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Cadence Design Systems, Inc. reported its results under new revenue rules, ASC Topic 606. For the third quarter of 2018, Cadence reported revenue of $532 million, GAAP net income of $99 million, or $0.35 per share on a diluted basis, and non-GAAP net income (as defined below) of $139 million, or $0.49 per share on a diluted basis.
Cadence also reported its results under the old revenue rules, ASC Topic 605, for easier comparison with prior results, all of which were reported under ASC Topic 605.
Under ASC Topic 605, for the third quarter of 2018, Cadence reported revenue of $526 million, compared to revenue of $485 million reported for the same period in 2017. On a GAAP basis, Cadence recognized net income of $95 million, or $0.34 per share on a diluted basis, in the third quarter of 2018, compared to net income of $81 million, or $0.29 per share on a diluted basis for the same period in 2017. Using the non-GAAP measure defined below, net income for the third quarter of 2018 was $137 million, or $0.49 per share on a diluted basis, as compared to non-GAAP net income of $98 million, or $0.35 per share on a diluted basis, for the same period in 2017.
“Broad-based strength across our product lines enabled Cadence to achieve outstanding operating results for the third quarter,” said Lip-Bu Tan, chief executive officer. “We also continued to innovate and launch new products, including the industry’s first silicon-proven, 7-nanometer long-reach 112G SerDes IP and the Tensilica DNA 100 Processor IP targeted at deep neural-network applications.”
“I am pleased to report that we exceeded all of our key operating metrics for the quarter,” said John Wall, senior vice president and chief financial officer. “We expect strong demand and cash flow to continue into the fourth quarter, and as a result we are raising our outlook for fiscal 2018 and increasing stock repurchases to $75 million for the fourth quarter.”
The outlook provided below is on an ASC Topic 606 basis, which Cadence has adopted for its fiscal year 2018 using the modified retrospective transition method. As required by the new standard, the company will report revenue under both methods for the 2018 transition year.
For the fourth quarter of 2018, the company expects total revenue in the range of $545 million to $555 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.27 to $0.29. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.46 to $0.48.
For 2018, the company expects total revenue in the range of $2.113 billion to $2.123 billion. On a GAAP basis, net income per diluted share for 2018 is expected to be in the range of $1.15 to $1.17. Using the non-GAAP measure defined below, net income per diluted share for 2018 is expected to be in the range of $1.80 to $1.82.
For 2018, the company is forecasting a non-GAAP income tax rate of 16 percent, down from 23 percent used in 2017, primarily resulting from the tax rate reduction.
For comparison purposes, the company expects the outlook at the midpoint for 2018 on the prior ASC Topic 605 basis to be as follows: revenue of $2.130 billion, GAAP net income per diluted share of $1.18 and non-GAAP net income per diluted share of $1.85.
Cadence enables electronic systems and semiconductor companies to create the innovative end products that are transforming the way people live, work and play. Cadence® software, hardware and semiconductor IP are used by customers to deliver products to market faster. The company’s System Design Enablement strategy helps customers develop differentiated products—from chips to boards to systems—in mobile, consumer, cloud datacenter, automotive, aerospace, IoT, industrial and other market segments. Cadence is listed as one of Fortune Magazine's 100 Best Companies to Work For. Learn more at cadence.com.