Cadence Design Systems (NASDAQ: NASDAQ:CDNS) has reported robust Q3 2023 results, with non-GAAP earnings of $1.26 per share, surpassing the Zacks Consensus Estimate by 4.1% and marking an 18.9% YoY increase. The company's revenues reached $1.023 billion, beating estimates by 1.7% and reflecting a 13.3% YoY rise, driven by demand across all segments. According to InvestingPro data, this performance contributes to revenue growth of 15.76% LTM2023.Q2.
The company's Digital IC business secured 11 new wins in Q3, while its Cerebrus AI-driven solution was deployed by customers including Broadcom (NASDAQ:AVGO). This contributed to a significant backlog of $5.4 billion at the end of the quarter. Cadence operates with a high return on assets, as indicated by InvestingPro Tips, and the recent data confirms this with a return on assets of 18.7% LTM2023.Q2.
Imagination Technologies utilized Cadence's solutions for its latest design, contributing to an 18% YoY growth in the verification business and a 15% rise in the Custom IC business. The System Design & Analysis Business segment also reported a 20% YoY increase. Cadence is known for its high earnings quality, with free cash flow often exceeding net income, a fact highlighted by InvestingPro Tips. This pattern continued in Q3, with Cadence generating a free cash flow of $374 million.
In addition to these strong performances, Cadence repurchased shares worth $185 million during the quarter. Nisshinbo Micro Devices leveraged various Cadence tools to enhance design efficiency. The company's stock generally trades with low price volatility, as per InvestingPro Tips, and this is reflected in the 1 Week Price Total Return of -4.04% and 1 Month Price Total Return of 4.01% Y2023.D297.
Following these positive results, Cadence has raised its full-year guidance for 2023. It now projects revenues of $4.06-$4.1 billion and non-GAAP earnings between $5.07-$5.13 per share. The non-GAAP operating margin is forecasted to be between 41.5-42%, with an operating cash flow of $1.3 to $1.4 billion.
As of September 30, 2023, Cadence had cash and cash equivalents of $962 million and long-term debt of $648.8 million. The company currently carries a Zacks Rank #2 (Buy). As noted by InvestingPro, Cadence operates with a moderate level of debt and its cash flows can sufficiently cover interest payments. For more insights and tips, readers can visit InvestingPro, which offers a comprehensive analysis of companies like Cadence.
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