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July 31, 2009
Share ThisCadence Design Systems, Inc. (CDNS) reported second quarter revenue of $209.9 million, below the Zacks Consensus Estimate of $216.0 million, and reported non-GAAP net loss of $0.05 per share, better than the Zacks Consensus Estimate of loss of $0.13.
Revenue for the quarter was down 31.7% to $209.9 million from $308.0 million reported in the year-ago quarter, and up 1.9% from $206.3 million reported in the previous quarter. However, this was in line with management’s guided range of $205.0 million to $215.0 million.
Product revenue for the quarter was $101.8 million down 41.8% year-over-year. Services revenue was $27.8 million down 17.5% year-over-year and Maintenance revenue was $80.2 million down 19.1% year-over-year.
Geographically, revenue mix in the second quarter was 48.0% from America, 21.0% from Europe, 17.0% from Japan, and 14.0% from Asia. The company has not yet seen a recovery in EDA spending, but the company’s field engagement efforts are extremely effective and its key technology products continue to strengthen its foothold. The sequential increase in revenue can be attributed to a sequential increase in product revenue.
Gross margin of 78.1% was down 340 basis points year-over-year. Gross margin declined, as cost of revenue declined at a lower rate than revenue on an annualized basis. On a GAAP basis, operating loss was $53.8 million versus an operating profit of $0.56 million in the year-ago period.
This translated to a negative operating margin of 25.6% versus a positive margin of 0.2% in the year-ago period. Operating margin declined significantly as the rate of revenue decline, exceeded the rate of decline in operating expenses. Although the company is trying to reduce cost and expenses, the impact was not substantial in the current quarter.
On a GAAP basis, net loss was $74.4 million or $0.29 per share versus net loss of $18.8 million or $0.07 per share in the year-ago quarter. On a non-GAAP basis (excluding amortization of acquired intangibles, stock-based compensation expense, integration and acquisition-related costs, gains/losses and expenses/credits related to non-qualified deferred compensation plan assets, restructuring charges and credits, amortization of debt discount, equity in losses from investments and write-down of investments).
Cadence reported net loss of $13.3 million or $0.05 per share, compared to a net gain of $24.2 million or $0.09 per share in the second quarter of 2008. This was better than the non-GAAP loss per share range of $0.09 to $0.07, projected by the company.
Cadence generated $3.0 million in cash for operating activities in the second quarter of 2009 versus $7.3 million cash used in the previous quarter. The company exited the quarter with $562.4 million in cash and short-term investments, up $4.4 million from the previous quarter. Long-term debt remained at $426.2 million in the quarter.
For the third quarter of 2009, the company expects total revenue in the range of $210 million to $220 million, and non-GAAP net loss / net income per share on a basis is expected to be in the range of $(0.01) to $0.01.
For the full year 2009, the company expects total revenue in the range of $830 million to $870 million, and non-GAAP Net loss per share for fiscal 2009 is expected to be in the range of $(0.20) to $(0.08). Although Cadence is offering new products and taking cost-cutting measures, but we are not confident in the company’s ability to grow and show healthy fundamentals very soon.
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