Using the non-GAAP measure defined below, operating margin for the third quarter of 2020 was 36 percent and net income was $197 million, or $0.70 per share on a diluted basis, compared to operating margin of 32 percent and net income of $153 million, or $0.54 per share on a diluted basis, for the same period in 2019.
“Cadence delivered outstanding results in the third quarter by continuing to innovate and delight customers,” said Lip-Bu Tan, chief executive officer. “System and semiconductor design activity remains strong and our Intelligent System Design strategy uniquely positions us to enable our customers to realize their cutting-edge designs. In the third quarter we expanded the scale and scope of our relationship with a global marquee company, and I am especially pleased with the momentum of our new systems products.”
“We are raising our 2020 revenue and earnings guidance primarily due to higher second half hardware and IP sales activity in China and continuing progress in our System Design and Analysis business,” said John Wall, senior vice president and chief financial officer.
During the third quarter of 2020, Cadence repurchased $75 million of its common stock and the Board of Directors has increased the previously announced authorization by an additional $750 million. As of the end of the third quarter of 2020, approximately $869 million remained available under the authorization to repurchase Cadence common stock. The actual timing and amount of repurchases will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
CFO Commentary
Commentary on the third quarter 2020 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 fourth quarter of 2020, the company expects total revenue in the range of $720 million to $740 million. Fourth quarter GAAP operating margin is expected to be in the range of 23 percent to 24 percent and GAAP net income per diluted share is expected to be in the range of $0.48 to $0.52. Using the non-GAAP measure defined below, operating margin is expected to be in the range of 34 percent to 35 percent and net income per diluted share is expected to be in the range of $0.72 to $0.76.
For 2020, the company expects total revenue in the range of $2.643 billion to $2.663 billion. On a GAAP basis, operating margin is expected to be in the range of 23 percent to 24 percent and GAAP net income per diluted share for 2020 is expected to be in the range of $1.97 to $2.01. Using the non-GAAP measure defined below, operating margin for 2020 is expected to be in the range of 34 percent to 35 percent and net income per diluted share for 2020 is expected to be in the range of $2.68 to $2.72.
Our fiscal years are 52- or 53-week periods ending on the Saturday closest to December 31. Fiscal 2020 will be a 53-week fiscal year, with an additional week in our fourth quarter of 2020. Fiscal 2019 was a 52-week fiscal year.
A schedule showing a reconciliation of the business outlook from GAAP operating margin, GAAP net income and diluted net income per share to non-GAAP operating margin and non-GAAP net income and diluted net income per share is included in this release.
