Fitch ups Cadence Design

Fitch said it upgraded Cadence Design Systems, Inc.'s long-term issuer default rating to A- from BBB+. The outlook is stable.

“The ratings and outlook reflect Fitch's expectations for solid operating performance. Benefiting from increase in semiconductor demand, the company has seen revenue growing in the double digits for the past six quarters. Fitch expects the momentum to continue through the near- and medium term supported by the increasing semiconductor contents across diverse industries, including information technology, telecom, industrial and automotive,” the agency said in a press release.

“In spite of the company's relatively small revenue base for the rating category, its EBITDA and FCF margins are strong for the category. Between 2013 and 2020, the company generated EBITDA margins of 26%-37% and FCF margins of 17.5%-30%. Fitch estimates Cadence's FCF margin remaining near 30% to generate FCF near or in excess of $1 billion through our forecast period. We expect Cadence's FCF to increase gradually, in-line with revenue growth,” Fitch said.

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