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Cadence (CDNS) Q2 Earnings & Revenues Top Estimates, Rise Y/Y
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Cadence Design Systems (CDNS - Free Report) posted non-GAAP earnings of $1.22 per share in second-quarter 2023, which topped the Zacks Consensus Estimate by 3.4% and increased 13% year over year.
Revenues of $977 million surpassed the Zacks Consensus Estimate by 0.3% and rose 13.9% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher customer demand. CDNS ended the quarter with a backlog of $5.3 billion.
Management also raised full-year guidance on the back of strong second-quarter results. The company also highlighted increasing business opportunities presented by proliferation of Generative AI.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence noted that customers are significantly increasing their R&D budget in AI-driven automation which bodes well for the company. Most of the generational trends like 5G, hyperscale computing and autonomous driving are being reinforced by the use of Generative AI. This is accelerating chip design activity and thereby creating plenty of business prospects for the company, added Cadence. CDNS also stated that it has collaborated with Tesla for development of the latter’s Dojo AI supercomputer.
Revenues for 2023 are now projected in the range of $4.05-$4.09 billion. The Zacks Consensus Estimate is currently pegged at $4.05 billion, which indicates year-over-year growth of 13.8%. Earlier, management had projected revenues in the $4.03-$4.07 billion band.
Non-GAAP earnings for 2023 are now expected to be between $5.05 per share and $5.11 per share. The Zacks Consensus Estimate is pegged at $5.00, which suggests year-over-year rise of 17.1%. Earlier, non-GAAP earnings were anticipated in the range of $4.96-$5.04 per share.
For third-quarter 2023, revenues are estimated in the $990-$1,010 million band. The Zacks Consensus Estimate is currently pegged at $1.01 billion, suggesting a year-over-year improvement of 11.9%.
Non-GAAP earnings for third-quarter 2023 are anticipated to be between $1.18 per share and $1.22 per share. The Zacks Consensus Estimate is pegged at $1.24, suggesting a year-over-year increase of 17%.
The stock was down 4.1% in the pre-market trading on Jul 25. Shares of Cadence have gained 35% compared with the sub-industry’s growth of 36.4% in the past year.
Image Source: Zacks Investment Research
Performance in Details
In the second quarter, Product & Maintenance revenues (94.5% of total revenues) of $923 million were up 14.9% year over year. Services revenues (5.5%) of $54 million declined 1.8% from the year-ago quarter’s figure. Our estimates for revenues from Product & Maintenance, and Service segments were $911.6 million and $59.2 million, respectively.
Geographically, the Americas, China, Other Asia, Europe, and the Middle East and Africa and Japan contributed 41%, 18%, 18%, 17% and 6%, respectively, to total revenues in the quarter under review.
Product-wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, Intellectual Property, and Systems Design & Analysis contributed 22%, 27%, 27%, 11% and 13% to total revenues, respectively.
Cadence Cerebrus AI-driven solution witnessed accelerating momentum and was deployed by several customers.
The verification business increased 27% year over year due to rising complexity of system verification and software bring-up.
Palladium and Protium (especially Z2 and X2) platforms witnessed continued traction with many deal wins. CDNS won 14 new clients and 45 repeat orders in the second quarter. Most deal wins came from clients in the AI, hyperscale computing and automotive segments.
Cadence’s System Design & Analysis Business segment reported 23% year-over-year rise as it expanded its presence beyond electronic design automation. The company’s digital IC business reported 15% year-over-year revenue growth, driven by rapid adoption of digital full flow solutions.
For the second quarter, total non-GAAP costs and expenses increased 15.2% year over year to $569 million.
Non-GAAP gross margin expanded 80 basis points (bps) to 91.4%, but non-GAAP operating margin contracted 60 bps on a year-over-year basis to 41.8%.
Balance Sheet & Cash Flow
As of Jun 30, 2023, CDNS had cash and cash equivalents of $874 million compared with $917 million as of Mar 31, 2023
Long-term debt was $648.6 million as of Jun 30, 2023 compared with $648.3 million as of Mar 31, 2023.
Cadence generated operating cash flow of $414 million in the reported quarter compared with the prior quarter’s figure of $267 million. Free cash flow was $394 million compared with $241 million reported in the previous quarter.
It repurchased shares worth $265 million in the second quarter.
Q3 and 2023 Guidance
For 2023, non-GAAP operating margin is forecast in the range of 41.2-42.2%.
For 2023, operating cash flow is projected to be between $1.3 billion and $1.4 billion. Management expects to utilize 50% of the free cash flow to repurchase shares in 2023.
Non-GAAP operating margin is estimated to be nearly 40% for the third quarter. The company expects to repurchase shares worth approximately $125 million in the third quarter.
Zacks Rank & Other Key Picks
Cadence currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Woodward’s fiscal 2023 earnings has increased 0.8% in the past 60 days to $3.61 per share. WWD’s long-term earnings growth rate is anticipated to be 13.5%. Shares of WWD have risen 23.1% in the past year.
The consensus mark for Salesforce’s fiscal 2024 earnings is pegged at $7.44 per share, up 4.6% in the past 60 days. The long-term earnings growth rate is anticipated to be 30.7%.
CRM’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 15.5%. Shares of CRM have increased 32.4% in the past year.
The consensus estimate for Adobe’s fiscal 2023 earnings is pegged at $15.70 per share, up 1.8% in the past 60 days. The long-term earnings growth rate is anticipated to be 13.3%.
Adobe’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average beat being 3.1%. Shares of ADBE have improved 38.3% in the past year.
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Cadence (CDNS) Q2 Earnings & Revenues Top Estimates, Rise Y/Y
Cadence Design Systems (CDNS - Free Report) posted non-GAAP earnings of $1.22 per share in second-quarter 2023, which topped the Zacks Consensus Estimate by 3.4% and increased 13% year over year.
Revenues of $977 million surpassed the Zacks Consensus Estimate by 0.3% and rose 13.9% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher customer demand. CDNS ended the quarter with a backlog of $5.3 billion.
Management also raised full-year guidance on the back of strong second-quarter results. The company also highlighted increasing business opportunities presented by proliferation of Generative AI.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
Cadence noted that customers are significantly increasing their R&D budget in AI-driven automation which bodes well for the company. Most of the generational trends like 5G, hyperscale computing and autonomous driving are being reinforced by the use of Generative AI. This is accelerating chip design activity and thereby creating plenty of business prospects for the company, added Cadence. CDNS also stated that it has collaborated with Tesla for development of the latter’s Dojo AI supercomputer.
Revenues for 2023 are now projected in the range of $4.05-$4.09 billion. The Zacks Consensus Estimate is currently pegged at $4.05 billion, which indicates year-over-year growth of 13.8%. Earlier, management had projected revenues in the $4.03-$4.07 billion band.
Non-GAAP earnings for 2023 are now expected to be between $5.05 per share and $5.11 per share. The Zacks Consensus Estimate is pegged at $5.00, which suggests year-over-year rise of 17.1%. Earlier, non-GAAP earnings were anticipated in the range of $4.96-$5.04 per share.
For third-quarter 2023, revenues are estimated in the $990-$1,010 million band. The Zacks Consensus Estimate is currently pegged at $1.01 billion, suggesting a year-over-year improvement of 11.9%.
Non-GAAP earnings for third-quarter 2023 are anticipated to be between $1.18 per share and $1.22 per share. The Zacks Consensus Estimate is pegged at $1.24, suggesting a year-over-year increase of 17%.
The stock was down 4.1% in the pre-market trading on Jul 25. Shares of Cadence have gained 35% compared with the sub-industry’s growth of 36.4% in the past year.
Image Source: Zacks Investment Research
Performance in Details
In the second quarter, Product & Maintenance revenues (94.5% of total revenues) of $923 million were up 14.9% year over year. Services revenues (5.5%) of $54 million declined 1.8% from the year-ago quarter’s figure. Our estimates for revenues from Product & Maintenance, and Service segments were $911.6 million and $59.2 million, respectively.
Geographically, the Americas, China, Other Asia, Europe, and the Middle East and Africa and Japan contributed 41%, 18%, 18%, 17% and 6%, respectively, to total revenues in the quarter under review.
Product-wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, Intellectual Property, and Systems Design & Analysis contributed 22%, 27%, 27%, 11% and 13% to total revenues, respectively.
Cadence Cerebrus AI-driven solution witnessed accelerating momentum and was deployed by several customers.
The verification business increased 27% year over year due to rising complexity of system verification and software bring-up.
Palladium and Protium (especially Z2 and X2) platforms witnessed continued traction with many deal wins. CDNS won 14 new clients and 45 repeat orders in the second quarter. Most deal wins came from clients in the AI, hyperscale computing and automotive segments.
Cadence’s System Design & Analysis Business segment reported 23% year-over-year rise as it expanded its presence beyond electronic design automation. The company’s digital IC business reported 15% year-over-year revenue growth, driven by rapid adoption of digital full flow solutions.
For the second quarter, total non-GAAP costs and expenses increased 15.2% year over year to $569 million.
Non-GAAP gross margin expanded 80 basis points (bps) to 91.4%, but non-GAAP operating margin contracted 60 bps on a year-over-year basis to 41.8%.
Balance Sheet & Cash Flow
As of Jun 30, 2023, CDNS had cash and cash equivalents of $874 million compared with $917 million as of Mar 31, 2023
Long-term debt was $648.6 million as of Jun 30, 2023 compared with $648.3 million as of Mar 31, 2023.
Cadence generated operating cash flow of $414 million in the reported quarter compared with the prior quarter’s figure of $267 million. Free cash flow was $394 million compared with $241 million reported in the previous quarter.
It repurchased shares worth $265 million in the second quarter.
Q3 and 2023 Guidance
For 2023, non-GAAP operating margin is forecast in the range of 41.2-42.2%.
For 2023, operating cash flow is projected to be between $1.3 billion and $1.4 billion. Management expects to utilize 50% of the free cash flow to repurchase shares in 2023.
Non-GAAP operating margin is estimated to be nearly 40% for the third quarter. The company expects to repurchase shares worth approximately $125 million in the third quarter.
Zacks Rank & Other Key Picks
Cadence currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks worth consideration in the broader technology space are Woodward (WWD - Free Report) , Salesforce (CRM - Free Report) and Adobe (ADBE - Free Report) . Salesforce sports a Zacks Rank #1 while each of Woodward and Adobe 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 Woodward’s fiscal 2023 earnings has increased 0.8% in the past 60 days to $3.61 per share. WWD’s long-term earnings growth rate is anticipated to be 13.5%. Shares of WWD have risen 23.1% in the past year.
The consensus mark for Salesforce’s fiscal 2024 earnings is pegged at $7.44 per share, up 4.6% in the past 60 days. The long-term earnings growth rate is anticipated to be 30.7%.
CRM’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 15.5%. Shares of CRM have increased 32.4% in the past year.
The consensus estimate for Adobe’s fiscal 2023 earnings is pegged at $15.70 per share, up 1.8% in the past 60 days. The long-term earnings growth rate is anticipated to be 13.3%.
Adobe’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average beat being 3.1%. Shares of ADBE have improved 38.3% in the past year.