Cadence Beats On Q2 Earnings, Announces CEO Transition, Gets Analyst Price Target Bump

Cadence Design Systems Inc CDNS reported second-quarter FY21 revenue growth of 14% year-on-year to $728.3 million, surpassing the analyst consensus of $722.7 million.
Revenue from Product and maintenance grew 14% Y/Y to $687.9 million, and Services rose 9% Y/Y to $40.4 million.
The non-GAAP operating margin expanded 400 basis points to 39%.
The non-GAAP EPS of $0.86 beat the analyst consensus of $0.76.
It held $847.2 million in cash and equivalents and generated $380 million in operating cash flow.
CDNS repurchased shares worth $220 million in Q2.
The company launched four new products reaching a total of eight products so far in 2021. It added 13 new customers.
Cadence acknowledged the success of the Cerebrus Intelligent Chip Explorer launch. Secular demand for its hardware continued unabated, leading to the best Q2 for its Palladium and Protium platforms.
Strong momentum continued for the System Design & Analysis segment, with 20% Y/Y revenue growth. It expanded its system footprint with multiple verticals, including aerospace and defense, 5G wireless, and communications.
AWR and Integrand had a record quarter, and the integration of the recent NUMECA and Pointwise acquisitions was progressing well.
Cadence is well-positioned to capitalize on the 5G, hyperscaler, and autonomous vehicles trends underpinned by AI, machine learning, and data analytics.
The company appointed President Anirudh Devgan as the CEO, effective December. Devgan will also join the board effective Aug. 2.
CEO Lip-Bu Tan will transition to the role of Executive Chairman. Chairman John Shoven was appointed lead independent director.
Outlook: Cadence sees Q3 revenue of $730 million - $750 million, above the consensus of $722.6 million. It sees non-GAAP EPS of $0.74 - $0.76 versus the analyst consensus of $0.74. The non-GAAP operating margin guidance is 34%.
Analyst Rating: Keybanc analyst Jason Celino reiterated Overweight and raised the price target from $162 to $166, implying a 14% upside.
Price action: CDNS shares closed lower by 0.48% at $144.97 on Monday.

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