EX-99.02 3 cfocommentary4202020ex.htm CFO COMMENTARY Exhibit
Exhibit 99.02
image0a22.jpg


 
CADENCE REPORTS FIRST QUARTER
2020
 
CADENCE DESIGN SYSTEMS, INC.
 
 
 
 
 
 
 
 
 
 
 
CFO COMMENTARY
 
 
 
 
Key Takeaways
• Q1 results met or exceeded our expectations for key financial metrics.
• Repurchased $100 million of Cadence stock in Q1.
Q2 2020 Outlook
• Revenue : $580 - $600 million.
• GAAP operating margin: ~18%.
• Non-GAAP operating margin: ~30%.
• GAAP EPS: $0.28 - $0.32
• Non-GAAP EPS: $0.50 - $0.54
Q1 2020 KEY METRICS
 
• Revenue $618 million
• GAAP operating margin 23%
• Non-GAAP operating margin 32%
• GAAP EPS $0.44
• Non-GAAP EPS $0.60
• Operating cash flow $218 million
 
 
 
 
 
 
 
FY 2020 Outlook
• Revenue: $2.545 - $2.585 billion.
• GAAP operating margin: 21% - 22%.
• Non-GAAP operating margin: 32% - 33%.
• GAAP EPS: $1.58 - $1.68
• Non-GAAP EPS $2.40 - $2.50
• Operating cash flow: $775 - $825 million.
• Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year.
Financial Results Webcast
 
 
Our Q1 2020 financial results webcast will begin April 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 April 20, 2020 until 5:00 p.m. (Pacific) on June 12, 2020.
 
 
 
 
 
 
 

 
 
 
April 20, 2020
Cadence Q1 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
 
 
$2,545 - $2,585
 
Revenue growth
 
 
7%
 
10%
 
9%
 
 
9% - 11%
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating expenses
1,571
 
1,619
 
1,742
 
1,845
 
 
~2,002
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating expenses
1,348
 
1,409
 
1,491
 
1,587
 
 
~1,728
 
Non-GAAP operating expense growth
 
 
5%
 
6%
 
6%
 
 
~9%
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating margin
13%
 
17%
 
19%
 
21%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Implied GAAP operating margin**
 
 
 
 
 
 
 
 
 
21.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP operating margin
26%
 
28%
 
30%
 
32%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Implied Non-GAAP operating margin**
 
 
 
 
 
 
 
 
 
32.5%
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP earnings per share
$0.70
 
$0.73
 
$1.23
 
$3.53
 
 
$1.58 - $1.68
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP earning per share
$1.21
 
$1.40
 
$1.87
 
$2.20
 
 
$2.40 - $2.50
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares diluted outstanding
291.3
 
280.2
 
281.1
 
280.5
 
 
278 - 281
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow from operations
445
 
471
 
605
 
730
 
 
$775 - $825
 
 
 
 
 
 
 
 
 
 
 
 
 
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.

Second Quarter 2020 Financial Outlook
 
Q2 2019A
 
Q1 2020A
 
 
Q2 2020E
 
 
 
 
 
 
 
 
 
Total Revenue ($ Million)
$580.4
 
$618.0
 
 
$580 - $600
 
   Q/Q Growth
 
 
3%
 
 
(6)% - (3)%
 
   Y/Y Growth
 
 
7%
 
 
(0)% - 3%
 
 
 
 
 
 
 
 
 
GAAP Operating Margin
23%
 
23%
 
 
~18%
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Margin
34%
 
32%
 
 
~30%
 
 
 
 
 
 
 
 
 
GAAP EPS
$0.38
 
$0.44
 
 
$0.28 - $0.32
 
 
 
 
 
 
 
 
 
Non-GAAP EPS
$0.57
 
$0.60
 
 
$0.50 - $0.54
 
   Q/Q Growth
 
 
11%
 
 
(17)% - (10)%
 
   Y/Y Growth
 
 
11%
 
 
(12)% - (5)%
 
 
 
 
 
 
 
 
 





April 20, 2020
Cadence Q1 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
 
 
$2.545 - $2.585
 
   Y/Y Growth
9%
 
9% - 11%
 
 
9% - 11%
 
 
 
 
 
 
 
 
 
Revenue from Beginning Remaining Performance Obligations
~75%
 
~75%
 
 
~75%
 
 
 
 
 
 
 
 
 
GAAP Operating Margin
21.1%
 
21% - 22%
 
 
21% - 22%
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Margin
32.1%
 
32% - 33%
 
 
32% - 33%
 
 
 
 
 
 
 
 
 
GAAP Other Income & Expense ($ Million)
$(12.8)
 
$(16) - $(25)
 
 
$(29) - $(33)
 
 
 
 
 
 
 
 
 
Non-GAAP Other Income & Expense ($ Million)
$(14.1)
 
$(12) - $(21)
 
 
$(19) - $(23)
 
 
 
 
 
 
 
 
 
GAAP Tax Rate
-106%
 
~20%
 
 
~14%
 
 
 
 
 
 
 
 
 
Non-GAAP Tax Rate
16%
 
16%
 
 
16%
 
 
 
 
 
 
 
 
 
Weighted Average Diluted Shares Outstanding (Million)
280.5
 
279 - 282
 
 
278 - 281
 
 
 
 
 
 
 
 
 
GAAP EPS
$3.53
 
$1.46 - $1.56
 
 
$1.58 - $1.68
 
 
 
 
 
 
 
 
 
Non-GAAP EPS
$2.20
 
$2.40 - $2.50
 
 
$2.40 - $2.50
 
   Y/Y Growth
18%
 
9% - 14%
 
 
9% - 14%
 
 
 
 
 
 
 
 
 
Cash Flow from Operations ($ Million)
$730
 
$775 - $825
 
 
$775 - $825
 
 
 
 
 
 
 
 
 
DSO
47
 
~45
 
 
~45
 
 
 
 
 
 
 
 
 
Capital Expenditures ($ Million)
$75
 
~$90
 
 
~$80
 
 
 
 
 
 
 
 
 

April 20, 2020
Cadence Q1 2020 Financial Results
3
Cadence Design Systems, Inc.
 

First Quarter Financial Results
Backlog
(In Billions)
 
 
 
 
2018
 
2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Backlog*
 
 
 
 
$3.0
 
$3.6
 
 
$3.7
 
 
 
 
 
 
 
 
 
 
 
 
 
*Backlog = Remaining Performance Obligations + IP Access Agreements
Revenue
(In Thousands)
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Product and Maintenance
$543,518
 
$548,028
 
$548,105
 
$564,964
 
 
$581,699
 
Services
33,224
 
32,391
 
31,498
 
34,591
 
 
36,258
 
   Total Revenue
$576,742
 
$580,419
 
$579,603
 
$599,555
 
 
$617,957
 

Revenue Mix by Geography
(% of Total Revenue)
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
Americas
44
%
 
42
%
 
44
%
 
46
%
 
 
43
%
 
China
10
%
 
12
%
 
10
%
 
9
%
 
 
13
%
 
Other Asia
19
%
 
19
%
 
21
%
 
20
%
 
 
18
%
 
Europe, Middle East and Africa
18
%
 
20
%
 
18
%
 
18
%
 
 
19
%
 
Japan
9
%
 
7
%
 
7
%
 
7
%
 
 
7
%
 
   Total
100
%
 
100
%
 
100
%
 
100
%
 
 
100
%
 

Revenue Mix by Product Group
(% of Total Revenue)
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
Functional Verification
24
%
 
22
%
 
20
%
 
24
%
 
 
23
%
 
Digital IC Design and Signoff
30
%
 
31
%
 
30
%
 
29
%
 
 
29
%
 
Custom IC Design and Simulation
25
%
 
26
%
 
26
%
 
25
%
 
 
25
%
 
System Interconnect and Analysis
9
%
 
10
%
 
9
%
 
9
%
 
 
9
%
 
IP
12
%
 
11
%
 
15
%
 
13
%
 
 
14
%
 
   Total
100
%
 
100
%
 
100
%
 
100
%
 
 
100
%
 

Gross Margin
 
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Gross Margin
87.8
%
 
89.4
%
 
89.5
%
 
87.8
%
 
 
88.0
%
 
Non-GAAP Gross Margin
89.7
%
 
91.6
%
 
91.5
%
 
89.7
%
 
 
89.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 

Total Costs and Expenses
(In Thousands)
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Total GAAP Costs and Expenses
$448,346
 
$446,744
 
$458,777
 
$490,656
 
 
$478,606
 
Total Non-GAAP Costs and Expenses
$390,166
 
$385,591
 
$395,995
 
$415,140
 
 
$418,827
 
 
 
 
 
 
 
 
 
 
 
 
 

April 20, 2020
Cadence Q1 2020 Financial Results
4
Cadence Design Systems, Inc.
 

Operating Margin
 
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating Margin
22.3
%
 
23.0
%
 
20.8
%
 
18.2
%
 
 
22.6
%
 
Non-GAAP Operating Margin
32.3
%
 
33.6
%
 
31.7
%
 
30.8
%
 
 
32.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 

Earnings Per Share
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Net Income Per Share
$0.43
 
$0.38
 
$0.36
 
$2.36
 
 
$0.44
 
Non-GAAP Net Income Per Share
$0.54
 
$0.57
 
$0.54
 
$0.54
 
 
$0.60
 
 
 
 
 
 
 
 
 
 
 
 
 

Total DSO
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
DSO
42
 
38
 
43
 
47
 
 
42
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet and Cash Review
Cash Flow from Operating Activities
(In Thousands)
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Cash from Operating Activities
$185,414
 
$246,360
 
$138,530
 
$159,296
 
 
$217,719
 
 
 
 
 
 
 
 
 
 
 
 
 

Capital Expenditures
(In Thousands)
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
$15,275
 
$15,287
 
$16,965
 
$27,078
 
 
$22,179
 
 
 
 
 
 
 
 
 
 
 
 
 

Cash and Cash Equivalents
(In Thousands)
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and Cash Equivalents
$538,898
 
$633,415
 
$655,216
 
$705,210
 
 
$946,285
 
 
 
 
 
 
 
 
 
 
 
 
 
•
Approximately 53 percent of our cash and cash equivalents were in the U.S. at quarter-end.

Stock Repurchase
(In Thousands, Except Share Price)
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
Share Repurchase
$81,114

 
$75,006

 
$75,011

 
$75,017

 
 
$100,022

 
Number of Shares
1,529

 
1,125

 
1,065

 
1,122

 
 
1,488

 
Average Share Price
$53.05

 
$66.67

 
$70.43

 
$66.86

 
 
$67.22

 
 
 
 
 
 
 
 
 
 
 
 
 

Employees
 
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
Headcount
7,570

 
7,743

 
8,016

 
8,078

 
 
8,205

 
 
 
 
 
 
 
 
 
 
 
 
 

April 20, 2020
Cadence Q1 2020 Financial Results
5
Cadence Design Systems, Inc.
 

Forward Looking Statements
The statements in this CFO Commentary contain forward-looking statements 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 electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence’s efforts to improve operational efficiency and growth, including strategic, customer and supplier relationships; (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, economic conditions, government regulations, trade restrictions or the COVID-19 pandemic; (v) economic and industry conditions, government regulations, trade restrictions and the duration and severity of the COVID-19 pandemic and containment measures in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates and Cadence’s ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence’s efforts to maintain and improve operational efficiency in its business, including its ability to retain key employees and to have the vast majority of its employees work remotely during the COVID-19 pandemic; (x) 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; (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (xii) the effects of the COVID-19 pandemic and containment measures. 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.

April 20, 2020
Cadence Q1 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)
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP total costs and expenses
$448,346

 
$446,744

 
$458,777

 
$490,656

 
 
$478,606

 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items to non-GAAP total costs and expenses
 
 
 
 
 
 
 
 
 
 
 
Amortization of acquired intangibles
(13,162
)
 
(14,458
)
 
(12,799
)
 
(12,660
)
 
 
(15,066
)
 
Stock-based compensation expense
(42,253
)
 
(44,257
)
 
(48,279
)
 
(46,758
)
 
 
(46,482
)
 
Non-qualified deferred compensation (expenses) credits
(2,540
)
 
(862
)
 
(52
)
 
(1,948
)
 
 
4,796

 
Restructuring and other (charges) credits
689

 
313

 
186

 
(9,809
)
 
 
1,067

 
Acquisition and integration-related costs
(914
)
 
(1,889
)
 
(1,838
)
 
(3,466
)
 
 
(3,970
)
 
Special charges
—

 
—

 
—

 
(875
)
 
 
(124
)
 
Non-GAAP total costs and expenses†
$390,166

 
$385,591

 
$395,995

 
$415,140

 
 
$418,827

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

† 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

 
 
~$2,002

 
 
 
 
 
 
 
 
 
 
 
 
 
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
)
 
 
~(200)

 
Non-qualified deferred compensation (expenses) credits
(2
)
 
(6
)
 
1

 
(5
)
 
 
~5

 
Restructuring and other (charges) credits
(41
)
 
(9
)
 
(11
)
 
(9
)
 
 
~1

 
Acquisition and integration-related costs
(11
)
 
(8
)
 
(20
)
 
(8
)
 
 
~(16)

 
Special charges
—

 
—

 
—

 
(1
)
 
 
—

 
Non-GAAP total costs and expenses†
$1,348

 
$1,409

 
$1,491

 
$1,587

 
 
~$1,728

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

† 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.



April 20, 2020
Cadence Q1 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
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP gross margin as percent of total revenue
87.8%
 
89.4%
 
89.5%
 
87.8%
 
 
88.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items to non-GAAP gross margin as a percent of total revenue
 
 
 
 
 
 
 
 
 
 
 
Amortization of acquired intangibles
1.7%
 
1.9%
 
1.7%
 
1.6%
 
 
1.7%
 
Stock-based compensation expense
0.2%
 
0.3%
 
0.3%
 
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†
89.7%
 
91.6%
 
91.5%
 
89.7%
 
 
89.9%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
† 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.




April 20, 2020
Cadence Q1 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
 
Q1 2019
 
Q2 2019
 
Q3 2019
 
Q4 2019
 
 
Q1 2020
 
 
Q2 2020E
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating margin as percent of total revenue
22%
 
23%
 
21%
 
18%
 
 
23%
 
 
~18%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciling items to non-GAAP operating margin as a percent of total revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of acquired intangibles
2%
 
3%
 
2%
 
2%
 
 
2%
 
 
3%
 
Stock-based compensation expense
7%
 
8%
 
9%
 
8%
 
 
7%
 
 
8%
 
Non-qualified deferred compensation expenses (credits)
1%
 
0%
 
0%
 
0%
 
 
(1)%
 
 
0%
 
Restructuring and other charges (credits)
0%
 
0%
 
0%
 
2%
 
 
0%
 
 
0%
 
Acquisition and integration-related costs
0%
 
0%
 
0%
 
1%
 
 
1%
 
 
1%
 
Special charges
0%
 
0%
 
0%
 
0%
 
 
0%
 
 
0%
 
Non-GAAP operating margin as percent of total revenue†
32%
 
34%
 
32%
 
31%
 
 
32%
 
 
~30%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

† 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%
 
 
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%
 
 
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.




April 20, 2020
Cadence Q1 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)
Q1 2019

 
Q2 2019

 
Q3 2019

 
Q4 2019

 
 
Q1 2020

 
 
Q2 2020E

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income per share on a GAAP basis
$0.43

 
$0.38

 
$0.36

 
$2.36

 
 
$0.44

 
 
$0.28 - $0.32

 
Amortization of acquired intangibles
0.05

 
0.05

 
0.04

 
0.05

 
 
0.05

 
 
0.06

 
Stock-based compensation expense
0.15

 
0.16

 
0.17

 
0.17

 
 
0.17

 
 
0.17

 
Non-qualified deferred compensation expenses (credits)
0.01

 
—

 
—

 
0.01

 
 
(0.02
)
 
 
—

 
Restructuring and other charges (credits)
—

 
—

 
—

 
0.03

 
 
—

 
 
—

 
Acquisition and integration-related costs
—

 
—

 
0.01

 
0.01

 
 
0.02

 
 
0.02

 
Special charges
—

 
—

 
—

 
—

 
 
—

 
 
—

 
Other income or expense related to investments and non-qualified deferred compensation plan assets *
(0.02
)
 
0.01

 
0.01

 
—

 
 
0.03

 
 
—

 
Income tax benefit related to intercompany transfers of certain intellectual property rights
—

 
—

 
—

 
(2.06
)
 
 
—

 
 
—

 
Income tax effect of non-GAAP adjustments
(0.08
)
 
(0.03
)
 
(0.05
)
 
(0.03
)
 
 
(0.09
)
 
 
(0.03
)
 
Diluted net income per share on a non-GAAP basis †
$0.54

 
$0.57

 
$0.54

 
$0.54

 
 
$0.60

 
 
$0.50 - $0.54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in calculation of diluted net income per share - GAAP **
280,615

 
281,054

 
280,666

 
279,557

 
 
279,265

 
 
 
 
Shares used in calculation of diluted net income per share - non-GAAP **
280,615

 
281,054

 
280,666

 
279,557

 
 
279,265

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

† 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.



April 20, 2020
Cadence Q1 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

 
 
$1.58 - $1.68

 
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

 
 
0.71

 
Non-qualified deferred compensation expenses (credits)
0.01

 
0.02

 
(0.01
)
 
 
0.02

 
 
(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

 
 
0.06

 
Special charges
—

 
—

 
—

 
 
—

 
 
—

 
Other income or expense related to investments and non-qualified deferred compensation plan assets *
(0.02
)
 
(0.05
)
 
—

 
 
(0.01
)
 
 
0.03

 
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
)
 
 
(0.19
)
 
Diluted net income per share on a non-GAAP basis †
$1.21

 
$1.40

 
$1.87

 
 
$2.20

 
 
$2.40 - $2.50

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in calculation of diluted net income per share - GAAP **
291,256

 
280,221

 
281,144

 
 
280,515

 
 
278 - 281M

 
Shares used in calculation of diluted net income per share - non-GAAP **
291,256

 
280,221

 
281,144

 
 
280,515

 
 
278 - 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.






April 20, 2020
Cadence Q1 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)
 
 
$(29) - $(33)
 
 
 
 
 
 
 
 
 
 
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)
 
 
10
 
Non-GAAP total other income and expense†
$(21.1)
 
 
$(14.1)
 
 
$(19) - $(23)
 
 
 
 
 
 
 
 
 
 

† 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.




April 20, 2020
Cadence Q1 2020 Financial Results
12