Cadence Design Systems, Inc. Net Income dropped on 40.3% while EBITDA Margin increased on 3.2 pp from 27.8% to 31.0%
02/22/2021 • About Cadence Design Systems, Inc. (
$CDNS) • By InTwits
Cadence Design Systems, Inc. reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 31.0% in FY2020 vs. 27.8% in FY2019 vs. 20.1% in FY2016
- Cadence Design Systems, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.1%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $44m in 2020, $54m in 2019, $153m in 2018, $78m in 2017, $53m in 2016
- The company has highly profitable business model: ROIC is 23.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Cadence Design Systems, Inc.'s Revenue jumped on 14.8%. Revenue growth showed acceleration in FY20Q4 - it increased 26.7% YoY. Revenue growth was accelerating on average by 1.9 pp per annum in FY2016-FY2020. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.2 pp from 27.8% to 31.0% in FY2020. EBITDA Margin stuck to a growing trend at 2.7 pp per annum in FY2016-FY2020.
Gross Margin showed almost no change in FY2020. Gross Margin followed a growing trend at 0.63 pp per annum in FY2016-FY2020. SG&A as a % of Revenue decreased slightly on 1.6 pp from 26.6% to 25.0% in FY2020. SG&A as a % of Revenue followed a declining trend at -0.92 pp per annum in FY2016-FY2020.
Net Income margin dropped on 20.3 pp from 42.3% to 22.0% in FY2020.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 3.5% in FY2020. The company showed small growth in CAPEX/Revenue of 0.55 pp from 3.0% in FY2017 to 3.5% in FY2020. It's average CAPEX/Revenue for the last three years was 3.2%.
Return on investment
The company operates at high and attractive ROIC (23.5%) and ROE (25.7%). ROIC showed almost no change in FY2020. ROE dropped on 32.6 pp from 58.3% to 25.7% in FY2020. ROIC stuck to a growing trend at 1.8 pp per annum in the last 5 years. During the last 5 years ROE topped in FY2019 at 58.3%.
Leverage (Debt)
Debt level is -0.5x Net Debt / EBITDA and 0.6x Debt / EBITDA. Debt increased on 8.4% while cash jumped on 31.7%.
Cadence Design Systems, Inc. has no short term refinancing risk: cash is higher than short term debt (2,737.1%).
Valuation and dividends
The company's trades at EV/EBITDA 48.8x and P/E 69.4x.
Management team
Lip-Bu Tan is a the company's CEO. Lip-Bu Tan has spent 12 years with the company. John M Wall is a Cadence Design Systems, Inc.'s CFO. John M Wall has spent 3 years at the company.
Financial and operational results
FY ended 01/02/2021
Cadence Design Systems, Inc. ($CDNS) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 1,816 | 1,943 | 2,138 | 2,336 | 2,683 | 14.8% |
| Gross Profit | 1,560 | 1,706 | 1,879 | 2,070 | 2,377 | 14.9% |
| SG&A | 520 | 553 | 573 | 621 | 671 | 7.9% |
| EBITDA | 364 | 439 | 515 | 649 | 831 | 28.0% |
| EBIT | 245 | 324 | 396 | | | |
| Interest expence | 24 | 26 | 23 | | | |
| Tax | 34 | 111 | 31 | | | |
| Net Income | 203 | 204 | 346 | 989 | 591 | -40.3% |
| Stock Based Compensation | 109 | 130 | 168 | | | |
Balance Sheet
|
|---|
| Cash | 465 | 688 | 533 | 705 | 928 | 31.7% |
| Accounts Receivable | 157 | 190 | 297 | | | |
| Inventory | 39 | 33 | 28 | | | |
| Short Term Debt | 50 | 85 | 100 | 26 | 34 | 32.7% |
| Long Term Debt | 643 | 644 | 345 | 431 | 461 | 6.9% |
Cash flow
|
|---|
| Capex | 54 | 58 | 62 | 75 | 95 | 27.1% |
| Acquisitions | 42 | 143 | | | | |
Ratios
|
|---|
| Revenue growth | 6.7% | 7.0% | 10.0% | 9.3% | 14.8% | |
| EBITDA growth | -9.7% | 20.6% | 17.2% | 26.1% | 28.0% | |
|
|---|
| Gross Margin | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% | 0.0% |
| EBITDA Margin | 20.1% | 22.6% | 24.1% | 27.8% | 31.0% | 3.2% |
| EBIT Margin | 13.5% | 16.7% | 18.5% | | |
| SG&A, % of revenue | 28.6% | 28.5% | 26.8% | 26.6% | 25.0% | -1.6% |
| SBC, % of revenue | 6.0% | 6.7% | 7.8% | | |
| Net Income Margin | 11.2% | 10.5% | 16.2% | 42.3% | 22.0% | -20.3% |
| CAPEX, % of revenue | 3.0% | 3.0% | 2.9% | 3.2% | 3.5% | 0.3% |
|
|---|
| ROIC | 15.5% | 20.5% | 22.9% | 23.1% | 23.5% | 0.3% |
| ROE | 19.2% | 23.6% | 30.4% | 58.3% | 25.7% | -32.6% |
| Net Debt/EBITDA | 0.6x | 0.1x | -0.2x | -0.4x | -0.5x | -0.1x |
| Interest expence / Average debt | 3.4% | 3.6% | 3.9% | | | |
People
|
|---|
| Insider ownership | 1.6% | 1.6% | 1.6% | | | |
| Employees | 7,094 | 7,200 | 7,500 | | | |
| Revenue/Employee, th. $ | 256 | 270 | 285 | | | |
Cadence Design Systems, Inc. ($CDNS) key quoterly financial indicators
| mln. $ | FY20Q1 | FY20Q2 | FY20Q3 | FY20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 618 | 638 | 667 | 760 | | 7.1% | 10.0% | 15.0% | 26.7% |
| EBITDA | 173 | 189 | 206 | 224 | | 4.1% | 7.9% | 29.4% | 49.8% |
| Net Income | 124 | 131 | 162 | 174 | | 2.8% | 22.4% | 59.2% | -73.7% |
Balance Sheet
|
|---|
| Cash | 946 | 1,189 | 1,307 | 928 | | 75.6% | 87.7% | 99.4% | 31.7% |
| Short Term Debt | 350 | 350 | 350 | 34 | | 374.4% | 1,175.1% | 1,162.8% | 32.7% |
| Long Term Debt | 346 | 346 | 347 | 461 | | -18.9% | -21.1% | -20.6% | 6.9% |
Ratios
|
|---|
| Gross Margin | 88.0% | 88.2% | 87.7% | 90.3% | | 0.2% | -1.2% | -1.8% | 2.6% |
| EBITDA Margin | 27.9% | 29.5% | 31.0% | 29.4% | | -0.8% | -0.6% | 3.5% | 4.5% |
| Net Income Margin | 20.1% | 20.6% | 24.2% | 22.9% | | -0.8% | 2.1% | 6.7% | -87.2% |
Peers in Application Software
Below you can find Cadence Design Systems, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 15.7% | 15.2% | 19.5% | 14.5% |
|---|
| Cadence Design Systems, Inc. ($CDNS) | - | 7.0% | 10.0% | 9.3% | 14.8% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Mitek Systems, Inc. ($MITK) | 90.2% | 91.1% | 86.3% | 85.5% | 87.0% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 67.9% | 69.4% |
|---|
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 2.7% | 6.8% |
|---|
| Cadence Design Systems, Inc. ($CDNS) | 20.1% | 22.6% | 24.1% | 27.8% | 31.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Cadence Design Systems, Inc. ($CDNS) | 3.0% | 3.0% | 2.9% | 3.2% | 3.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.5% | -2.2% |
|---|
| Cadence Design Systems, Inc. ($CDNS) | 15.5% | 20.5% | 22.9% | 23.1% | 23.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (53 companies) | -0.9x | -0.9x | -0.7x | 0.4x | 0.3x |
|---|
| Cadence Design Systems, Inc. ($CDNS) | 0.6x | 0.1x | -0.2x | -0.4x | -0.5x |
