Cadence(CDNS) - 2023 Q3 - Quarterly Report

Revenue Performance - Revenue for the three months ended September 30, 2023, was $1,023.1 million, a 13% increase from$ 902.6 million for the same period in 2022[95]. - Recurring revenue represented 85% of total revenue for the three months ended September 30, 2023, compared to 84% for the same period in 2022[93]. - Product and maintenance revenue for the nine months ended September 30, 2023, was $2,852.4 million, reflecting a 14% increase from$ 2,494.3 million in 2022[95]. - The company experienced a 14% growth in total revenue for the nine months ended September 30, 2023, amounting to $3,021.4 million compared to$ 2,661.8 million in 2022[95]. - Revenue from the United States increased by $29.4 million (7%) to$ 421.6 million, while revenue from China grew by $23.7 million (16%) to$ 172.0 million during the same period[98]. - Revenue recognized over time was 83% for the three months ended September 30, 2023, compared to 81% for the same period in 2022, indicating a growth in recurring revenue[92]. - Recurring revenue accounted for 85% of total revenue for the nine months ended September 30, 2023, compared to 84% for the same period in 2022[93]. - Revenue from emulation and prototyping hardware offerings contributed significantly to growth in China during the nine months ended September 30, 2023[99]. Cost and Expenses - Cost of product and maintenance for the three months ended September 30, 2023, was $85.8 million, up 38% from$ 62.4 million in the same period last year[102]. - Operating expenses for the three months ended September 30, 2023, totaled $604.4 million, reflecting a 10% increase from$ 550.2 million in the prior year[112]. - Research and development expenses increased by $46.0 million (14%) to$ 369.6 million for the three months ended September 30, 2023[112]. - Marketing and sales expenses rose by $23.3 million (15%) to$ 176.2 million during the same period[112]. - The cost of product and maintenance increased primarily due to higher sales of emulation and prototyping hardware, which saw a cost increase of $20.1 million for the three months ended September 30, 2023[106]. - General and administrative expenses decreased by$ 15.1 million and $7.4 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022[117]. - Cost of services for the three months ended September 30, 2023, was$ 23.8 million, a 6% decrease from $25.2 million in the prior year[102]. Profitability and Margins - Operating margin decreased to 29% and 30% for the three and nine months ended September 30, 2023, down from 29% and 32% in the same periods in 2022[121]. - Total interest expense increased to$ 9.1 million and $27.2 million for the three and nine months ended September 30, 2023, respectively, compared to$ 5.5 million and $13.9 million in the same periods in 2022[122]. - Provision for income taxes was$ 45.6 million and $202.6 million for the three and nine months ended September 30, 2023, with effective tax rates of 15.2% and 22.0%, respectively[123]. Cash Flow and Liquidity - Cash and cash equivalents increased to$ 962.0 million as of September 30, 2023, from $882.3 million as of December 31, 2022[126]. - Net working capital rose to$ 560.3 million as of September 30, 2023, compared to $359.1 million as of December 31, 2022[127]. - Cash provided by operating activities was$ 1,077.1 million for the nine months ended September 30, 2023, an increase of $98.8 million compared to$ 978.3 million in the same period in 2022[128]. - Cash used for investing activities decreased to $(313.6) million for the nine months ended September 30, 2023, from$ (674.5) million in the same period in 2022, primarily due to decreases in cash used for business combinations[130]. - Cash used for financing activities increased to $(666.0) million for the nine months ended September 30, 2023, compared to$ (299.9) million for the same period in 2022, a change of $(366.1) million[131]. - Approximately 66% of the company's cash and cash equivalents were held by foreign subsidiaries as of September 30, 2023[126]. - The increase in net working capital as of September 30, 2023, compared to December 31, 2022, was primarily due to the timing of cash receipts from customers and disbursements for operating and financing activities[127]. Strategic Initiatives - The company continues to invest in research and development activities and technical sales support, which is reflected in the growth of revenue from software and emulation and prototyping hardware offerings[90]. - The company has terminated operations in Russia due to geopolitical conflicts, which has not materially impacted its financial results[87]. - The company anticipates limited impact from expanded trade control laws and regulations on its business operations[87]. - The company has not experienced material impacts on its financial condition or liquidity from geopolitical conflicts, including the termination of operations in Russia[87]. - The company expects to continue investing in attracting and retaining talent for both marketing and research and development through hiring and acquisitions[114][115]. - The Board of Directors authorized an additional$ 1.0 billion for the stock repurchase program, with approximately $1.5 billion remaining available as of September 30, 2023[132]. - The company entered into a$ 300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025, with compliance to all financial covenants as of September 30, 2023[135]. - The company issued $350.0 million in Senior Notes due October 15, 2024, with net proceeds of$ 342.4 million, and was in compliance with all covenants associated with these notes as of September 30, 2023[134].