Benzinga | Jul 27, 2021 05:43AM EDT

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

* Cadence Design Systems Inc (NASDAQ: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.