Cadence Design Systems reports record backlog and cRPO, shares tumble on weak guidance

Cadence Design Systems, Inc. (CDNS) has reported its financial results for the fourth quarter of fiscal year 2023, with revenue of $1.069 billion, compared to $900 million in the same period last year. The company's GAAP operating margin was 31%, compared to 23% in the fourth quarter of fiscal year 2022, while its non-GAAP operating margin was 43%, compared to 36% in the same period last year. Non-GAAP diluted net income per share was $1.38, compared to $0.96 in the same period last year.

The company's fourth quarter of fiscal year 2023 performance was driven by strong demand for its products and services, particularly in the Americas region, which accounted for 44% of total revenue. This was followed by China at 15%, Other Asia at 19%, Europe, Middle East, and Africa (EMEA) at 16%, and Japan at 6%.

Cadence Design Systems also reported record backlog of $6.0 billion and a current Remaining Payment Obligation (cRPO) of $3.2 billion. The company's business outlook for fiscal year 2024 is positive, with revenue expected to be in the range of $4.55 billion to $4.61 billion, a 20% increase compared to fiscal year 2023. The company also expects GAAP operating margin to be in the range of 32% to 33% and non-GAAP operating margin to be in the range of 42% to 43%.

For the first quarter of fiscal year 2024, the company expects revenue to be in the range of $990 million to $1.01 billion, a slight decrease compared to the fourth quarter of fiscal year 2023. The company also expects GAAP operating margin to be in the range of 24.5% to 25.5% and non-GAAP operating margin to be in the range of 36.5% to 37.5%.

The company"s guidance was generally in line with analyst expectations which is viewed as a disappointment as the stock had rallied 13% in the weeks ahead of the report. Shares slipped from $310 to $280 but are attempting to bounce back in whippy, light-volume price action. 

In conclusion, Cadence Design Systems' financial results for the fourth quarter of fiscal year 2023 were strong, driven by record backlog and cRPO. The company's business outlook for fiscal year 2024 is positive, with expectations of continued growth in revenue and operating margins. However, the company's guidance for the first quarter of fiscal year 2024 indicates a slight decrease in revenue, which may be a cause for concern for investors.

$CDNS(CDNS)