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Cadence Design (CDNS) Q2 Earnings, Revenues Beat Estimates

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Cadence Design Systems, Inc. CDNS reported earnings of 28 cents per share (including stock-based compensation) for second-quarter 2017, beating the Zacks Consensus Estimate by seven cents.

Excluding stock-based compensation, earnings were 34 cents per share, reflecting an increase of 17.2% from the year-ago quarter.

Revenues also increased 5.7% year over year to $479 million, beating the Zacks Consensus Estimate of $478 million.

Notably, the company has outperformed the industry on a year-to-date basis. While the stock returned 39.1%, the industry gained 24.3% over the same time frame.

Quarter Details

Product & Maintenance generated revenues to the tune of $443.8 million, which accounted for 92.7% of total revenue. Segment revenues were up 5.7% on a year-over-year basis.

On the other hand, Services generated revenues of $35.1 million, which accounted for the remaining 7.3% of total revenue. Revenues were up 6.3% on a year-over-year basis.

Product wise, revenues from Digital and signoff grew 14% year over year, with deeper market penetration. IP revenues grew 15% year over year, as the company’s new refined strategy gained momentum. Custom analog grew 9% year over year and SPB segment saw growth of 7% from the year-ago quarter.

Revenues from Asia were up 18% year over year, making it the highest contributor.

Strong adoption continued for Palladium Z1, given the company’s recent partnership with HiSilicon. Moreover, Rohm, a Japanese electronics part manufacturing company adopted Cadence’s ISO 26262 compliant functional safety verification solution. Its customer base saw the addition of an advanced driver assistance system (ADAS) company.

In the second quarter, the company also released Virtuoso system, a platform to optimize design integration between chip, package and board flows. The company also extended its partnership with Mathworks to help modify mixed signal designs.

Cadence Design Systems, Inc. Price, Consensus and EPS Surprise

Cadence Design Systems, Inc. Price, Consensus and EPS Surprise | Cadence Design Systems, Inc. Quote

Management noted that Vinovus and Tensilica are gaining accelerated traction with high adoption rate. Customer reception of Protium S1 FPGA-based prototyping system was also positive.

Meanwhile, stringent cost control helped operating margin (including stock-based compensation) expanded 210 bps on a year-over-year basis to 17.9%.

However, research and development spending increased 7.4% compared with the year-ago quarter.

Balance Sheet

Net cash from operating activities was $162.1 million compared with $92.4 million in the previous quarter. Cadence ended the quarter with cash and short-term investments of $655.9 million, better than $547.6 million at the end of first-quarter 2017.


For the third quarter of 2017, Cadence expects total revenue to be in the range of $475 million to $485 million and non-GAAP earnings in the range of 33 cents to 35 cents per share.

For the 2017, the company raised its guidance. Revenues are now expected to be in the range of $1.91 billion to $1.95 billion; non-GAAP operating margin is expected to be approximately 27% and non-GAAP earnings are guided in the range of $1.36 to $1.42.

The lower end of both revenues and earnings per share guidance was raised, leading to a rise in the mid-point. Operating cash flow is anticipated to be in the range of $430 million to $470 million.

Zacks Rank & Key Picks

Cadence currently has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector are Cypress Semiconductor , Lam Research LRCX and Applied Optoelectronics AAOI, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank Stocks here.

Long-term earnings growth rates for Cypress Semiconductor, Lam Research and Applied Optoelectronics are projected to be 10%, 16.4% and 18.8%, respectively.

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