Cadence Design Systems, Inc - Investor Introduction April - June 2019
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Cadence Design Systems, Inc. Investor Introduction April - June 2019
Safe Harbor Statement and Regulation G Safe Harbor Statement The following discussion contains forward looking statements, and our actual results may differ materially from those expectations discussed here. Additional information concerning factors that could cause such a difference can be found in our Form 10-Q for the quarter ended March 30, 2019, our Form 10-K for the year ended December 29, 2018, the company’s future filings with the Securities and Exchange Commission and the cautionary statements regarding forward-looking statements in our April 22, 2019 earnings press release for the quarter ended March 30, 2019. Regulation G In addition to financial results prepared in accordance with Generally Accepted Accounting Principles, or GAAP, this presentation will also contain certain non-GAAP financial measures. Cadence management believes that in addition to using GAAP results in evaluating our business, it can also be useful to measure results using certain non-GAAP financial measures. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results, including those set forth in our April 22, 2019 press release and our CFO Commentary for the quarter ended March 30, 2019, both of which can be found in the quarterly earnings section of the investor relations portion of our website at cadence.com. 2 © 2019 Cadence Design Systems, Inc. All rights reserved.
Cadence-at-a-glance
• Leading provider of system design enablement
(SDE) solutions – software, hardware, and IP
• Mission critical technology for designing
today’s electronic systems
• Culture of innovation - more than 20 significant
new products in last 3 years
• Subscription software model with very high
customer renewal rates and loyalty
• Revenue: ~$2.14B
• Headquarters in Silicon Valley
~7600 employees worldwide
NASDAQ: CDNS; S&P 500 & Nasdaq 100 indexes
3 © 2019 Cadence Design Systems, Inc. All rights reserved.
Financial summary
2018
2500
Revenue
2000
($ millions)
Revenue1 1500
$2.14B
1000
500
Non-GAAP
0
operating 2012 2013 2014 2015 2016 2017 2018
margin1
30%
$2.00
Non-GAAP EPS1
$1.75
Free $1.50
$1.25
cash flow
$1.00
$543M $0.75
$0.50
$0.25
$0.00
2012 2013 2014 2015 2016 2017 2018
Notes:
1. Non-GAAP operating margin and non-GAAP EPS (excludes amortization of acquired intangibles, stock-based compensation, non-qualified deferred compensation expenses
and certain non-recurring cash expenses. See quarterly earnings releases and CFO Commentary for reconciliations to GAAP measures.
4 © 2019 Cadence Design Systems, Inc. All rights reserved.
Industry landscape
▪ Cadence and its peers develop highly
specialized software, hardware, and IP
solutions for the automated design and
verification of electronic products and SDE/EDA economics within
systems the 2017 electronics framework
▪ Our technology is critical to semiconductors, Applications
and is increasingly deployed by a variety of
systems companies Electronic Systems
$1.50T
Semi $445B
SDE/EDA
& IP
$9.8B
Source: The McClean Report, 2018, ESD Alliance Market Survey Service Q4 2017, Cadence analysis
5 © 2019 Cadence Design Systems, Inc. All rights reserved.
Data-driven economy (DDE) drives growth
opportunities
Data Data
Creation Storage
Data Data
Transmission Analytics
6 © 2019 Cadence Design Systems, Inc. All rights reserved.
Key technology waves propel DDE
Mobile Edge computing
Machine learning
Automotive Datacenter
7 © 2019 Cadence Design Systems, Inc. All rights reserved.
System Design Enablement (SDE) strategy 8 © 2019 Cadence Design Systems, Inc. All rights reserved.
SDE – expanding beyond traditional EDA
▪ The System Design Enablement strategy drives growth in our core EDA
and IP business, broadens our reach in system companies and targeted
verticals, and guides expansion into newer adjacent areas.
▪ The next phase of this strategy is Intelligent System Design.
▪ The foundation of the strategy continues to be delivering Design Excellence
via our core EDA and IP business. In addition, we are building upon our core
competency in computational software to expand into two new areas:
− System Innovation, where we are expanding into new system domains,
and
− Pervasive Intelligence, where we will apply AI and our algorithmic know-
how to our core business and specific verticals.
9 © 2019 Cadence Design Systems, Inc. All rights reserved.
Intelligent System Design
▪ The Intelligent System Design strategy will enable us to provide more
capabilities and value to our customers, while also expanding our current
total addressable market from about $10 billion to an estimated $30 billion
over the next five years.
▪ Some of our recent activities in the System Innovation space includes:
− A strategic partnership with Green Hills Software, which opens new
opportunities in the estimated more than $3 billion embedded system
safety and security space.
− In April we entered the System Analysis market, an estimated $4.5 billion
total addressable market opportunity, with our first product for this space,
the Clarity 3D Solver, a next-generation solution for electromagnetic field
simulation.
10 © 2019 Cadence Design Systems, Inc. All rights reserved.Innovation – engine of growth
2019
Cadence
Announced in Q2 Clarity
CloudBurst
Tensilica
Virtuoso® HiFi 5 DSP
GDDR6 IP
RF Solution with AI Speech
processing Tensilica
Legato™
Cadence® 112G SerDes Vision C5
Reliability TSMC VDE
Cloud IP DSP
Solution
Tensilica® Pegasus™ Legato
DDR5 DIP Liberate™ Verification Memory
2016 - 2018 in TSMC 7nm Trio
Vision
Q6 DSP System Solution
Tensilica Modus DFT OrCAD® Tensilica
DNA 100 Software Capture Cloud HiFi 3z DSP
Processor Solution
Protium™ S1
JasperGold RTL Next-Gen Conformal®
Prototyping
Signoff Apps Virtuoso ADE Smart LEC
Platform
Tensilica Tensilica Virtuoso
Vision P6 DDR5 IP Fusion G3 System Design
DSP DSP Platform
Xcelium™
Parallel
Simulator
11 © 2019 Cadence Design Systems, Inc. All rights reserved.Recurring revenue model
High visibility software revenue stream
▪ Recurring revenue mix: 85 - 90% for 2019
▪ RPO: $2.8B (Q1’19)
Revenue
700
Revenue growth
600
▪ 12% (Q’19/Q1’18) 500
($ millions)
400
300
200
100
0
2012 2013 2014 2015 2016 2017 2018 2019
12 © 2019 Cadence Design Systems, Inc. All rights reserved.Diversified business across products and
regions
Verification Americas
12% 8%
Digital China
24%
Analog Other Asia
9% 19%
PCB/Pkg EMEA
45%
IP Japan
26%
18%
29%
10%
Revenue mix for 2018
13 © 2019 Cadence Design Systems, Inc. All rights reserved.Driving profitable growth
Strong operating profitability:
▪ Focus on growth and disciplined ROI-centric resource allocation
▪ Non-GAAP operating margin 30%1 (2018)
Non-GAAP Operating Margin1
35%
30%
25%
20%
15%
10%
5%
0%
2012 2013 2014 2015 2016 2017 2018
Notes:
1. Non-GAAP operating margin and non-GAAP EPS (excludes amortization of acquired intangibles, stock-based compensation, non-qualified deferred compensation expenses
and certain non-recurring cash expenses. See quarterly earnings releases and CFO Commentary for reconciliations to GAAP measures.
14 © 2019 Cadence Design Systems, Inc. All rights reserved.Cash flow, capital structure and uses of cash
Free cash flow
Free cash flow generation 600
500
▪ $543M (2018)
($ millions)
400
300
Capital structure (Q1 ‘19) 200
▪ Cash: $539M 100
▪ LT Debt: $400M 0
2012 2013 2014 2015 2016 2017 2018
▪ Credit facility: $350M
Stock repurchase
1200
Capital allocation
1000
▪ Internal investment
($ millions)
800
▪ M&A 600
▪ Repurchase stock 400
200
0
2012 2013 2014 2015 2016 2017 2018
15 © 2019 Cadence Design Systems, Inc. All rights reserved.In summary
▪ Mission critical solutions for designing semiconductors and electronic
systems
▪ Data-driven economy and its supporting technology waves combined
with our Intelligent System Design strategy expand TAM
▪ Culture of innovation creates the products for category leadership
and growth
▪ Growth, focus and discipline drive financial performance
16 © 2019 Cadence Design Systems, Inc. All rights reserved.© 2019 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo, and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
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