Business Wire | Oct 19, 2020 04:05PM EDT

Cadence Reports Third Quarter 2020 Financial Results

Oct. 19, 2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 19, 2020--Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the third quarter of 2020.

Cadence reported third quarter 2020 revenue of $667 million, compared to revenue of $580 million reported for the same period in 2019. On a GAAP basis, Cadence achieved operating margin of 25 percent and recognized net income of $162 million, or $0.58 per share on a diluted basis, in the third quarter of 2020, compared to operating margin of 21 percent and net income of $102 million, or $0.36 per share on a diluted basis, for the same period in 2019.

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.

Audio Webcast Scheduled

Lip-Bu Tan, chief executive officer, and John Wall, senior vice president and chief financial officer, will host the third quarter 2020 financial results audio webcast today, October 19, 2020, 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 October 19, 2020 at 5 p.m. (Pacific) and ending December 18, 2020 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 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 electronic products from chips to boards to systems for the most dynamic market applications including consumer, hyperscale computing, 5G communications, automotive, aerospace, industrial and healthcare. For six years in a row, Fortune Magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at cadence.com.

(c) 2020 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 the ability to develop, install or deliver Cadence's products or services; (iv) change in customer demands 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 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 or other matters; (ix) the effects of any litigation or other proceedings to which Cadence is or may become a party; and (x) the duration, severity 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, 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

September September 26, 2020 28, 2019

(unaudited)

GAAP operating margin as a percent of total 25% 21%revenue

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

Amortization of acquired intangibles 3% 2%

Stock-based compensation expense 7% 9%

Non-qualified deferred compensation expenses 0% 0%

Restructuring and other charges (credits) 0% 0%

Acquisition and integration-related costs 1% 0%

Non-GAAP operating margin as a percent of total 36% 32%revenue

Net Income Reconciliation

Three Months Ended

September 26, 2020

September 28, 2019

(unaudited)

(in thousands)

Net income on a GAAP basis

$

161,630

$

101,514

Amortization of acquired intangibles

15,885

12,799

Stock-based compensation expense

45,334

48,279

Non-qualified deferred compensation expenses

1,779

52

Restructuring and other charges (credits)

13

(186

)

Acquisition and integration-related costs

6,739

1,838

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

(876

)

2,344

Income tax effect of non-GAAP adjustments

(33,451

)

(13,899

)

Net income on a non-GAAP basis

$

197,053

$

152,741

Net Income Reconciliation Three Months Ended

September September 26, 2020 28, 2019

(unaudited)

(in thousands)

Net income on a GAAP basis $ 161,630 $ 101,514

Amortization of acquired intangibles 15,885 12,799

Stock-based compensation expense 45,334 48,279

Non-qualified deferred compensation expenses 1,779 52

Restructuring and other charges (credits) 13 (186 )

Acquisition and integration-related costs 6,739 1,838

Other income or expense related to investments and (876 ) 2,344 non-qualified deferred compensation plan assets*

Income tax effect of non-GAAP adjustments (33,451 ) (13,899 )

Net income on a non-GAAP basis $ 197,053 $ 152,741

*

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.

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 26, 2020

September 28, 2019

(unaudited)

(in thousands, except per share data)

Diluted net income per share on a GAAP basis

$

0.58

$

0.36

Amortization of acquired intangibles

0.06

0.04

Stock-based compensation expense

0.16

0.17

Non-qualified deferred compensation expenses

-

-

Restructuring and other charges (credits)

-

-

Acquisition and integration-related costs

0.02

0.01

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

-

0.01

Income tax effect of non-GAAP adjustments

(0.12

)

(0.05

)

Diluted net income per share on a non-GAAP basis

$

0.70

$

0.54

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

280,024

280,666

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

280,024

280,666

Diluted Net Income Per Share Reconciliation Three Months Ended

September September 26, 2020 28, 2019

(unaudited)

(in thousands, except per share data)

Diluted net income per share on a GAAP basis $ 0.58 $ 0.36

Amortization of acquired intangibles 0.06 0.04

Stock-based compensation expense 0.16 0.17

Non-qualified deferred compensation expenses - -

Restructuring and other charges (credits) - -

Acquisition and integration-related costs 0.02 0.01

Other income or expense related to investments and - 0.01 non-qualified deferred compensation plan assets*

Income tax effect of non-GAAP adjustments (0.12 ) (0.05 )

Diluted net income per share on a non-GAAP basis $ 0.70 $ 0.54

Shares used in calculation of diluted net income per 280,024 280,666 share - GAAP**

Shares used in calculation of diluted net income per 280,024 280,666 share - non-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.

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.

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 December 18, 2020, 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 fourth quarter 2020 earnings release is published, which is currently scheduled for February 22, 2021.

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.

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 December 18, 2020, 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 fourth quarter 2020 earnings release is published, which is currently scheduled for February 22, 2021.

Cadence Design Systems, Inc.Condensed Consolidated Balance SheetsSeptember 26, 2020 and December 28, 2019(In thousands)(Unaudited) September 26, 2020 December 28, 2019 Current assets:Cash and cash equivalents $ 1,306,564 $ 705,210

Receivables, net 300,413 304,546

Inventories 47,979 55,802

Prepaid expenses and other 81,526 103,785

Total current assets 1,736,482 1,169,343

Property, plant and equipment, net 288,163 275,855

Goodwill 780,842 661,856

Acquired intangibles, net 227,753 172,375

Deferred taxes 722,656 732,367

Other assets 384,256 345,429

Total assets $ 4,140,152 $ 3,357,225

Current liabilities:Revolving credit facility $ 350,000 $ -

Accounts payable and accrued liabilities 290,886 316,908

Current portion of deferred revenue 477,003 355,483

Total current liabilities 1,117,889 672,391

Long-term liabilities:Long-term portion of deferred revenue 84,646 73,400

Long-term debt 346,584 346,019

Other long-term liabilities 195,315 162,521

Total long-term liabilities 626,545 581,940

Stockholders' equity 2,395,718 2,102,894

Total liabilities and stockholders' $ 4,140,152 $ 3,357,225equityCadence Design Systems, Inc.Condensed Consolidated Income StatementsFor the Three and Nine Months Ended September 26, 2020 and September 28, 2019(In thousands, except per share amounts)(Unaudited)Three Months EndedNine Months EndedSeptember 26,2020September 28,2019September 26,2020September 28,2019Revenue:Product and maintenance$

630,329

$

548,105

$

1,813,384

$

1,639,651

Services36,278

31,498

109,598

97,113

Total revenue666,607

579,603

1,922,982

1,736,764

Costs and expenses:Cost of product and maintenance64,800

41,715

175,915

135,625

Cost of services17,484

19,260

56,047

57,404

Marketing and sales123,738

121,368

369,958

354,406

Research and development250,934

240,542

743,423

700,566

General and administrative35,928

33,204

105,161

97,713

Amortization of acquired intangibles4,438

2,874

13,234

9,341

Restructuring and other charges (credits)13

(186

)

(1,329

)

(1,188

)

Total costs and expenses497,335

458,777

1,462,409

1,353,867

Income from operations169,272

120,826

460,573

382,897

Interest expense(5,325

)

(4,240

)

(15,876

)

(14,607

)

Other income, net1,766

122

1,862

5,253

Income before provision for income taxes165,713

116,708

446,559

373,543

Provision for income taxes4,083

15,194

29,653

44,239

Net income$

161,630

$

101,514

$

416,906

$

329,304

Net income per share - basic$

0.59

$

0.37

$

1.52

$

1.21

Net income per share - diluted$

0.58

$

0.36

$

1.49

$

1.17

Weighted average common shares outstanding - basic273,996

273,329

273,633

273,224

Weighted average common shares outstanding - diluted280,024

280,666

279,455

280,817

Cadence Design Systems, Inc.Condensed Consolidated Income StatementsFor the Three and Nine Months Ended September 26, 2020 and September 28, 2019(In thousands, except per share amounts)(Unaudited) Three Months Ended Nine Months Ended September September September 26, September 28, 26, 28, 2020 2019 2020 2019 Revenue:Product and maintenance $ 630,329 $ 548,105 $ 1,813,384 $ 1,639,651

Services 36,278 31,498 109,598 97,113

Total revenue 666,607 579,603 1,922,982 1,736,764

Costs and expenses:Cost of product and 64,800 41,715 175,915 135,625 maintenanceCost of services 17,484 19,260 56,047 57,404

Marketing and sales 123,738 121,368 369,958 354,406

Research and 250,934 240,542 743,423 700,566 developmentGeneral and 35,928 33,204 105,161 97,713 administrativeAmortization of 4,438 2,874 13,234 9,341 acquired intangiblesRestructuring and other 13 (186 ) (1,329 ) (1,188 )charges (credits) Total costs and 497,335 458,777 1,462,409 1,353,867 expenses Income from operations 169,272 120,826 460,573 382,897

Interest expense (5,325 ) (4,240 ) (15,876 ) (14,607 )

Other income, net 1,766 122 1,862 5,253

Income before provision 165,713 116,708 446,559 373,543 for income taxes Provision for income 4,083 15,194 29,653 44,239 taxes Net income $ 161,630 $ 101,514 $ 416,906 $ 329,304

Net income per share - $ 0.59 $ 0.37 $ 1.52 $ 1.21 basic Net income per share - $ 0.58 $ 0.36 $ 1.49 $ 1.17 diluted Weighted average common 273,996 273,329 273,633 273,224 shares outstanding -basic Weighted average common 280,024 280,666 279,455 280,817 shares outstanding -dilutedCadence Design Systems, Inc.Condensed Consolidated Statements of Cash FlowsFor the Nine Months Ended September 26, 2020 and September 28, 2019(In thousands)(Unaudited)Nine Months Ended

September 26,

September 28,

2020

2019

Cash and cash equivalents at beginning of period$

705,210

$

533,298

Cash flows from operating activities:Net income416,906

329,304

Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization107,019

91,400

Amortization of debt discount and fees770

747

Stock-based compensation138,723

134,789

Loss on investments, net5,118

2,655

Deferred income taxes(18,966

)

(10,938

)

Provisions for losses (recoveries) on receivables1,087

(358

)

ROU asset amortization and change in operating lease liabilities2,064

4,285

Other non-cash items410

197

Changes in operating assets and liabilities, net of effect of acquired businesses:Receivables9,945

26,553

Inventories6,376

(43,781

)

Prepaid expenses and other22,769

38,703

Other assets(21,287

)

3,554

Accounts payable and accrued liabilities(30,455

)

(4,001

)

Deferred revenue124,491

(6,968

)

Other long-term liabilities4,430

4,163

Net cash provided by operating activities769,400

570,304

Cash flows from investing activities:Purchases of non-marketable investments-

(33,717

)

Proceeds from the sale of non-marketable investments-

2,952

Purchases of property, plant and equipment(63,745

)

(47,527

)

Cash paid in business combinations, net of cash acquired(197,562

)

(338

)

Net cash used for investing activities(261,307

)

(78,630

)

Cash flows from financing activities:Proceeds from revolving credit facility350,000

150,000

Payment on revolving credit facility-

(250,000

)

Proceeds from issuance of common stock71,451

49,127

Stock received for payment of employee taxes on vesting of restricted stock(85,515

)

(75,016

)

Payments for repurchases of common stock(250,047

)

(231,131

)

Net cash provided by (used for) financing activities85,889

(357,020

)

Effect of exchange rate changes on cash and cash equivalents7,372

(12,736

)

Increase in cash and cash equivalents601,354

121,918

Cash and cash equivalents at end of period$

1,306,564

$

655,216

Cadence Design Systems, Inc.Condensed Consolidated Statements of Cash FlowsFor the Nine Months Ended September 26, 2020 and September 28, 2019(In thousands)(Unaudited) Nine Months Ended

September 26, September 28,

2020 2019

Cash and cash equivalents at beginning of period $ 705,210 $ 533,298

Cash flows from operating activities:Net income 416,906 329,304

Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization 107,019 91,400

Amortization of debt discount and fees 770 747

Stock-based compensation 138,723 134,789

Loss on investments, net 5,118 2,655

Deferred income taxes (18,966 ) (10,938 )

Provisions for losses (recoveries) on receivables 1,087 (358 )

ROU asset amortization and change in operating 2,064 4,285 lease liabilitiesOther non-cash items 410 197

Changes in operating assets and liabilities, netof effect of acquired businesses:Receivables 9,945 26,553

Inventories 6,376 (43,781 )

Prepaid expenses and other 22,769 38,703

Other assets (21,287 ) 3,554

Accounts payable and accrued liabilities (30,455 ) (4,001 )

Deferred revenue 124,491 (6,968 )

Other long-term liabilities 4,430 4,163

Net cash provided by operating activities 769,400 570,304

Cash flows from investing activities:Purchases of non-marketable investments - (33,717 )

Proceeds from the sale of non-marketable - 2,952 investmentsPurchases of property, plant and equipment (63,745 ) (47,527 )

Cash paid in business combinations, net of cash (197,562 ) (338 )acquiredNet cash used for investing activities (261,307 ) (78,630 )

Cash flows from financing activities:Proceeds from revolving credit facility 350,000 150,000

Payment on revolving credit facility - (250,000 )

Proceeds from issuance of common stock 71,451 49,127

Stock received for payment of employee taxes on (85,515 ) (75,016 )vesting of restricted stockPayments for repurchases of common stock (250,047 ) (231,131 )

Net cash provided by (used for) financing 85,889 (357,020 )activities Effect of exchange rate changes on cash and cash 7,372 (12,736 )equivalents Increase in cash and cash equivalents 601,354 121,918

Cash and cash equivalents at end of period $ 1,306,564 $ 655,216

Cadence Design Systems, Inc.(Unaudited)Revenue Mix by Geography (% of Total Revenue)2019

2020

GEOGRAPHYQ1Q2Q3Q4YearQ1Q2Q3Americas44%

42%

44%

46%

44%

43%

44%

42%

China10%

12%

10%

9%

10%

13%

12%

17%

Other Asia19%

19%

21%

20%

20%

18%

19%

19%

Europe, Middle East and Africa18%

20%

18%

18%

18%

19%

18%

16%

Japan9%

7%

7%

7%

8%

7%

7%

6%

Total100%

100%

100%

100%

100%

100%

100%

100%

Revenue Mix by Product Category (% of Total Revenue)2019

2020

PRODUCT CATEGORYQ1Q2Q3Q4YearQ1Q2Q3Custom IC Design and Simulation25%

26%

26%

25%

25%

25%

24%

24%

Digital IC Design and Signoff30%

31%

30%

29%

30%

29%

28%

27%

Functional Verification, including Emulation and Prototyping Hardware24%

22%

20%

24%

23%

23%

24%

23%

IP12%

11%

15%

13%

13%

14%

14%

15%

System Design and Analysis9%

10%

9%

9%

9%

9%

10%

11%

Total100%

100%

100%

100%

100%

100%

100%

100%

Cadence Design Systems, Inc.(Unaudited) Revenue Mix by Geography (%of Total Revenue) 2019 2020

GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Americas 44% 42% 44% 46% 44% 43% 44% 42%

China 10% 12% 10% 9% 10% 13% 12% 17%

Other Asia 19% 19% 21% 20% 20% 18% 19% 19%

Europe, Middle East and 18% 20% 18% 18% 18% 19% 18% 16%AfricaJapan 9% 7% 7% 7% 8% 7% 7% 6%

Total 100% 100% 100% 100% 100% 100% 100% 100%

Revenue Mix by ProductCategory (% of Total Revenue) 2019 2020

PRODUCT CATEGORY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Custom IC Design and 25% 26% 26% 25% 25% 25% 24% 24%SimulationDigital IC Design and Signoff 30% 31% 30% 29% 30% 29% 28% 27%

Functional Verification, 24% 22% 20% 24% 23% 23% 24% 23%including Emulation andPrototyping HardwareIP 12% 11% 15% 13% 13% 14% 14% 15%

System Design and Analysis 9% 10% 9% 9% 9% 9% 10% 11%

Total 100% 100% 100% 100% 100% 100% 100% 100%

Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Operating MarginAs of October 19, 2020(Unaudited)Three Months EndingYear EndingJanuary 2, 2021January 2, 2021ForecastForecastGAAP operating margin as a percent of total revenue23% - 24%

23% - 24%

Reconciling items to non-GAAP operating margin as a percent of total revenue:Amortization of acquired intangibles2%

3%

Stock-based compensation expense8%

7%

Acquisition and integration-related costs1%

1%

Non-GAAP operating margin as a percent of total revenue?34% - 35%

34% - 35%

Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Operating MarginAs of October 19, 2020(Unaudited) Three Months Year Ending Ending January 2, January 2, 2021 2021 Forecast Forecast GAAP operating margin as a percent of total revenue 23% - 24% 23% - 24%



Reconciling items to non-GAAP operating margin as a percent of total revenue:Amortization of acquired intangibles 2% 3%

Stock-based compensation expense 8% 7%

Acquisition and integration-related costs 1% 1%

Non-GAAP operating margin as a percent of total 34% - 35% 34% - 35%revenue??

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.? 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 ShareAs of October 19, 2020(Unaudited)Three Months EndingYear EndingJanuary 2, 2021January 2, 2021ForecastForecastDiluted net income per share on a GAAP basis$0.48 to $0.52

$1.97 to $2.01

Amortization of acquired intangibles0.06

0.23

Stock-based compensation expense0.21

0.70

Non-qualified deferred compensation expenses-

-

Restructuring and other charges (credits)-

-

Acquisition and integration-related costs0.02

0.08

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

0.02

Income tax effect of non-GAAP adjustments(0.05)

(0.32)

Diluted net income per share on a non-GAAP basis?$0.72 to $0.76$2.68 to $2.72Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Net IncomeAs of October 19, 2020(Unaudited)Three Months EndingYear EndingJanuary 2, 2021January 2, 2021($ in millions)ForecastForecastNet income on a GAAP basis$134 to $146$551 to $563Amortization of acquired intangibles17

64

Stock-based compensation expense58

196

Non-qualified deferred compensation expenses-

1

Restructuring and other charges (credits)-

(1)

Acquisition and integration-related costs5

21

Other income or expense related to investments and non-qualified deferred compensation plan assets*1

5

Income tax effect of non-GAAP adjustments(14)

(88)

Net income on a non-GAAP basis?$201 to $213$749 to $761Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per ShareAs of October 19, 2020(Unaudited) Three Year Months Ending Ending January 2, January 2021 2, 2021 Forecast Forecast $0.48 to $1.97 toDiluted net income per share on a GAAP basis $0.52 $2.01



Amortization of acquired intangibles 0.06 0.23

Stock-based compensation expense 0.21 0.70

Non-qualified deferred compensation expenses - -

Restructuring and other charges (credits) - -

Acquisition and integration-related costs 0.02 0.08

Other income or expense related to investments and - 0.02non-qualified deferred compensation plan assets*Income tax effect of non-GAAP adjustments (0.05) (0.32)

Diluted net income per share on a non-GAAP basis? $0.72 to $2.68 to $0.76 $2.72 Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Net IncomeAs of October 19, 2020(Unaudited) Three Year Months Ending Ending January 2, January 2021 2, 2021($ in millions) Forecast Forecast Net income on a GAAP basis $134 to $551 to $146 $563 Amortization of acquired intangibles 17 64

Stock-based compensation expense 58 196

Non-qualified deferred compensation expenses - 1

Restructuring and other charges (credits) - (1)

Acquisition and integration-related costs 5 21

Other income or expense related to investments and 1 5non-qualified deferred compensation plan assets*Income tax effect of non-GAAP adjustments (14) (88)

Net income on a non-GAAP basis? $201 to $749 to $213 $761?

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. CDNS-IR

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