Cadence Reports Fourth Quarter and Fiscal Year 2022 Financial Results

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, including its most recent reports on Form 10-K and Form 10-Q and 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 measures contained within this press release with their most directly comparable GAAP 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

 

 

December 31, 2022

 

January 1, 2022

 

 

(unaudited)

GAAP operating margin as a percent of total revenue

 

23%

 

25%

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

 

 

 

 

Stock-based compensation expense

 

8%

 

7%

Amortization of acquired intangibles

 

2%

 

2%

Acquisition and integration-related costs

 

2%

 

1%

Restructuring

 

0%

 

0%

Non-qualified deferred compensation expenses

 

1%

 

1%

Non-GAAP operating margin as a percent of total revenue

 

36%

 

36%

Operating Margin Reconciliation

 

Years Ended

 

 

December 31, 2022

 

January 1, 2022

 

 

(unaudited)

GAAP operating margin as a percent of total revenue

 

30%

 

26%

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

 

 

 

 

Stock-based compensation expense

 

8%

 

7%

Amortization of acquired intangibles

 

2%

 

2%

Acquisition and integration-related costs

 

1%

 

1%

Restructuring

 

0%

 

0%

Non-qualified deferred compensation expenses (credits)

 

(1)%

 

0%

Special charges*

 

0%

 

1%

Non-GAAP operating margin as a percent of total revenue

 

40%

 

37%

*

Includes costs related to a voluntary retirement program in the second quarter of 2021.

Net Income Reconciliation

 

Three Months Ended

 

 

December 31, 2022

 

January 1, 2022

(in thousands)

 

(unaudited)

Net income on a GAAP basis

 

$

240,392

 

 

$

176,579

 

Stock-based compensation expense

 

 

73,249

 

 

 

54,230

 

Amortization of acquired intangibles

 

 

15,369

 

 

 

16,781

 

Acquisition and integration-related costs

 

 

17,510

 

 

 

5,946

 

Restructuring

 

 

13

 

 

 

(80

)

Non-qualified deferred compensation expenses

 

 

3,233

 

 

 

2,205

 

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

 

 

(2,584

)

 

 

(2,454

)

Income tax effect of non-GAAP adjustments

 

 

(85,397

)

 

 

(25,834

)

Net income on a non-GAAP basis

 

$

261,785

 

 

$

227,373

 

*

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

 

 

December 31, 2022

 

January 1, 2022

(in thousands)

 

(unaudited)

Net income on a GAAP basis

 

$

848,952

 

 

$

695,955

 

Stock-based compensation expense

 

 

270,439

 

 

 

210,090

 

Amortization of acquired intangibles

 

 

59,818

 

 

 

67,216

 

Acquisition and integration-related costs

 

 

41,103

 

 

 

22,413

 

Restructuring

 

 

55

 

 

 

(1,048

)

Non-qualified deferred compensation expenses (credits)

 

 

(8,744

)

 

 

6,163

 

Special charges*

 

 

 

 

 

26,832

 

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

 

 

14,171

 

 

 

(6,745

)

Income tax effect of non-GAAP adjustments

 

 

(52,475

)

 

 

(102,456

)

Net income on a non-GAAP basis

 

$

1,173,319

 

 

$

918,420

 

* Includes costs related to a voluntary retirement program in the second quarter of 2021.
 

**

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

 

 

December 31, 2022

 

January 1, 2022

(in thousands, except per share data)

 

(unaudited)

Diluted net income per share on a GAAP basis

 

$

0.88

 

 

$

0.63

 

Stock-based compensation expense

 

 

0.27

 

 

 

0.20

 

Amortization of acquired intangibles

 

 

0.06

 

 

 

0.06

 

Acquisition and integration-related costs

 

 

0.06

 

 

 

0.02

 

Restructuring

 

 

 

 

 

 

Non-qualified deferred compensation expenses

 

 

0.01

 

 

 

0.01

 

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

 

 

(0.01

)

 

 

(0.01

)

Income tax effect of non-GAAP adjustments

 

 

(0.31

)

 

 

(0.09

)

Diluted net income per share on a non-GAAP basis

 

$

0.96

 

 

$

0.82

 

Shares used in calculation of diluted net income per share

 

 

272,997

 

 

 

278,253

 

*

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

 

 

December 31, 2022

 

January 1, 2022

(in thousands, except per share data)

 

(unaudited)

Diluted net income per share on a GAAP basis

 

$

3.09

 

 

$

2.50

 

Stock-based compensation expense

 

 

0.98

 

 

 

0.75

 

Amortization of acquired intangibles

 

 

0.22

 

 

 

0.24

 

Acquisition and integration-related costs

 

 

0.15

 

 

 

0.08

 

Restructuring

 

 

 

 

 

 

Non-qualified deferred compensation expenses (credits)

 

 

(0.03

)

 

 

0.02

 

Special charges*

 

 

 

 

 

0.10

 

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

 

 

0.05

 

 

 

(0.03

)

Income tax effect of non-GAAP adjustments

 

 

(0.19

)

 

 

(0.37

)

Diluted net income per share on a non-GAAP basis

 

$

4.27

 

 

$

3.29

 

Shares used in calculation of diluted net income per share

 

 

275,011

 

 

 

278,858

 

* Includes costs related to a voluntary retirement program in the second quarter of 2021.
 

**

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.


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