Cadence reported first quarter 2010 revenue of $222 million, compared to revenue of $206 million reported for the same period in 2009. On a GAAP basis, Cadence recognized a net loss of $12 million, or $(0.04) per share on a diluted basis, in the first quarter of 2010, compared to a net loss of $63 million, or $(0.25) per share on a diluted basis in the same period in 2009.
Using Cadence's non-GAAP measure, net income in the first quarter of 2010 was $6 million, or $0.02 per share on a diluted basis, as compared to a net loss of $25 million, or $(0.10) per share on a diluted basis, in the same period in 2009.
"Cadence is off to a good start in 2010. The team executed across the board and our focus on customer engagement continues to yield success," said Lip-Bu Tan, president and chief executive officer. "Business improved in all geographies with strength in Asia and North America, and in all platform areas, especially verification, custom and digital design."
"We put up another consistent operating performance in the first quarter with our key operating metrics meeting or exceeding our expectations," said Kevin S. Palatnik, senior vice president and chief financial officer.
In addition to using GAAP results to evaluate 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, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, restructuring charges and credits, amortization of discount on convertible notes, equity in losses or income from investments, write-down of investments, and gains or losses on the sale of investments. 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.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.
Business Outlook
For the second quarter of 2010, the company expects total revenue in the range of $215 million to $225 million. Second quarter GAAP net loss per diluted share is expected to be in the range of $(0.05) to $(0.03). Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.02 to $0.04.
For the full year 2010, the company expects total revenue in the range of $865 million to $900 million. On a GAAP basis, net loss per diluted share for fiscal 2010 is expected to be in the range of $(0.23) to $(0.13). Using the non-GAAP measure defined below, net income per diluted share for fiscal 2010 is expected to be in the range of $0.05 to $0.15.
A schedule showing a reconciliation of the business outlook from GAAP net loss and diluted net loss per share to non-GAAP net income and diluted net income 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 first quarter of fiscal year 2010 financial results audio webcast today, April 28, 2010, 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 April 28, 2010 at 5 p.m. (Pacific) and ending May 12, 2010 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. Cadence 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 and the Cadence logo are registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
The statements contained above regarding Cadence's first quarter 2010 results, as well as the information 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, among others: (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 disclosed restructurings without significant unexpected costs or delays, and the success of Cadence's other efforts to improve operational efficiency and growth; (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 the previously disclosed restructurings and other efforts to improve operational efficiency 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 disclosed restructurings and other efforts to improve operational efficiency on Cadence's business, including its strategic and customer relationships, ability to retain key employees and stock prices; (x) events that affect the reserves Cadence may take from time to time with respect to accounts receivable, taxes, litigation or other matters; 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 related to our business, please refer to Cadence's filings with the Securities and Exchange Commission. These include Cadence's Annual Report on Form 10-K for the year ended January 2, 2010, and Cadence'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, integration and acquisition-related costs, gains or losses and expenses or credits related to non-qualified deferred compensation plan assets, restructuring charges and credits, amortization of discount on convertible notes, equity in losses or income from investments, write-down of investments and gains or losses on the sale of investments. 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.
Cadence's management believes it is useful in measuring Cadence's
operations to exclude amortization of intangible assets and integration and
acquisition-related costs because these costs are primarily fixed at the
time of an acquisition and generally cannot be changed by Cadence's
management in the short term. In addition, Cadence's management believes it
is useful to exclude stock-based compensation expense because it enhances
investors' ability to review Cadence's business from the same perspective
as Cadence's management, which believes that stock-based compensation
expense is not directly attributable to the underlying performance of
Cadence's business operations. Cadence's management also believes that it
is useful to exclude restructuring charges and credits. During fiscal 2009,
Cadence commenced a restructuring program that it expects to complete by
the end of fiscal 2010. Cadence's management believes that in measuring the
company's operations, it is useful to exclude any such restructuring
charges and credits because exclusion of such charges permits consistent
evaluations of Cadence's performance before and after such actions are
taken. Cadence's management believes it is useful to exclude gains or
losses and expenses or credits related to the non-qualified deferred
compensation plan assets because these gains or losses and expenses or
credits are not part of Cadence's direct costs of operations, but reflect
changes in the value of assets held in the non-qualified deferred
compensation plan. Cadence's management also believes it is useful to
exclude the amortization of the discount on convertible notes because this
incremental cost recorded as interest expense does not represent a cash
obligation of the company and is not part of Cadence's direct cost of
operations. Finally, Cadence's management believes it is useful to exclude
the equity in losses or income from investments, write-down of investments
and gains or losses on the sale of investments because these items are not
part of Cadence's direct cost of operations. Rather, these are
non-operating items that are included in other income or expense and are
part of the company's investment activities.
