Why Cadence Design Systems Inc (NASDAQ: CDNS) stock is under pressure

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Cadence Design Systems Inc (NASDAQ: CDNS) stock fell over 4.4% on April 21st, 2020 (as of 1:19 pm GMT-4 ; Source: Google finance) post earnings for the first quarter of FY 20. In mid-March, the company had taken the loan of $350 million under the revolving credit facility as a precautionary measure to provide additional liquidity in light of the recent global economic uncertainty caused by the COVID-19 pandemic. At the low end of the revenue range for Q2, the company has assumed that the government-mandated or recommended shelter-in-place orders in effect today will remain in place for the remainder of the quarter, and any hardware or IP products that the company are not able to deliver before the end of the Q2 will be delivered in the second half of the year. The shelter-in-place orders that are in effect today due to the COVID-19 pandemic create some logistical challenges related to fulfilling some hardware and IP product orders.

Therefore, at the end of the first quarter, the company’s cash balance totaled $946 million while the principal value of debt outstanding was $700 million, Operating cash flow for Q1 was $218 million, DSOs were 42 days, and during Q1, the company had repurchased $100 million of Cadence shares.

CDNS in the first quarter of FY 20 has reported the adjusted earnings per share of 60 cents, while adjusted revenue growth of 7.1 percent to $617.96 million in the first quarter of FY 20.

For the second quarter of 2020, the company expects total revenue to be in the range of $580 million to $600 million. Second quarter non-GAAP operating margin is projected to be approximately 30 percent and net income per diluted share is projected to be in the range of $0.50 to $0.54. The analysts were expecting for the company to earn 59 cents a share on sales of $621.7 million.

For 2020, the company expects total revenue to be in the range of $2.545 billion to $2.585 billion. On a non-GAAP basis, operating margin for 2020 is projected to be in the range of 32 percent to 33 percent and net income per diluted share for 2020 is projected to be in the range of $2.40 to $2.50.

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