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Cadence (CDNS) Q2 Earnings & Revenues Top Estimates, Up Y/Y
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Cadence Design Systems Inc (CDNS - Free Report) posted non-GAAP earnings of $1.08 per share in second-quarter 2022, which topped the Zacks Consensus Estimate by 11.3% and increased 26% year over year.
Revenues of $857.5 million surpassed the Zacks Consensus Estimate by 2.45% and increased 18% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher demand for its products. CDNS ended the quarter with a backlog of $5.6 billion.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Driven by strong second-quarter results, the company raised its outlook for 2022. Revenues for the full year are now projected in the range of $3.47-$3.51 billion compared with the earlier guidance of $3.395-$3.435 billion. The Zacks Consensus Estimate for 2022 revenues is currently pegged at $3.4 billion, which indicates year-over-year growth of 13.8%.
Non-GAAP earnings for 2022 are expected in the range of $4.06-$4.12 per share compared with the earlier guidance of $3.89-$3.97 per share. The Zacks Consensus Estimate for 2022 earnings is pegged at $3.94 per share, which suggests year-over-year growth of 19.8%.
In the reported quarter, Cadence announced an agreement to acquire OpenEye Scientific Software for about $500 million in cash. The deal is expected to close in the third quarter of 2022 and improve revenues by approximately $40 million in fiscal 2023, per company estimates.
The acquisition is aimed at accelerating Cadence’s Intelligent System Design strategy and expand its total addressable market. The company wants to expand its reach in the molecular modeling and simulation market as pharmaceutical and biotechnology companies leverage computational software solutions for drug discovery.
Following the announcement, shares of Cadence are up 3.1% in the premarket trading on Jul 26. In the past year, the company’s stock has jumped 17% against the industry’s decline of 16.2%.
Image Source: Zacks Investment Research
Performance in Details
In the second quarter, Product & Maintenance revenues (93.6% of total revenues) of $802.3 million were up 16.6% year over year. Services revenues (6.4%) of $55.2 million increased 36.7% from the year-ago quarter’s figure.
Geographically, the Americas, China, Other Asia, Europe, Middle East and Africa (EMEA) and Japan contributed 45%, 13%, 18%, 18% and 6%, respectively, to total revenues in the quarter under review.
Product wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, IP and Systems Design & Analysis contributed 23%, 27%, 24%, 14% and 12% to total revenues, respectively.
The company’s digital and signoff business delivered 14% year-over-year growth in revenues. Digital Full Flow saw robust traction with 25 new customer wins in the first half of the year. The company’s Cadence Cerebrus solution witnessed accelerating momentum and was deployed by several customers like Intel, NVIDIA, Broadcom, Samsung and Renesas.
Palladium and Protium (especially Z2 and X2) platforms witnessed continued momentum with many deal wins. The company noted that it won 10 new clients and 50 repeat orders in the second quarter, which included more than two-third for both platforms. Mostly deal wins came from clients in the hyperscale, AI/ML and server customers.
In the quarter under review, the company launched 15 Verification IP solutions that enable customers across industrial, automotive, hyperscale data center and mobile domains to develop system-on-chip.
Cadence’s System Design & Analysis Business segment reported 29% year-over-year growth.
In the quarter under review, total non-GAAP costs and expenses increased 12% year over year to $493.9 million.
Non-GAAP gross margin contracted 120 basis points (bps) to 90.6%, but the non-GAAP operating margin was up 300 bps on a year-over-year basis to 42.4% in the quarter under review.
Balance Sheet & Cash Flow
As of Jul 2, 2022, the company had cash and cash equivalents of approximately $1.03 billion compared with $1.135 billion as of Apr 2, 2022.
The company’s long-term debt came in at $348 million as of Jul 2, 2022, compared with $347.8 million as of Apr 2, 2022.
The company generated an operating cash flow of $661.1 million in the reported quarter compared with the prior quarter’s figure of $588.8 million. Free cash flow in the quarter under review was $301 million compared with $319 million reported in the previous quarter.
The company repurchased shares worth approximately $320 million in the second quarter.
2022 Outlook Raised
For 2022, the non-GAAP operating margin is forecast in the range of 39.25-40.25% against the range of 38.5-40% guided previously.
For 2022, operating cash flow is projected to be $1.2 billion. Management expects to utilize the free cash flow generated to repurchase shares worth approximately $900 million.
For third-quarter 2022, revenues are projected in the range of $860-$880 million. The Zacks Consensus Estimate for revenues is currently pegged at $831 million, suggesting a year-over-year increase of 10.7%.
Non-GAAP earnings are expected to be 94-98 cents per share. The Zacks Consensus Estimate for earnings is pegged at 88 cents per share, suggesting a year-over-year increase of 10%.
Non-GAAP operating margin is forecast between 37% and 38% for the third quarter. The company expects to repurchase shares for at least $150 million in the next quarter.
The Zacks Consensus Estimate for Aspen Technology’s 2022 earnings is pegged at $5.49 per share, increasing 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.
Aspen Technology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.1%. Shares of AZPN have soared 24.6% in the past year.
The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.
Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have jumped 19% in the past year.
The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $37.06 per share, up 3.9% in the past 60 days. AVGO’s expected long-term earnings growth rate is 14.5%.
Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 2.2%. Shares of AVGO have gained 6.4% in the past year.
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Cadence (CDNS) Q2 Earnings & Revenues Top Estimates, Up Y/Y
Cadence Design Systems Inc (CDNS - Free Report) posted non-GAAP earnings of $1.08 per share in second-quarter 2022, which topped the Zacks Consensus Estimate by 11.3% and increased 26% year over year.
Revenues of $857.5 million surpassed the Zacks Consensus Estimate by 2.45% and increased 18% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher demand for its products. CDNS ended the quarter with a backlog of $5.6 billion.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
Driven by strong second-quarter results, the company raised its outlook for 2022. Revenues for the full year are now projected in the range of $3.47-$3.51 billion compared with the earlier guidance of $3.395-$3.435 billion. The Zacks Consensus Estimate for 2022 revenues is currently pegged at $3.4 billion, which indicates year-over-year growth of 13.8%.
Non-GAAP earnings for 2022 are expected in the range of $4.06-$4.12 per share compared with the earlier guidance of $3.89-$3.97 per share. The Zacks Consensus Estimate for 2022 earnings is pegged at $3.94 per share, which suggests year-over-year growth of 19.8%.
In the reported quarter, Cadence announced an agreement to acquire OpenEye Scientific Software for about $500 million in cash. The deal is expected to close in the third quarter of 2022 and improve revenues by approximately $40 million in fiscal 2023, per company estimates.
The acquisition is aimed at accelerating Cadence’s Intelligent System Design strategy and expand its total addressable market. The company wants to expand its reach in the molecular modeling and simulation market as pharmaceutical and biotechnology companies leverage computational software solutions for drug discovery.
Following the announcement, shares of Cadence are up 3.1% in the premarket trading on Jul 26. In the past year, the company’s stock has jumped 17% against the industry’s decline of 16.2%.
Image Source: Zacks Investment Research
Performance in Details
In the second quarter, Product & Maintenance revenues (93.6% of total revenues) of $802.3 million were up 16.6% year over year. Services revenues (6.4%) of $55.2 million increased 36.7% from the year-ago quarter’s figure.
Geographically, the Americas, China, Other Asia, Europe, Middle East and Africa (EMEA) and Japan contributed 45%, 13%, 18%, 18% and 6%, respectively, to total revenues in the quarter under review.
Product wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, IP and Systems Design & Analysis contributed 23%, 27%, 24%, 14% and 12% to total revenues, respectively.
The company’s digital and signoff business delivered 14% year-over-year growth in revenues. Digital Full Flow saw robust traction with 25 new customer wins in the first half of the year. The company’s Cadence Cerebrus solution witnessed accelerating momentum and was deployed by several customers like Intel, NVIDIA, Broadcom, Samsung and Renesas.
Palladium and Protium (especially Z2 and X2) platforms witnessed continued momentum with many deal wins. The company noted that it won 10 new clients and 50 repeat orders in the second quarter, which included more than two-third for both platforms. Mostly deal wins came from clients in the hyperscale, AI/ML and server customers.
In the quarter under review, the company launched 15 Verification IP solutions that enable customers across industrial, automotive, hyperscale data center and mobile domains to develop system-on-chip.
Cadence’s System Design & Analysis Business segment reported 29% year-over-year growth.
In the quarter under review, total non-GAAP costs and expenses increased 12% year over year to $493.9 million.
Non-GAAP gross margin contracted 120 basis points (bps) to 90.6%, but the non-GAAP operating margin was up 300 bps on a year-over-year basis to 42.4% in the quarter under review.
Balance Sheet & Cash Flow
As of Jul 2, 2022, the company had cash and cash equivalents of approximately $1.03 billion compared with $1.135 billion as of Apr 2, 2022.
The company’s long-term debt came in at $348 million as of Jul 2, 2022, compared with $347.8 million as of Apr 2, 2022.
The company generated an operating cash flow of $661.1 million in the reported quarter compared with the prior quarter’s figure of $588.8 million. Free cash flow in the quarter under review was $301 million compared with $319 million reported in the previous quarter.
The company repurchased shares worth approximately $320 million in the second quarter.
2022 Outlook Raised
For 2022, the non-GAAP operating margin is forecast in the range of 39.25-40.25% against the range of 38.5-40% guided previously.
For 2022, operating cash flow is projected to be $1.2 billion. Management expects to utilize the free cash flow generated to repurchase shares worth approximately $900 million.
For third-quarter 2022, revenues are projected in the range of $860-$880 million. The Zacks Consensus Estimate for revenues is currently pegged at $831 million, suggesting a year-over-year increase of 10.7%.
Non-GAAP earnings are expected to be 94-98 cents per share. The Zacks Consensus Estimate for earnings is pegged at 88 cents per share, suggesting a year-over-year increase of 10%.
Non-GAAP operating margin is forecast between 37% and 38% for the third quarter. The company expects to repurchase shares for at least $150 million in the next quarter.
Zacks Rank & Stocks to Consider
Cadence currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology space are Aspen Technology (AZPN - Free Report) , Synopsys (SNPS - Free Report) and Broadcom (AVGO - Free Report) . Broadcom sports a Zacks Rank #1 (Strong Buy) whereas Aspen Technology and Synopsys carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Aspen Technology’s 2022 earnings is pegged at $5.49 per share, increasing 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.
Aspen Technology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.1%. Shares of AZPN have soared 24.6% in the past year.
The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.
Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have jumped 19% in the past year.
The Zacks Consensus Estimate for Broadcom’s fiscal 2022 earnings is pegged at $37.06 per share, up 3.9% in the past 60 days. AVGO’s expected long-term earnings growth rate is 14.5%.
Broadcom’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 2.2%. Shares of AVGO have gained 6.4% in the past year.