CADENCE DESIGN SYSTEMS, INC.
Cadence reported third quarter 2020 revenue of
Using the non-GAAP measure defined below, operating margin for the third quarter of 2020 was 36 percent and net income was
'Cadence delivered outstanding results in the third quarter by continuing to innovate and delight customers,' said
'We are raising our 2020 revenue and earnings guidance primarily due to higher second half hardware and IP sales activity in
During the third quarter of 2020, Cadence repurchased
CFO Commentary
Commentary on the third quarter 2020 financial results by
Business Outlook
For the fourth quarter of 2020, the company expects total revenue in the range of
For 2020, the company expects total revenue in the range of
Our fiscal years are 52- or 53-week periods ending on the Saturday closest to
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.
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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,
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
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
(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
(in thousands)
(unaudited)
Net income on a GAAP basis
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
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
(in thousands, except per share data)
(unaudited)
Diluted net income per share on a GAAP basis
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
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
For more information, please contact:
Cadence Investor Relations
408-944-7100
investor_relations@cadence.com
Cadence Newsroom
408-944-7039
newsroom@cadence.com
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