Form 8-K CADENCE DESIGN SYSTEMS For: Apr 25
Exhibit 99.01
Cadence Reports First Quarter 2022 Financial Results
SAN JOSE, Calif. — April 25, 2022 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the first quarter of 2022.
Cadence reported first quarter 2022 revenue of $902 million, compared to revenue of $736 million for the same period in 2021. On a GAAP basis, Cadence achieved operating margin of 35 percent and recognized net income of $235 million, or $0.85 per share on a diluted basis, in the first quarter of 2022, compared to operating margin of 28 percent and net income of $187 million, or $0.67 per share on a diluted basis, for the same period in 2021.
Using the non-GAAP measures defined below, operating margin for the first quarter of 2022 was 44 percent and net income was $324 million, or $1.17 per share on a diluted basis, compared to operating margin of 38 percent and net income of $231 million, or $0.83 per share on a diluted basis, for the same period in 2021.
“Q1 was a strong start of the year for Cadence, as we delivered outstanding results driven by broad-based strength across our diverse product portfolio,” said Anirudh Devgan, president and chief executive officer. “Our Intelligent System Design strategy aligns well with the generational secular trends that are fueling robust design activity, and our innovative solutions are accelerating growth in both our core and our new systems businesses across a rapidly expanding customer base.”
“Q1 results reflect the success we have with our customers and partners, as well as the solid execution from the Cadence team. We benefited from strong demand for our technologies,” said John Wall, senior vice president and chief financial officer. “We exceeded all key operating metrics for the quarter and are raising our full year guidance.”
CFO Commentary
Commentary on the first quarter 2022 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 second quarter of 2022, the company expects total revenue in the range of $825 million to $845 million. Second quarter GAAP operating margin is expected to be in the range of 29 percent to 30 percent and GAAP net income per diluted share is expected to be in the range of $0.59 to $0.63. Using the non-GAAP measures defined below, operating margin is expected to be in the range of 39 percent to 40 percent and net income per diluted share is expected to be in the range of $0.95 to $0.99.
For fiscal year 2022, the company expects total revenue in the range of $3.395 billion to $3.435 billion. On a GAAP basis, operating margin is expected to be in the range of 28.5 percent to 30 percent and GAAP net income per diluted share for 2022 is expected to be in the range of $2.51 to $2.59. Using the non-GAAP measures defined below, operating margin for 2022 is expected to be in the range of 38.5 percent to 40 percent and net income per diluted share for 2022 is expected to be in the range of $3.89 to $3.97.
The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate could be subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use this normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.
A schedule showing reconciliations of the business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, is included in this release.
Audio Webcast Scheduled
Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the first quarter 2022 financial results audio webcast today, April 25, 2022, 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 April 25, 2022 at 5 p.m. (Pacific) and ending June 17, 2022 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 systems 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 products from chips to boards to complete systems for the most dynamic market applications, including hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and healthcare. For eight years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.
© 2022 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 deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands or supply constraints 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, inflation rates 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, regulatory or other matters; (ix) the effects of any litigation, regulatory or other proceedings to which Cadence is or may become a party; and (x) the duration, severity, volatility 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 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 | |||||||||||||
| April 2, 2022 | April 3, 2021 | |||||||||||||
| (unaudited) | ||||||||||||||
| GAAP operating margin as a percent of total revenue | 35% | 28% | ||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue: | ||||||||||||||
| Stock-based compensation expense | 7% | 7% | ||||||||||||
| Amortization of acquired intangibles | 2% | 2% | ||||||||||||
| Acquisition and integration-related costs | 0% | 1% | ||||||||||||
| Restructuring | 0% | 0% | ||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | ||||||||||||
| Non-GAAP operating margin as a percent of total revenue | 44% | 38% | ||||||||||||
| Net Income Reconciliation | Three Months Ended | |||||||||||||
| April 2, 2022 | April 3, 2021 | |||||||||||||
| (in thousands) | (unaudited) | |||||||||||||
| Net income on a GAAP basis | $ | 235,335 | $ | 187,169 | ||||||||||
| Stock-based compensation expense | 59,469 | 52,596 | ||||||||||||
| Amortization of acquired intangibles | 16,935 | 16,399 | ||||||||||||
| Acquisition and integration-related costs | 3,897 | 5,510 | ||||||||||||
| Restructuring | 12 | (277) | ||||||||||||
| Non-qualified deferred compensation expenses (credits) | (2,568) | 1,898 | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | 4,606 | (3,332) | ||||||||||||
| Income tax effect of non-GAAP adjustments | 5,938 | (28,782) | ||||||||||||
| Net income on a non-GAAP basis | $ | 323,624 | $ | 231,181 | ||||||||||
| * | 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 | |||||||||||||
| April 2, 2022 | April 3, 2021 | |||||||||||||
| (in thousands, except per share data) | (unaudited) | |||||||||||||
| Diluted net income per share on a GAAP basis | $ | 0.85 | $ | 0.67 | ||||||||||
| Stock-based compensation expense | 0.22 | 0.19 | ||||||||||||
| Amortization of acquired intangibles | 0.06 | 0.06 | ||||||||||||
| Acquisition and integration-related costs | 0.01 | 0.02 | ||||||||||||
| Restructuring | — | — | ||||||||||||
| Non-qualified deferred compensation expenses (credits) | (0.01) | — | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | 0.02 | (0.01) | ||||||||||||
| Income tax effect of non-GAAP adjustments | 0.02 | (0.10) | ||||||||||||
| Diluted net income per share on a non-GAAP basis | $ | 1.17 | $ | 0.83 | ||||||||||
| Shares used in calculation of diluted net income per share | 276,918 | 280,140 | ||||||||||||
| * | 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. | ||||
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 June 17, 2022, 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 second quarter 2022 earnings release is published, which is currently scheduled for July 25, 2022.
For more information, please contact:
Cadence Investor Relations
408-944-7100
investor_relations@cadence.com
Cadence Newsroom
408-944-7039
newsroom@cadence.com
Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
April 2, 2022 and January 1, 2022
(In thousands)
(Unaudited)
| April 2, 2022 | January 1, 2022 | |||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 1,134,752 | $ | 1,088,940 | ||||||||||
| Receivables, net | 361,789 | 337,596 | ||||||||||||
| Inventories | 110,213 | 115,721 | ||||||||||||
| Prepaid expenses and other | 128,143 | 173,512 | ||||||||||||
| Total current assets | 1,734,897 | 1,715,769 | ||||||||||||
| Property, plant and equipment, net | 310,690 | 305,911 | ||||||||||||
| Goodwill | 923,719 | 928,358 | ||||||||||||
| Acquired intangibles, net | 219,110 | 233,265 | ||||||||||||
| Deferred taxes | 787,111 | 763,770 | ||||||||||||
| Other assets | 419,540 | 439,226 | ||||||||||||
| Total assets | $ | 4,395,067 | $ | 4,386,299 | ||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable and accrued liabilities | $ | 360,547 | $ | 417,283 | ||||||||||
| Current portion of deferred revenue | 600,279 | 553,942 | ||||||||||||
| Total current liabilities | 960,826 | 971,225 | ||||||||||||
| Long-term liabilities: | ||||||||||||||
| Long-term portion of deferred revenue | 106,838 | 101,148 | ||||||||||||
| Long-term debt | 347,792 | 347,588 | ||||||||||||
| Other long-term liabilities | 219,428 | 225,663 | ||||||||||||
| Total long-term liabilities | 674,058 | 674,399 | ||||||||||||
| Stockholders’ equity | 2,760,183 | 2,740,675 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 4,395,067 | $ | 4,386,299 | ||||||||||
Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended April 2, 2022 and April 3, 2021
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||||||||||
| April 2, 2022 | April 3, 2021 | |||||||||||||
| Revenue: | ||||||||||||||
| Product and maintenance | $ | 846,244 | $ | 699,054 | ||||||||||
| Services | 55,522 | 36,974 | ||||||||||||
| Total revenue | 901,766 | 736,028 | ||||||||||||
| Costs and expenses: | ||||||||||||||
| Cost of product and maintenance | 72,795 | 64,906 | ||||||||||||
| Cost of services | 25,048 | 19,061 | ||||||||||||
| Marketing and sales | 140,186 | 132,826 | ||||||||||||
| Research and development | 290,895 | 270,992 | ||||||||||||
| General and administrative | 48,937 | 39,952 | ||||||||||||
| Amortization of acquired intangibles | 4,964 | 4,631 | ||||||||||||
| Restructuring | 12 | (277) | ||||||||||||
| Total costs and expenses | 582,837 | 532,091 | ||||||||||||
| Income from operations | 318,929 | 203,937 | ||||||||||||
| Interest expense | (4,108) | (4,217) | ||||||||||||
| Other income (expense), net | (4,900) | 2,701 | ||||||||||||
| Income before provision for income taxes | 309,921 | 202,421 | ||||||||||||
| Provision for income taxes | 74,586 | 15,252 | ||||||||||||
| Net income | $ | 235,335 | $ | 187,169 | ||||||||||
| Net income per share - basic | $ | 0.86 | $ | 0.68 | ||||||||||
| Net income per share - diluted | $ | 0.85 | $ | 0.67 | ||||||||||
| Weighted average common shares outstanding - basic | 272,431 | 274,021 | ||||||||||||
| Weighted average common shares outstanding - diluted | 276,918 | 280,140 | ||||||||||||
Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended April 2, 2022 and April 3, 2021
(In thousands)
(Unaudited)
| Three Months Ended | |||||||||||
| April 2, 2022 | April 3, 2021 | ||||||||||
| Cash and cash equivalents at beginning of period | $ | 1,088,940 | $ | 928,432 | |||||||
| Cash flows from operating activities: | |||||||||||
| Net income | 235,335 | 187,169 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 34,825 | 36,218 | |||||||||
| Amortization of debt discount and fees | 268 | 264 | |||||||||
| Stock-based compensation | 59,469 | 52,596 | |||||||||
| (Gain) loss on investments, net | 2,038 | (1,433) | |||||||||
| Deferred income taxes | (24,920) | 2,710 | |||||||||
| Provisions for losses (recoveries) on receivables | (344) | 77 | |||||||||
| ROU asset amortization and change in operating lease liabilities | 926 | (2,136) | |||||||||
| Other non-cash items | 88 | 302 | |||||||||
| Changes in operating assets and liabilities, net of effect of acquired businesses: | |||||||||||
| Receivables | (28,426) | (45,927) | |||||||||
| Inventories | 4,580 | (669) | |||||||||
| Prepaid expenses and other | 44,419 | (3,014) | |||||||||
| Other assets | 11,588 | 6,260 | |||||||||
| Accounts payable and accrued liabilities | (58,203) | (80,769) | |||||||||
| Deferred revenue | 56,225 | 59,166 | |||||||||
| Other long-term liabilities | (1,260) | (2,372) | |||||||||
| Net cash provided by operating activities | 336,608 | 208,442 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of non-marketable investments | (1,000) | — | |||||||||
| Purchases of property, plant and equipment | (18,130) | (16,968) | |||||||||
| Purchases of intangible assets | (750) | — | |||||||||
| Cash paid in business combinations, net of cash acquired | — | (189,262) | |||||||||
| Net cash used for investing activities | (19,880) | (206,230) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock | 45,673 | 46,384 | |||||||||
| Stock received for payment of employee taxes on vesting of restricted stock | (56,343) | (56,385) | |||||||||
| Payments for repurchases of common stock | (250,016) | (172,267) | |||||||||
| Net cash used for financing activities | (260,686) | (182,268) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (10,230) | (5,395) | |||||||||
| Increase (decrease) in cash and cash equivalents | 45,812 | (185,451) | |||||||||
| Cash and cash equivalents at end of period | $ | 1,134,752 | $ | 742,981 | |||||||
Cadence Design Systems, Inc.
(Unaudited)
Revenue Mix by Geography (% of Total Revenue)
| 2021 | 2022 | ||||||||||||||||||||||||||||||||||
| GEOGRAPHY | Q1 | Q2 | Q3 | Q4 | Year | Q1 | |||||||||||||||||||||||||||||
| Americas | 46 | % | 44 | % | 46 | % | 43 | % | 45 | % | 47 | % | |||||||||||||||||||||||
| China | 12 | % | 14 | % | 13 | % | 12 | % | 13 | % | 16 | % | |||||||||||||||||||||||
| Other Asia | 18 | % | 19 | % | 18 | % | 21 | % | 19 | % | 18 | % | |||||||||||||||||||||||
| Europe, Middle East and Africa | 18 | % | 17 | % | 17 | % | 18 | % | 17 | % | 14 | % | |||||||||||||||||||||||
| Japan | 6 | % | 6 | % | 6 | % | 6 | % | 6 | % | 5 | % | |||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||
Revenue Mix by Product Category (% of Total Revenue)
| 2021 | 2022 | ||||||||||||||||||||||||||||||||||
| PRODUCT CATEGORY | Q1 | Q2 | Q3 | Q4 | Year | Q1 | |||||||||||||||||||||||||||||
| Custom IC Design and Simulation | 23 | % | 23 | % | 23 | % | 24 | % | 23 | % | 22 | % | |||||||||||||||||||||||
| Digital IC Design and Signoff | 27 | % | 28 | % | 29 | % | 29 | % | 29 | % | 27 | % | |||||||||||||||||||||||
| Functional Verification, including Emulation and Prototyping Hardware | 26 | % | 25 | % | 23 | % | 21 | % | 24 | % | 28 | % | |||||||||||||||||||||||
| IP | 14 | % | 13 | % | 14 | % | 14 | % | 13 | % | 13 | % | |||||||||||||||||||||||
| System Design and Analysis | 10 | % | 11 | % | 11 | % | 12 | % | 11 | % | 10 | % | |||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of April 25, 2022
(Unaudited)
| Three Months Ending July 2, 2022 | Year Ending December 31, 2022 | |||||||||||||
| Forecast | Forecast | |||||||||||||
| GAAP operating margin as a percent of total revenue | 29% - 30% | 28.5% - 30% | ||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue: | ||||||||||||||
| Stock-based compensation expense | 8% | 8% | ||||||||||||
| Amortization of acquired intangibles | 2% | 2% | ||||||||||||
| Acquisition and integration-related costs | 0% | 0% | ||||||||||||
| Non-qualified deferred compensation credits | 0% | 0% | ||||||||||||
| Non-GAAP operating margin as a percent of total revenue† | 39% - 40% | 38.5% - 40% | ||||||||||||
| † | 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 April 25, 2022
(Unaudited)
| Three Months Ending July 2, 2022 | Year Ending December 31, 2022 | |||||||||||||
| Forecast | Forecast | |||||||||||||
| Diluted net income per share on a GAAP basis | $0.59 to $0.63 | $2.51 to $2.59 | ||||||||||||
| Stock-based compensation expense | 0.23 | 0.98 | ||||||||||||
| Amortization of acquired intangibles | 0.05 | 0.19 | ||||||||||||
| Acquisition and integration-related costs | 0.01 | 0.03 | ||||||||||||
| Non-qualified deferred compensation credits | — | (0.01) | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | — | 0.02 | ||||||||||||
| Income tax effect of non-GAAP adjustments | 0.07 | 0.17 | ||||||||||||
| Diluted net income per share on a non-GAAP basis† | $0.95 to $0.99 | $3.89 to $3.97 | ||||||||||||
Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of April 25, 2022
(Unaudited)
| Three Months Ending July 2, 2022 | Year Ending December 31, 2022 | |||||||||||||
| ($ in millions) | Forecast | Forecast | ||||||||||||
| Net income on a GAAP basis | $164 to $175 | $697 to $719 | ||||||||||||
| Stock-based compensation expense | 64 | 272 | ||||||||||||
| Amortization of acquired intangibles | 15 | 52 | ||||||||||||
| Acquisition and integration-related costs | 1 | 8 | ||||||||||||
| Non-qualified deferred compensation credits | — | (3) | ||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | — | 5 | ||||||||||||
| Income tax effect of non-GAAP adjustments | 19 | 49 | ||||||||||||
| Net income on a non-GAAP basis† | $263 to $274 | $1,080 to $1,102 | ||||||||||||
| † | 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, 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 FIRST QUARTER 2022 | ||||||||
| CADENCE DESIGN SYSTEMS, INC. | ||||||||
CFO COMMENTARY | ||||||||
Key Takeaways • Q1 results exceeded expectations for key financial metrics, with backlog > $5 billion. • Raising FY 2022 outlook; expect revenue growth and non-GAAP operating margin to exceed 14% and 39%, respectively, for FY 2022. • As a result, 3-year revenue CAGR projected to exceed 13% and on track to achieve non-GAAP incremental margin of > 50% for the sixth year in a row. | Q2 2022 Outlook • Revenue : $825 - $845 million. • GAAP operating margin: 29% - 30%. • Non-GAAP operating margin: 39% - 40%. • GAAP EPS: $0.59 - $0.63 • Non-GAAP EPS: $0.95 - $0.99 • Expect to repurchase at least $125 million of Cadence shares in Q2. | Q1 2022 KEY METRICS | ||||||
• Revenue $902 million • GAAP operating margin 35% • Non-GAAP operating margin 44% • GAAP EPS $0.85 • Non-GAAP EPS $1.17 • Operating cash flow $337 million | ||||||||
FY 2022 Outlook • Revenue: $3.395 - $3.435 billion. • GAAP operating margin: 28.5% - 30%. • Non-GAAP operating margin: 38.5% - 40%. • GAAP EPS: $2.51 - $2.59 • Non-GAAP EPS $3.89 - $3.97 • Operating cash flow: $1.19 - $1.29 billion. • Expect to use at least 50% of free cash flow to repurchase Cadence shares for the year. | Financial Results Webcast | |||||||
| Our Q1 2022 financial results webcast will begin April 25, 2022 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 25, 2022 until 5:00 p.m. (Pacific) on June 17, 2022. | ||||||||
| April 25, 2022 | Cadence Q1 2022 Financial Results | 1 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Financial Metrics
| (In Millions, except per share data) | 2016 | 2017* | 2018 | 2019 | 2020* | 2021 | 2022E | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,816 | $ | 1,943 | $ | 2,138 | $ | 2,336 | $ | 2,683 | $ | 2,988 | $3,395- $3,435 | ||||||||||||||||||||||||||||||||||
| Revenue growth* | 7% | 7% | 10% | 9% | 15% | 11% | 14% - 15% | ||||||||||||||||||||||||||||||||||||||||
| 3-year CAGR | 8% | 7% | 8% | 9% | 11% | 12% | ~13% | ||||||||||||||||||||||||||||||||||||||||
| 3-year CAGR without 53rd week impact | 8% | 11% | |||||||||||||||||||||||||||||||||||||||||||||
| GAAP operating expenses | $ | 1,571 | $ | 1,619 | $ | 1,742 | $ | 1,845 | $ | 2,037 | $ | 2,209 | ~$2,404 | ||||||||||||||||||||||||||||||||||
| Non-GAAP operating expenses | $ | 1,348 | $ | 1,409 | $ | 1,491 | $ | 1,587 | $ | 1,739 | $ | 1,877 | ~$2,075 | ||||||||||||||||||||||||||||||||||
| Non-GAAP operating expense growth | 5% | 6% | 6% | 10% | 8% | ~11% | |||||||||||||||||||||||||||||||||||||||||
| GAAP operating margin | 13% | 17% | 19% | 21% | 24% | 26% | |||||||||||||||||||||||||||||||||||||||||
| Implied GAAP operating margin** | 29.25% | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-GAAP operating margin | 26% | 28% | 30% | 32% | 35% | 37% | |||||||||||||||||||||||||||||||||||||||||
| Implied Non-GAAP operating margin** | 39.25% | ||||||||||||||||||||||||||||||||||||||||||||||
| GAAP earnings per share | $ | 0.70 | $ | 0.73 | $ | 1.23 | $ | 3.53 | $ | 2.11 | $ | 2.50 | $2.51 - $2.59 | ||||||||||||||||||||||||||||||||||
| Non-GAAP earning per share | $ | 1.21 | $ | 1.40 | $ | 1.87 | $ | 2.20 | $ | 2.80 | $ | 3.29 | $3.89 - $3.97 | ||||||||||||||||||||||||||||||||||
| Weighted average shares diluted outstanding | 291.3 | 280.2 | 281.1 | 280.5 | 279.6 | 278.9 | 276 - 279 | ||||||||||||||||||||||||||||||||||||||||
| Cash flow from operations | 445 | 471 | 605 | 730 | 905 | 1,101 | $1,190 - $1,290 | ||||||||||||||||||||||||||||||||||||||||
| Capital expenditures | 54 | 58 | 62 | 75 | 95 | 65 | ~$115 | ||||||||||||||||||||||||||||||||||||||||
* Fiscal 2014 and 2020 were 53-week years, compared to all other years which are 52 week years. 2020 included approximately $45 million revenue impact for the extra week. 2014 revenue (which impacts the 3 year CAGR in 2017) included approximately $27 million revenue impact for the extra week.
** At midpoint of guidance.
Profitability Trends
| (In Millions) | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022E | ||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,816 | $ | 1,943 | $ | 2,138 | $ | 2,336 | $ | 2,683 | $ | 2,988 | $ | 3,415 | |||||||||||||||||||||||||||||||||
| Revenue Growth | 7% | 7% | 10% | 9% | 15% | 11% | ~14% | ||||||||||||||||||||||||||||||||||||||||
| 3-Year Revenue Growth CAGR | 8% | 7% | 8% | 9% | 11% | 12% | ~13% | ||||||||||||||||||||||||||||||||||||||||
| Non-GAAP operating margin | 26% | 28% | 30% | 32% | 35% | 37% | 38.5% - 40% | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | (6)% | (7)% | (8)% | (8)% | (7)% | (7)% | ~(8)% | ||||||||||||||||||||||||||||||||||||||||
| Non-GAAP operating margin adjusted for stock-based compensation | 20% | 21% | 22% | 24% | 28% | 30% | 30.5% - 32% | ||||||||||||||||||||||||||||||||||||||||
| Non-GAAP operating income | $ | 469 | $ | 534 | $ | 647 | $ | 749 | $ | 944 | $ | 1,111 | $ | 1,340 | |||||||||||||||||||||||||||||||||
| Non-GAAP operating income adjusted for stock-based compensation | $ | 360 | $ | 404 | $ | 479 | $ | 567 | $ | 747 | $ | 901 | $ | 1,068 | |||||||||||||||||||||||||||||||||
| April 25, 2022 | Cadence Q1 2022 Financial Results | 2 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Second Quarter 2022 Financial Outlook
| Q2 2021 | Q1 2022 | Q2 2022E | |||||||||||||||||||||
| Total Revenue ($ Millions) | $ | 728 | $ | 902 | $825 - $845 | ||||||||||||||||||
| Q/Q Growth | 17% | (9)% - (6)% | |||||||||||||||||||||
| Y/Y Growth | 23% | 13% - 16% | |||||||||||||||||||||
| GAAP Operating Margin | 25% | 35% | 29% - 30% | ||||||||||||||||||||
| Non-GAAP Operating Margin | 39% | 44% | 39% - 40% | ||||||||||||||||||||
| GAAP EPS | $ | 0.56 | $ | 0.85 | $0.59 - $0.63 | ||||||||||||||||||
| Non-GAAP EPS | $ | 0.86 | $ | 1.17 | $0.95 - $0.99 | ||||||||||||||||||
| Q/Q Growth | 43% | (19)% -(15)% | |||||||||||||||||||||
| Y/Y Growth | 41% | 10% -15% | |||||||||||||||||||||
Fiscal Year 2022 Financial Outlook
| Previous | Current | ||||||||||||||||||||||
| FY 2021 | FY 2022E | FY 2022E | |||||||||||||||||||||
| Recurring Revenue | 85% - 90% | 85% - 90% | 85% - 90% | ||||||||||||||||||||
| Total Revenue ($ Millions) | $ | 2,988 | $3,320 - $3,380 | $3,395 - $3,435 | |||||||||||||||||||
| Y/Y Growth | 11% | 11% - 13% | 14% - 15% | ||||||||||||||||||||
| Revenue from Beginning Backlog | ~70% | ~75% | ~75% | ||||||||||||||||||||
| GAAP Operating Margin | 26.1% | 27.5% - 29% | 28.5% - 30% | ||||||||||||||||||||
| Non-GAAP Operating Margin | 37.2% | 37.5% - 39% | 38.5% - 40% | ||||||||||||||||||||
| GAAP Other Income & Expense ($ Millions) | $ | (11) | $(15) - $(23) | $(21) - $(27) | |||||||||||||||||||
| Non-GAAP Other Income & Expense ($ Millions) | $ | (17) | $(15) - $(23) | $(16) - $(22) | |||||||||||||||||||
| GAAP Tax Rate | 9% | ~25% | ~28% | ||||||||||||||||||||
| Non-GAAP Tax Rate | 16% | 17.5% | 17.5% | ||||||||||||||||||||
| Weighted Average Diluted Shares Outstanding (Millions) | 278.9 | 277 - 279 | 276 - 279 | ||||||||||||||||||||
| GAAP EPS | $ | 2.50 | $2.46 - $2.56 | $2.51 - $2.59 | |||||||||||||||||||
| Non-GAAP EPS | $ | 3.29 | $3.70 - $3.80 | $3.89 - $3.97 | |||||||||||||||||||
| Y/Y Growth | 18% | 12% - 16% | 18% - 21% | ||||||||||||||||||||
| Cash Flow from Operations ($ Millions) | $ | 1,101 | $1,150 - $1,250 | $1,190 - $1,290 | |||||||||||||||||||
| DSO | 40 | ~45 | ~45 | ||||||||||||||||||||
| Capital Expenditures ($ Millions) | $ | 65 | ~$125 | ~$115 | |||||||||||||||||||
| April 25, 2022 | Cadence Q1 2022 Financial Results | 3 | ||||||
| Cadence Design Systems, Inc. | ||||||||
First Quarter Financial Results
Backlog
| (In Billions) | 2018 | 2019 | 2020 | 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Backlog | $ | 3.0 | $ | 3.6 | $ | 3.9 | $ | 4.4 | $ | 5.1 | |||||||||||||||||||||||||
Revenue
| (In Millions) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Product and Maintenance | $ | 699 | $ | 688 | $ | 706 | $ | 720 | $ | 846 | |||||||||||||||||||||||||
| Services | 37 | 40 | 45 | 53 | 56 | ||||||||||||||||||||||||||||||
| Total Revenue | $ | 736 | $ | 728 | $ | 751 | $ | 773 | $ | 902 | |||||||||||||||||||||||||
Recurring and Up-Front Revenue
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| Revenue recognized over time | 82 | % | 84 | % | 86 | % | 88 | % | 81 | % | |||||||||||||||||||||||||
| Revenue from arrangements with non-cancelable commitments | 4 | % | 3 | % | 3 | % | 3 | % | 2 | % | |||||||||||||||||||||||||
| Recurring Revenue | 86 | % | 87 | % | 89 | % | 91 | % | 83 | % | |||||||||||||||||||||||||
| Up-Front Revenue | 14 | % | 13 | % | 11 | % | 9 | % | 17 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
Trailing Twelve Months Recurring and Up-Front Revenue
| Trailing Twelve Months Ended | |||||||||||||||||||||||||||||||||||
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| Recurring Revenue | 87 | % | 87 | % | 87 | % | 88 | % | 87 | % | |||||||||||||||||||||||||
| Up-Front Revenue | 13 | % | 13 | % | 13 | % | 12 | % | 13 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
Revenue Mix by Geography
Revenue Mix by Product Category
| (% of Total Revenue) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Americas | 46 | % | 44 | % | 46 | % | 43 | % | 47 | % | |||||||||||||||||||||||||
| China | 12 | % | 14 | % | 13 | % | 12 | % | 16 | % | |||||||||||||||||||||||||
| Other Asia | 18 | % | 19 | % | 18 | % | 21 | % | 18 | % | |||||||||||||||||||||||||
| Europe, Middle East and Africa | 18 | % | 17 | % | 17 | % | 18 | % | 14 | % | |||||||||||||||||||||||||
| Japan | 6 | % | 6 | % | 6 | % | 6 | % | 5 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
| (% of Total Revenue) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Custom IC Design and Simulation | 23 | % | 23 | % | 23 | % | 24 | % | 22 | % | |||||||||||||||||||||||||
| Digital IC Design and Signoff | 27 | % | 28 | % | 29 | % | 29 | % | 27 | % | |||||||||||||||||||||||||
| Functional Verification | 26 | % | 25 | % | 23 | % | 21 | % | 28 | % | |||||||||||||||||||||||||
| IP | 14 | % | 13 | % | 14 | % | 14 | % | 13 | % | |||||||||||||||||||||||||
| System Design and Analysis | 10 | % | 11 | % | 11 | % | 12 | % | 10 | % | |||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||||||||||
| April 25, 2022 | Cadence Q1 2022 Financial Results | 4 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Gross Margin
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| GAAP Gross Margin | 88.6 | % | 89.5 | % | 89.8 | % | 91.0 | % | 89.1 | % | |||||||||||||||||||||||||
| Non-GAAP Gross Margin | 90.4 | % | 91.8 | % | 91.6 | % | 92.7 | % | 90.7 | % | |||||||||||||||||||||||||
Total Costs and Expenses
| (In Millions) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Total GAAP Costs and Expenses | $ | 532 | $ | 543 | $ | 557 | $ | 577 | $ | 583 | |||||||||||||||||||||||||
| Total Non-GAAP Costs and Expenses | $ | 456 | $ | 441 | $ | 483 | $ | 498 | $ | 505 | |||||||||||||||||||||||||
Operating Margin
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| GAAP Operating Margin | 27.7 | % | 25.5 | % | 25.8 | % | 25.3 | % | 35.4 | % | |||||||||||||||||||||||||
| Non-GAAP Operating Margin | 38.1 | % | 39.5 | % | 35.7 | % | 35.5 | % | 44.0 | % | |||||||||||||||||||||||||
Earnings Per Share
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| GAAP Net Income Per Share | $ | 0.67 | $ | 0.56 | $ | 0.63 | $ | 0.63 | $ | 0.85 | |||||||||||||||||||||||||
| Non-GAAP Net Income Per Share | $ | 0.83 | $ | 0.86 | $ | 0.80 | $ | 0.82 | $ | 1.17 | |||||||||||||||||||||||||
Total DSO
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| DSO | 48 | 49 | 40 | 40 | 37 | ||||||||||||||||||||||||||||||
Balance Sheet and Cash Review
Free Cash Flow
| (In Millions) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Net Cash from Operating Activities | $ | 208 | $ | 380 | $ | 296 | $ | 216 | $ | 337 | |||||||||||||||||||||||||
| Capital Expenditures | 17 | 14 | 19 | 15 | 18 | ||||||||||||||||||||||||||||||
| Free Cash Flow | $ | 191 | $ | 366 | $ | 277 | $ | 201 | $ | 319 | |||||||||||||||||||||||||
Cash and Cash Equivalents
| (In Millions) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Cash and Cash Equivalents | $ | 743 | $ | 847 | $ | 1,014 | $ | 1,089 | $ | 1,135 | |||||||||||||||||||||||||
•Approximately 37 percent of our cash and cash equivalents were in the U.S. at quarter-end.
Share Repurchase
| (In Millions, Except Share Price) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| Share Repurchase | $ | 172 | $ | 220 | $ | 110 | $ | 110 | $ | 250 | |||||||||||||||||||||||||
| Number of Shares | 1.323 | 1.720 | 0.723 | 0.635 | 1.566 | ||||||||||||||||||||||||||||||
| Average Share Price | $ | 130.01 | $ | 127.91 | $ | 152.14 | $ | 173.22 | $ | 159.64 | |||||||||||||||||||||||||
Employees
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| Headcount | 8,990 | 9,092 | 9,257 | 9,298 | 9,411 | ||||||||||||||||||||||||||||||
| April 25, 2022 | Cadence Q1 2022 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 deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands or supply constraints 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, inflation rates 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, regulatory or other matters; (ix) the effects of any litigation, regulatory or other proceedings to which Cadence is or may become a party; and (x) the duration, severity, volatility 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.
© 2022 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 25, 2022 | Cadence Q1 2022 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 Millions) | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | ||||||||||||||||||||||||||||||
| GAAP total costs and expenses | $ | 532 | $ | 543 | $ | 557 | $ | 577 | $ | 583 | |||||||||||||||||||||||||
| Reconciling items to non-GAAP total costs and expenses | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | (53) | (50) | (53) | (54) | (59) | ||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | (16) | (17) | (17) | (17) | (17) | ||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | (5) | (6) | (5) | (6) | (4) | ||||||||||||||||||||||||||||||
| Restructuring | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Non-qualified deferred compensation (expenses) credits | (2) | (2) | 1 | (2) | 2 | ||||||||||||||||||||||||||||||
| Special charges* | — | (27) | — | — | — | ||||||||||||||||||||||||||||||
Non-GAAP total costs and expenses † | $ | 456 | $ | 441 | $ | 483 | $ | 498 | $ | 505 | |||||||||||||||||||||||||
* Q2 2021 includes costs related to a voluntary retirement program.
† 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 | 2020* | 2021 | 2022E | ||||||||||||||||||||||||||||||||||||||||
| GAAP total costs and expenses | $ | 1,571 | $ | 1,619 | $ | 1,742 | $ | 1,845 | $ | 2,037 | $ | 2,209 | $ | 2,404 | |||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP total costs and expenses | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | (109) | (130) | (168) | (182) | (197) | (210) | (272) | ||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | (60) | (57) | (53) | (53) | (64) | (67) | (52) | ||||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | (11) | (8) | (20) | (8) | (23) | (23) | (8) | ||||||||||||||||||||||||||||||||||||||||
| Restructuring | (41) | (9) | (11) | (9) | (9) | 1 | — | ||||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation (expenses) credits | (2) | (6) | 1 | (5) | (5) | (6) | 3 | ||||||||||||||||||||||||||||||||||||||||
| Special charges ** | — | — | — | (1) | — | (27) | — | ||||||||||||||||||||||||||||||||||||||||
Non-GAAP total costs and expenses † | $ | 1,348 | $ | 1,409 | $ | 1,491 | $ | 1,587 | $ | 1,739 | $ | 1,877 | $ | 2,075 | |||||||||||||||||||||||||||||||||
* Fiscal 2020 was a 53-week year.
** 2021 includes costs related to a voluntary retirement program.
† 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 25, 2022 | Cadence Q1 2022 Financial Results | 7 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Gross Margin as a Percent of Total Revenue to Non-GAAP Gross Margin as a Percent of Total Revenue
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | |||||||||||||||||||||||||||||||
| GAAP gross margin as a percent of total revenue | 88.6% | 89.5% | 89.8% | 91.0% | 89.1% | ||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP gross margin as a percent of total revenue | |||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.2% | 0.2% | 0.3% | 0.2% | 0.2% | ||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 1.6% | 1.7% | 1.5% | 1.5% | 1.4% | ||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | ||||||||||||||||||||||||||||||
| Special charges * | 0.0% | 0.4% | 0.0% | 0.0% | 0.0% | ||||||||||||||||||||||||||||||
Non-GAAP gross margin as a percent of total revenue † | 90.4% | 91.8% | 91.6% | 92.7% | 90.7% | ||||||||||||||||||||||||||||||
* Q2 2021 includes costs related to a voluntary retirement program.
† 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 25, 2022 | Cadence Q1 2022 Financial Results | 8 | ||||||
| Cadence Design Systems, Inc. | ||||||||
Reconciliation of GAAP Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue
| Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022E | |||||||||||||||||||||||||||||||||||||||
| GAAP operating margin as a percent of total revenue | 28% | 25% | 26% | 25% | 35% | 29% - 30% | ||||||||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 7% | 7% | 7% | 7% | 7% | 8% | ||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 2% | 2% | 2% | 2% | 2% | 2% | ||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 1% | 1% | 1% | 1% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
| Restructuring | 0% | 0% | 0% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | 1% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
| Special charges * | 0% | 4% | 0% | 0% | 0% | 0% | ||||||||||||||||||||||||||||||||||||||
Non-GAAP operating margin as a percent of total revenue † | 38% | 39% | 36% | 36% | 44% | 39% - 40% | ||||||||||||||||||||||||||||||||||||||
* Q2 2021 includes costs related to a voluntary retirement program.
† 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 | 2020 | 2021 | 2022E | ||||||||||||||||||||||||||||||||||||||||||||
| GAAP operating margin as a percent of total revenue | 13% | 17% | 19% | 21% | 24% | 26% | 28.5% - 30% | |||||||||||||||||||||||||||||||||||||||||||
| Reconciling items to non-GAAP operating margin as a percent of total revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 6% | 7% | 8% | 8% | 7% | 7% | 8% | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 4% | 3% | 2% | 2% | 3% | 2% | 2% | |||||||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 1% | 0% | 1% | 0% | 1% | 1% | 0% | |||||||||||||||||||||||||||||||||||||||||||
| Restructuring | 2% | 1% | 0% | 1% | 0% | 0% | 0% | |||||||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0% | 0% | 0% | 0% | 0% | 0% | 0% | |||||||||||||||||||||||||||||||||||||||||||
| Special charges * | 0% | 0% | 0% | 0% | 0% | 1% | 0% | |||||||||||||||||||||||||||||||||||||||||||
Non-GAAP operating margin as a percent of total revenue † | 26% | 28% | 30% | 32% | 35% | 37% | 38.5% - 40% | |||||||||||||||||||||||||||||||||||||||||||
* 2021 includes costs related to a voluntary retirement program.
† 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 25, 2022 | Cadence Q1 2022 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 2021 | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | Q2 2022E | ||||||||||||||||||||||||||||||||||||||
| Diluted net income per share on a GAAP basis | $ | 0.67 | $ | 0.56 | $ | 0.63 | $ | 0.63 | $ | 0.85 | $0.59 - $0.63 | |||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.19 | 0.18 | 0.19 | 0.20 | 0.22 | 0.23 | ||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 0.06 | 0.06 | 0.06 | 0.06 | 0.06 | 0.05 | ||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 0.02 | 0.02 | 0.02 | 0.02 | 0.01 | 0.01 | ||||||||||||||||||||||||||||||||||||||
| Restructuring | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | — | 0.01 | — | 0.01 | (0.01) | — | ||||||||||||||||||||||||||||||||||||||
| Special charges * | — | 0.10 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets ** | (0.01) | (0.01) | — | (0.01) | 0.02 | — | ||||||||||||||||||||||||||||||||||||||
| Income tax effect of non-GAAP adjustments | (0.10) | (0.06) | (0.10) | (0.09) | 0.02 | 0.07 | ||||||||||||||||||||||||||||||||||||||
Diluted net income per share on a non-GAAP basis † | $ | 0.83 | $ | 0.86 | $ | 0.80 | $ | 0.82 | $ | 1.17 | $0.95 - $0.99 | |||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share | 280,140 | 278,558 | 278,311 | 278,253 | 276,918 | |||||||||||||||||||||||||||||||||||||||
† 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.
* Q2 2021 includes costs related to a voluntary retirement program.
** 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 25, 2022 | Cadence Q1 2022 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 | 2020 | 2021 | 2022E | ||||||||||||||||||||||||||||||||||||||||
| Diluted net income per share on a GAAP basis | $ | 0.70 | $ | 0.73 | $ | 1.23 | $ | 3.53 | $ | 2.11 | $ | 2.50 | $2.51 - $2.59 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 0.37 | 0.46 | 0.60 | 0.65 | 0.71 | 0.75 | 0.98 | ||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangibles | 0.21 | 0.20 | 0.19 | 0.19 | 0.23 | 0.24 | 0.19 | ||||||||||||||||||||||||||||||||||||||||
| Acquisition and integration-related costs | 0.04 | 0.03 | 0.07 | 0.03 | 0.08 | 0.08 | 0.03 | ||||||||||||||||||||||||||||||||||||||||
| Restructuring | 0.14 | 0.03 | 0.04 | 0.03 | 0.03 | — | — | ||||||||||||||||||||||||||||||||||||||||
| Non-qualified deferred compensation expenses (credits) | 0.01 | 0.02 | (0.01) | 0.02 | 0.02 | 0.02 | (0.01) | ||||||||||||||||||||||||||||||||||||||||
| Special charges* | — | — | — | — | — | 0.10 | — | ||||||||||||||||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets** | (0.02) | (0.05) | — | (0.01) | — | (0.03) | 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) | (0.38) | (0.37) | 0.17 | ||||||||||||||||||||||||||||||||||||||||
| Diluted net income per share on a non-GAAP basis † | $ | 1.21 | $ | 1.40 | $ | 1.87 | $ | 2.20 | $ | 2.80 | $ | 3.29 | $3.89 - $3.97 | ||||||||||||||||||||||||||||||||||
| Shares used in calculation of diluted net income per share | 291,256 | 280,221 | 281,144 | 280,515 | 279,641 | 278,858 | 276 - 279M | ||||||||||||||||||||||||||||||||||||||||
† 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.
* 2021 includes costs related to a voluntary retirement program.
** 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 25, 2022 | Cadence Q1 2022 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 2020 | FY 2021 | FY 2022E | |||||||||||||||||||||||
| GAAP total other income and expense | $ | (12.8) | $ | (10.7) | $(21) - $(27) | |||||||||||||||||||||
| Reconciling items to non-GAAP total income and expense | ||||||||||||||||||||||||||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* | (0.5) | (6.7) | 5 | |||||||||||||||||||||||
Non-GAAP total other income and expense† | $ | (13.3) | $ | (17.4) | $(16) - $(22) | |||||||||||||||||||||
† 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 25, 2022 | Cadence Q1 2022 Financial Results | 12 | ||||||