Semiconductor design software provider Cadence Design Systems (NASDAQ:CDNS) fell short of analysts' expectations in Q1 CY2024, with revenue down 1.2% year on year to $1.01 billion. Next quarter's revenue guidance of $1.04 billion also underwhelmed, coming in 6.3% below analysts' estimates. It made a non-GAAP profit of $1.17 per share, down from its profit of $1.29 per share in the same quarter last year.
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Cadence (CDNS) Q1 CY2024 Highlights:
- Revenue: $1.01 billion vs analyst estimates of $1.02 billion (0.9% miss)
- EPS (non-GAAP): $1.17 vs analyst estimates of $1.13 (3.5% beat)
- Revenue Guidance for Q2 CY2024 is $1.04 billion at the midpoint, below analyst estimates of $1.11 billion
- The company reconfirmed its revenue guidance for the full year of $4.59 billion at the midpoint
- Gross Margin (GAAP): 87.6%, in line with the same quarter last year
- Free Cash Flow of $203.6 million, down 14.6% from the previous quarter
- Backlog: $6.0 billion
- cRPO: $3.1 billion
- Market Capitalization: $76.4 billion
“Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer.
With the name chosen to reflect the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ:CDNS) offers a software-as-a-service platform for semiconductor engineering and design.
Design Software
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Sales Growth
As you can see below, Cadence's revenue growth has been mediocre over the last three years, growing from $736 million in Q1 2021 to $1.01 billion this quarter.
This quarter, Cadence's revenue was down 1.2% year on year, which might disappointment some shareholders.
Next quarter's guidance suggests that Cadence is expecting revenue to grow 6.5% year on year to $1.04 billion, slowing down from the 13.9% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 17.3% over the next 12 months before the earnings results announcement.
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Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Cadence's free cash flow came in at $203.6 million in Q1, down 15.4% year on year.
Cadence has generated $1.21 billion in free cash flow over the last 12 months, an eye-popping 29.7% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.
Key Takeaways from Cadence's Q1 Results
We struggled to find many strong positives in these results. Although its EPS beat Wall Street's estimates, its revenue and billings missed while its revenue guidance for next quarter fell short. The company raised its full-year 2024 revenue outlook, but the new forecast aligned with analysts' expectations, meaning it was already priced into the stock. Overall, the results could have been better. The company is down 7.3% on the results and currently trades at $264.5 per share.
Cadence may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.