Attached files
| file | filename |
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| EX-99.01 - PRESS RELEASE - CADENCE DESIGN SYSTEMS INC | cdns7202020ex9901.htm |
| 8-K - 8-K - CADENCE DESIGN SYSTEMS INC | cdns-20200720.htm |
Exhibit 99.02
| CADENCE REPORTS SECOND QUARTER 2020 | |||||||||||
| CADENCE DESIGN SYSTEMS, INC. | |||||||||||
CFO COMMENTARY | |||||||||||
Key Takeaways • Q2 results exceeded our expectations for key financial metrics. • Increasing 2020 outlook for revenue, operating margin, EPS and cash flow. • Repurchased $75 million of Cadence stock in Q2. | Q3 2020 Outlook • Revenue : $630 - $650 million. • GAAP operating margin: ~22%. • Non-GAAP operating margin: ~32%. • GAAP EPS: $0.49 - $0.51 • Non-GAAP EPS: $0.59 - $0.61 | Q2 2020 KEY METRICS | |||||||||
• Revenue $638 million • GAAP operating margin 24% • Non-GAAP operating margin 35% • GAAP EPS $0.47 • Non-GAAP EPS $0.66 • Operating cash flow $345 million | |||||||||||
FY 2020 Outlook • Revenue: $2.585 - $2.615 billion. • GAAP operating margin: ~22%. • Non-GAAP operating margin: ~33%. • GAAP EPS: $1.84 - $1.90 • Non-GAAP EPS $2.50 - $2.56 • Operating cash flow: $810 - $840 million. • Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year. | Financial Results Webcast | ||||||||||
| Our Q2 2020 financial results webcast will begin July 20, 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 July 20, 2020 until 5:00 p.m. (Pacific) on September 11, 2020. | |||||||||||
| July 20, 2020 | Cadence Q2 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 | $2,585 - $2,615 | ||||||||||||||||||||||||||||||
| Revenue growth | 7% | 10% | 9% | 11% - 12% | |||||||||||||||||||||||||||||||
| GAAP operating expenses | $ | 1,571 | $ | 1,619 | $ | 1,742 | $ | 1,845 | ~$2,020 | ||||||||||||||||||||||||||
| Non-GAAP operating expenses | $ | 1,348 | $ | 1,409 | $ | 1,491 | $ | 1,587 | ~$1,742 | ||||||||||||||||||||||||||
| Non-GAAP operating expense growth | 5% | 6% | 6% | ~10% | |||||||||||||||||||||||||||||||
| GAAP operating margin | 13% | 17% | 19% | 21% | |||||||||||||||||||||||||||||||
| Implied GAAP operating margin** | ~22% | ||||||||||||||||||||||||||||||||||
| Non-GAAP operating margin | 26% | 28% | 30% | 32% | |||||||||||||||||||||||||||||||
| Implied Non-GAAP operating margin** | ~33% | ||||||||||||||||||||||||||||||||||
| GAAP earnings per share | $0.70 | $0.73 | $1.23 | $3.53 | $1.84 - $1.90 | ||||||||||||||||||||||||||||||
| Non-GAAP earning per share | $1.21 | $1.40 | $1.87 | $2.20 | $2.50 - $2.56 | ||||||||||||||||||||||||||||||
| Weighted average shares diluted outstanding | 291.3 | 280.2 | 281.1 | 280.5 | 279 - 281 | ||||||||||||||||||||||||||||||
| Cash flow from operations | 445 | 471 | 605 | 730 | $810 - $840 | ||||||||||||||||||||||||||||||
| Capital expenditures | 54 | 58 | 62 | 75 | ~$80 | ||||||||||||||||||||||||||||||
* Fiscal years 2016 and 2017 accounted for under ASC Topic 605, prior to adoption of ASC Topic 606 in 2018.
** At midpoint of guidance.
Third Quarter 2020 Financial Outlook
| Q3 2019A | Q2 2020A | Q3 2020E | |||||||||||||||||||||
| Total Revenue ($ Million) | $579.6 | $638.4 | $630 - $650 | ||||||||||||||||||||
| Q/Q Growth | 3% | (1)% - 2% | |||||||||||||||||||||
| Y/Y Growth | 10% | 9% - 12% | |||||||||||||||||||||
| GAAP Operating Margin | 21% | 24% | ~22% | ||||||||||||||||||||
| Non-GAAP Operating Margin | 32% | 35% | ~32% | ||||||||||||||||||||
| GAAP EPS | $0.36 | $0.47 | $0.49 - $0.51 | ||||||||||||||||||||
| Non-GAAP EPS | $0.54 | $0.66 | $0.59 - $0.61 | ||||||||||||||||||||
| Q/Q Growth | 10% | (11)% - (8)% | |||||||||||||||||||||
| Y/Y Growth | 16% | 9% - 13% | |||||||||||||||||||||
| July 20, 2020 | Cadence Q2 2020 Financial Results | 2 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Fiscal Year 2020 Financial Outlook
| Previous | Current | ||||||||||||||||||||||
| FY 2019A | FY 2020E | FY 2020E | |||||||||||||||||||||
| Recurring Revenue | 85% - 90% | 85% - 90% | 85% - 90% | ||||||||||||||||||||
| Total Revenue ($ Billion) | $2.336 | $2.545 - $2.585 | $2.585 - $2.615 | ||||||||||||||||||||
| Y/Y Growth | 9% | 9% - 11% | 11% - 12% | ||||||||||||||||||||
| Revenue from Beginning Backlog* | ~75% | ~75% | ~75% | ||||||||||||||||||||
| GAAP Operating Margin | 21.1% | 21% - 22% | ~22% | ||||||||||||||||||||
| Non-GAAP Operating Margin | 32.1% | 32% - 33% | ~33% | ||||||||||||||||||||
| GAAP Other Income & Expense ($ Million) | $(12.8) | $(29) - $(33) | $(21) - $(25) | ||||||||||||||||||||
| Non-GAAP Other Income & Expense ($ Million) | $(14.1) | $(19) - $(23) | $(15) - $(19) | ||||||||||||||||||||
| GAAP Tax Rate | -106% | ~14% | ~6% | ||||||||||||||||||||
| Non-GAAP Tax Rate | 16% | 16% | 16% | ||||||||||||||||||||
| Weighted Average Diluted Shares Outstanding (Million) | 280.5 | 278 - 281 | 279 - 281 | ||||||||||||||||||||
| GAAP EPS | $3.53 | $1.58 - $1.68 | $1.84 - $1.90 | ||||||||||||||||||||
| Non-GAAP EPS | $2.20 | $2.40 - $2.50 | $2.50 - $2.56 | ||||||||||||||||||||
| Y/Y Growth | 18% | 9% - 14% | 14% - 16% | ||||||||||||||||||||
| Cash Flow from Operations ($ Million) | $730 | $775 - $825 | $810 - $840 | ||||||||||||||||||||
| DSO | 47 | ~45 | ~45 | ||||||||||||||||||||
| Capital Expenditures ($ Million) | $75 | ~$80 | ~$80 | ||||||||||||||||||||
*Backlog = Remaining Performance Obligations + IP Access Agreements
| July 20, 2020 | Cadence Q2 2020 Financial Results | 3 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Second Quarter Financial Results
Backlog
| (In Billions) | 2018 | 2019 | Q2 2020 | ||||||||||||||||||||||||||||||||
| Backlog* | $3.0 | $3.6 | $3.7 | ||||||||||||||||||||||||||||||||
*Backlog = Remaining Performance Obligations + IP Access Agreements
Revenue
| (In Thousands) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Product and Maintenance | $548,028 | $548,105 | $564,964 | $581,699 | $601,356 | ||||||||||||||||||||||||||||||
| Services | 32,391 | 31,498 | 34,591 | 36,258 | 37,062 | ||||||||||||||||||||||||||||||
| Total Revenue | $580,419 | $579,603 | $599,555 | $617,957 | $638,418 | ||||||||||||||||||||||||||||||
Revenue Mix by Geography
| (% of Total Revenue) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Americas | 42 | % | 44 | % | 46 | % | 43 | % | 44 | % | |||||||||||||||||||||||||
| China | 12 | % | 10 | % | 9 | % | 13 | % | 12 | % | |||||||||||||||||||||||||
| Other Asia | 19 | % | 21 | % | 20 | % | 18 | % | 19 | % | |||||||||||||||||||||||||
| Europe, Middle East and Africa | 20 | % | 18 | % | 18 | % | 19 | % | 18 | % | |||||||||||||||||||||||||
| Japan | 7 | % | 7 | % | 7 | % | 7 | % | 7 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
Revenue Mix by Product Category
| (% of Total Revenue) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Custom IC Design and Simulation | 26 | % | 26 | % | 25 | % | 25 | % | 24 | % | |||||||||||||||||||||||||
| Digital IC Design and Signoff | 31 | % | 30 | % | 29 | % | 29 | % | 28 | % | |||||||||||||||||||||||||
| Functional Verification | 22 | % | 20 | % | 24 | % | 23 | % | 24 | % | |||||||||||||||||||||||||
| IP | 11 | % | 15 | % | 13 | % | 14 | % | 14 | % | |||||||||||||||||||||||||
| System Interconnect and Analysis | 10 | % | 9 | % | 9 | % | 9 | % | 10 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
Gross Margin
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | |||||||||||||||||||||||||||||||
| GAAP Gross Margin | 89.4 | % | 89.5 | % | 87.8 | % | 88.0 | % | 88.2 | % | |||||||||||||||||||||||||
| Non-GAAP Gross Margin | 91.6 | % | 91.5 | % | 89.7 | % | 89.9 | % | 90.3 | % | |||||||||||||||||||||||||
Total Costs and Expenses
| (In Thousands) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Total GAAP Costs and Expenses | $446,744 | $458,777 | $490,656 | $478,606 | $486,468 | ||||||||||||||||||||||||||||||
| Total Non-GAAP Costs and Expenses | $385,591 | $395,995 | $415,140 | $418,827 | $414,559 | ||||||||||||||||||||||||||||||
| July 20, 2020 | Cadence Q2 2020 Financial Results | 4 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Operating Margin
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | |||||||||||||||||||||||||||||||
| GAAP Operating Margin | 23.0 | % | 20.8 | % | 18.2 | % | 22.6 | % | 23.8 | % | |||||||||||||||||||||||||
| Non-GAAP Operating Margin | 33.6 | % | 31.7 | % | 30.8 | % | 32.2 | % | 35.1 | % | |||||||||||||||||||||||||
Earnings Per Share
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | |||||||||||||||||||||||||||||||
| GAAP Net Income Per Share | $0.38 | $0.36 | $2.36 | $0.44 | $0.47 | ||||||||||||||||||||||||||||||
| Non-GAAP Net Income Per Share | $0.57 | $0.54 | $0.54 | $0.60 | $0.66 | ||||||||||||||||||||||||||||||
Total DSO
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | |||||||||||||||||||||||||||||||
| DSO | 38 | 43 | 47 | 42 | 45 | ||||||||||||||||||||||||||||||
Balance Sheet and Cash Review
Cash Flow from Operating Activities
| (In Thousands) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Net Cash from Operating Activities | $246,360 | $138,530 | $159,296 | $217,719 | $345,124 | ||||||||||||||||||||||||||||||
Capital Expenditures
| (In Thousands) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Capital Expenditures | $15,287 | $16,965 | $27,078 | $22,179 | $21,356 | ||||||||||||||||||||||||||||||
Cash and Cash Equivalents
| (In Thousands) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $633,415 | $655,216 | $705,210 | $946,285 | $1,189,186 | ||||||||||||||||||||||||||||||
•Approximately 57 percent of our cash and cash equivalents were in the U.S. at quarter-end.
Stock Repurchase
| (In Thousands, Except Share Price) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| Share Repurchase | $75,006 | $75,011 | $75,017 | $100,022 | $75,014 | ||||||||||||||||||||||||||||||
| Number of Shares | 1,125 | 1,065 | 1,122 | 1,488 | 920 | ||||||||||||||||||||||||||||||
| Average Share Price | $66.67 | $70.43 | $66.86 | $67.22 | $81.54 | ||||||||||||||||||||||||||||||
Employees
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | |||||||||||||||||||||||||||||||
| Headcount | 7,743 | 8,016 | 8,078 | 8,205 | 8,375 | ||||||||||||||||||||||||||||||
| July 20, 2020 | Cadence Q2 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.
| July 20, 2020 | Cadence Q2 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) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | ||||||||||||||||||||||||||||||
| GAAP total costs and expenses | $446,744 | $458,777 | $490,656 | $478,606 | $486,468 | ||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP total costs and expenses | |||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | (14,458) | (12,799) | (12,660) | (15,066) | (16,074) | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | (44,257) | (48,279) | (46,758) | (46,482) | (46,907) | ||||||||||||||||||||||||||||||
| Non-qualified deferred compensation (expenses) credits | (862) | (52) | (1,948) | 4,796 | (3,618) | ||||||||||||||||||||||||||||||
| Restructuring and other (charges) credits | 313 | 186 | (9,809) | 1,067 | 275 | ||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | (1,889) | (1,838) | (3,466) | (3,970) | (5,315) | ||||||||||||||||||||||||||||||
| Special charges | — | — | (875) | (124) | (270) | ||||||||||||||||||||||||||||||
Non-GAAP total costs and expenses† | $385,591 | $395,995 | $415,140 | $418,827 | $414,559 | ||||||||||||||||||||||||||||||
† 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 | ~$2,020 | ||||||||||||||||||||||||||||||
| 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) | ~(197) | ||||||||||||||||||||||||||||||
| 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) | ~(19) | ||||||||||||||||||||||||||||||
| Special charges | — | — | — | (1) | — | ||||||||||||||||||||||||||||||
Non-GAAP total costs and expenses† | $1,348 | $1,409 | $1,491 | $1,587 | ~$1,742 | ||||||||||||||||||||||||||||||
† 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.
| July 20, 2020 | Cadence Q2 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
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | |||||||||||||||||||||||||||||||
| GAAP gross margin as percent of total revenue | 89.4% | 89.5% | 87.8% | 88.0% | 88.2% | ||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP gross margin as a percent of total revenue | |||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 1.9% | 1.7% | 1.6% | 1.7% | 1.8% | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.3% | 0.3% | 0.3% | 0.2% | 0.3% | ||||||||||||||||||||||||||||||
| 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† | 91.6% | 91.5% | 89.7% | 89.9% | 90.3% | ||||||||||||||||||||||||||||||
† 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.
| July 20, 2020 | Cadence Q2 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
| Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020E | |||||||||||||||||||||||||||||||||||||||
| GAAP operating margin as percent of total revenue | 23% | 21% | 18% | 23% | 24% | ~22% | ||||||||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 3% | 2% | 2% | 2% | 2% | 2% | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 8% | 9% | 8% | 7% | 7% | 7% | ||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | (1)% | 1% | 0% | ||||||||||||||||||||||||||||||||||||||
| Restructuring and other charges (credits) | 0% | 0% | 2% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 0% | 0% | 1% | 1% | 1% | 1% | ||||||||||||||||||||||||||||||||||||||
| Special charges | 0% | 0% | 0% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
Non-GAAP operating margin as percent of total revenue† | 34% | 32% | 31% | 32% | 35% | ~32% | ||||||||||||||||||||||||||||||||||||||
† 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% | ~22% | |||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 4% | 3% | 2% | 2% | 2% | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 6% | 7% | 8% | 8% | 8% | |||||||||||||||||||||||||||||||||
| 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% | ~33% | |||||||||||||||||||||||||||||||||
† 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.
| July 20, 2020 | Cadence Q2 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) | Q2 2019 | Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020E | ||||||||||||||||||||||||||||||||||||||
| Diluted net income per share on a GAAP basis | $0.38 | $0.36 | $2.36 | $0.44 | $0.47 | $0.49 - $0.51 | ||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 0.05 | 0.04 | 0.05 | 0.05 | 0.06 | 0.06 | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.16 | 0.17 | 0.17 | 0.17 | 0.17 | 0.16 | ||||||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||||||
| Special charges | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets * | 0.01 | 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 | (0.03) | (0.05) | (0.03) | (0.09) | (0.06) | (0.14) | ||||||||||||||||||||||||||||||||||||||
Diluted net income per share on a non-GAAP basis † | $0.57 | $0.54 | $0.54 | $0.60 | $0.66 | $0.59 - $0.61 | ||||||||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share - GAAP ** | 281,054 | 280,666 | 279,557 | 279,265 | 279,080 | |||||||||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share - non-GAAP ** | 281,054 | 280,666 | 279,557 | 279,265 | 279,080 | |||||||||||||||||||||||||||||||||||||||
† 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.
| July 20, 2020 | Cadence Q2 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 | $1.84 - $1.90 | |||||||||||||||||||||||||||||||||
| 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 | 0.07 | |||||||||||||||||||||||||||||||||
| 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) | (0.36) | |||||||||||||||||||||||||||||||||
Diluted net income per share on a non-GAAP basis † | $1.21 | $1.40 | $1.87 | $2.20 | $2.50 - $2.56 | |||||||||||||||||||||||||||||||||
| 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.
| July 20, 2020 | Cadence Q2 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) - $(25) | |||||||||||||||||||||||
| 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) | 6 | |||||||||||||||||||||||
Non-GAAP total other income and expense† | $(21.1) | $(14.1) | $(15) - $(19) | |||||||||||||||||||||||
† 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.
| July 20, 2020 | Cadence Q2 2020 Financial Results | 12 | ||||||