Business Wire | Oct 25, 2021 04:06PM EDT

Cadence Reports Third Quarter 2021 Financial Results

Oct. 25, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 25, 2021--Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the third quarter of 2021.

Cadence reported third quarter 2021 revenue of $751 million, compared to revenue of $667 million for the same period in 2020. On a GAAP basis, Cadence achieved operating margin of 26 percent and recognized net income of $176 million, or $0.63 per share on a diluted basis, in the third quarter of 2021, compared to operating margin of 25 percent and net income of $162 million, or $0.58 per share on a diluted basis, for the same period in 2020.

Using the non-GAAP measure defined below, operating margin for the third quarter of 2021 was 36 percent and net income was $222 million, or $0.80 per share on a diluted basis, compared to operating margin of 36 percent and net income of $197 million, or $0.70 per share on a diluted basis, for the same period in 2020.

"Cadence delivered stronger than expected financial results for the third quarter, fueled by accelerating demand for our highly differentiated solutions," said Lip-Bu Tan, chief executive officer. "Design activity remains robust and the Cadence team continues to execute exceedingly well to our Intelligent System Design strategy."

"Delighting customers and accelerating growth requires a relentless commitment to innovation," added Anirudh Devgan, president. "Our innovation pipeline continued to deliver, as we introduced four additional significant new products this quarter, including the revolutionary Integrity 3D-IC Platform."

"We exceeded our guidance on all key metrics for the third quarter and as a result, I am pleased to raise our outlook for the year," said John Wall, senior vice president and chief financial officer.

CFO Commentary

Commentary on the third quarter 2021 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 2021, the company expects total revenue in the range of $745 million to $765 million. Fourth quarter GAAP operating margin is expected to be approximately 24 percent and GAAP net income per diluted share is expected to be in the range of $0.49 to $0.53. Using the non-GAAP measure defined below, operating margin is expected to be approximately 35 percent and net income per diluted share is expected to be in the range of $0.76 to $0.80.

For 2021, the company expects total revenue in the range of $2.96 billion to $2.98 billion. On a GAAP basis, operating margin is expected to be approximately 26 percent and GAAP net income per diluted share for 2021 is expected to be in the range of $2.36 to $2.40. Using the non-GAAP measure defined below, operating margin for 2021 is expected to be approximately 37 percent and net income per diluted share for 2021 is expected to be in the range of $3.24 to $3.28.

Our fiscal years are 52- or 53-week periods ending on the Saturday closest to December 31. Fiscal 2021 will be a 52-week fiscal year. Fiscal 2020 was a 53-week fiscal year, with an additional week in our fourth quarter of 2020.

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; Anirudh Devgan, president; and John Wall, senior vice president and chief financial officer will host the third quarter 2021 financial results audio webcast today, October 25, 2021, 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 25, 2021, at 5 p.m. (Pacific) and ending December 17, 2021, 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, mobile, aerospace, industrial and healthcare. For seven years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at cadence.com.

(c) 2021 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 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 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 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

October September 2, 2021 26, 2020

(unaudited)

GAAP operating margin as a percent of total revenue 26 % 25 %

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

Stock-based compensation expense 7 % 7 %

Amortization of acquired intangibles 2 % 3 %

Acquisition and integration-related costs 1 % 1 %

Restructuring and other charges (credits) 0 % 0 %

Non-qualified deferred compensation expenses (credits) 0 % 0 %

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

Net Income Reconciliation

Three Months Ended

October 2, 2021

September 26, 2020

(in thousands)

(unaudited)

Net income on a GAAP basis

$

176,307

$

161,630

Stock-based compensation expense

52,746

45,334

Amortization of acquired intangibles

16,774

15,885

Acquisition and integration-related costs

5,326

6,739

Restructuring and other charges (credits)

(222

)

13

Non-qualified deferred compensation expenses (credits)

(351

)

1,779

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

815

(876

)

Income tax effect of non-GAAP adjustments

(29,817

)

(33,451

)

Net income on a non-GAAP basis

$

221,578

$

197,053

Net Income Reconciliation Three Months Ended

October 2, September 2021 26, 2020

(in thousands) (unaudited)

Net income on a GAAP basis $ 176,307 $ 161,630

Stock-based compensation expense 52,746 45,334

Amortization of acquired intangibles 16,774 15,885

Acquisition and integration-related costs 5,326 6,739

Restructuring and other charges (credits) (222 ) 13

Non-qualified deferred compensation expenses (351 ) 1,779 (credits)

Other income or expense related to investments and 815 (876 )non-qualified deferred compensation plan assets*

Income tax effect of non-GAAP adjustments (29,817 ) (33,451 )

Net income on a non-GAAP basis $ 221,578 $ 197,053

*

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

October 2, 2021

September 26, 2020

(in thousands, except per share data)

(unaudited)

Diluted net income per share on a GAAP basis

$

0.63

$

0.58

Stock-based compensation expense

0.19

0.16

Amortization of acquired intangibles

0.06

0.06

Acquisition and integration-related costs

0.02

0.02

Restructuring and other charges (credits)

-

-

Non-qualified deferred compensation expenses (credits)

-

-

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

-

-

Income tax effect of non-GAAP adjustments

(0.10

)

(0.12

)

Diluted net income per share on a non-GAAP basis

$

0.80

$

0.70

Shares used in calculation of diluted net income per share

278,311

280,024

Diluted Net Income Per Share Reconciliation Three Months Ended

October September 2, 2021 26, 2020

(in thousands, except per share data) (unaudited)

Diluted net income per share on a GAAP basis $ 0.63 $ 0.58

Stock-based compensation expense 0.19 0.16

Amortization of acquired intangibles 0.06 0.06

Acquisition and integration-related costs 0.02 0.02

Restructuring and other charges (credits) - -

Non-qualified deferred compensation expenses (credits) - -

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

Income tax effect of non-GAAP adjustments (0.10 ) (0.12 )

Diluted net income per share on a non-GAAP basis $ 0.80 $ 0.70

Shares used in calculation of diluted net income per 278,311 280,024 share

*

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 December 17, 2021, 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 2021 earnings release is published, which is currently scheduled for February 22, 2022.

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 December 17, 2021, 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 2021 earnings release is published, which is currently scheduled for February 22, 2022.

Cadence Design Systems, Inc.Condensed Consolidated Balance SheetsOctober 2, 2021 and January 2, 2021(In thousands)(Unaudited) October 2, 2021 January 2, 2021 Current assets: Cash and cash equivalents $ 1,013,819 $ 928,432

Receivables, net 327,191 338,487

Inventories 101,575 75,956

Prepaid expenses and other 100,428 135,712

Total current assets 1,543,013 1,478,587

Property, plant and equipment, net 303,313 311,125

Goodwill 925,949 782,087

Acquired intangibles, net 247,628 210,590

Deferred taxes 766,036 732,290

Other assets 427,936 436,106

Total assets $ 4,213,875 $ 3,950,785

Current liabilities: Accounts payable and accrued liabilities $ 363,835 $ 349,951

Current portion of deferred revenue 543,361 446,857

Total current liabilities 907,196 796,808

Long-term liabilities: Long-term portion of deferred revenue 95,991 107,064

Long-term debt 347,385 346,793

Other long-term liabilities 232,041 207,102

Total long-term liabilities 675,417 660,959

Stockholders' equity 2,631,262 2,493,018

Total liabilities and stockholders' equity $ 4,213,875 $ 3,950,785

Cadence Design Systems, Inc.Condensed Consolidated Income StatementsFor the Three and Nine Months Ended October 2, 2021 and September 26, 2020(In thousands, except per share amounts)(Unaudited)Three Months EndedNine Months EndedOctober 2,

2021

September 26,

2020

October 2,

2021

September 26,

2020

Revenue:Product and maintenance$

706,160

$

630,329

$

2,093,098

$

1,813,384

Services44,735

36,278

122,110

109,598

Total revenue750,895

666,607

2,215,208

1,922,982

Costs and expenses:Cost of product and maintenance54,185

64,800

174,933

175,915

Cost of services22,402

17,484

62,380

56,047

Marketing and sales143,401

123,738

412,194

369,958

Research and development289,105

250,934

845,324

743,423

General and administrative42,990

35,928

123,275

105,161

Amortization of acquired intangibles5,000

4,438

14,661

13,234

Restructuring and other charges (credits)(222

)

13

(968

)

(1,329

)

Total costs and expenses556,861

497,335

1,631,799

1,462,409

Income from operations194,034

169,272

583,409

460,573

Interest expense(4,196

)

(5,325

)

(12,729

)

(15,876

)

Other income (expense), net(1,143

)

1,766

3,701

1,862

Income before provision for income taxes188,695

165,713

574,381

446,559

Provision for income taxes12,388

4,083

55,005

29,653

Net income$

176,307

$

161,630

$

519,376

$

416,906

Net income per share - basic$

0.65

$

0.59

$

1.90

$

1.52

Net income per share - diluted$

0.63

$

0.58

$

1.86

$

1.49

Weighted average common shares outstanding - basic273,194

273,996

273,636

273,633

Weighted average common shares outstanding - diluted278,311

280,024

279,046

279,455

Cadence Design Systems, Inc.Condensed Consolidated Income StatementsFor the Three and Nine Months Ended October 2, 2021 and September 26, 2020(In thousands, except per share amounts)(Unaudited) Three Months Ended Nine Months Ended October 2, September October 2, September 26, 26, 2021 2021 2020 2020

Revenue: Product and $ 706,160 $ 630,329 $ 2,093,098 $ 1,813,384 maintenanceServices 44,735 36,278 122,110 109,598

Total revenue 750,895 666,607 2,215,208 1,922,982

Costs and expenses: Cost of product and 54,185 64,800 174,933 175,915 maintenanceCost of services 22,402 17,484 62,380 56,047

Marketing and sales 143,401 123,738 412,194 369,958

Research and 289,105 250,934 845,324 743,423 developmentGeneral and 42,990 35,928 123,275 105,161 administrativeAmortization of 5,000 4,438 14,661 13,234 acquired intangiblesRestructuring and (222 ) 13 (968 ) (1,329 )other charges (credits) Total costs and 556,861 497,335 1,631,799 1,462,409 expenses Income from 194,034 169,272 583,409 460,573 operations Interest expense (4,196 ) (5,325 ) (12,729 ) (15,876 )

Other income (1,143 ) 1,766 3,701 1,862 (expense), net Income before 188,695 165,713 574,381 446,559 provision for income taxes Provision for 12,388 4,083 55,005 29,653 income taxes Net income $ 176,307 $ 161,630 $ 519,376 $ 416,906

Net income per $ 0.65 $ 0.59 $ 1.90 $ 1.52 share - basic Net income per $ 0.63 $ 0.58 $ 1.86 $ 1.49 share - diluted Weighted average 273,194 273,996 273,636 273,633 common shares outstanding - basic Weighted averagecommon shares 278,311 280,024 279,046 279,455 outstanding -diluted Cadence Design Systems, Inc.Condensed Consolidated Statements of Cash FlowsFor the Nine Months Ended October 2, 2021 and September 26, 2020(In thousands)(Unaudited)Nine Months EndedOctober 2,September 26,2021

2020

Cash and cash equivalents at beginning of period$

928,432

$

705,210

Cash flows from operating activities:Net income519,376

416,906

Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization106,962

107,019

Amortization of debt discount and fees952

770

Stock-based compensation155,860

138,723

(Gain) loss on investments, net(330

)

5,118

Deferred income taxes(34,566

)

(18,966

)

Provisions for losses on receivables234

1,087

ROU asset amortization and change in operating lease liabilities(2,917

)

2,064

Other non-cash items146

410

Changes in operating assets and liabilities, net of effect of acquired businesses:Receivables15,132

9,945

Inventories(25,608

)

6,376

Prepaid expenses and other36,632

22,769

Other assets8,127

(21,287

)

Accounts payable and accrued liabilities10,501

(30,455

)

Deferred revenue84,183

124,491

Other long-term liabilities10,417

4,430

Net cash provided by operating activities885,101

769,400

Cash flows from investing activities:Proceeds from the sale of non-marketable investments128

-

Purchases of property, plant and equipment(49,977

)

(63,745

)

Cash paid in business combinations, net of cash acquired(220,026

)

(197,562

)

Net cash used for investing activities(269,875

)

(261,307

)

Cash flows from financing activities:Proceeds from revolving credit facility-

350,000

Payment of debt issuance costs(1,285

)

-

Proceeds from issuance of common stock83,632

71,451

Stock received for payment of employee taxes on vesting of restricted stock(108,185

)

(85,515

)

Payments for repurchases of common stock(502,301

)

(250,047

)

Net cash provided by (used for) financing activities(528,139

)

85,889

Effect of exchange rate changes on cash and cash equivalents(1,700

)

7,372

Increase in cash and cash equivalents85,387

601,354

Cash and cash equivalents at end of period$

1,013,819

$

1,306,564

Cadence Design Systems, Inc.Condensed Consolidated Statements of Cash FlowsFor the Nine Months Ended October 2, 2021 and September 26, 2020(In thousands)(Unaudited) Nine Months Ended October 2, September 26, 2021 2020

Cash and cash equivalents at beginning of period $ 928,432 $ 705,210

Cash flows from operating activities:Net income 519,376 416,906

Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization 106,962 107,019

Amortization of debt discount and fees 952 770

Stock-based compensation 155,860 138,723

(Gain) loss on investments, net (330 ) 5,118

Deferred income taxes (34,566 ) (18,966 )

Provisions for losses on receivables 234 1,087

ROU asset amortization and change in operating (2,917 ) 2,064 lease liabilitiesOther non-cash items 146 410

Changes in operating assets and liabilities, netof effect of acquired businesses:Receivables 15,132 9,945

Inventories (25,608 ) 6,376

Prepaid expenses and other 36,632 22,769

Other assets 8,127 (21,287 )

Accounts payable and accrued liabilities 10,501 (30,455 )

Deferred revenue 84,183 124,491

Other long-term liabilities 10,417 4,430

Net cash provided by operating activities 885,101 769,400

Cash flows from investing activities:Proceeds from the sale of non-marketable 128 - investmentsPurchases of property, plant and equipment (49,977 ) (63,745 )

Cash paid in business combinations, net of cash (220,026 ) (197,562 )acquiredNet cash used for investing activities (269,875 ) (261,307 )

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

Payment of debt issuance costs (1,285 ) -

Proceeds from issuance of common stock 83,632 71,451

Stock received for payment of employee taxes on (108,185 ) (85,515 )vesting of restricted stockPayments for repurchases of common stock (502,301 ) (250,047 )

Net cash provided by (used for) financing (528,139 ) 85,889 activities Effect of exchange rate changes on cash and cash (1,700 ) 7,372 equivalents Increase in cash and cash equivalents 85,387 601,354

Cash and cash equivalents at end of period $ 1,013,819 $ 1,306,564

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

2021

GEOGRAPHYQ1Q2Q3Q4YearQ1Q2Q3Americas43

%

44

%

42

%

41

%

42

%

46

%

44

%

46

%

China13

%

12

%

17

%

17

%

15

%

12

%

14

%

13

%

Other Asia18

%

19

%

19

%

18

%

18

%

18

%

19

%

18

%

Europe, Middle East and Africa

19

%

18

%

16

%

17

%

18

%

18

%

17

%

17

%

Japan7

%7

%6

%7

%7

%6

%6

%6

%Total100

%

100

%

100

%

100

%

100

%

100

%

100

%

100

%

Revenue Mix by Product Category (% of Total Revenue)2020

2021

PRODUCT CATEGORYQ1Q2Q3Q4YearQ1Q2Q3Custom IC Design and Simulation25

%

24

%

24

%

26

%

25

%

23

%

23

%

23

%

Digital IC Design and Signoff29

%

28

%

27

%

31

%

29

%

27

%

28

%

29

%

Functional Verification, including Emulation and Prototyping Hardware23

%

24

%

23

%

19

%

22

%

26

%

25

%

23

%

IP14

%

14

%

15

%

13

%

14

%

14

%

13

%

14

%

System Design and Analysis9

%

10

%

11

%

11

%

10

%

10

%

11

%

11

%

Total100

%

100

%

100

%

100

%

100

%

100

%

100

%

100

%

Cadence Design Systems, Inc.(Unaudited) Revenue Mix byGeography (% of Total Revenue) 2020 2021

GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Americas 43 % 44 % 42 % 41 % 42 % 46 % 44 % 46 %

China 13 % 12 % 17 % 17 % 15 % 12 % 14 % 13 %

Other Asia 18 % 19 % 19 % 18 % 18 % 18 % 19 % 18 %

Europe, Middle 19 % 18 % 16 % 17 % 18 % 18 % 17 % 17 %East and Africa

Japan 7 % 7 % 6 % 7 % 7 % 6 % 6 % 6 %

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

Revenue Mix byProduct Category (% ofTotal Revenue) 2020 2021

PRODUCT Q1 Q2 Q3 Q4 Year Q1 Q2 Q3CATEGORY Custom IC 25 % 24 % 24 % 26 % 25 % 23 % 23 % 23 %Design and SimulationDigital IC 29 % 28 % 27 % 31 % 29 % 27 % 28 % 29 %Design and SignoffFunctionalVerification,including 23 % 24 % 23 % 19 % 22 % 26 % 25 % 23 %Emulation andPrototypingHardwareIP 14 % 14 % 15 % 13 % 14 % 14 % 13 % 14 %

System Design 9 % 10 % 11 % 11 % 10 % 10 % 11 % 11 %and AnalysisTotal 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %

Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Operating MarginAs of October 25, 2021(Unaudited)Three Months EndingYear EndingJanuary 1, 2022January 1, 2022ForecastForecastGAAP operating margin as a percent of total revenue~24%~26%Reconciling items to non-GAAP operating margin as a percent of total revenue:Stock-based compensation expense8%

7%

Amortization of acquired intangibles2%

2%

Acquisition and integration-related costs1%

1%

Restructuring and other credits0%

0%

Non-qualified deferred compensation expenses0%

0%

Special charges*0%

1%

Non-GAAP operating margin as a percent of total revenue?~35%~37%Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Operating MarginAs of October 25, 2021(Unaudited) Three Months Year Ending Ending January 1, January 1, 2022 2022 Forecast Forecast GAAP operating margin as a percent of total revenue ~24% ~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 and other credits 0% 0%

Non-qualified deferred compensation expenses 0% 0%

Special charges* 0% 1%

Non-GAAP operating margin as a percent of total ~35% ~37%revenue?? The non-GAAP measures presented in the table above should not be considered a substitute forfinancial results and measures determined or calculated in accordance with GAAP.* Comprised of costs related to a voluntary retirement program in the second quarter of 2021. ? 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. * Comprised of costs related to a voluntary retirement program in the second quarter of 2021. Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per ShareAs of October 25, 2021(Unaudited)Three Months EndingYear EndingJanuary 1, 2022January 1, 2022ForecastForecastDiluted net income per share on a GAAP basis$0.49 to $0.53$2.36 to $2.40Stock-based compensation expense0.21

0.77

Amortization of acquired intangibles0.06

0.24

Acquisition and integration-related costs0.02

0.08

Restructuring and other credits-

-

Non-qualified deferred compensation expenses-

0.01

Special charges*-

0.10

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

(0.02)

Income tax effect of non-GAAP adjustments(0.02)

(0.30)

Diluted net income per share on a non-GAAP basis?$0.76 to $0.80$3.24 to $3.28Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Net IncomeAs of October 25, 2021(Unaudited)Three Months EndingYear EndingJanuary 1, 2022January 1, 2022($ in millions)ForecastForecastNet income on a GAAP basis$137 to $149$657 to $669Stock-based compensation expense58

214

Amortization of acquired intangibles17

67

Acquisition and integration-related costs6

22

Restructuring and other credits-

(1)

Non-qualified deferred compensation expenses-

4

Special charges*-

27

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

(4)

Income tax effect of non-GAAP adjustments(7)

(84)

Net income on a non-GAAP basis?$211 to $223$902 to $914Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per ShareAs of October 25, 2021(Unaudited) Three Year Months Ending Ending January 1, January 2022 1, 2022 Forecast Forecast Diluted net income per share on a GAAP basis $0.49 to $2.36 to $0.53 $2.40 Stock-based compensation expense 0.21 0.77

Amortization of acquired intangibles 0.06 0.24

Acquisition and integration-related costs 0.02 0.08

Restructuring and other credits - -

Non-qualified deferred compensation expenses - 0.01

Special charges* - 0.10

Other income or expense related to investments and - (0.02)non-qualified deferred compensation plan assets**Income tax effect of non-GAAP adjustments (0.02) (0.30)

Diluted net income per share on a non-GAAP basis? $0.76 to $3.24 to $0.80 $3.28 Cadence Design Systems, Inc.Impact of Non-GAAP Adjustments on Forward Looking Net IncomeAs of October 25, 2021(Unaudited) Three Year Months Ending Ending January 1, January 2022 1, 2022($ in millions) Forecast Forecast Net income on a GAAP basis $137 to $657 to $149 $669 Stock-based compensation expense 58 214

Amortization of acquired intangibles 17 67

Acquisition and integration-related costs 6 22

Restructuring and other credits - (1)

Non-qualified deferred compensation expenses - 4

Special charges* - 27

Other income or expense related to investments and - (4)non-qualified deferred compensation plan assets**Income tax effect of non-GAAP adjustments (7) (84)

Net income on a non-GAAP basis? $211 to $902 to $223 $914? The non-GAAP measures presented in the table above should not be considered a substitute forfinancial results and measures determined or calculated in accordance with GAAP.* Comprised of 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. CDNS-IR

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