Cadence(CDNS) - 2024 Q1 - Quarterly Report

Revenue Performance - Revenue for the three months ended March 31, 2024, was $1,009.1 million, a decrease of 1% compared to$ 1,021.7 million for the same period in 2023[92]. - Total revenue for the three months ended March 31, 2024, was $1,009.1 million, a decrease of$ 12.6 million or 1% compared to $1,021.7 million for the same period in 2023[96]. - Revenue from the United States was$ 435.5 million, a slight increase of $1.2 million or 0.3% year-over-year[96]. - Revenue from China decreased by$ 60.4 million or 34% to $117.2 million, contributing to a decline in overall revenue[96]. - Recurring revenue increased to 90% of total revenue for the three months ended March 31, 2024, up from 80% in the same period of 2023[90]. - Revenue from services grew by 65% to$ 95.7 million for the three months ended March 31, 2024, compared to $58.0 million in the same period of 2023[93]. - The percentage of revenue recognized over time increased to 87% for the three months ended March 31, 2024, compared to 77% in the same period of 2023[89]. - Revenue from Custom IC Design and Simulation remained stable at 22% for the three months ended March 31, 2024, consistent with previous quarters[95]. - The Digital IC Design and Signoff category accounted for 29% of total revenue for the three months ended March 31, 2024, consistent with the previous quarter[95]. Operating Expenses and Margins - Operating expenses increased to$ 628.3 million, up $57.8 million or 10% from$ 570.5 million in the prior year[107]. - Total operating expenses increased by 10% to $628.3 million for the three months ended March 31, 2024, from$ 570.5 million in the same period of 2023[107]. - Operating margin decreased to 25% for the three months ended March 31, 2024, down from 32% in the same period last year[116]. - Research and development expenses rose by $28.7 million or 8% to$ 379.0 million, reflecting continued investment in talent and infrastructure[107]. - Marketing and sales expenses increased by 8% to $180.6 million for the three months ended March 31, 2024, from$ 166.7 million in the same period of 2023[107]. - General and administrative expenses rose by 28% to $68.7 million for the three months ended March 31, 2024, compared to$ 53.5 million for the same period in 2023[107]. - Cost of product and maintenance decreased by $24.8 million or 25% to$ 75.4 million, primarily due to reduced costs associated with emulation and prototyping hardware[100]. - Product and maintenance-related costs decreased by 29% to $64.1 million for the three months ended March 31, 2024, compared to$ 89.9 million for the same period in 2023[102]. Cash Flow and Financial Position - Cash provided by operating activities decreased to $253.2 million for the three months ended March 31, 2024, down from$ 267.4 million in the same period of 2023, a decline of $14.2 million[125]. - Cash used for investing activities increased significantly to$ (79.8) million in the three months ended March 31, 2024, compared to $(35.7) million in the same period of 2023, primarily due to higher payments for business combinations and property purchases[127]. - Cash used for financing activities decreased to$ (159.4) million for the three months ended March 31, 2024, from $(197.4) million in the same period of 2023, reflecting reduced payments on the revolving credit facility[128]. - As of March 31, 2024, cash and cash equivalents totaled$ 1,012.4 million, a slight increase from $1,008.2 million as of December 31, 2023, with net working capital rising to$ 464.2 million from $385.4 million[122][123]. - The company had no outstanding borrowings under its$ 700 million revolving credit facility as of March 31, 2024, and was in compliance with all financial covenants[131]. - The company issued $350 million of 4.375% Senior Notes due October 15, 2024, and was in compliance with all covenants associated with these notes as of March 31, 2024[132]. - Approximately 73% of the company's cash and cash equivalents were held by foreign subsidiaries as of March 31, 2024, which may vary due to the timing of collections and repatriation of foreign earnings[123]. Acquisitions and Investments - The acquisition of Invecas, Inc. is expected to enhance the company's capabilities in delivering end-to-end system solutions[82]. - The company completed the acquisition of Invecas, enhancing its capabilities in design engineering and embedded software solutions[82]. - The company entered into a definitive agreement to acquire BETA CAE Systems International AG for$ 1.24 billion, with 60% to be paid in cash and 40% in common stock, expected to close in the second quarter of fiscal 2024[129]. - The company expects to continue attracting and retaining talent through hiring and acquisitions to support growth in both technical sales and research and development[109][111]. - The company reported gains from investments in equity securities, contributing positively to its financial performance[87]. Tax and Compliance - The provision for income taxes for the three months ended March 31, 2024, was $62.4 million, compared to$ 79.7 million for the same period in 2023, reflecting a decrease in the effective tax rate from 24.8% to 20.1%[119]. - The company expects the fiscal 2024 effective tax rate to be approximately 25.0%, with quarterly rates varying due to stock-based awards and other factors[121]. - Interest expense decreased to $8.7 million, down from$ 9.3 million in the prior year, mainly due to reduced borrowings under the 2021 Credit Facility[118]. - The company has a five-year senior unsecured revolving credit facility with a maximum borrowing capacity of $1.05 billion, with no outstanding borrowings as of March 31, 2024[131]. - The company has a$ 300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025, and was also in compliance with all financial covenants associated with this loan as of March 31, 2024[133]. Geopolitical and Market Impact - The company anticipates limited impact from expanded trade control laws and geopolitical conflicts on its business operations[84]. - The company continues to monitor the impact of geopolitical conflicts and trade control laws on its operations, with limited expected impact on financial results[84].