Cadence Design Systems Inc. (NASDAQ:CDNS)

The financial data reveals a consistent upward trend in the value of goodwill over the observed periods. Starting at approximately $782 million in 2020, goodwill increased steadily each year, reaching nearly $2.38 billion by the end of 2024. This growth suggests ongoing acquisitions or revaluations that have augmented the company’s intangible assets.

Existing technology assets showed a gradual increase from about $371 million in 2020 to nearly $480 million in 2022, followed by a noticeable decline to approximately $326 million in 2023, before recovering to roughly $465 million in 2024. This fluctuation may indicate periods of impairment, disposals, or changes in capitalization policies related to technology assets.

Agreements and relationships values also exhibited a rising trend with intermittent decreases. Beginning at $180 million in 2020, the value increased to around $275 million by 2022, then declined to nearly $198 million in 2023, before surging to over $386 million in 2024. This pattern could reflect acquisitions, renegotiations, or shifts in valuation methodologies impacting these intangible categories.

Tradenames, trademarks, and patents demonstrated a modest but consistent upward movement from approximately $10.6 million in 2020 to $28.1 million in 2024, indicating incremental additions or revaluations of intellectual property assets.

The gross carrying amount of acquired intangibles with definite lives increased from about $561 million in 2020 to $767 million in 2022, followed by a decline to $537 million in 2023 and a subsequent rebound to around $880 million in 2024. Such variability points to acquisition activity, disposals, or reclassifications within these intangible assets.

Accumulated amortization showed a relatively steady increase in absolute terms from approximately $351 million in 2020 to $420 million in 2022, which is consistent with the aging and amortization of intangible assets. However, there was a significant decrease in accumulated amortization in 2023 to around $207 million, which partially reversed to about $285 million in 2024. This decline followed by a rise could indicate impairments, accelerated amortization, or changes in amortization policies.

The net value of acquired intangibles with definite lives rose considerably from approximately $211 million in 2020 to $348 million in 2022, followed by a slight decrease to $330 million in 2023 and a substantial increase to about $595 million in 2024. This pattern aligns with the changes in gross carrying amount and accumulated amortization, signaling active management and adjustment of intangible assets.

In-process technology appears as a new addition with $6.8 million recorded in both 2022 and 2023, absent from earlier and later periods, suggesting specific projects under development during those years that may have been completed, disposed of, or reclassified subsequently.

The total goodwill and acquired intangibles exhibited a strong upward trajectory throughout the period, increasing from roughly $993 million in 2020 to nearly $3 billion by the end of 2024. This substantial growth underscores a strategic emphasis on the accumulation and retention of intangible assets.

The financial data for the company indicates several notable trends in both reported and goodwill-adjusted figures over the five-year period examined.

Total Assets

Reported total assets have shown a consistent upward trajectory from approximately $3.95 billion in 2020 to about $8.97 billion by the end of 2024. This represents significant growth, with the most substantial increase occurring between 2023 and 2024. Adjusted total assets, which exclude goodwill, also increased steadily from around $3.17 billion in 2020 to approximately $6.60 billion in 2024. Although the adjusted assets follow a similar upward trend, their year-over-year growth rate is more moderate compared to the reported figures, indicating that the inclusion of goodwill inflates total asset values across the years, especially in 2024.

Stockholders’ Equity

Reported stockholders' equity grew from about $2.49 billion in 2020 to $4.67 billion in 2024. The increase was gradual from 2020 through 2022, followed by a more pronounced rise in 2023 and 2024. The adjusted stockholders' equity, reflecting the removal of goodwill, presents a less consistent pattern: from 2020 to 2021, equity increased slightly, then declined substantially in 2022 before recovering and rising steadily again in 2023 and 2024. This fluctuation suggests volatility in the components excluded in the adjusted measure, likely related to impairment or reassessment of goodwill during the period, especially noted in 2022's decline.

Comparative Insights

The gap between reported and adjusted figures for both total assets and equity widens noticeably over time, particularly by 2024. This phenomenon points to an increasing proportion of assets and equity represented by goodwill or other intangible items not reflected in the adjusted values. The sharper rise in reported assets and equity compared to their adjusted counterparts signals a growing relevance of these intangible assets in the company's balance sheet composition.

Overall Assessment

The analysis reveals steady expansion in the company's scale as evidenced by total assets and stockholders’ equity, both in reported and adjusted terms. However, the divergence between reported and adjusted figures underscores the impact of goodwill on the financial position, highlighting the necessity for careful consideration of intangible assets when evaluating the company's true net asset value and equity strength. Periods of volatility in adjusted equity, particularly the decrease observed in 2022, suggest episodes of goodwill impairment or revaluation that merit further investigation.

Total Asset Turnover

The reported total asset turnover remained stable around 0.68 to 0.69 from 2020 to 2022, increased slightly to 0.72 in 2023, then declined notably to 0.52 in 2024. In contrast, adjusted total asset turnover, which excludes goodwill, exhibited a steady upward trend from 0.85 in 2020 to 0.99 in 2023, followed by a decrease to 0.7 in 2024. This suggests an improvement in the efficiency of asset utilization excluding goodwill until 2023, with a subsequent reduction in 2024.

Financial Leverage

Reported financial leverage showed a gradual increase from 1.58 in 2020 to 1.87 in 2022, then dipped to 1.67 in 2023 before rising again to 1.92 in 2024. Adjusted financial leverage, accounting for goodwill adjustments, followed a similar but more pronounced pattern. It increased substantially from 1.85 in 2020 to a peak of 2.74 in 2022, decreased to 2.21 in 2023, and then rose sharply to 2.87 in 2024. The higher adjusted leverage ratios imply a greater reliance on debt or equity financing relative to adjusted assets, especially noticeable in 2022 and 2024.

Return on Equity (ROE)

The reported ROE increased progressively from 23.69% in 2020 to a peak of 30.93% in 2022, remained nearly stable at 30.58% in 2023, and then declined significantly to 22.58% in 2024. The adjusted ROE, eliminating goodwill effects, demonstrated a stronger growth trend, surging from 34.52% in 2020 to exceptionally high levels of 61.93% in 2022 and 55.72% in 2023, before dropping to 45.99% in 2024. This indicates that underlying earnings power, excluding goodwill, improved markedly until 2022 and 2023, with a decline in 2024 but still maintaining a higher level than the reported figures.

Return on Assets (ROA)

The reported ROA showed a moderate increase from 14.95% in 2020 to 18.36% in 2023, followed by a notable decrease to 11.76% in 2024. Similarly, the adjusted ROA reflected a consistent upward trajectory from 18.64% in 2020 to 25.19% in 2023, then falling to 16% in 2024. These adjusted figures reveal enhanced asset profitability without the distortion of goodwill until 2023, with a decline in the latest period.

Total Assets

The reported total assets increased consistently over the observed period, rising from approximately 3.95 billion US dollars at the end of 2020 to about 8.97 billion by the end of 2024. This represents more than a twofold increase. The adjusted total assets, which likely exclude goodwill or intangible assets, also showed a steady upward trend, growing from roughly 3.17 billion US dollars in 2020 to approximately 6.60 billion in 2024. Both reported and adjusted figures depict asset growth, though the adjusted values are consistently lower, indicating a significant portion of assets attributable to goodwill or similar adjustments.

Total Asset Turnover (Reported)

The reported total asset turnover ratio remained relatively stable from 2020 through 2023, fluctuating slightly between 0.68 and 0.72. However, in 2024, a considerable decline to 0.52 was observed. This suggests that despite the increase in total assets, revenue generation relative to asset size slowed noticeably in 2024 when considering reported assets.

Total Asset Turnover (Adjusted)

When adjusted for goodwill or similar factors, the total asset turnover ratio displayed a generally positive trajectory from 0.85 in 2020 to a peak of 0.99 in 2023. This indicates improved efficiency in using adjusted assets to generate revenue during this timeframe. Nevertheless, similar to the reported turnover, a decline to 0.70 occurred in 2024, though the value remained higher than the reported turnover ratio for the same period. The higher values for adjusted turnover suggest asset efficiency is better understood when excluding goodwill, but both metrics reflect a reduced asset utilization in the final year.

Overall Insights

The company demonstrated significant growth in asset base, both reported and adjusted, across the five-year span. The increasing asset values point to expansion and investment activities. Meanwhile, total asset turnover ratios indicate operational efficiency was maintained or improved up until 2023 but declined in 2024. The sharper drop in reported asset turnover compared to adjusted turnover implies that the inclusion of goodwill and other intangible assets affects operational efficiency assessments. The data suggests a need for management to examine the causes of decreasing asset turnover in 2024, potentially reassessing asset deployment or focusing on improving revenue relative to asset base.

Total Assets

Reported total assets have shown a consistent upward trend from 3,950,785 thousand US dollars in 2020 to 8,974,482 thousand US dollars in 2024, more than doubling over the five-year period. Adjusted total assets, which exclude goodwill, also demonstrate a steady increase from 3,168,698 thousand US dollars in 2020 to 6,595,811 thousand US dollars in 2024, nearly doubling as well. The gap between reported and adjusted total assets widens over time, indicating that goodwill has grown significantly in absolute terms.

Stockholders' Equity

Reported stockholders’ equity exhibits a rising trend, increasing from 2,493,018 thousand US dollars in 2020 to 4,673,578 thousand US dollars in 2024. The increase is somewhat smoother, but with a notable acceleration after 2022. In contrast, adjusted stockholders’ equity shows a less consistent pattern; while it rises from 1,710,931 thousand US dollars in 2020 to 1,812,317 thousand US dollars in 2021, it drops sharply to 1,370,845 thousand US dollars in 2022 before resuming growth through 2024, reaching 2,294,907 thousand US dollars. This volatility suggests impairment or revaluation adjustments affecting equity when goodwill is excluded.

Financial Leverage

Reported financial leverage ratios fluctuate moderately, starting at 1.58 in 2020, rising gradually to 1.87 in 2022, then declining to 1.67 in 2023, followed by an increase to 1.92 in 2024. Adjusted financial leverage ratios, which exclude goodwill, display a more pronounced increase over the same period: from 1.85 in 2020 to a peak of 2.74 in 2022, decreasing to 2.21 in 2023, and rising again to 2.87 in 2024. The higher and more volatile adjusted leverage ratios indicate that exclusion of goodwill leads to recognition of greater financial leverage and more variability in the company’s capital structure assessment.

Overall Insights

The data reflect robust asset growth with a significant increase in intangible assets represented by goodwill. The disparity between reported and adjusted figures highlights the material influence of goodwill on the financial position. The fluctuations in adjusted equity and leverage ratios suggest caution in interpreting financial health solely based on reported figures, as goodwill adjustments reveal higher leverage and potential equity impairment. The company’s financial structure appears to be progressively leveraging more, especially when goodwill is excluded, indicating a possible increase in financial risk over the observed period.

The data reveals distinct trends in both reported and goodwill-adjusted financial metrics over the five-year period ending December 31, 2024. These trends provide insights into the company's equity growth and profitability from both a reported and an adjusted perspective.

Stockholders’ Equity Trends

Reported stockholders’ equity shows a steady and significant increase from approximately 2.49 billion US dollars in 2020 to about 4.67 billion US dollars in 2024. This represents a near doubling within five years, indicating robust equity growth on a reported basis.

In contrast, adjusted stockholders’ equity, which presumably excludes goodwill or other adjustments, exhibits a less consistent pattern. Starting at around 1.71 billion US dollars in 2020, it increases slightly in 2021 but then declines markedly in 2022 to approximately 1.37 billion. Subsequently, it recovers over the next two years, reaching approximately 2.29 billion by 2024. This suggests that after adjustments, the net equity base fluctuates more and grows at a slower pace than the reported figure, reflecting potential goodwill impairments or other adjustments impacting the adjusted equity metric.

Return on Equity (ROE) Patterns

Reported ROE demonstrates a generally positive trend from 23.69% in 2020, peaking above 30% in 2022 and 2023, before declining to approximately 22.58% in 2024. This implies that while profitability relative to reported equity strengthened through 2023, it experienced a noticeable decrease in the final reported year.

Adjusted ROE presents a different and more volatile pattern. Beginning significantly higher than reported ROE at 34.52% in 2020, it climbs sharply to a peak of over 61.93% in 2022. Thereafter, it declines but remains elevated relative to reported ROE, settling at nearly 46% in 2024. The elevated and more variable adjusted ROE indicates a greater sensitivity of profitability to the adjusted equity base, highlighting potentially higher returns when goodwill or similar assets are excluded.

Comparative Insights

The divergence between reported and adjusted equity and ROE values suggests that goodwill and related intangibles have a considerable effect on the company's financial profile. The discrepancies in equity values and the amplified fluctuations in adjusted ROE imply that intangible asset values may have been subject to revaluation or impairment, which impacts the adjusted metrics significantly.

Overall, while reported figures show steady equity growth and relatively stable profitability, the adjusted data suggest more pronounced variability but higher returns on the reduced equity base. This reflects a potentially stronger underlying operating performance once adjustments are factored out, albeit with greater sensitivity to balance sheet changes.

Total Assets

The reported total assets show a consistent upward trend from 3,950,785 thousand US dollars in 2020 to 8,974,482 thousand US dollars in 2024, more than doubling over the five-year period. Adjusted total assets, which exclude goodwill, also increased steadily but at a more moderate pace from 3,168,698 thousand US dollars in 2020 to 6,595,811 thousand US dollars in 2024.

Return on Assets (ROA)

The reported ROA demonstrates an initial growth phase, rising from 14.95% in 2020 to a peak of 18.36% in 2023, followed by a noticeable decline to 11.76% in 2024. The adjusted ROA, consistently higher than the reported ROA, shows a similar pattern but with a sharper increase from 18.64% in 2020 to 25.19% in 2023, before decreasing to 16% in 2024.

Comparative Analysis of Reported versus Adjusted Figures

The gap between reported and adjusted total assets widens over the years, indicating growing goodwill or intangible asset values relative to total assets. While both metrics trend upward, the reported assets growth is more pronounced by 2024. The disparity in ROA values suggests that excluding goodwill boosts the apparent asset efficiency, with adjusted ROA consistently outperforming reported ROA. However, both measures illustrate a peak in asset profitability in 2023 followed by a decline in 2024, suggesting a potential reduction in operational efficiency or asset returns in the most recent year.

Overall Trend and Insights

The data indicates substantial asset base expansion over the period analyzed, coupled with improving asset profitability until 2023. The decrease in both reported and adjusted ROA in 2024 may warrant further investigation to understand underlying causes such as market conditions, operational challenges, or changes in asset composition. The continued increase in adjusted total assets highlights ongoing investments or asset growth aside from intangible components.