Cadence reported fourth quarter 2008 revenue of $227 million, compared to revenue of $458 million reported for the same period in 2007. On a GAAP basis, Cadence recognized a net loss of $1.64 billion, or $(6.57) per share on a diluted basis, in the fourth quarter of 2008, compared to net income of $120 million, or $0.41 per share on a diluted basis in the same period in 2007. Revenue for fiscal year 2008 totaled $1.04 billion, compared to revenue of $1.62 billion in fiscal year 2007. The net loss for fiscal year 2008 was $1.85 billion, or $(7.29) per share on a diluted basis, compared to net income of $296 million, or $1.01 per share on a diluted basis for fiscal year 2007. The GAAP net loss for the fourth quarter and fiscal year 2008 includes a non-cash impairment charge of $1.36 billion, related to Cadence's goodwill, intangible assets, and fixed assets. The impairment charge, which was driven by adverse economic conditions and a decline in the company's market capitalization, has no effect on the company's cash flows.
In addition to using GAAP results in evaluating Cadence's business, management believes it is useful to measure results using a non-GAAP measure of net income or net loss, which excludes, as applicable, amortization of intangible assets, stock-based compensation expense, in-process research and development charges, certain termination and legal costs, costs related to Cadence's withdrawn proposal to acquire Mentor Graphics Corporation and losses on the sale of Mentor Graphics Corporation shares, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, executive severance costs, restructuring charges and credits, losses on extinguishment of debt, equity in losses (income) from investments, write-down of investments, impairment charges related to goodwill, intangible assets and fixed assets, and losses related to the liquidation of a subsidiary. Non-GAAP net income or net loss is adjusted by the amount of additional taxes or tax benefit that the company would accrue if it used non-GAAP results instead of GAAP results to calculate the company's tax liability. See "GAAP to non-GAAP Reconciliation" below for further information on the non-GAAP measure.
Using this non-GAAP measure, net loss in the fourth quarter of 2008 was $11 million, or $(0.04) per share on a diluted basis, as compared to net income of $133 million, or $0.46 per share on a diluted basis, in the same period in 2007. For fiscal year 2008, non-GAAP net loss was $10 million, or $(0.04) per share on a diluted basis, compared to net income of $397 million and $1.35 per share on a diluted basis in fiscal year 2007.
"While Cadence faced many challenges in 2008, we continue to develop and deliver quality products for our customers. During 2008, we refreshed each of our major product platforms," said Lip-Bu Tan, President and Chief Executive Officer. "We also made a number of important decisions in 2008 to position Cadence to build long-term shareholder value. Among the most important were the transition to a 90/10 ratable model and a significant restructuring."
"We made very good progress in Q4 toward our goal of a stable 90/10 ratable model with over 85 percent of orders booked under ratable licenses," added Kevin S. Palatnik, Senior Vice President and Chief Financial Officer. "And, the restructuring we announced in November is on track."
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Business Outlook
For the first quarter of 2009, the company expects total revenue in the range of $200 million to $210 million. First quarter GAAP net loss per diluted share is expected to be in the range of $(0.33) to $(0.31). Net loss per diluted share using the non-GAAP measure defined below is expected to be in the range of $(0.13) to $(0.11).
For the full year 2009, the company expects total revenue in the range of $830 million to $870 million. On a GAAP basis, net loss per diluted share for fiscal 2009 is expected to be in the range of $(0.99) to $(0.87). Using the non-GAAP measure defined below, net loss per diluted share for fiscal 2009 is expected to be in the range of $(0.36) to $(0.24).
A schedule showing a reconciliation of the business outlook from GAAP net loss and diluted net loss per share to the non-GAAP net loss and diluted net loss per share is included with this release.
Audio Webcast Scheduled
Lip-Bu Tan, Cadence's President and Chief Executive Officer, and Kevin S. Palatnik, Cadence's Senior Vice President and Chief Financial Officer, will host a fourth quarter 2008 financial results audio webcast today, February 4, 2009, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the Web site at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting February 4, 2009 at 5 p.m. (Pacific) and ending February 11, 2009 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/company/investor_relations.
About Cadence
Cadence enables global electronic-design innovation and plays an essential role in the creation of today's integrated circuits and electronics. Customers use Cadence® software and hardware, methodologies, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, Calif., with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about Cadence and its products and services is available at www.cadence.com.
Cadence is a registered trademark and the Cadence logo is a trademark of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
The statements contained above regarding the company's fourth quarter and fiscal year 2008 results, as well as the comments in the Business Outlook section and the statements by Lip-Bu Tan and Kevin S. Palatnik include forward-looking statements based on current expectations or beliefs, as well as a number of preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Readers are cautioned not to put undue reliance on these forward-looking statements, which are not a guarantee of future performance and are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence's control, including but not limited to: (i) Cadence's ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) Cadence's ability to successfully complete and realize the expected benefits of the previously announced restructuring without significant unexpected costs or delays; (iii) the mix of products and services sold and the timing of significant orders for Cadence's products, and its shift to a ratable license structure, which may result in changes in the mix of license types; (iv) change in customer demands, including the possibility that Cadence's previously announced restructuring and management changes could result in delays in customers' purchases of products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence's ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires; (ix) the effects of the previously announced restructuring and management changes on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock price; (x) Cadence's ability to timely remediate a previously announced material weakness; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.
For a detailed discussion of these and other cautionary statements, please refer to the company's filings with the Securities and Exchange Commission. These include the company's Annual Report on Form 10-K for the year ended December 29, 2007, the company's Form 10-Q for the period ended September 27, 2008, and the company's future filings.
GAAP to non-GAAP Reconciliation
Cadence management evaluates and makes operating decisions using various
operating measures. These measures are generally based on the revenues of
its product, maintenance and services business operations and certain costs
of those operations, such as cost of revenues, research and development,
sales and marketing and general and administrative expenses. One such
measure is non-GAAP net income or net loss, which is a non-GAAP financial
measure under Section 101 of Regulation G under the Securities Exchange Act
of 1934, as amended, and is GAAP net income or net loss excluding, as
applicable, amortization of intangible assets, stock-based compensation
expense, in-process research and development charges, certain termination
and legal costs, costs related to Cadence's withdrawn proposal to acquire
Mentor Graphics Corporation and losses on the sale of Mentor Graphics
Corporation shares, integration and acquisition-related costs, gains or
losses and expenses or credits related to non-qualified deferred
compensation plan assets, executive severance costs, restructuring charges
and credits, losses on extinguishment of debt, equity in losses (income)
from investments, write-down of investments, impairment charges related to
goodwill, intangible assets and fixed assets, and losses related to the
liquidation of a subsidiary. Intangible assets consist primarily of
purchased or licensed technology, backlog, patents, trademarks,
distribution rights, customer contracts and related relationships and
non-compete agreements. Non-GAAP net income or net loss is adjusted by the
amount of additional taxes or tax benefit that the company would accrue if
it used non-GAAP results instead of GAAP results to calculate the company's
tax liability.
