Cadence Reports Third Quarter 2019 Financial Results

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 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 28, 2019

 

September 29, 2018

 

 

(unaudited)

GAAP operating margin as a percent of total revenue

 

21%

 

19%

Reconciling items to non-GAAP operating margin as a percent of total revenue:

 

 

 

 

Amortization of acquired intangibles

 

2%

 

3%

Stock-based compensation expense

 

9%

 

9%

Non-qualified deferred compensation expenses

 

0%

 

0%

Restructuring and other credits

 

0%

 

0%

Acquisition and integration-related costs

 

0%

 

1%

Non-GAAP operating margin as a percent of total revenue

 

32%

 

32%

 

Net Income Reconciliation

 

Three Months Ended

 

 

September 28, 2019

 

September 29, 2018

 

 

(unaudited)

(in thousands)

 

 

 

 

Net income on a GAAP basis

 

$

101,514

 

 

$

99,318

 

Amortization of acquired intangibles

 

12,799

 

 

12,975

 

Stock-based compensation expense

 

48,279

 

 

46,264

 

Non-qualified deferred compensation expenses

 

52

 

 

1,120

 

Restructuring and other credits

 

(186

)

 

(172

)

Acquisition and integration-related costs

 

1,838

 

 

6,670

 

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

 

2,344

 

 

(498

)

Income tax effect of non-GAAP adjustments

 

(13,899

)

 

(26,306

)

Net income on a non-GAAP basis

 

$

152,741

 

 

$

139,371

 

*

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 28, 2019

 

September 29, 2018

 

 

(unaudited)

(in thousands, except per share data)

 

 

 

 

Diluted net income per share on a GAAP basis

 

$

0.36

 

 

$

0.35

 

Amortization of acquired intangibles

 

0.04

 

 

0.05

 

Stock-based compensation expense

 

0.17

 

 

0.16

 

Non-qualified deferred compensation expenses

 

 

 

 

Restructuring and other credits

 

 

 

 

Acquisition and integration-related costs

 

0.01

 

 

0.02

 

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

 

0.01

 

 

 

Income tax effect of non-GAAP adjustments

 

(0.05

)

 

(0.09

)

Diluted net income per share on a non-GAAP basis

 

$

0.54

 

 

$

0.49

 

Shares used in calculation of diluted net income per share — GAAP**

 

280,666

 

 

281,646

 

Shares used in calculation of diluted net income per share — non-GAAP**

 

280,666

 

 

281,646

 

*

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.


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