GAAP to Non-GAAP Reconciliation
Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance.
To supplement Cadence’s financial results presented on a GAAP basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP. Non-GAAP net income is calculated by Cadence management by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, acquisition and integration-related costs including retention expenses, investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring, executive severance and other significant items not directly related to Cadence’s core business operations, and the income tax effect of non-GAAP pre-tax adjustments.
Cadence management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of Cadence’s core business operations and therefore provides supplemental information to Cadence management and investors regarding the performance of the business operations, facilitates comparisons to the historical operating results and allows the review of Cadence's business from the same perspective as Cadence management, including forecasting and budgeting.
The following tables reconcile the specific items excluded from GAAP operating margin, GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:
Operating Margin Reconciliation |
|
Three Months Ended |
||
|
|
January 2, 2021 |
|
December 28, 2019 |
|
|
(unaudited) |
||
GAAP operating margin as a percent of total revenue |
|
24% |
|
18% |
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 |
|
1% |
|
1% |
Restructuring and other charges |
|
1% |
|
2% |
Non-qualified deferred compensation expenses |
|
1% |
|
0% |
Special charges |
|
0% |
|
0% |
Non-GAAP operating margin as a percent of total revenue |
|
37% |
|
31% |
Operating Margin Reconciliation |
|
Years Ended |
||
|
|
January 2, 2021 |
|
December 28, 2019 |
|
|
(unaudited) |
||
GAAP operating margin as a percent of total revenue |
|
24% |
|
21% |
Reconciling items to non-GAAP operating margin as a percent of total revenue: |
|
|
|
|
Stock-based compensation expense |
|
7% |
|
8% |
| Amortization of acquired intangibles |
|
3% |
|
2% |
| Acquisition and integration-related costs |
|
1% |
|
0% |
| Restructuring and other charges |
|
0% |
|
1% |
| Non-qualified deferred compensation expenses |
|
0% |
|
0% |
| Special charges |
|
0% |
|
0% |
| Non-GAAP operating margin as a percent of total revenue |
|
35% |
|
32% |
| Net Income Reconciliation |
|
Three Months Ended |
||||||
|
|
|
January 2, 2021 |
|
December 28, 2019 |
||||
| (in thousands) |
|
(unaudited) |
||||||
| Net income on a GAAP basis |
|
$ |
173,738 |
|
|
$ |
659,675 |
|
| Stock-based compensation expense |
|
58,545 |
|
|
46,758 |
|
||
| Amortization of acquired intangibles |
|
17,168 |
|
|
12,660 |
|
||
| Acquisition and integration-related costs |
|
6,556 |
|
|
3,466 |
|
||
| Restructuring and other charges |
|
10,544 |
|
|
9,809 |
|
||
| Non-qualified deferred compensation expenses |
|
4,280 |
|
|
1,948 |
|
||
| Special charges |
|
— |
|
|
875 |
|
||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* |
|
(4,860 |
) |
|
(513 |
) |
||
| Income tax benefit related to intercompany transfers of certain intellectual property rights |
|
— |
|
|
(575,618 |
) |
||
| Income tax effect of non-GAAP adjustments |
|
(32,097 |
) |
|
(7,500 |
) |
||
| Net income on a non-GAAP basis |
|
$ |
233,874 |
|
|
$ |
151,560 |
|
| * |
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. |
| Net Income Reconciliation |
|
Years Ended |
||||||
|
|
|
January 2, 2021 |
|
December 28, 2019 |
||||
| (in thousands) |
|
(unaudited) |
||||||
| Net income on a GAAP basis |
|
$ |
590,644 |
|
|
$ |
988,979 |
|
| Stock-based compensation expense |
|
197,268 |
|
|
181,547 |
|
||
| Amortization of acquired intangibles |
|
64,193 |
|
|
53,079 |
|
||
| Acquisition and integration-related costs |
|
22,580 |
|
|
8,107 |
|
||
| Restructuring and other charges |
|
9,215 |
|
|
8,621 |
|
||
| Non-qualified deferred compensation expenses |
|
4,881 |
|
|
5,402 |
|
||
| Special charges |
|
394 |
|
|
875 |
|
||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* |
|
(522 |
) |
|
(1,314 |
) |
||
| Income tax benefit related to intercompany transfers of certain intellectual property rights |
|
— |
|
|
(575,618 |
) |
||
| Income tax effect of non-GAAP adjustments |
|
(106,817 |
) |
|
(52,037 |
) |
||
| Net income on a non-GAAP basis |
|
$ |
781,836 |
|
|
$ |
617,641 |
|
| * |
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 |
||||||
|
|
|
January 2, 2021 |
|
December 28, 2019 |
||||
| (in thousands, except per share data) |
|
(unaudited) |
||||||
| Diluted net income per share on a GAAP basis |
|
$ |
0.62 |
|
|
$ |
2.36 |
|
| Stock-based compensation expense |
|
0.21 |
|
|
0.17 |
|
||
| Amortization of acquired intangibles |
|
0.06 |
|
|
0.05 |
|
||
| Acquisition and integration-related costs |
|
0.02 |
|
|
0.01 |
|
||
| Restructuring and other charges |
|
0.04 |
|
|
0.03 |
|
||
| Non-qualified deferred compensation expenses |
|
0.01 |
|
|
0.01 |
|
||
| Special charges |
|
— |
|
|
— |
|
||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* |
|
(0.02 |
) |
|
— |
|
||
| Income tax benefit related to intercompany transfers of certain intellectual property rights |
|
— |
|
|
(2.06 |
) |
||
| Income tax effect of non-GAAP adjustments |
|
(0.11 |
) |
|
(0.03 |
) |
||
| Diluted net income per share on a non-GAAP basis |
|
$ |
0.83 |
|
|
$ |
0.54 |
|
| Shares used in calculation of diluted net income per share |
|
280,173 |
|
|
279,557 |
|
||
| * |
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 |
|
Years Ended |
||||||
|
|
|
January 2, 2021 |
|
December 28, 2019 |
||||
| (in thousands, except per share data) |
|
(unaudited) |
||||||
| Diluted net income per share on a GAAP basis |
|
$ |
2.11 |
|
|
$ |
3.53 |
|
| Stock-based compensation expense |
|
0.71 |
|
|
0.65 |
|
||
| Amortization of acquired intangibles |
|
0.23 |
|
|
0.19 |
|
||
| Acquisition and integration-related costs |
|
0.08 |
|
|
0.03 |
|
||
| Restructuring and other charges |
|
0.03 |
|
|
0.03 |
|
||
| Non-qualified deferred compensation expenses |
|
0.02 |
|
|
0.02 |
|
||
| Special charges |
|
— |
|
|
— |
|
||
| Other income or expense related to investments and non-qualified deferred compensation plan assets* |
|
— |
|
|
(0.01 |
) |
||
| Income tax benefit related to intercompany transfers of certain intellectual property rights |
|
— |
|
|
(2.05 |
) |
||
| Income tax effect of non-GAAP adjustments |
|
(0.38 |
) |
|
(0.19 |
) |
||
| Diluted net income per share on a non-GAAP basis |
|
$ |
2.80 |
|
|
$ |
2.20 |
|
| Shares used in calculation of diluted net income per share |
|
279,641 |
|
|
280,515 |
|
||
| * |
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. |
