CDNS 8-K
Cadence Design Systems Inc (CDNS)
8-K
2020-10-19
For: 2020-10-19
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Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 19, 2020
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On October 19, 2020, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter ended September 26, 2020.
A copy of the press release is attached hereto as Exhibit 99.01 and a copy of the commentary by the Chief Financial Officer of Cadence regarding Cadence's financial results for the quarter ended September 26, 2020 is attached hereto as Exhibit 99.02, and the press release and the commentary are incorporated herein by reference.
The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibits
| Exhibit No. | Description | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: October 19, 2020
| CADENCE DESIGN SYSTEMS, INC. | ||||||||
| By: | /s/ John M. Wall | |||||||
| John M. Wall | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||
Exhibit 99.01
Cadence Reports Third Quarter 2020 Financial Results
SAN JOSE, Calif. — October 19, 2020 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the third quarter of 2020.
Cadence reported third quarter 2020 revenue of $667 million, compared to revenue of $580 million reported for the same period in 2019. On a GAAP basis, Cadence achieved operating margin of 25 percent and recognized net income of $162 million, or $0.58 per share on a diluted basis, in the third quarter of 2020, compared to operating margin of 21 percent and net income of $102 million, or $0.36 per share on a diluted basis, for the same period in 2019.
Using the non-GAAP measure defined below, operating margin for the third quarter of 2020 was 36 percent and net income was $197 million, or $0.70 per share on a diluted basis, compared to operating margin of 32 percent and net income of $153 million, or $0.54 per share on a diluted basis, for the same period in 2019.
“Cadence delivered outstanding results in the third quarter by continuing to innovate and delight customers,” said Lip-Bu Tan, chief executive officer. “System and semiconductor design activity remains strong and our Intelligent System Design strategy uniquely positions us to enable our customers to realize their cutting-edge designs. In the third quarter we expanded the scale and scope of our relationship with a global marquee company, and I am especially pleased with the momentum of our new systems products.”
“We are raising our 2020 revenue and earnings guidance primarily due to higher second half hardware and IP sales activity in China and continuing progress in our System Design and Analysis business,” said John Wall, senior vice president and chief financial officer.
During the third quarter of 2020, Cadence repurchased $75 million of its common stock and the Board of Directors has increased the previously announced authorization by an additional $750 million. As of the end of the third quarter of 2020, approximately $869 million remained available under the authorization to repurchase Cadence common stock. The actual timing and amount of repurchases will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
CFO Commentary
Commentary on the third quarter 2020 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.
Business Outlook
For the fourth quarter of 2020, the company expects total revenue in the range of $720 million to $740 million. Fourth quarter GAAP operating margin is expected to be in the range of 23 percent to 24 percent and GAAP net income per diluted share is expected to be in the range of $0.48 to $0.52. Using the non-GAAP measure defined below, operating margin is expected to be in the range of 34 percent to 35 percent and net income per diluted share is expected to be in the range of $0.72 to $0.76.
For 2020, the company expects total revenue in the range of $2.643 billion to $2.663 billion. On a GAAP basis, operating margin is expected to be in the range of 23 percent to 24 percent and GAAP net income per diluted share for 2020 is expected to be in the range of $1.97 to $2.01. Using the non-GAAP measure defined below, operating margin for 2020 is expected to be in the range of 34 percent to 35 percent and net income per diluted share for 2020 is expected to be in the range of $2.68 to $2.72.
Our fiscal years are 52- or 53-week periods ending on the Saturday closest to December 31. Fiscal 2020 will be a 53-week fiscal year, with an additional week in our fourth quarter of 2020. Fiscal 2019 was a 52-week fiscal year.
A schedule showing a reconciliation of the business outlook from GAAP operating margin, GAAP net income and diluted net income per share to non-GAAP operating margin and non-GAAP net income and diluted net income per share is included in this release.
Audio Webcast Scheduled
Lip-Bu Tan, chief executive officer, and John Wall, senior vice president and chief financial officer, will host the third quarter 2020 financial results audio webcast today, October 19, 2020, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting
October 19, 2020 at 5 p.m. (Pacific) and ending December 18, 2020 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.
About Cadence
Cadence is a pivotal leader in electronic design, building upon more than 30 years of computational software expertise. The company applies its underlying Intelligent System Design strategy to deliver software, hardware and IP that turn design concepts into reality. Cadence customers are the world’s most innovative companies, delivering extraordinary electronic products from chips to boards to systems for the most dynamic market applications including consumer, hyperscale computing, 5G communications, automotive, aerospace, industrial and healthcare. For six years in a row, Fortune Magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at cadence.com.
© 2020 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
This document includes forward-looking statements which are based on current expectations and preliminary assumptions that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands that could result in delays in purchases, development, installations or deliveries of Cadence's products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations and Cadence’s ability to access capital and debt markets; (vii) the acquisition of other companies or technologies or the failure to successfully integrate and operate them; (viii) events that affect cash flow, liquidity, or reserves, or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation or other matters; (ix) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (x) the duration, severity and effects of the COVID-19 pandemic and containment measures on Cadence, its employees, and its suppliers and customers, which may also have the effect of heightening the other risks described in this paragraph. In addition, the timing and amount of Cadence's repurchase of its common stock under the authorizations will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, which include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.
GAAP to Non-GAAP Reconciliation
Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance.
To supplement Cadence’s financial results presented on a GAAP basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP. Non-GAAP net income is calculated by Cadence management by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, acquisition and integration-related costs including retention expenses, investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring, executive severance and other significant items not directly related to Cadence’s core business operations, and the income tax effect of non-GAAP pre-tax adjustments.
Cadence management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of Cadence’s core business operations and therefore provides supplemental information to Cadence management and investors regarding the performance of the business operations, facilitates comparisons to the historical operating results and allows the review of Cadence's business from the same perspective as Cadence management, including forecasting and budgeting.
The following tables reconcile the specific items excluded from GAAP operating margin, GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
| Operating Margin Reconciliation | Three Months Ended | |||||||||||||
| September 26, 2020 | September 28, 2019 | |||||||||||||
| (unaudited) | ||||||||||||||
| GAAP operating margin as a percent of total revenue | 25% | 21% | ||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue: | ||||||||||||||
| Amortization of acquired intangibles | 3% | 2% | ||||||||||||
| Stock-based compensation expense | 7% | 9% | ||||||||||||
| Non-qualified deferred compensation expenses | 0% | 0% | ||||||||||||
| Restructuring and other charges (credits) | 0% | 0% | ||||||||||||
| Acquisition and integration-related costs | 1% | 0% | ||||||||||||
| Non-GAAP operating margin as a percent of total revenue | 36% | 32% | ||||||||||||
| Net Income Reconciliation | Three Months Ended | |||||||||||||
| September 26, 2020 | September 28, 2019 | |||||||||||||
| (unaudited) | ||||||||||||||
| (in thousands) | ||||||||||||||
| Net income on a GAAP basis | $ | 161,630 | $ | 101,514 | ||||||||||
| Amortization of acquired intangibles | 15,885 | 12,799 | ||||||||||||
| Stock-based compensation expense | 45,334 | 48,279 | ||||||||||||
| Non-qualified deferred compensation expenses | 1,779 | 52 | ||||||||||||
| Restructuring and other charges (credits) | 13 | (186) | ||||||||||||
| Acquisition and integration-related costs | 6,739 | 1,838 | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | (876) | 2,344 | ||||||||||||
| Income tax effect of non-GAAP adjustments | (33,451) | (13,899) | ||||||||||||
| Net income on a non-GAAP basis | $ | 197,053 | $ | 152,741 | ||||||||||
| * | Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. | ||||
| Diluted Net Income Per Share Reconciliation | Three Months Ended | |||||||||||||
| September 26, 2020 | September 28, 2019 | |||||||||||||
| (unaudited) | ||||||||||||||
| (in thousands, except per share data) | ||||||||||||||
| Diluted net income per share on a GAAP basis | $ | 0.58 | $ | 0.36 | ||||||||||
| Amortization of acquired intangibles | 0.06 | 0.04 | ||||||||||||
| Stock-based compensation expense | 0.16 | 0.17 | ||||||||||||
| Non-qualified deferred compensation expenses | — | — | ||||||||||||
| Restructuring and other charges (credits) | — | — | ||||||||||||
| Acquisition and integration-related costs | 0.02 | 0.01 | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | — | 0.01 | ||||||||||||
| Income tax effect of non-GAAP adjustments | (0.12) | (0.05) | ||||||||||||
| Diluted net income per share on a non-GAAP basis | $ | 0.70 | $ | 0.54 | ||||||||||
| Shares used in calculation of diluted net income per share — GAAP** | 280,024 | 280,666 | ||||||||||||
| Shares used in calculation of diluted net income per share — non-GAAP** | 280,024 | 280,666 | ||||||||||||
| * | Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. | ||||
| ** | Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss. | ||||
Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its website.
Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence’s current expectations on matters covered unless Cadence publishes a notice stating otherwise.
Beginning December 18, 2020, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute Cadence’s current expectations. During the Quiet Period, the business outlook in these documents should be considered historical, speaking as of prior to the Quiet Period only and not subject to any update by Cadence. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until Cadence’s fourth quarter 2020 earnings release is published, which is currently scheduled for February 22, 2021.
For more information, please contact:
Cadence Investor Relations
408-944-7100
Cadence Newsroom
408-944-7039
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
September 26, 2020 and December 28, 2019
(In thousands)
(Unaudited)
| September 26, 2020 | December 28, 2019 | |||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 1,306,564 | $ | 705,210 | ||||||||||
| Receivables, net | 300,413 | 304,546 | ||||||||||||
| Inventories | 47,979 | 55,802 | ||||||||||||
| Prepaid expenses and other | 81,526 | 103,785 | ||||||||||||
| Total current assets | 1,736,482 | 1,169,343 | ||||||||||||
| Property, plant and equipment, net | 288,163 | 275,855 | ||||||||||||
| Goodwill | 780,842 | 661,856 | ||||||||||||
| Acquired intangibles, net | 227,753 | 172,375 | ||||||||||||
| Deferred taxes | 722,656 | 732,367 | ||||||||||||
| Other assets | 384,256 | 345,429 | ||||||||||||
| Total assets | $ | 4,140,152 | $ | 3,357,225 | ||||||||||
| Current liabilities: | ||||||||||||||
| Revolving credit facility | $ | 350,000 | $ | — | ||||||||||
| Accounts payable and accrued liabilities | 290,886 | 316,908 | ||||||||||||
| Current portion of deferred revenue | 477,003 | 355,483 | ||||||||||||
| Total current liabilities | 1,117,889 | 672,391 | ||||||||||||
| Long-term liabilities: | ||||||||||||||
| Long-term portion of deferred revenue | 84,646 | 73,400 | ||||||||||||
| Long-term debt | 346,584 | 346,019 | ||||||||||||
| Other long-term liabilities | 195,315 | 162,521 | ||||||||||||
| Total long-term liabilities | 626,545 | 581,940 | ||||||||||||
| Stockholders’ equity | 2,395,718 | 2,102,894 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 4,140,152 | $ | 3,357,225 | ||||||||||
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Nine Months Ended September 26, 2020 and September 28, 2019
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 26, 2020 | September 28, 2019 | September 26, 2020 | September 28, 2019 | |||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Product and maintenance | $ | 630,329 | $ | 548,105 | $ | 1,813,384 | $ | 1,639,651 | ||||||||||||||||||
| Services | 36,278 | 31,498 | 109,598 | 97,113 | ||||||||||||||||||||||
| Total revenue | 666,607 | 579,603 | 1,922,982 | 1,736,764 | ||||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Cost of product and maintenance | 64,800 | 41,715 | 175,915 | 135,625 | ||||||||||||||||||||||
| Cost of services | 17,484 | 19,260 | 56,047 | 57,404 | ||||||||||||||||||||||
| Marketing and sales | 123,738 | 121,368 | 369,958 | 354,406 | ||||||||||||||||||||||
| Research and development | 250,934 | 240,542 | 743,423 | 700,566 | ||||||||||||||||||||||
| General and administrative | 35,928 | 33,204 | 105,161 | 97,713 | ||||||||||||||||||||||
| Amortization of acquired intangibles | 4,438 | 2,874 | 13,234 | 9,341 | ||||||||||||||||||||||
| Restructuring and other charges (credits) | 13 | (186) | (1,329) | (1,188) | ||||||||||||||||||||||
| Total costs and expenses | 497,335 | 458,777 | 1,462,409 | 1,353,867 | ||||||||||||||||||||||
| Income from operations | 169,272 | 120,826 | 460,573 | 382,897 | ||||||||||||||||||||||
| Interest expense | (5,325) | (4,240) | (15,876) | (14,607) | ||||||||||||||||||||||
| Other income, net | 1,766 | 122 | 1,862 | 5,253 | ||||||||||||||||||||||
| Income before provision for income taxes | 165,713 | 116,708 | 446,559 | 373,543 | ||||||||||||||||||||||
| Provision for income taxes | 4,083 | 15,194 | 29,653 | 44,239 | ||||||||||||||||||||||
| Net income | $ | 161,630 | $ | 101,514 | $ | 416,906 | $ | 329,304 | ||||||||||||||||||
| Net income per share - basic | $ | 0.59 | $ | 0.37 | $ | 1.52 | $ | 1.21 | ||||||||||||||||||
| Net income per share - diluted | $ | 0.58 | $ | 0.36 | $ | 1.49 | $ | 1.17 | ||||||||||||||||||
| Weighted average common shares outstanding - basic | 273,996 | 273,329 | 273,633 | 273,224 | ||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 280,024 | 280,666 | 279,455 | 280,817 | ||||||||||||||||||||||
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 26, 2020 and September 28, 2019
(In thousands)
(Unaudited)
| Nine Months Ended | |||||||||||
| September 26, 2020 | September 28, 2019 | ||||||||||
| Cash and cash equivalents at beginning of period | $ | 705,210 | $ | 533,298 | |||||||
| Cash flows from operating activities: | |||||||||||
| Net income | 416,906 | 329,304 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 107,019 | 91,400 | |||||||||
| Amortization of debt discount and fees | 770 | 747 | |||||||||
| Stock-based compensation | 138,723 | 134,789 | |||||||||
| Loss on investments, net | 5,118 | 2,655 | |||||||||
| Deferred income taxes | (18,966) | (10,938) | |||||||||
| Provisions for losses (recoveries) on receivables | 1,087 | (358) | |||||||||
| ROU asset amortization and change in operating lease liabilities | 2,064 | 4,285 | |||||||||
| Other non-cash items | 410 | 197 | |||||||||
| Changes in operating assets and liabilities, net of effect of acquired businesses: | |||||||||||
| Receivables | 9,945 | 26,553 | |||||||||
| Inventories | 6,376 | (43,781) | |||||||||
| Prepaid expenses and other | 22,769 | 38,703 | |||||||||
| Other assets | (21,287) | 3,554 | |||||||||
| Accounts payable and accrued liabilities | (30,455) | (4,001) | |||||||||
| Deferred revenue | 124,491 | (6,968) | |||||||||
| Other long-term liabilities | 4,430 | 4,163 | |||||||||
| Net cash provided by operating activities | 769,400 | 570,304 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of non-marketable investments | — | (33,717) | |||||||||
| Proceeds from the sale of non-marketable investments | — | 2,952 | |||||||||
| Purchases of property, plant and equipment | (63,745) | (47,527) | |||||||||
| Cash paid in business combinations, net of cash acquired | (197,562) | (338) | |||||||||
| Net cash used for investing activities | (261,307) | (78,630) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from revolving credit facility | 350,000 | 150,000 | |||||||||
| Payment on revolving credit facility | — | (250,000) | |||||||||
| Proceeds from issuance of common stock | 71,451 | 49,127 | |||||||||
| Stock received for payment of employee taxes on vesting of restricted stock | (85,515) | (75,016) | |||||||||
| Payments for repurchases of common stock | (250,047) | (231,131) | |||||||||
| Net cash provided by (used for) financing activities | 85,889 | (357,020) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 7,372 | (12,736) | |||||||||
| Increase in cash and cash equivalents | 601,354 | 121,918 | |||||||||
| Cash and cash equivalents at end of period | $ | 1,306,564 | $ | 655,216 | |||||||
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
| 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| GEOGRAPHY | Q1 | Q2 | Q3 | Q4 | Year | Q1 | Q2 | Q3 | |||||||||||||||||||||||||||||||||||||||
| Americas | 44 | % | 42 | % | 44 | % | 46 | % | 44 | % | 43 | % | 44 | % | 42 | % | |||||||||||||||||||||||||||||||
| China | 10 | % | 12 | % | 10 | % | 9 | % | 10 | % | 13 | % | 12 | % | 17 | % | |||||||||||||||||||||||||||||||
| Other Asia | 19 | % | 19 | % | 21 | % | 20 | % | 20 | % | 18 | % | 19 | % | 19 | % | |||||||||||||||||||||||||||||||
| Europe, Middle East and Africa | 18 | % | 20 | % | 18 | % | 18 | % | 18 | % | 19 | % | 18 | % | 16 | % | |||||||||||||||||||||||||||||||
| Japan | 9 | % | 7 | % | 7 | % | 7 | % | 8 | % | 7 | % | 7 | % | 6 | % | |||||||||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||||||||
Revenue Mix by Product Category (% of Total Revenue)
| 2019 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| PRODUCT CATEGORY | Q1 | Q2 | Q3 | Q4 | Year | Q1 | Q2 | Q3 | |||||||||||||||||||||||||||||||||||||||
| Custom IC Design and Simulation | 25 | % | 26 | % | 26 | % | 25 | % | 25 | % | 25 | % | 24 | % | 24 | % | |||||||||||||||||||||||||||||||
| Digital IC Design and Signoff | 30 | % | 31 | % | 30 | % | 29 | % | 30 | % | 29 | % | 28 | % | 27 | % | |||||||||||||||||||||||||||||||
| Functional Verification, including Emulation and Prototyping Hardware | 24 | % | 22 | % | 20 | % | 24 | % | 23 | % | 23 | % | 24 | % | 23 | % | |||||||||||||||||||||||||||||||
| IP | 12 | % | 11 | % | 15 | % | 13 | % | 13 | % | 14 | % | 14 | % | 15 | % | |||||||||||||||||||||||||||||||
| System Design and Analysis | 9 | % | 10 | % | 9 | % | 9 | % | 9 | % | 9 | % | 10 | % | 11 | % | |||||||||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||||||||
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of October 19, 2020
(Unaudited)
| Three Months Ending January 2, 2021 | Year Ending January 2, 2021 | |||||||||||||
| Forecast | Forecast | |||||||||||||
| GAAP operating margin as a percent of total revenue | 23% - 24% | 23% - 24% | ||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue: | ||||||||||||||
| Amortization of acquired intangibles | 2% | 3% | ||||||||||||
| Stock-based compensation expense | 8% | 7% | ||||||||||||
| Acquisition and integration-related costs | 1% | 1% | ||||||||||||
| Non-GAAP operating margin as a percent of total revenue† | 34% - 35% | 34% - 35% | ||||||||||||
| † | The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP. | ||||
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of October 19, 2020
(Unaudited)
| Three Months Ending January 2, 2021 | Year Ending January 2, 2021 | |||||||||||||
| Forecast | Forecast | |||||||||||||
| Diluted net income per share on a GAAP basis | $0.48 to $0.52 | $1.97 to $2.01 | ||||||||||||
| Amortization of acquired intangibles | 0.06 | 0.23 | ||||||||||||
| Stock-based compensation expense | 0.21 | 0.70 | ||||||||||||
| Non-qualified deferred compensation expenses | — | — | ||||||||||||
| Restructuring and other charges (credits) | — | — | ||||||||||||
| Acquisition and integration-related costs | 0.02 | 0.08 | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | — | 0.02 | ||||||||||||
| Income tax effect of non-GAAP adjustments | (0.05) | (0.32) | ||||||||||||
| Diluted net income per share on a non-GAAP basis† | $0.72 to $0.76 | $2.68 to $2.72 | ||||||||||||
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of October 19, 2020
(Unaudited)
| Three Months Ending January 2, 2021 | Year Ending January 2, 2021 | |||||||||||||
| ($ in millions) | Forecast | Forecast | ||||||||||||
| Net income on a GAAP basis | $134 to $146 | $551 to $563 | ||||||||||||
| Amortization of acquired intangibles | 17 | 64 | ||||||||||||
| Stock-based compensation expense | 58 | 196 | ||||||||||||
| Non-qualified deferred compensation expenses | — | 1 | ||||||||||||
| Restructuring and other charges (credits) | — | (1) | ||||||||||||
| Acquisition and integration-related costs | 5 | 21 | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | 1 | 5 | ||||||||||||
| Income tax effect of non-GAAP adjustments | (14) | (88) | ||||||||||||
| Net income on a non-GAAP basis† | $201 to $213 | $749 to $761 | ||||||||||||
| † | The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP. | ||||
| * | Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. | ||||
Exhibit 99.02
| CADENCE REPORTS THIRD QUARTER 2020 | |||||||||||
| CADENCE DESIGN SYSTEMS, INC. | |||||||||||
CFO COMMENTARY | |||||||||||
Key Takeaways • Q3 results exceeded our expectations for key financial metrics. • Raising 2020 revenue outlook by $53 million. • Q4 2020 is a 14-week quarter. Revenue outlook for Q4 includes $45 million for the extra week. | Q4 2020 Outlook • Revenue : $720 - $740 million. • GAAP operating margin: 23% - 24%. • Non-GAAP operating margin: 34% - 35%. • GAAP EPS: $0.48 - $0.52 • Non-GAAP EPS: $0.72 - $0.76 | Q3 2020 KEY METRICS | |||||||||
• Revenue $667 million • GAAP operating margin 25% • Non-GAAP operating margin 36% • GAAP EPS $0.58 • Non-GAAP EPS $0.70 • Operating cash flow $207 million | |||||||||||
FY 2020 Outlook • Revenue: $2.643 - $2.663 billion. • GAAP operating margin: 23% - 24%. • Non-GAAP operating margin: 34% - 35%. • GAAP EPS: $1.97 - $2.01 • Non-GAAP EPS $2.68 - $2.72 • Operating cash flow: $840 - $870 million. • Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year. | Financial Results Webcast | ||||||||||
| Our Q3 2020 financial results webcast will begin October 19, 2020 at 2:00 p.m. (Pacific). The webcast may be accessed at www.cadence.com/cadence/investor_relations. An archive of the webcast will be available on October 19, 2020 until 5:00 p.m. (Pacific) on December 18, 2020. | |||||||||||
| October 19, 2020 | Cadence Q3 2020 Financial Results | 1 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Financial Metrics
| (In Millions, except per share data) | 2016 | 2017* | 2018 | 2019 | 2020E* | ||||||||||||||||||||||||||||||
| Revenue | $1,816 | $1,943 | $2,138 | $2,336 | $2,643 - $2,663 | ||||||||||||||||||||||||||||||
| Revenue growth | 7% | 7% | 10% | 9% | 13% - 14% | ||||||||||||||||||||||||||||||
| 3-year CAGR | 8% | 7% | 8% | 9% | ~11% | ||||||||||||||||||||||||||||||
| 3-year CAGR without 53rd week impact | 8% | 8% | 8% | 9% | ~10% | ||||||||||||||||||||||||||||||
| GAAP operating expenses | $ | 1,571 | $ | 1,619 | $ | 1,742 | $ | 1,845 | ~$2,019 | ||||||||||||||||||||||||||
| Non-GAAP operating expenses | $ | 1,348 | $ | 1,409 | $ | 1,491 | $ | 1,587 | ~$1,738 | ||||||||||||||||||||||||||
| Non-GAAP operating expense growth | 5% | 6% | 6% | ~10% | |||||||||||||||||||||||||||||||
| GAAP operating margin | 13% | 17% | 19% | 21% | |||||||||||||||||||||||||||||||
| Implied GAAP operating margin** | ~23.5% | ||||||||||||||||||||||||||||||||||
| Non-GAAP operating margin | 26% | 28% | 30% | 32% | |||||||||||||||||||||||||||||||
| Implied Non-GAAP operating margin** | ~34.5% | ||||||||||||||||||||||||||||||||||
| GAAP earnings per share | $0.70 | $0.73 | $1.23 | $3.53 | $1.97 - $2.01 | ||||||||||||||||||||||||||||||
| Non-GAAP earning per share | $1.21 | $1.40 | $1.87 | $2.20 | $2.68 - $2.72 | ||||||||||||||||||||||||||||||
| Weighted average shares diluted outstanding | 291.3 | 280.2 | 281.1 | 280.5 | 279 - 281 | ||||||||||||||||||||||||||||||
| Cash flow from operations | 445 | 471 | 605 | 730 | $840 - $870 | ||||||||||||||||||||||||||||||
| Capital expenditures | 54 | 58 | 62 | 75 | ~$95 | ||||||||||||||||||||||||||||||
* Fiscal 2014 and 2020 are 53-week years, compared to fiscal 2015-2019, which were 52 week years. 2020 outlook includes approximately $45 million revenue impact for the extra week. 2014 revenue included approximately $27 million revenue impact for the extra week.
** At midpoint of guidance.
Fourth Quarter 2020 Financial Outlook
| Q4 2019A | Q3 2020A | Q4 2020E | |||||||||||||||||||||
| Total Revenue ($ Million) | $599.6 | $666.6 | $720 - $740 | ||||||||||||||||||||
| Q/Q Growth | 4% | 8% - 11% | |||||||||||||||||||||
| Y/Y Growth | 15% | 20% - 23% | |||||||||||||||||||||
| GAAP Operating Margin | 18% | 25% | 23% - 24% | ||||||||||||||||||||
| Non-GAAP Operating Margin | 31% | 36% | 34% - 35% | ||||||||||||||||||||
| GAAP EPS | $2.36 | $0.58 | $0.48 - $0.52 | ||||||||||||||||||||
| Non-GAAP EPS | $0.54 | $0.70 | $0.72 - $0.76 | ||||||||||||||||||||
| Q/Q Growth | 6% | 3% - 9% | |||||||||||||||||||||
| Y/Y Growth | 30% | 33% - 41% | |||||||||||||||||||||
| October 19, 2020 | Cadence Q3 2020 Financial Results | 2 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Fiscal Year 2020 Financial Outlook
| Previous | Current | ||||||||||||||||||||||
| FY 2019A | FY 2020E | FY 2020E | |||||||||||||||||||||
| Recurring Revenue | 85% - 90% | 85% - 90% | 85% - 90% | ||||||||||||||||||||
| Total Revenue ($ Billion) | $2.336 | $2.585 - $2.615 | $2.643 - $2.663 | ||||||||||||||||||||
| Y/Y Growth | 9% | 11% - 12% | 13% - 14% | ||||||||||||||||||||
| Revenue from Beginning Backlog* | ~75% | ~75% | ~75% | ||||||||||||||||||||
| GAAP Operating Margin | 21.1% | ~22% | 23% - 24% | ||||||||||||||||||||
| Non-GAAP Operating Margin | 32.1% | ~33% | 34% - 35% | ||||||||||||||||||||
| GAAP Other Income & Expense ($ Million) | $(12.8) | $(21) - $(25) | $(21) - $(23) | ||||||||||||||||||||
| Non-GAAP Other Income & Expense ($ Million) | $(14.1) | $(15) - $(19) | $(16) - $(18) | ||||||||||||||||||||
| GAAP Tax Rate | -106% | ~6% | ~9% | ||||||||||||||||||||
| Non-GAAP Tax Rate | 16% | 16% | 16% | ||||||||||||||||||||
| Weighted Average Diluted Shares Outstanding (Million) | 280.5 | 279 - 281 | 279 - 281 | ||||||||||||||||||||
| GAAP EPS | $3.53 | $1.84 - $1.90 | $1.97 - $2.01 | ||||||||||||||||||||
| Non-GAAP EPS | $2.20 | $2.50 - $2.56 | $2.68 - $2.72 | ||||||||||||||||||||
| Y/Y Growth | 18% | 14% - 16% | 22% - 24% | ||||||||||||||||||||
| Cash Flow from Operations ($ Million) | $730 | $810 - $840 | $840 - $870 | ||||||||||||||||||||
| DSO | 47 | ~45 | ~45 | ||||||||||||||||||||
| Capital Expenditures ($ Million) | $75 | ~$80 | ~$95 | ||||||||||||||||||||
*Backlog = Remaining Performance Obligations + IP Access Agreements
| October 19, 2020 | Cadence Q3 2020 Financial Results | 3 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Third Quarter Financial Results
Backlog
| (In Billions) | 2018 | 2019 | Q3 2020 | ||||||||||||||||||||||||||||||||
| Backlog* | $3.0 | $3.6 | $3.8 | ||||||||||||||||||||||||||||||||
*Backlog = Remaining Performance Obligations + IP Access Agreements
Revenue
| (In Thousands) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Product and Maintenance | $548,105 | $564,964 | $581,699 | $601,356 | $630,329 | ||||||||||||||||||||||||||||||
| Services | 31,498 | 34,591 | 36,258 | 37,062 | 36,278 | ||||||||||||||||||||||||||||||
| Total Revenue | $579,603 | $599,555 | $617,957 | $638,418 | $666,607 | ||||||||||||||||||||||||||||||
Revenue Mix by Geography
| (% of Total Revenue) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Americas | 44 | % | 46 | % | 43 | % | 44 | % | 42 | % | |||||||||||||||||||||||||
| China | 10 | % | 9 | % | 13 | % | 12 | % | 17 | % | |||||||||||||||||||||||||
| Other Asia | 21 | % | 20 | % | 18 | % | 19 | % | 19 | % | |||||||||||||||||||||||||
| Europe, Middle East and Africa | 18 | % | 18 | % | 19 | % | 18 | % | 16 | % | |||||||||||||||||||||||||
| Japan | 7 | % | 7 | % | 7 | % | 7 | % | 6 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
Revenue Mix by Product Category
| (% of Total Revenue) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Custom IC Design and Simulation | 26 | % | 25 | % | 25 | % | 24 | % | 24 | % | |||||||||||||||||||||||||
| Digital IC Design and Signoff | 30 | % | 29 | % | 29 | % | 28 | % | 27 | % | |||||||||||||||||||||||||
| Functional Verification | 20 | % | 24 | % | 23 | % | 24 | % | 23 | % | |||||||||||||||||||||||||
| IP | 15 | % | 13 | % | 14 | % | 14 | % | 15 | % | |||||||||||||||||||||||||
| System Design and Analysis | 9 | % | 9 | % | 9 | % | 10 | % | 11 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
Gross Margin
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||||||||||||||
| GAAP Gross Margin | 89.5 | % | 87.8 | % | 88.0 | % | 88.2 | % | 87.7 | % | |||||||||||||||||||||||||
| Non-GAAP Gross Margin | 91.5 | % | 89.7 | % | 89.9 | % | 90.3 | % | 89.6 | % | |||||||||||||||||||||||||
Total Costs and Expenses
| (In Thousands) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Total GAAP Costs and Expenses | $458,777 | $490,656 | $478,606 | $486,468 | $497,335 | ||||||||||||||||||||||||||||||
| Total Non-GAAP Costs and Expenses | $395,995 | $415,140 | $418,827 | $414,559 | $427,585 | ||||||||||||||||||||||||||||||
| October 19, 2020 | Cadence Q3 2020 Financial Results | 4 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Operating Margin
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||||||||||||||
| GAAP Operating Margin | 20.8 | % | 18.2 | % | 22.6 | % | 23.8 | % | 25.4 | % | |||||||||||||||||||||||||
| Non-GAAP Operating Margin | 31.7 | % | 30.8 | % | 32.2 | % | 35.1 | % | 35.9 | % | |||||||||||||||||||||||||
Earnings Per Share
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||||||||||||||
| GAAP Net Income Per Share | $0.36 | $2.36 | $0.44 | $0.47 | $0.58 | ||||||||||||||||||||||||||||||
| Non-GAAP Net Income Per Share | $0.54 | $0.54 | $0.60 | $0.66 | $0.70 | ||||||||||||||||||||||||||||||
Total DSO
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||||||||||||||
| DSO | 43 | 47 | 42 | 45 | 41 | ||||||||||||||||||||||||||||||
Balance Sheet and Cash Review
Cash Flow from Operating Activities
| (In Thousands) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Net Cash from Operating Activities | $138,530 | $159,296 | $217,719 | $345,124 | $206,557 | ||||||||||||||||||||||||||||||
Capital Expenditures
| (In Thousands) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| . | |||||||||||||||||||||||||||||||||||
| Capital Expenditures | $16,965 | $27,078 | $22,179 | $21,356 | $20,210 | ||||||||||||||||||||||||||||||
Cash and Cash Equivalents
| (In Thousands) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $655,216 | $705,210 | $946,285 | $1,189,186 | $1,306,564 | ||||||||||||||||||||||||||||||
•Approximately 62 percent of our cash and cash equivalents were in the U.S. at quarter-end.
Stock Repurchase
| (In Thousands, Except Share Price) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| Share Repurchase | $75,011 | $75,017 | $100,022 | $75,014 | $75,011 | ||||||||||||||||||||||||||||||
| Number of Shares | 1,065 | 1,122 | 1,488 | 920 | 717 | ||||||||||||||||||||||||||||||
| Average Share Price | $70.43 | $66.86 | $67.22 | $81.54 | $104.62 | ||||||||||||||||||||||||||||||
Employees
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||||||||||||||
| Headcount | 8,016 | 8,078 | 8,205 | 8,375 | 8,674 | ||||||||||||||||||||||||||||||
| October 19, 2020 | Cadence Q3 2020 Financial Results | 5 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Forward Looking Statements
The statements in this CFO Commentary contain forward-looking statements which are based on current expectations and preliminary assumptions that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands that could result in delays in purchases, development, installations or deliveries of Cadence's products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations and Cadence’s ability to access capital and debt markets; (vii) the acquisition of other companies or technologies or the failure to successfully integrate and operate them; (viii) events that affect cash flow, liquidity, or reserves, or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation or other matters; (ix) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (x) the duration, severity and effects of the COVID-19 pandemic and containment measures on Cadence, its employees, and its suppliers and customers, which may also have the effect of heightening the other risks described in this paragraph. In addition, the timing and amount of Cadence's repurchase of its common stock under the authorizations will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, which include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.
GAAP to Non-GAAP Reconciliation
Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this CFO Commentary with their most directly comparable GAAP financial results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance. See our earnings press release issued today for further discussion of our non-GAAP financial measures, as well as the reconciliation provided in the Appendix to this CFO Commentary.
Cadence’s management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company’s core business operations and therefore provides supplemental information to Cadence’s management and investors regarding the performance of the business operations, facilitates comparisons to the historical operating results and allows the review of Cadence’s business from the same perspective as Cadence’s management, including forecasting and budgeting.
© 2020 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 6 | ||||||
| Cadence Design Systems, Inc. | ||||||||
APPENDIX I
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses
| (In Thousands) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||||||||||||||||||||
| GAAP total costs and expenses | $458,777 | $490,656 | $478,606 | $486,468 | $497,335 | ||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP total costs and expenses | |||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | (12,799) | (12,660) | (15,066) | (16,074) | (15,885) | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | (48,279) | (46,758) | (46,482) | (46,907) | (45,334) | ||||||||||||||||||||||||||||||
| Non-qualified deferred compensation (expenses) credits | (52) | (1,948) | 4,796 | (3,618) | (1,779) | ||||||||||||||||||||||||||||||
| Restructuring and other (charges) credits | 186 | (9,809) | 1,067 | 275 | (13) | ||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | (1,838) | (3,466) | (3,970) | (5,315) | (6,739) | ||||||||||||||||||||||||||||||
| Special charges | — | (875) | (124) | (270) | — | ||||||||||||||||||||||||||||||
Non-GAAP total costs and expenses† | $395,995 | $415,140 | $418,827 | $414,559 | $427,585 | ||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses
| (In Millions) | 2016 | 2017 | 2018 | 2019 | 2020E | ||||||||||||||||||||||||||||||
| GAAP total costs and expenses | $1,571 | $1,619 | $1,742 | $1,845 | ~$2,019 | ||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP total costs and expenses | |||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | (60) | (57) | (53) | (53) | ~(64) | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | (109) | (130) | (168) | (182) | ~(196) | ||||||||||||||||||||||||||||||
| Non-qualified deferred compensation (expenses) credits | (2) | (6) | 1 | (5) | ~(1) | ||||||||||||||||||||||||||||||
| Restructuring and other (charges) credits | (41) | (9) | (11) | (9) | ~1 | ||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | (11) | (8) | (20) | (8) | ~(21) | ||||||||||||||||||||||||||||||
| Special charges | — | — | — | (1) | — | ||||||||||||||||||||||||||||||
Non-GAAP total costs and expenses† | $1,348 | $1,409 | $1,491 | $1,587 | ~$1,738 | ||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 7 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Gross Margin as Percent of Total Revenue to Non-GAAP Gross Margin as Percent of Total Revenue
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | |||||||||||||||||||||||||||||||
| GAAP gross margin as percent of total revenue | 89.5% | 87.8% | 88.0% | 88.2% | 87.7% | ||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP gross margin as a percent of total revenue | |||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 1.7% | 1.6% | 1.7% | 1.8% | 1.7% | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.3% | 0.3% | 0.2% | 0.3% | 0.2% | ||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | ||||||||||||||||||||||||||||||
Non-GAAP gross margin as percent of total revenue† | 91.5% | 89.7% | 89.9% | 90.3% | 89.6% | ||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 8 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Operating Margin as Percent of Total Revenue to Non-GAAP Operating Margin as Percent of Total Revenue
| Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020E | |||||||||||||||||||||||||||||||||||||||
| GAAP operating margin as percent of total revenue | 21% | 18% | 23% | 24% | 25% | 23% - 24% | ||||||||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 2% | 2% | 2% | 2% | 3% | 2% | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 9% | 8% | 7% | 7% | 7% | 8% | ||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | (1)% | 1% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
| Restructuring and other charges (credits) | 0% | 2% | 0% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 0% | 1% | 1% | 1% | 1% | 1% | ||||||||||||||||||||||||||||||||||||||
| Special charges | 0% | 0% | 0% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
Non-GAAP operating margin as percent of total revenue† | 32% | 31% | 32% | 35% | 36% | 34% - 35% | ||||||||||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
| 2016 | 2017 | 2018 | 2019 | 2020E | ||||||||||||||||||||||||||||||||||
| GAAP operating margin as percent of total revenue | 13% | 17% | 19% | 21% | 23% - 24% | |||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 4% | 3% | 2% | 2% | 3% | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 6% | 7% | 8% | 8% | 7% | |||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | 0% | 0% | |||||||||||||||||||||||||||||||||
| Restructuring and other charges (credits) | 2% | 1% | 0% | 1% | 0% | |||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 1% | 0% | 1% | 0% | 1% | |||||||||||||||||||||||||||||||||
| Special charges | 0% | 0% | 0% | 0% | 0% | |||||||||||||||||||||||||||||||||
Non-GAAP operating margin as percent of total revenue† | 26% | 28% | 30% | 32% | 34% - 35% | |||||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 9 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Diluted Net Income Per Share to Non-GAAP Diluted Net Income Per Share
| (In Thousands, Except Per Share Data) | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020E | ||||||||||||||||||||||||||||||||||||||
| Diluted net income per share on a GAAP basis | $0.36 | $2.36 | $0.44 | $0.47 | $0.58 | $0.48 - $0.52 | ||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 0.04 | 0.05 | 0.05 | 0.06 | 0.06 | 0.06 | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.17 | 0.17 | 0.17 | 0.17 | 0.16 | 0.21 | ||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | — | 0.01 | (0.02) | 0.01 | — | — | ||||||||||||||||||||||||||||||||||||||
| Restructuring and other charges (credits) | — | 0.03 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 0.01 | 0.01 | 0.02 | 0.02 | 0.02 | 0.02 | ||||||||||||||||||||||||||||||||||||||
| Special charges | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets * | 0.01 | — | 0.03 | (0.01) | — | — | ||||||||||||||||||||||||||||||||||||||
| Income tax benefit related to intercompany transfers of certain intellectual property rights | — | (2.06) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Income tax effect of non-GAAP adjustments | (0.05) | (0.03) | (0.09) | (0.06) | (0.12) | (0.05) | ||||||||||||||||||||||||||||||||||||||
Diluted net income per share on a non-GAAP basis † | $0.54 | $0.54 | $0.60 | $0.66 | $0.70 | $0.72 - $0.76 | ||||||||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share - GAAP ** | 280,666 | 279,557 | 279,265 | 279,080 | 280,024 | |||||||||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share - non-GAAP ** | 280,666 | 279,557 | 279,265 | 279,080 | 280,024 | |||||||||||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.
** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 10 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Diluted Net Income Per Share to Non-GAAP Diluted Net Income Per Share
| (In Thousands, Except Per Share Data) | 2016 | 2017 | 2018 | 2019 | 2020E | |||||||||||||||||||||||||||||||||
| Diluted net income per share on a GAAP basis | $0.70 | $0.73 | $1.23 | $3.53 | $1.97 - $2.01 | |||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 0.21 | 0.20 | 0.19 | 0.19 | 0.23 | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.37 | 0.46 | 0.60 | 0.65 | 0.70 | |||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0.01 | 0.02 | (0.01) | 0.02 | — | |||||||||||||||||||||||||||||||||
| Restructuring and other charges (credits) | 0.14 | 0.03 | 0.04 | 0.03 | — | |||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 0.04 | 0.03 | 0.07 | 0.03 | 0.08 | |||||||||||||||||||||||||||||||||
| Special charges | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets * | (0.02) | (0.05) | — | (0.01) | 0.02 | |||||||||||||||||||||||||||||||||
| Income tax benefit related to intercompany transfers of certain intellectual property rights | — | — | — | (2.05) | — | |||||||||||||||||||||||||||||||||
| Income tax related to transition tax | — | 0.24 | — | — | — | |||||||||||||||||||||||||||||||||
| Income tax related to tax rate change | — | 0.09 | — | — | — | |||||||||||||||||||||||||||||||||
| Income tax effect of non-GAAP adjustments | (0.24) | (0.35) | (0.25) | (0.19) | (0.32) | |||||||||||||||||||||||||||||||||
Diluted net income per share on a non-GAAP basis † | $1.21 | $1.40 | $1.87 | $2.20 | $2.68 - $2.72 | |||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share - GAAP ** | 291,256 | 280,221 | 281,144 | 280,515 | 279 - 281M | |||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share - non-GAAP ** | 291,256 | 280,221 | 281,144 | 280,515 | 279 - 281M | |||||||||||||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.
** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 11 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Total Other Income and Expense to Non-GAAP Total Other Income and Expense
| (In Millions) | FY 2018 | FY 2019 | FY 2020E | |||||||||||||||||||||||
| GAAP total other income and expense | $(19.8) | $(12.8) | $(21) - $(23) | |||||||||||||||||||||||
| Reconciling items to non-GAAP total income and expense | ||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | (1.3) | (1.3) | 5 | |||||||||||||||||||||||
Non-GAAP total other income and expense† | $(21.1) | $(14.1) | $(16) - $(18) | |||||||||||||||||||||||
† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.
* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.
| October 19, 2020 | Cadence Q3 2020 Financial Results | 12 | ||||||