8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 8-K

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): February 12, 2024

CADENCE DESIGN SYSTEMS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware	000-15867	00-0000000
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2655 Seely Avenue, San Jose, California 95134

(Address of Principal Executive Offices) (Zip Code)

(408) 943-1234

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CDNS	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On February 12, 2024, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter and fiscal year ended December 31, 2023.

A copy of the press release is attached hereto as Exhibit 99.01 and a copy of the commentary by the Chief Financial Officer of Cadence regarding Cadence's financial results for the quarter and fiscal year ended December 31, 2023 is attached hereto as Exhibit 99.02, and the press release and the commentary are incorporated herein by reference.

The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

Exhibit No.	Description
99.01	Press Release issued by Cadence Design Systems, Inc. on February 12, 2024.
99.02	CFO Commentary on Results of Quarter and Fiscal Year Ended December 31, 2023.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 12, 2024

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ John M. Wall
	John M. Wall
	Senior Vice President and Chief Financial Officer

EX-99.01

Exhibit 99.01

Cadence Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Fiscal Year 2023 Total Revenue Up 15% Year Over Year

EPS Up Over 20% Year Over Year

Record Backlog of $6.0 Billion and cRPO of $3.2 Billion

SAN JOSE, Calif. — February 12, 2024 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the fourth quarter and fiscal year 2023.

Fourth Quarter 2023 Financial Highlights

•Revenue of $1.069 billion, compared to revenue of $900 million in Q4 2022

•GAAP operating margin of 31%, compared to 23% in Q4 2022

•Non-GAAP operating margin of 43%, compared to 36% in Q4 2022

•GAAP diluted net income per share of $1.19, compared to $0.88 in Q4 2022

•Non-GAAP diluted net income per share of $1.38, compared to $0.96 in Q4 2022

Fiscal Year 2023 Financial Highlights

•Revenue of $4.090 billion, compared to revenue of $3.562 billion in 2022

•GAAP operating margin of 31%, compared to 30% in 2022

•Non-GAAP operating margin of 42%, compared to 40% in 2022

•GAAP diluted net income per share of $3.82, compared to $3.09 in 2022

•Non-GAAP diluted net income per share of $5.15, compared to $4.27 in 2022

•Year-end backlog was $6.0 billion and current remaining performance obligations (“cRPO”), contract revenue expected to be recognized as revenue in the next 12 months, was $3.2 billion

“Cadence delivered exceptional results for 2023, propelled by our innovative solutions and the successful execution of our Intelligent System Design strategy,” said Anirudh Devgan, president and chief executive officer. “I'm thrilled about the opportunities ahead of us, particularly in AI and 3D-IC. And I look forward to continuing to drive our broad-based business momentum through our technology leadership.”

“We had a strong finish to the year, with growth across all our businesses in 2023,” said John Wall, senior vice president and chief financial officer. “I’m pleased with our record year-end backlog of $6.0 billion and cRPO of $3.2 billion, and I look forward to building on that strength in 2024.”

CFO Commentary

Commentary on the fourth quarter and fiscal year 2023 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

Business Outlook

For fiscal year 2024, the company expects:

•Revenue in the range of $4.55 billion to $4.61 billion

•GAAP operating margin in the range of 32% to 33%

•Non-GAAP operating margin in the range of 42% to 43%

•GAAP diluted net income per share in the range of $4.08 to $4.18

•Non-GAAP diluted net income per share in the range of $5.87 to $5.97

For the first quarter of 2024, the company expects:

•Revenue in the range of $990 million to $1.01 billion

•GAAP operating margin in the range of 24.5% to 25.5%

•Non-GAAP operating margin in the range of 36.5% to 37.5%

•GAAP diluted net income per share in the range of $0.74 to $0.78

•Non-GAAP diluted net income per share in the range of $1.10 to $1.14

The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use the current normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

Reconciliations of the financial highlights and business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, are included in this press release.

Business Highlights

•Further broadened Cadence.AI generative AI portfolio with introduction of Voltus™ InsightAI for intelligent power analysis and Celsius™ Studio for AI-driven full system thermal analysis. Accelerating momentum of our Cadence.AI portfolio has led to an almost tenfold increase in the number of customers adopting our GenAI solutions in 2023

•System Design and Analysis grew 22% year over year in 2023, with strong momentum from the company's multiphysics platform delivering superior results to customers across multiple segments including aerospace and defense and automotive

•The Millennium™ Enterprise Multiphysics Platform, which was announced earlier this month, is the industry’s first hardware/software platform combining AI, HPC and digital twin technology delivering 20x energy efficiency and up to 100x design impact

•Expanded long-standing collaborations with strategic partners NVIDIA, Arm and Intel

•2023 was another record year for Palladium® and Protium™ hardware systems, with an exceptionally strong Q1 2023 hardware quarter when the company expanded production capacity to improve delivery lead times against the backlog

Audio Webcast Scheduled

Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the fourth quarter and fiscal year 2023 financial results audio webcast today, February 12, 2024, 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 February 12, 2024 at 5 p.m. (Pacific) and ending March 15, 2024 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 systems 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 products from chips to boards to complete systems for the most dynamic market applications, including hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and healthcare. For nine years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.

© 2024 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 press release contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (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 deliveries 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, geopolitical and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions, and rising tensions and conflicts around the world such as in the Middle East and with respect to Taiwan; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates, Cadence's upcoming debt maturities and Cadence’s ability to access capital and debt markets; (vii) the continued acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (viii) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (ix) 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; (x) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject; and (xi) Cadence's ability to successfully meet corporate governance, environmental and social targets and strategies. In addition, the timing and amount of Cadence’s repurchases of its common stock are 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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.

All forward-looking statements in this press release are based on management's expectations as of the date of this press release and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

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, 2023	December 31, 2022
	(unaudited)
GAAP operating margin as a percent of total revenue	31%	23%
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%	2%
Restructuring	0%	0%
Non-qualified deferred compensation expenses	1%	1%
Non-GAAP operating margin as a percent of total revenue	43%	36%

Operating Margin Reconciliation	Years Ended
	December 31, 2023	December 31, 2022
	(unaudited)
GAAP operating margin as a percent of total revenue	31%	30%
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	0%	0%
Non-qualified deferred compensation expenses (credits)	0%	(1)%
Non-GAAP operating margin as a percent of total revenue	42%	40%

Net Income Reconciliation	Three Months Ended
	December 31, 2023		December 31, 2022
(in thousands)	(unaudited)
Net income on a GAAP basis	$	323,899	$	240,392
Stock-based compensation expense	86,683		73,249
Amortization of acquired intangibles	16,920		15,369
Acquisition and integration-related costs	12,583		17,510
Restructuring	(569)		13
Non-qualified deferred compensation expenses	6,295		3,233
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(27,966)		(2,584)
Income tax effect of non-GAAP adjustments	(41,638)		(85,397)
Net income on a non-GAAP basis	$	376,207	$	261,785

* 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, 2023		December 31, 2022
(in thousands)	(unaudited)
Net income on a GAAP basis	$	1,041,144	$	848,952
Stock-based compensation expense	325,611		270,439
Amortization of acquired intangibles	61,970		59,818
Acquisition and integration-related costs	56,542		41,103
Restructuring	11,013		55
Non-qualified deferred compensation expenses (credits)	10,851		(8,744)
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(45,502)		14,171
Income tax effect of non-GAAP adjustments	(57,139)		(52,475)
Net income on a non-GAAP basis	$	1,404,490	$	1,173,319

* 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, 2023		December 31, 2022
(in thousands, except per share data)	(unaudited)
Diluted net income per share on a GAAP basis	$	1.19	$	0.88
Stock-based compensation expense	0.32		0.27
Amortization of acquired intangibles	0.06		0.06
Acquisition and integration-related costs	0.04		0.06
Restructuring	—		—
Non-qualified deferred compensation expenses	0.02		0.01
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.10)		(0.01)
Income tax effect of non-GAAP adjustments	(0.15)		(0.31)
Diluted net income per share on a non-GAAP basis	$	1.38	$	0.96
Shares used in calculation of diluted net income per share	272,419		272,997

* 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, 2023		December 31, 2022
(in thousands, except per share data)	(unaudited)
Diluted net income per share on a GAAP basis	$	3.82	$	3.09
Stock-based compensation expense	1.19		0.98
Amortization of acquired intangibles	0.23		0.22
Acquisition and integration-related costs	0.21		0.15
Restructuring	0.04		—
Non-qualified deferred compensation expenses (credits)	0.04		(0.03)
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.17)		0.05
Income tax effect of non-GAAP adjustments	(0.21)		(0.19)
Diluted net income per share on a non-GAAP basis	$	5.15	$	4.27
Shares used in calculation of diluted net income per share	272,748		275,011

* 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.

For more information, please contact:

Cadence Investor Relations

408-944-7100

investor_relations@cadence.com

Cadence Newsroom

408-944-7039

newsroom@cadence.com

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

December 31, 2023 and December 31, 2022

(In thousands)

(Unaudited)

	December 31, 2023		December 31, 2022
Current assets:
Cash and cash equivalents	$	1,008,152	$	882,325
Receivables, net	489,224		486,710
Inventories	181,661		128,005
Prepaid expenses and other	297,180		209,727
Total current assets	1,976,217		1,706,767
Property, plant and equipment, net	403,213		371,451
Goodwill	1,535,845		1,374,268
Acquired intangibles, net	336,843		354,617
Deferred taxes	880,001		853,691
Other assets	537,372		476,277
Total assets	$	5,669,491	$	5,137,071
Current liabilities:
Revolving credit facility	$	—	$	100,000
Current portion of long-term debt	349,285		—
Accounts payable and accrued liabilities	576,558		557,158
Current portion of deferred revenue	665,024		690,538
Total current liabilities	1,590,867		1,347,696
Long-term liabilities:
Long-term portion of deferred revenue	98,931		91,524
Long-term debt	299,771		648,078
Other long-term liabilities	275,651		304,660
Total long-term liabilities	674,353		1,044,262
Stockholders’ equity	3,404,271		2,745,113
Total liabilities and stockholders’ equity	$	5,669,491	$	5,137,071

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three Months and Years Ended December 31, 2023 and December 31, 2022

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended				Years Ended
	December 31, 2023		December 31, 2022		December 31, 2023		December 31, 2022
Revenue:
Product and maintenance	$	981,987	$	845,880	$	3,834,359	$	3,340,197
Services	86,636		53,997		255,627		221,521
Total revenue	1,068,623		899,877		4,089,986		3,561,718
Costs and expenses:
Cost of product and maintenance	71,491		69,702		331,760		273,565
Cost of services	32,639		23,813		103,281		98,058
Marketing and sales	180,368		171,817		690,319		604,224
Research and development	367,443		350,423		1,441,796		1,251,544
General and administrative	75,742		68,065		242,430		242,116
Amortization of acquired intangibles	4,981		4,927		18,162		18,470
Restructuring	(569)		13		11,013		55
Total costs and expenses	732,095		688,760		2,838,761		2,488,032
Income from operations	336,528		211,117		1,251,225		1,073,686
Interest expense	(8,989)		(9,082)		(36,185)		(22,934)
Other income (expense), net	34,523		8,490		66,886		(5,389)
Income before provision (benefit) for income taxes	362,062		210,525		1,281,926		1,045,363
Provision (benefit) for income taxes	38,163		(29,867)		240,782		196,411
Net income	$	323,899	$	240,392	$	1,041,144	$	848,952
Net income per share - basic	$	1.20	$	0.89	$	3.86	$	3.13
Net income per share - diluted	$	1.19	$	0.88	$	3.82	$	3.09
Weighted average common shares outstanding - basic	269,088		269,709		269,381		271,198
Weighted average common shares outstanding - diluted	272,419		272,997		272,748		275,011

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

For the Years Ended December 31, 2023 and December 31, 2022

(In thousands)

(Unaudited)

	Years Ended
	December 31, 2023		December 31, 2022
Cash and cash equivalents at beginning of year	$	882,325	$	1,088,940
Cash flows from operating activities:
Net income	1,041,144		848,952
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	145,292		132,088
Amortization of debt discount and fees	1,262		1,134
Stock-based compensation	325,611		270,439
(Gain) loss on investments, net	(34,602)		5,425
Deferred income taxes	(36,512)		(107,606)
Provisions for losses on receivables	3,325		204
ROU asset amortization and change in operating lease liabilities	451		3,342
Other non-cash items	1,983		371
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(11,748)		(138,471)
Inventories	(65,895)		(23,073)
Prepaid expenses and other	39,015		(38,927)
Other assets	(45,784)		(933)
Accounts payable and accrued liabilities	5,415		113,945
Deferred revenue	(21,583)		131,462
Other long-term liabilities	1,802		43,542
Net cash provided by operating activities	1,349,176		1,241,894
Cash flows from investing activities:
Purchases of investments	(176,170)		(1,000)
Proceeds from the sale and maturity of investments	64,775		366
Purchases of property, plant and equipment	(102,337)		(123,215)
Purchases of intangible assets	(166)		(1,000)
Cash paid in business combinations, net of cash acquired	(198,351)		(613,785)
Net cash used for investing activities	(412,249)		(738,634)
Cash flows from financing activities:
Proceeds from revolving credit facility	50,000		585,000
Payments on revolving credit facility	(150,000)		(485,000)
Proceeds from term loan	—		300,000
Payment of debt issuance costs	—		(425)
Proceeds from issuance of common stock	132,957		105,331
Stock received for payment of employee taxes on vesting of restricted stock	(136,396)		(111,864)
Payments for repurchases of common stock	(700,134)		(1,050,091)
Net cash used for financing activities	(803,573)		(657,049)
Effect of exchange rate changes on cash and cash equivalents	(7,527)		(52,826)
Increase (decrease) in cash and cash equivalents	125,827		(206,615)
Cash and cash equivalents at end of year	$	1,008,152	$	882,325

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2022										2023
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
Americas	47	%	45	%	45	%	46	%	46	%	44	%	41	%	43	%	44	%	43	%
China	16	%	13	%	17	%	13	%	15	%	17	%	18	%	17	%	15	%	17	%
Other Asia	18	%	18	%	17	%	18	%	18	%	18	%	18	%	19	%	19	%	19	%
Europe, Middle East and Africa	14	%	18	%	16	%	17	%	16	%	15	%	17	%	15	%	16	%	16	%
Japan	5	%	6	%	5	%	6	%	5	%	6	%	6	%	6	%	6	%	5	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Category (% of Total Revenue)

	2022										2023
PRODUCT CATEGORY	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
Custom IC Design and Simulation	22	%	23	%	22	%	22	%	22	%	20	%	22	%	22	%	22	%	22	%
Digital IC Design and Signoff	27	%	27	%	29	%	28	%	28	%	25	%	27	%	28	%	29	%	27	%
Functional Verification, including Emulation and Prototyping Hardware	28	%	24	%	25	%	25	%	26	%	32	%	27	%	26	%	24	%	27	%
IP	13	%	14	%	12	%	12	%	12	%	11	%	11	%	11	%	13	%	12	%
System Design and Analysis	10	%	12	%	12	%	13	%	12	%	12	%	13	%	13	%	12	%	12	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Operating Margin

As of February 12, 2024

(Unaudited)

	Three Months Ending March 31, 2024	Year Ending December 31, 2024
	Forecast	Forecast
GAAP operating margin as a percent of total revenue	24.5% - 25.5%	32% - 33%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense	9%	8%
Amortization of acquired intangibles	2%	1%
Acquisition and integration-related costs	1%	1%
Non-GAAP operating margin as a percent of total revenue†	36.5% - 37.5%	42% - 43%

† 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 Share

As of February 12, 2024

(Unaudited)

	Three Months Ending March 31, 2024	Year Ending December 31, 2024
	Forecast	Forecast
Diluted net income per share on a GAAP basis	$0.74 to $0.78	$4.08 to $4.18
Stock-based compensation expense	0.32	1.36
Amortization of acquired intangibles	0.06	0.24
Acquisition and integration-related costs	0.04	0.14
Income tax effect of non-GAAP adjustments	(0.06)	0.05
Diluted net income per share on a non-GAAP basis†	$1.10 to $1.14	$5.87 to $5.97

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Net Income

As of February 12, 2024

(Unaudited)

	Three Months Ending March 31, 2024	Year Ending December 31, 2024
($ in millions)	Forecast	Forecast
Net income on a GAAP basis	$202 to $213	$1,111 to $1,138
Stock-based compensation expense	88	370
Amortization of acquired intangibles	16	66
Acquisition and integration-related costs	12	39
Income tax effect of non-GAAP adjustments	(16)	13
Net income on a non-GAAP basis†	$302 to $313	$1,599 to $1,626

†
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.

EX-99.02

Exhibit 99.02

CADENCE REPORTS FOURTH QUARTER AND FISCAL YEAR 2023
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
Key Takeaways for 2023 • Revenue growth of 15%, and EPS growth of >20% • A seventh consecutive year of >50% incremental non-GAAP operating margin, resulting in non-GAAP operating margin of 42% • Record year-end backlog of $6.0B and current RPO of $3.2B	Q1 2024 Outlook • Revenue : $990 million - $1.010 billion • GAAP operating margin: 24.5% - 25.5% • Non-GAAP operating margin: 36.5% - 37.5% • GAAP EPS: $0.74 - $0.78 • Non-GAAP EPS: $1.10 - $1.14 • Expect to use approximately $125 million to repurchase Cadence shares in Q1	Q4 2023 KEY METRICS
		• Revenue $1.069 billion • GAAP operating margin 31% • Non-GAAP operating margin 43% • GAAP EPS $1.19 • Non-GAAP EPS $1.38 • Operating cash flow $272 million
FY 2024 Outlook • Revenue: $4.55 - $4.61 billion • GAAP operating margin: 32% - 33% • Non-GAAP operating margin: 42% - 43% • GAAP EPS: $4.08 - $4.18 • Non-GAAP EPS $5.87 - $5.97 • Operating cash flow: $1.35 - $1.45 billion • Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year	Financial Results Webcast	FY 2023 KEY METRICS
	Our Q4 2023 financial results webcast will begin February 12, 2024 at 2:00 p.m. (Pacific). The webcast may be accessed at www.cadence.com/cadence/investor_relations. An archive of the webcast will be available on February 12, 2024 until 5:00 p.m. (Pacific) on March 15, 2024.	• Revenue $4.090 billion • GAAP operating margin 31% • Non-GAAP operating margin 42% • GAAP EPS $3.82 • Non-GAAP EPS $5.15 • Operating cash flow $1.349 billion

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 1

Cadence Design Systems, Inc.

Financial Metrics

(In Millions, except per share data)	2018		2019		2020*		2021		2022		2023*		2024E
Revenue	$	2,138	$	2,336	$	2,683	$	2,988	$	3,562	$	4,090	$4,550- $4,610
Revenue growth*	10%		9%		15%		11%		19%		15%		11% - 13%
3-year CAGR	8%		9%		11%		12%		15%		15%		~15%
3-year CAGR without 53rd week impact					11%						16%
GAAP operating expenses	$	1,742	$	1,845	$	2,037	$	2,209	$	2,488	$	2,839	~$3,109
GAAP operating expense growth	8%		6%		10%		8%		13%		14%		~10%
Non-GAAP operating expenses	$	1,491	$	1,587	$	1,739	$	1,877	$	2,125	$	2,373	~$2,634
Non-GAAP operating expense growth	6%		6%		10%		8%		13%		12%		~11%
GAAP operating margin**	19%		21%		24%		26%		30%		31%		32.5	%
Non-GAAP operating margin**	30%		32%		35%		37%		40%		42%		42.5	%
GAAP earnings per share	$	1.23	$	3.53	$	2.11	$	2.50	$	3.09	$	3.82	$4.08 - $4.18
Non-GAAP earning per share	$	1.87	$	2.20	$	2.80	$	3.29	$	4.27	$	5.15	$5.87 - $5.97
Non-GAAP EPS growth**	34%		18%		27%		18%		30%		21%		15	%
3-year Non-GAAP EPS CAGR**	20%		22%		26%		21%		25%		23%		22	%
Weighted average shares diluted outstanding	281.1		280.5		279.6		278.9		275.0		272.7		271.5 - 273.5
Cash flow from operations	605		730		905		1,101		1,242		1,349		$1,350 - $1,450
Capital expenditures	62		75		95		65		123		102		~$120

* Fiscal 2020 was a 53-week year, compared to all other years which were 52 week years. 2020 (which impacts the 3 year CAGR in 2023) included approximately $45 million revenue impact for the extra week.

** At midpoint of guidance.

Profitability Trends

(In Millions)	2018		2019		2020		2021		2022		2023		2024E*
Revenue	$	2,138	$	2,336	$	2,683	$	2,988	$	3,562	$	4,090	$	4,580
Revenue Growth	10%		9%		15%		11%		19%		15%		12%
3-Year Revenue Growth CAGR	8%		9%		11%		12%		15%		15%		15%
GAAP operating margin	19%		21%		24%		26%		30%		31%		32.5%
Non-GAAP operating margin	30%		32%		35%		37%		40%		42%		42.5%
Stock-based compensation	(8)%		(8)%		(7)%		(7)%		(8)%		(8)%		(8)%
Non-GAAP operating margin adjusted for stock-based compensation	22%		24%		28%		30%		32%		34%		34.5%
GAAP operating income	$	396	$	492	$	646	$	779	$	1,074	$	1,251	$	1,471
Non-GAAP operating income	$	647	$	749	$	944	$	1,111	$	1,436	$	1,717	$	1,946
Non-GAAP operating income adjusted for stock-based compensation	$	479	$	567	$	747	$	901	$	1,166	$	1,391	$	1,576

* At midpoint of guidance.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 2

Cadence Design Systems, Inc.

First Quarter 2024 Financial Outlook

	Q1 2023		Q4 2023		Q1 2024E
Total Revenue ($ Millions)	$	1,022	$	1,069	$990 - $1,010
Q/Q Growth			4%		(7)% - (6)%
Y/Y Growth			19%		(3)% - (1)%
GAAP Operating Margin	32%		31%		24.5% - 25.5%
Non-GAAP Operating Margin	42%		43%		36.5% - 37.5%
GAAP EPS	$	0.89	$	1.19	$0.74 - $0.78
Non-GAAP EPS	$	1.29	$	1.38	$1.10 - $1.14

Fiscal Year 2024 Financial Outlook

	FY 2023		FY 2024E
Recurring Revenue	84%		80% - 85%
Total Revenue ($ Millions)	$	4,090	$4,550 - $4,610
Y/Y Growth	15%		11% - 13%
Revenue from Beginning Backlog	~75%		~70%
GAAP Operating Margin	30.6%		32% - 33%
Non-GAAP Operating Margin	42.0%		42% - 43%
GAAP Other Income & Expense ($ Millions)	$	31	$(10) - $(18)
Non-GAAP Other Income & Expense ($ Millions)	$	(15)	$(10) - $(18)
GAAP Tax Rate	19%		~23%
Non-GAAP Tax Rate	17.5%		16.5%
Weighted Average Diluted Shares Outstanding (Millions)	272.7		271.5 - 273.5
GAAP EPS	$	3.82	$4.08 - $4.18
Y/Y Growth	24%		7% - 9%
Non-GAAP EPS	$	5.15	$5.87 - $5.97
Y/Y Growth	21%		14% - 16%
Cash Flow from Operations ($ Millions)	$	1,349	$1,350 - $1,450
DSO	43		~45
Capital Expenditures ($ Millions)	$	102	~$120

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 3

Cadence Design Systems, Inc.

Fourth Quarter and Fiscal Year Financial Results

Backlog

(In Billions)	2019		2020		2021		2022		2023
Backlog	$	3.6	$	3.9	$	4.4	$	5.8	$	6.0

Revenue

(In Millions)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Product and Maintenance	$	846	$	964	$	923	$	966	$	982
Services	54		58		54		57		87
Total Revenue	$	900	$	1,022	$	977	$	1,023	$	1,069

(In Millions)	2019		2020*		2021		2022		2023
Product and Maintenance	$	2,204	$	2,537	$	2,813	$	3,340	$	3,834
Services	132		146		175		222		256
Total Revenue	$	2,336	$	2,683	$	2,988	$	3,562	$	4,090

* Fiscal 2020 was a 53-week year.

Recurring and Up-Front Revenue

	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Revenue recognized over time	84	%	77	%	82	%	83	%	85	%
Revenue from arrangements with non-cancelable commitments	3	%	3	%	3	%	2	%	2	%
Recurring Revenue	87	%	80	%	85	%	85	%	87	%
Up-Front Revenue	13	%	20	%	15	%	15	%	13	%
Total	100	%	100	%	100	%	100	%	100	%

	2020		2021		2022		2023
Revenue recognized over time	85	%	85	%	83	%	81	%
Revenue from arrangements with non-cancelable commitments	3	%	3	%	2	%	3	%
Recurring Revenue	88	%	88	%	85	%	84	%
Up-Front Revenue	12	%	12	%	15	%	16	%
Total	100	%	100	%	100	%	100	%

Trailing Twelve Months Recurring and Up-Front Revenue

	Trailing Twelve Months Ended
	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Recurring Revenue	85	%	84	%	84	%	84	%	84	%
Up-Front Revenue	15	%	16	%	16	%	16	%	16	%
Total	100	%	100	%	100	%	100	%	100	%

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 4

Cadence Design Systems, Inc.

Revenue Mix by Geography

(% of Total Revenue)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Americas	46	%	44	%	41	%	43	%	44	%
China	13	%	17	%	18	%	17	%	15	%
Other Asia	18	%	18	%	18	%	19	%	19	%
Europe, Middle East and Africa	17	%	15	%	17	%	15	%	16	%
Japan	6	%	6	%	6	%	6	%	6	%
Total	100	%	100	%	100	%	100	%	100	%

(% of Total Revenue)	2019		2020		2021		2022		2023
Americas	44	%	42	%	45	%	46	%	43	%
China	10	%	15	%	13	%	15	%	17	%
Other Asia	20	%	18	%	19	%	18	%	19	%
Europe, Middle East and Africa	18	%	18	%	17	%	16	%	16	%
Japan	8	%	7	%	6	%	5	%	5	%
Total	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Category

(% of Total Revenue)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Custom IC Design and Simulation	22	%	20	%	22	%	22	%	22	%
Digital IC Design and Signoff	28	%	25	%	27	%	28	%	29	%
Functional Verification	25	%	32	%	27	%	26	%	24	%
IP	12	%	11	%	11	%	11	%	13	%
System Design and Analysis	13	%	12	%	13	%	13	%	12	%
Total	100	%	100	%	100	%	100	%	100	%

(% of Total Revenue)	2019		2020		2021		2022		2023
Custom IC Design and Simulation	25	%	25	%	23	%	22	%	22	%
Digital IC Design and Signoff	30	%	29	%	29	%	28	%	27	%
Functional Verification	23	%	22	%	24	%	26	%	27	%
IP	13	%	14	%	13	%	12	%	12	%
System Design and Analysis	9	%	10	%	11	%	12	%	12	%
Total	100	%	100	%	100	%	100	%	100	%

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 5

Cadence Design Systems, Inc.

3 Year Revenue CAGR by Product Category

(% of Total Revenue)	2019		2020		2021		2022		2023
Custom IC Design and Simulation	9	%	9	%	8	%	10	%	10	%
Digital IC Design and Signoff	10	%	11	%	11	%	13	%	13	%
Functional Verification	5	%	11	%	11	%	20	%	23	%
IP	16	%	18	%	16	%	15	%	8	%
System Design and Analysis	7	%	13	%	19	%	24	%	22	%
Total 3 Year CAGR	9	%	11	%	12	%	15	%	15	%

3 Year Revenue CAGR by Product Category Without 53rd Week Impact*

(% of Total Revenue)	2019		2020*		2021		2022		2023
Custom IC Design and Simulation	9	%	8	%	8	%	10	%	11	%
Digital IC Design and Signoff	10	%	10	%	11	%	13	%	14	%
Functional Verification	5	%	10	%	11	%	20	%	24	%
IP	16	%	18	%	16	%	15	%	9	%
System Design and Analysis	7	%	12	%	19	%	24	%	23	%
Total 3 Year CAGR	9	%	11	%	12	%	15	%	16	%

* Fiscal 2020 was a 53-week year and included approximately $45 million revenue impact for the extra week.

Gross Margin

	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
GAAP Gross Margin	89.6	%	87.8	%	90.1	%	89.3	%	90.3	%
Non-GAAP Gross Margin	91.1	%	89.1	%	91.4	%	90.6	%	91.7	%

	2019		2020		2021		2022		2023
GAAP Gross Margin	88.6	%	88.6	%	89.7	%	89.6	%	89.4	%
Non-GAAP Gross Margin	90.6	%	90.6	%	91.7	%	91.0	%	90.7	%

Total Costs and Expenses

(In Millions)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Total GAAP Costs and Expenses	$	689	$	699	$	677	$	730	$	732
Total Non-GAAP Costs and Expenses	$	579	$	591	$	569	$	603	$	610

(In Millions)	2019		2020*		2021		2022		2023
Total GAAP Costs and Expenses	$	1,845	$	2,037	$	2,209	$	2,488	$	2,839
Total Non-GAAP Costs and Expenses	$	1,587	$	1,739	$	1,877	$	2,125	$	2,373

* Fiscal 2020 was a 53-week year.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 6

Cadence Design Systems, Inc.

Operating Margin

	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
GAAP Operating Margin	23.5	%	31.6	%	30.7	%	28.6	%	31.5	%
Non-GAAP Operating Margin	35.6	%	42.1	%	41.8	%	41.1	%	42.9	%

	2019		2020		2021		2022		2023
GAAP Operating Margin	21.1	%	24.1	%	26.1	%	30.1	%	30.6	%
Non-GAAP Operating Margin	32.1	%	35.2	%	37.2	%	40.3	%	42.0	%

Net Income Per Share

	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
GAAP Net Income Per Share	$	0.88	$	0.89	$	0.81	$	0.93	$	1.19
Non-GAAP Net Income Per Share	$	0.96	$	1.29	$	1.22	$	1.26	$	1.38

	2019		2020		2021		2022		2023
GAAP Net Income Per Share	$	3.53	$	2.11	$	2.50	$	3.09	$	3.82
Non-GAAP Net Income Per Share	$	2.20	$	2.80	$	3.29	$	4.27	$	5.15

Total DSO

	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q4 2023
DSO	49	44	42	39	43

Balance Sheet and Cash Review

Free Cash Flow

(In Millions)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Net Cash from Operating Activities	$	264	$	267	$	414	$	396	$	272
Capital Expenditures	37		26		20		22		34
Free Cash Flow	$	227	$	241	$	394	$	374	$	238

(In Millions)	2019		2020		2021		2022		2023
Net Cash from Operating Activities	$	730	$	905	$	1,101	$	1,242	$	1,349
Capital Expenditures	75		95		65		123		102
Free Cash Flow	$	655	$	810	$	1,036	$	1,119	$	1,247

Cash and Cash Equivalents

(In Millions)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Cash and Cash Equivalents	$	882	$	917	$	874	$	962	$	1,008

(In Millions)	2019		2020		2021		2022		2023
Cash and Cash Equivalents	$	705	$	928	$	1,089	$	882	$	1,008

•Approximately 45 percent of our cash and cash equivalents were in the U.S. at quarter-end.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 7

Cadence Design Systems, Inc.

Share Repurchase

(In Millions)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
Share Repurchase	$	300	$	125	$	265	$	185	$	125
Number of Shares	1.939		0.668		1.178		0.811		0.488

•Q3 2023 includes 276,330 shares and $60 million equity forward contract from Q2 2023 ASR settled in Q3 2023.

(In Millions)	2019		2020		2021		2022		2023
Share Repurchase	$	306	$	380	$	612	$	1,050	$	700
Number of Shares	4.841		4.247		4.401		6.602		3.145

Employees

	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q4 2023
Headcount	10,228	10,579	10,832	11,139	11,226

	2019	2020	2021	2022	2023
Headcount	8,078	8,746	9,298	10,228	11,226

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 8

Cadence Design Systems, Inc.

Forward Looking Statements

This CFO Commentary contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (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 deliveries 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, geopolitical and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions, and rising tensions and conflicts around the world such as in the Middle East and with respect to Taiwan; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates, Cadence's upcoming debt maturities and Cadence’s ability to access capital and debt markets; (vii) the continued acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (viii) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (ix) 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; (x) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject; and (xi) Cadence's ability to successfully meet corporate governance, environmental and social targets and strategies. In addition, the timing and amount of Cadence’s repurchases of its common stock are 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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.

All forward-looking statements in this document are based on management's expectations as of the date of this document and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

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 GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this CFO Commentary 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. See our earnings press release issued today for further discussion of our non-GAAP financial measures, as well as the reconciliation provided in the Appendix to this CFO Commentary.

Cadence’s management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company’s core business operations and therefore provides supplemental information to Cadence’s 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’s management, including forecasting and budgeting.

© 2024 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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 9

Cadence Design Systems, Inc.

APPENDIX I

Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Millions)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023
GAAP total costs and expenses	$	689	$	699	$	677	$	730	$	732
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense	(73)		(74)		(76)		(88)		(87)
Amortization of acquired intangibles	(16)		(15)		(15)		(15)		(17)
Acquisition and integration-related costs	(18)		(16)		(14)		(14)		(13)
Restructuring	—		—		—		(12)		1
Non-qualified deferred compensation (expenses) credits	(3)		(3)		(3)		2		(6)
Non-GAAP total costs and expenses*	$	579	$	591	$	569	$	603	$	610

* 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.

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Millions)	2018		2019		2020*		2021		2022		2023		2024E
GAAP total costs and expenses	$	1,742	$	1,845	$	2,037	$	2,209	$	2,488	$	2,839	$	3,109
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense	(168)		(182)		(197)		(210)		(270)		(326)		(370)
Amortization of acquired intangibles	(53)		(53)		(64)		(67)		(60)		(62)		(66)
Acquisition and integration-related costs	(20)		(8)		(23)		(23)		(41)		(56)		(39)
Restructuring	(11)		(9)		(9)		1		—		(11)		—
Non-qualified deferred compensation (expenses) credits	1		(5)		(5)		(6)		8		(11)		—
Special charges**	—		(1)		—		(27)		—		—		—
Non-GAAP total costs and expenses***	$	1,491	$	1,587	$	1,739	$	1,877	$	2,125	$	2,373	$	2,634

*	Fiscal 2020 was a 53-week year.
**	2021 includes costs related to a voluntary retirement program.
***	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 10

Cadence Design Systems, Inc.

Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and Non-GAAP Operating Income Adjusted for Stock-based Compensation

(In Millions)	2018		2019		2020*		2021		2022		2023		2024E
GAAP operating income	$	396	$	492	$	646	$	779	$	1,074	$	1,251	$	1,471
Reconciling items to non-GAAP operating income
Stock-based compensation expense	168		182		197		210		270		326		370
Amortization of acquired intangibles	53		53		64		67		60		62		66
Acquisition and integration-related costs	20		8		23		23		41		56		39
Restructuring	11		9		9		(1)		—		11		—
Non-qualified deferred compensation expenses (credits)	(1)		5		5		6		(8)		11		—
Special charges**	—		1		—		27		—		—		—
Non-GAAP operating income***	$	647	$	749	$	944	$	1,111	$	1,436	$	1,717	$	1,946
Stock-based compensation expense	(168)		(182)		(197)		(210)		(270)		(326)		$	(370)
Non-GAAP operating income adjusted for stock-based compensation***	$	479	$	567	$	747	$	901	$	1,166	$	1,391	$	1,576

Table may not foot due to rounding

*	Fiscal 2020 was a 53-week year.
**	2021 includes costs related to a voluntary retirement program.
***	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 11

Cadence Design Systems, Inc.

Reconciliation of GAAP Gross Margin as a Percent of Total Revenue to Non-GAAP Gross Margin as a Percent of Total Revenue

	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q4 2023
GAAP gross margin as a percent of total revenue	89.6%	87.8%	90.1%	89.3%	90.3%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Stock-based compensation expense	0.3%	0.3%	0.2%	0.2%	0.3%
Amortization of acquired intangibles	1.2%	1.0%	1.1%	1.1%	1.1%
Non-qualified deferred compensation expenses (credits)	0.0%	0.0%	0.0%	0.0%	0.0%
Acquisition and integration-related costs	0.0%	0.0%	0.0%	0.0%	0.0%
Non-GAAP gross margin as a percent of total revenue*	91.1%	89.1%	91.4%	90.6%	91.7%

* 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.

Reconciliation of GAAP Gross Margin as a Percent of Total Revenue to Non-GAAP Gross Margin as a Percent of Total Revenue

	2019	2020	2021	2022	2023
GAAP gross margin as a percent of total revenue	88.6%	88.6%	89.7%	89.6%	89.4%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Stock-based compensation expense	0.3%	0.3%	0.3%	0.2%	0.2%
Amortization of acquired intangibles	1.7%	1.7%	1.6%	1.2%	1.1%
Non-qualified deferred compensation expenses (credits)	0.0%	0.0%	0.0%	0.0%	0.0%
Acquisition and integration-related costs	0.0%	0.0%	0.0%	0.0%	0.0%
Special charges *	0.0%	0.0%	0.1%	0.0%	0.0%
Non-GAAP gross margin as a percent of total revenue**	90.6%	90.6%	91.7%	91.0%	90.7%

*	2021 includes costs related to a voluntary retirement program.
**	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 12

Cadence Design Systems, Inc.

Reconciliation of GAAP Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue

	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q4 2023	Q1 2024E
GAAP operating margin as a percent of total revenue	23%	32%	31%	29%	31%	24.5% - 25.5%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Stock-based compensation expense	8%	7%	8%	9%	8%	9%
Amortization of acquired intangibles	2%	1%	2%	1%	2%	2%
Acquisition and integration-related costs	2%	2%	1%	1%	1%	1%
Restructuring	0%	0%	0%	1%	0%	0%
Non-qualified deferred compensation expenses (credits)	1%	0%	0%	0%	1%	0%
Non-GAAP operating margin as a percent of total revenue*	36%	42%	42%	41%	43%	36.5% - 37.5%

* 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.

Reconciliation of GAAP Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue

	2018	2019	2020	2021	2022	2023	2024E
GAAP operating margin as a percent of total revenue	19%	21%	24%	26%	30%	31%	32% - 33%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Stock-based compensation expense	8%	8%	7%	7%	8%	8%	8%
Amortization of acquired intangibles	2%	2%	3%	2%	2%	2%	1%
Acquisition and integration-related costs	1%	0%	1%	1%	1%	1%	1%
Restructuring	0%	1%	0%	0%	0%	0%	0%
Non-qualified deferred compensation expenses (credits)	0%	0%	0%	0%	(1)%	0%	0%
Special charges *	0%	0%	0%	1%	0%	0%	0%
Non-GAAP operating margin as a percent of total revenue**	30%	32%	35%	37%	40%	42%	42% - 43%

*	2021 includes costs related to a voluntary retirement program.
**	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 13

Cadence Design Systems, Inc.

Reconciliation of GAAP Diluted Net Income Per Share to Non-GAAP Diluted Net Income Per Share

(In Thousands, Except Per Share Data)	Q4 2022		Q1 2023		Q2 2023		Q3 2023		Q4 2023		Q1 2024E
Diluted net income per share on a GAAP basis	$	0.88	$	0.89	$	0.81	$	0.93	$	1.19	$0.74 - $0.78
Stock-based compensation expense	0.27		0.27		0.28		0.32		0.32		0.32
Amortization of acquired intangibles	0.06		0.05		0.06		0.06		0.06		0.06
Acquisition and integration-related costs	0.06		0.06		0.05		0.05		0.04		0.04
Restructuring	—		—		—		0.04		—		—
Non-qualified deferred compensation expenses (credits)	0.01		0.01		0.01		—		0.02		—
Other income or expense related to investments and non-qualified deferred compensation plan assets**	(0.01)		(0.01)		(0.01)		(0.04)		(0.10)		—
Income tax effect of non-GAAP adjustments	(0.31)		0.02		0.02		(0.10)		(0.15)		(0.06)
Diluted net income per share on a non-GAAP basis*	$	0.96	$	1.29	$	1.22	$	1.26	$	1.38	$1.10 - $1.14
Shares used in calculation of diluted net income per share	272,997		273,159		272,996		272,427		272,419

*	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 14

Cadence Design Systems, Inc.

Reconciliation of GAAP Diluted Net Income Per Share to Non-GAAP Diluted Net Income Per Share

(In Thousands, Except Per Share Data)	2018		2019		2020		2021		2022		2023		2024E
Diluted net income per share on a GAAP basis	$	1.23	$	3.53	$	2.11	$	2.50	$	3.09	$	3.82	$4.08 - $4.18
Stock-based compensation expense	0.60		0.65		0.71		0.75		0.98		1.19		1.36
Amortization of acquired intangibles	0.19		0.19		0.23		0.24		0.22		0.23		0.24
Acquisition and integration-related costs	0.07		0.03		0.08		0.08		0.15		0.21		0.14
Restructuring	0.04		0.03		0.03		—		—		0.04		—
Non-qualified deferred compensation expenses (credits)	(0.01)		0.02		0.02		0.02		(0.03)		0.04		—
Special charges**	—		—		—		0.10		—		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets***	—		(0.01)		—		(0.03)		0.05		(0.17)		—
Income tax benefit related to intercompany transfers of certain intellectual property rights	—		(2.05)		—		—		—		—		—
Income tax effect of non-GAAP adjustments	(0.25)		(0.19)		(0.38)		(0.37)		(0.19)		(0.21)		0.05
Diluted net income per share on a non-GAAP basis*	$	1.87	$	2.20	$	2.80	$	3.29	$	4.27	$	5.15	$5.87 - $5.97
Shares used in calculation of diluted net income per share	281,144		280,515		279,641		278,858		275,011		272,748		271.5 - 273.5M

*	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.
**	2021 includes costs related to a voluntary retirement program.
***	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 15

Cadence Design Systems, Inc.

Reconciliation of GAAP Total Other Income and Expense to Non-GAAP Total Other Income and Expense

(In Millions)	FY 2022		FY 2023		FY 2024E
GAAP total other income and expense	$	(28)	$	31	$(10) - $(18)
Reconciling items to non-GAAP total income and expense
Other income or expense related to investments and non-qualified deferred compensation plan assets**	14		(46)		—
Non-GAAP total other income and expense*	$	(14)	$	(15)	$(10) - $(18)

*	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.

February 12, 2024 Cadence Q4 and Fiscal Year 2023 Financial Results 16

XML

Document and Entity Information	Feb. 12, 2024
Cover [Abstract]
Document Type	8-K
Document Period End Date	Feb. 12, 2024
Entity Registrant Name	CADENCE DESIGN SYSTEMS, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	000-15867
Entity Tax Identification Number	00-0000000
Entity Address, Address Line One	2655 Seely Avenue,
Entity Address, City or Town	San Jose,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95134
City Area Code	(408)
Local Phone Number	943-1234
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	CDNS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000813672
Amendment Flag	false