Cadence Reports Q4, Fiscal Year 2023 Financial Results

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Cadence Design Systems, Inc. announced results for the fourth quarter and fiscal year 2023.

Fourth Quarter 2023 Financial Highlights

• Revenue of $1.069 billion, compared to revenue of $900 million in Q4 2022
• GAAP operating margin of 31%, compared to 23% in Q4 2022
• Non-GAAP operating margin of 43%, compared to 36% in Q4 2022
• GAAP diluted net income per share of $1.19, compared to $0.88 in Q4 2022
• Non-GAAP diluted net income per share of $1.38, compared to $0.96 in Q4 2022

Fiscal Year 2023 Financial Highlights

• Revenue of $4.090 billion, compared to revenue of $3.562 billion in 2022
• GAAP operating margin of 31%, compared to 30% in 2022
• Non-GAAP operating margin of 42%, compared to 40% in 2022
• GAAP diluted net income per share of $3.82, compared to $3.09 in 2022
• Non-GAAP diluted net income per share of $5.15, compared to $4.27 in 2022
• Year-end backlog was $6.0 billion and current remaining performance obligations (“cRPO”), contract revenue expected to be recognized as revenue in the next 12 months, was $3.2 billion

“Cadence delivered exceptional results for 2023, propelled by our innovative solutions and the successful execution of our Intelligent System Design strategy,” said Anirudh Devgan, president and chief executive officer. “I'm thrilled about the opportunities ahead of us, particularly in AI and 3D-IC. And I look forward to continuing to drive our broad-based business momentum through our technology leadership.”

“We had a strong finish to the year, with growth across all our businesses in 2023,” said John Wall, senior vice president and chief financial officer. “I’m pleased with our record year-end backlog of $6.0 billion and cRPO of $3.2 billion, and I look forward to building on that strength in 2024.”

CFO Commentary

Commentary on the fourth quarter and fiscal year 2023 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

Business Outlook

For fiscal year 2024, the company expects:

• Revenue in the range of $4.55 billion to $4.61 billion
• GAAP operating margin in the range of 32% to 33%
• Non-GAAP operating margin in the range of 42% to 43%
• GAAP diluted net income per share in the range of $4.08 to $4.18
• Non-GAAP diluted net income per share in the range of $5.87 to $5.97

For the first quarter of 2024, the company expects:

• Revenue in the range of $990 million to $1.01 billion
• GAAP operating margin in the range of 24.5% to 25.5%
• Non-GAAP operating margin in the range of 36.5% to 37.5%
• GAAP diluted net income per share in the range of $0.74 to $0.78
• Non-GAAP diluted net income per share in the range of $1.10 to $1.14

The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use the current normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

Reconciliations of the financial highlights and business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, are included in this press release.

Business Highlights

• Further broadened Cadence.AI generative AI portfolio with introduction of Voltus™ InsightAI for intelligent power analysis and Celsius™ Studio for AI-driven full system thermal analysis. Accelerating momentum of our Cadence.AI portfolio has led to an almost tenfold increase in the number of customers adopting our GenAI solutions in 2023
• System Design and Analysis grew 22% year over year in 2023, with strong momentum from the company's multiphysics platform delivering superior results to customers across multiple segments including aerospace and defense and automotive
• The Millennium™ Enterprise Multiphysics Platform, which was announced earlier this month, is the industry’s first hardware/software platform combining AI, HPC and digital twin technology delivering 20x energy efficiency and up to 100x design impact
• Expanded long-standing collaborations with strategic partners NVIDIA, Arm and Intel
• 2023 was another record year for Palladium® and Protium™ hardware systems, with an exceptionally strong Q1 2023 hardware quarter when the company expanded production capacity to improve delivery lead times against the backlog