure of $159.3 million.
The company repurchased shares worth approximately $100 million in the first quarter.
Bleak Guidance for Q2
For second-quarter 2020, Cadence expects total revenues in the range of $580-$600 million. The Zacks Consensus Estimate for revenues is pegged at $613.8 million.
Management guided non-GAAP earnings in the range of 50-54 cents per share. The Zacks Consensus Estimate for second-quarter earnings is pegged at 58 cents.
Non-GAAP operating margin for second-quarter 2020 is expected at around 30%.
Maintains 2020 View
Cadence reaffirmed its guidance for 2020, amid coronavirus-related headwinds.
Notably, revenues are projected in the range of $2.545-$2.585 billion. The Zacks Consensus Estimate for 2020 revenues is currently pegged at $2.53 billion.
Non-GAAP earnings are expected in the range of $2.40-$2.50 per share. Notably, the Zacks Consensus Estimate for 2020 earnings is pegged at $2.43 per share.
Further, non-GAAP operating margin for 2020 is expected in the range of 32-33%. Operating cash flow is anticipated in the range of $775-$825 million.
Notably, the guidance for 2020 takes into account the export limitations for certain Chinese customers as well as two recent acquisitions of AWR and Integrand that is expected to generate additional revenues.
Zacks Rank & Stocks to Consider
Cadence currently carries a Zacks Rank #3 (Hold).
Some other better-ranked stocks in the broader technology sector are Avid Technology, Inc. , Netlist, Inc. (NLST - Free Report) and Zoom Video Communications, Inc. (ZM - Free Report) , which sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Avid, Netlist and Zoom is currently pegged at 20%, 15% and 26.6%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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