Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Cadence Reports First Quarter 2024 Financial Results By: Cadence Design Systems, Inc. via Business Wire April 22, 2024 at 16:02 PM EDT Record First Quarter Backlog of $6.0 Billion and cRPO of $3.1 Billion Raising 2024 Revenue Outlook Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the first quarter of 2024. First Quarter 2024 Financial Results Revenue of $1.009 billion, compared to revenue of $1.022 billion in Q1 2023 GAAP operating margin of 25%, compared to 32% in Q1 2023 Non-GAAP operating margin of 38%, compared to 42% in Q1 2023 GAAP diluted net income per share of $0.91, compared to $0.89 in Q1 2023 Non-GAAP diluted net income per share of $1.17, compared to $1.29 in Q1 2023 Quarter-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 $3.1 billion. “Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer. “I’m pleased with our record Q1 backlog that reflects our broad-based strength and product leadership. We’re thrilled with the momentum of our Cadence.AI portfolio which is providing customers with the most comprehensive and impactful chip-to-systems design capabilities and are excited about the launch of our innovative third generation Dynamic Duo hardware platforms that further expands our leadership.” “Our strong Q1 results reflect our continued technology leadership supporting our customers and partners, and solid execution from the Cadence team,” said John Wall, senior vice president and chief financial officer. “I am pleased that we delivered record Q1 bookings and achieved record Q1 backlog of approximately $6.0 billion.” CFO Commentary Commentary on the first quarter of 2024 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 $4.56 billion to $4.62 billion GAAP operating margin in the range of 31% to 32% Non-GAAP operating margin in the range of 42% to 43% GAAP diluted net income per share in the range of $4.04 to $4.14 Non-GAAP diluted net income per share in the range of $5.88 to $5.98 For the second quarter of 2024, the company expects: Revenue in the range of $1.03 billion to $1.05 billion GAAP operating margin in the range of 26.5% to 27.5% Non-GAAP operating margin in the range of 38.5% to 39.5% GAAP diluted net income per share in the range of $0.73 to $0.77 Non-GAAP diluted net income per share in the range of $1.20 to $1.24 Cadence’s outlook does not include the impact of its pending acquisition of BETA CAE, the company’s expectations for which are largely unchanged from announcement. 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 Built upon AI-enhanced core design engines, the company's generative AI solutions boosted by foundational LLM co-pilots, are delivering unparalleled productivity, quality of results and time to market benefits for customers. Last week, at CadenceLIVE Silicon Valley, several top tier customers shared their remarkable successes with Cadence.AI products Launched the company's third generation hardware accelerated verification platforms - the Palladium Z3 emulation and Protium X3 prototyping platforms delivering more than 2x the capacity and 1.5x higher performance than the previous generation Introduced the Cadence Reality Digital Twin Platform that virtualizes the entire data center and uses AI, high-performance computing and physics-based simulation to significantly improve data center energy efficiency by up to 30% Announced a collaboration with Arm to develop a chiplet-based reference design and software development platform to accelerate software-defined vehicle innovation Audio Webcast Scheduled Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the first quarter 2024 financial results audio webcast today, April 22, 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 April 22, 2024 at 5 p.m. (Pacific) and ending June 14, 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 10 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, pending transactions 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) Cadence's pending acquisition of BETA CAE Systems International AG, which remains subject to certain closing conditions, the 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. Forward-looking statements regarding the pending BETA CAE acquisition and its impact are subject to additional risks and uncertainties including: the markets for BETA CAE’s or Cadence’s products and services may develop more slowly than expected or than they have in the past; operating results and cash flows may fluctuate more than expected; risks associated with tax liabilities or changes in applicable tax laws or interpretations to which the pending transaction or parties thereto are subject; BETA CAE or Cadence may fail to satisfy the closing conditions, including obtaining required regulatory approvals, in a timely manner or at all; uncertainties as to the availability of financing for the pending transaction upon acceptable terms on a timely basis and associated costs and expenses, including applicable interest rates; uncertainty as to the amount of shares to be issued by Cadence to acquire BETA CAE due to fluctuations in the trading prices of Cadence’s common stock; Cadence may fail to successfully acquire and integrate BETA CAE; Cadence may fail to realize the anticipated benefits of the pending acquisition; Cadence may incur unanticipated costs or other liabilities in connection with acquiring or integrating BETA CAE; Cadence may not repay debt or maintain share repurchases as anticipated, including as a result of insufficient free cash flow or use of cash for other purposes; the potential impact of the pending acquisition on relationships with third parties, including employees, customers, partners and competitors; Cadence may be unable to motivate and retain key personnel; and changes in or failure to comply with legislation or government regulations could affect the closing of the pending transaction or post-closing operations and results of operations. 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 March 31, 2024 March 31, 2023 (unaudited) GAAP operating margin as a percent of total revenue 25 % 32 % Reconciling items to non-GAAP operating margin as a percent of total revenue: Stock-based compensation expense 9 % 7 % Amortization of acquired intangibles 2 % 1 % Acquisition and integration-related costs 2 % 2 % Restructuring 0 % 0 % Non-qualified deferred compensation expenses 0 % 0 % Non-GAAP operating margin as a percent of total revenue 38 % 42 % Net Income Reconciliation Three Months Ended March 31, 2024 March 31, 2023 (in thousands) (unaudited) Net income on a GAAP basis $ 247,643 $ 241,804 Stock-based compensation expense 88,129 74,288 Amortization of acquired intangibles 16,755 14,527 Acquisition and integration-related costs 22,086 15,800 Restructuring 280 — Non-qualified deferred compensation expenses 4,588 3,150 Other income or expense related to investments and non-qualified deferred compensation plan assets* (59,986 ) (3,273 ) Income tax effect of non-GAAP adjustments (613 ) 5,137 Net income on a non-GAAP basis $ 318,882 $ 351,433 * 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 March 31, 2024 March 31, 2023 (in thousands, except per share data) (unaudited) Diluted net income per share on a GAAP basis $ 0.91 $ 0.89 Stock-based compensation expense 0.32 0.27 Amortization of acquired intangibles 0.06 0.05 Acquisition and integration-related costs 0.08 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* (0.22 ) (0.01 ) Income tax effect of non-GAAP adjustments — 0.02 Diluted net income per share on a non-GAAP basis $ 1.17 $ 1.29 Shares used in calculation of diluted net income per share 273,544 273,159 * 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 Design Systems, Inc. Condensed Consolidated Balance Sheets March 31, 2024 and December 31, 2023 (In thousands) (Unaudited) March 31, 2024 December 31, 2023 Current assets: Cash and cash equivalents $ 1,012,418 $ 1,008,152 Receivables, net 389,865 489,224 Inventories 185,784 181,661 Prepaid expenses and other 341,865 297,180 Total current assets 1,929,932 1,976,217 Property, plant and equipment, net 433,016 403,213 Goodwill 1,575,107 1,535,845 Acquired intangibles, net 334,644 336,843 Deferred taxes 886,576 880,001 Other assets 562,855 537,372 Total assets $ 5,722,130 $ 5,669,491 Current liabilities: Current portion of long-term debt $ 349,507 $ 349,285 Accounts payable and accrued liabilities 456,608 576,558 Current portion of deferred revenue 659,628 665,024 Total current liabilities 1,465,743 1,590,867 Long-term liabilities: Long-term portion of deferred revenue 87,003 98,931 Long-term debt 299,805 299,771 Other long-term liabilities 301,983 275,651 Total long-term liabilities 688,791 674,353 Stockholders' equity 3,567,596 3,404,271 Total liabilities and stockholders' equity $ 5,722,130 $ 5,669,491 Cadence Design Systems, Inc. Condensed Consolidated Income Statements For the Three Months Ended March 31, 2024 and March 31, 2023 (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2024 March 31, 2023 Revenue: Product and maintenance $ 913,385 $ 963,742 Services 95,718 57,948 Total revenue 1,009,103 1,021,690 Costs and expenses: Cost of product and maintenance 75,395 100,238 Cost of services 49,802 24,234 Marketing and sales 180,589 166,666 Research and development 378,958 350,295 General and administrative 68,716 53,527 Amortization of acquired intangibles 5,407 4,267 Restructuring 280 - Total costs and expenses 759,147 699,227 Income from operations 249,956 322,463 Interest expense (8,692 ) (9,260 ) Other income, net 68,779 8,284 Income before provision for income taxes 310,043 321,487 Provision for income taxes 62,400 79,683 Net income $ 247,643 $ 241,804 Net income per share - basic $ 0.92 $ 0.90 Net income per share - diluted $ 0.91 $ 0.89 Weighted average common shares outstanding - basic 269,606 269,501 Weighted average common shares outstanding - diluted 273,544 273,159 Cadence Design Systems, Inc. Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2024 and March 31, 2023 (In thousands) (Unaudited) Three Months Ended March 31, March 31, 2024 2023 Cash and cash equivalents at beginning of period $ 1,008,152 $ 882,325 Cash flows from operating activities: Net income 247,643 241,804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39,556 34,400 Amortization of debt discount and fees 320 311 Stock-based compensation 88,129 74,288 Gain on investments, net (55,394 ) (123 ) Deferred income taxes (1,523 ) (11,640 ) Provisions for losses on receivables 158 214 ROU asset amortization and change in operating lease liabilities (917 ) (1,392 ) Other non-cash items 78 99 Changes in operating assets and liabilities, net of effect of acquired businesses: Receivables 102,991 (8,719 ) Inventories (10,689 ) 399 Prepaid expenses and other (15,073 ) 56,212 Other assets (7,535 ) (42,084 ) Accounts payable and accrued liabilities (117,291 ) (117,915 ) Deferred revenue (23,941 ) 40,650 Other long-term liabilities 6,720 897 Net cash provided by operating activities 253,232 267,401 Cash flows from investing activities: Purchases of investments (2,095 ) (9,055 ) Proceeds from the sale and maturity of investments 43,377 102 Purchases of property, plant and equipment (49,601 ) (26,719 ) Cash paid in business combinations, net of cash acquired (71,450 ) - Net cash used for investing activities (79,769 ) (35,672 ) Cash flows from financing activities: Proceeds from revolving credit facility - 50,000 Payments on revolving credit facility - (120,000 ) Proceeds from issuance of common stock 116,725 65,370 Stock received for payment of employee taxes on vesting of restricted stock (151,123 ) (67,712 ) Payments for repurchases of common stock (125,006 ) (125,010 ) Net cash used for financing activities (159,404 ) (197,352 ) Effect of exchange rate changes on cash and cash equivalents (9,793 ) 261 Increase in cash and cash equivalents 4,266 34,638 Cash and cash equivalents at end of period $ 1,012,418 $ 916,963 Cadence Design Systems, Inc. (Unaudited) Revenue Mix by Geography (% of Total Revenue) 2023 2024 GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Americas 44% 41% 43% 44% 43% 46% China 17% 18% 17% 15% 17% 12% Other Asia 18% 18% 19% 19% 19% 20% Europe, Middle East and Africa 15% 17% 15% 16% 16% 17% Japan 6% 6% 6% 6% 5% 5% Total 100% 100% 100% 100% 100% 100% Revenue Mix by Product Category (% of Total Revenue) 2023 2024 PRODUCT CATEGORY Q1 Q2 Q3 Q4 Year Q1 Custom IC Design and Simulation 20% 22% 22% 22% 22% 22% Digital IC Design and Signoff 25% 27% 28% 29% 27% 29% Functional Verification, including Emulation and Prototyping Hardware 32% 27% 26% 24% 27% 25% IP 11% 11% 11% 13% 12% 12% System Design and Analysis 12% 13% 13% 12% 12% 12% Total 100% 100% 100% 100% 100% 100% Cadence Design Systems, Inc. Impact of Non-GAAP Adjustments on Forward Looking Operating Margin As of April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30, 2024 December 31, 2024 Forecast Forecast GAAP operating margin as a percent of total revenue 26.5% - 27.5% 31% - 32% Reconciling items to non-GAAP operating margin as a percent of total revenue: Stock-based compensation expense 9% 8% Amortization of acquired intangibles 2% 2% Acquisition and integration-related costs 1% 1% Non-qualified deferred compensation expenses 0% 0% Non-GAAP operating margin as a percent of total revenue† 38.5% - 39.5% 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 April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30, 2024 December 31, 2024 Forecast Forecast Diluted net income per share on a GAAP basis $0.73 to $0.77 $4.04 to $4.14 Stock-based compensation expense 0.32 1.41 Amortization of acquired intangibles 0.06 0.25 Acquisition and integration-related costs 0.06 0.20 Non-qualified deferred compensation expenses - 0.02 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (0.22) Income tax effect of non-GAAP adjustments 0.03 0.18 Diluted net income per share on a non-GAAP basis† $1.20 to $1.24 $5.88 to $5.98 †The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP * Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. Cadence Design Systems, Inc. Impact of Non-GAAP Adjustments on Forward Looking Net Income As of April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30,2024 December 31, 2024 Forecast Forecast ($ in millions) Net income on a GAAP basis $200 to $211 $1,105 to $1,132 Stock-based compensation expense 89 386 Amortization of acquired intangibles 17 68 Acquisition and integration-related costs 15 56 Non-qualified deferred compensation expenses - 5 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (60) Income tax effect of non-GAAP adjustments 8 48 Net income on a non-GAAP basis† $329 to $340 $1,608 to $1,635 †The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP * Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. CDNS-IR Category: Financial, Featured View source version on businesswire.com: https://www.businesswire.com/news/home/20240421912206/en/Contacts For more information, please contact: Cadence Investor Relations 408-944-7100 investor_relations@cadence.com Cadence Newsroom 408-944-7039 newsroom@cadence.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Cadence Reports First Quarter 2024 Financial Results By: Cadence Design Systems, Inc. via Business Wire April 22, 2024 at 16:02 PM EDT Record First Quarter Backlog of $6.0 Billion and cRPO of $3.1 Billion Raising 2024 Revenue Outlook Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the first quarter of 2024. First Quarter 2024 Financial Results Revenue of $1.009 billion, compared to revenue of $1.022 billion in Q1 2023 GAAP operating margin of 25%, compared to 32% in Q1 2023 Non-GAAP operating margin of 38%, compared to 42% in Q1 2023 GAAP diluted net income per share of $0.91, compared to $0.89 in Q1 2023 Non-GAAP diluted net income per share of $1.17, compared to $1.29 in Q1 2023 Quarter-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 $3.1 billion. “Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer. “I’m pleased with our record Q1 backlog that reflects our broad-based strength and product leadership. We’re thrilled with the momentum of our Cadence.AI portfolio which is providing customers with the most comprehensive and impactful chip-to-systems design capabilities and are excited about the launch of our innovative third generation Dynamic Duo hardware platforms that further expands our leadership.” “Our strong Q1 results reflect our continued technology leadership supporting our customers and partners, and solid execution from the Cadence team,” said John Wall, senior vice president and chief financial officer. “I am pleased that we delivered record Q1 bookings and achieved record Q1 backlog of approximately $6.0 billion.” CFO Commentary Commentary on the first quarter of 2024 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 $4.56 billion to $4.62 billion GAAP operating margin in the range of 31% to 32% Non-GAAP operating margin in the range of 42% to 43% GAAP diluted net income per share in the range of $4.04 to $4.14 Non-GAAP diluted net income per share in the range of $5.88 to $5.98 For the second quarter of 2024, the company expects: Revenue in the range of $1.03 billion to $1.05 billion GAAP operating margin in the range of 26.5% to 27.5% Non-GAAP operating margin in the range of 38.5% to 39.5% GAAP diluted net income per share in the range of $0.73 to $0.77 Non-GAAP diluted net income per share in the range of $1.20 to $1.24 Cadence’s outlook does not include the impact of its pending acquisition of BETA CAE, the company’s expectations for which are largely unchanged from announcement. 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 Built upon AI-enhanced core design engines, the company's generative AI solutions boosted by foundational LLM co-pilots, are delivering unparalleled productivity, quality of results and time to market benefits for customers. Last week, at CadenceLIVE Silicon Valley, several top tier customers shared their remarkable successes with Cadence.AI products Launched the company's third generation hardware accelerated verification platforms - the Palladium Z3 emulation and Protium X3 prototyping platforms delivering more than 2x the capacity and 1.5x higher performance than the previous generation Introduced the Cadence Reality Digital Twin Platform that virtualizes the entire data center and uses AI, high-performance computing and physics-based simulation to significantly improve data center energy efficiency by up to 30% Announced a collaboration with Arm to develop a chiplet-based reference design and software development platform to accelerate software-defined vehicle innovation Audio Webcast Scheduled Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the first quarter 2024 financial results audio webcast today, April 22, 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 April 22, 2024 at 5 p.m. (Pacific) and ending June 14, 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 10 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, pending transactions 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) Cadence's pending acquisition of BETA CAE Systems International AG, which remains subject to certain closing conditions, the 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. Forward-looking statements regarding the pending BETA CAE acquisition and its impact are subject to additional risks and uncertainties including: the markets for BETA CAE’s or Cadence’s products and services may develop more slowly than expected or than they have in the past; operating results and cash flows may fluctuate more than expected; risks associated with tax liabilities or changes in applicable tax laws or interpretations to which the pending transaction or parties thereto are subject; BETA CAE or Cadence may fail to satisfy the closing conditions, including obtaining required regulatory approvals, in a timely manner or at all; uncertainties as to the availability of financing for the pending transaction upon acceptable terms on a timely basis and associated costs and expenses, including applicable interest rates; uncertainty as to the amount of shares to be issued by Cadence to acquire BETA CAE due to fluctuations in the trading prices of Cadence’s common stock; Cadence may fail to successfully acquire and integrate BETA CAE; Cadence may fail to realize the anticipated benefits of the pending acquisition; Cadence may incur unanticipated costs or other liabilities in connection with acquiring or integrating BETA CAE; Cadence may not repay debt or maintain share repurchases as anticipated, including as a result of insufficient free cash flow or use of cash for other purposes; the potential impact of the pending acquisition on relationships with third parties, including employees, customers, partners and competitors; Cadence may be unable to motivate and retain key personnel; and changes in or failure to comply with legislation or government regulations could affect the closing of the pending transaction or post-closing operations and results of operations. 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 March 31, 2024 March 31, 2023 (unaudited) GAAP operating margin as a percent of total revenue 25 % 32 % Reconciling items to non-GAAP operating margin as a percent of total revenue: Stock-based compensation expense 9 % 7 % Amortization of acquired intangibles 2 % 1 % Acquisition and integration-related costs 2 % 2 % Restructuring 0 % 0 % Non-qualified deferred compensation expenses 0 % 0 % Non-GAAP operating margin as a percent of total revenue 38 % 42 % Net Income Reconciliation Three Months Ended March 31, 2024 March 31, 2023 (in thousands) (unaudited) Net income on a GAAP basis $ 247,643 $ 241,804 Stock-based compensation expense 88,129 74,288 Amortization of acquired intangibles 16,755 14,527 Acquisition and integration-related costs 22,086 15,800 Restructuring 280 — Non-qualified deferred compensation expenses 4,588 3,150 Other income or expense related to investments and non-qualified deferred compensation plan assets* (59,986 ) (3,273 ) Income tax effect of non-GAAP adjustments (613 ) 5,137 Net income on a non-GAAP basis $ 318,882 $ 351,433 * 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 March 31, 2024 March 31, 2023 (in thousands, except per share data) (unaudited) Diluted net income per share on a GAAP basis $ 0.91 $ 0.89 Stock-based compensation expense 0.32 0.27 Amortization of acquired intangibles 0.06 0.05 Acquisition and integration-related costs 0.08 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* (0.22 ) (0.01 ) Income tax effect of non-GAAP adjustments — 0.02 Diluted net income per share on a non-GAAP basis $ 1.17 $ 1.29 Shares used in calculation of diluted net income per share 273,544 273,159 * 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 Design Systems, Inc. Condensed Consolidated Balance Sheets March 31, 2024 and December 31, 2023 (In thousands) (Unaudited) March 31, 2024 December 31, 2023 Current assets: Cash and cash equivalents $ 1,012,418 $ 1,008,152 Receivables, net 389,865 489,224 Inventories 185,784 181,661 Prepaid expenses and other 341,865 297,180 Total current assets 1,929,932 1,976,217 Property, plant and equipment, net 433,016 403,213 Goodwill 1,575,107 1,535,845 Acquired intangibles, net 334,644 336,843 Deferred taxes 886,576 880,001 Other assets 562,855 537,372 Total assets $ 5,722,130 $ 5,669,491 Current liabilities: Current portion of long-term debt $ 349,507 $ 349,285 Accounts payable and accrued liabilities 456,608 576,558 Current portion of deferred revenue 659,628 665,024 Total current liabilities 1,465,743 1,590,867 Long-term liabilities: Long-term portion of deferred revenue 87,003 98,931 Long-term debt 299,805 299,771 Other long-term liabilities 301,983 275,651 Total long-term liabilities 688,791 674,353 Stockholders' equity 3,567,596 3,404,271 Total liabilities and stockholders' equity $ 5,722,130 $ 5,669,491 Cadence Design Systems, Inc. Condensed Consolidated Income Statements For the Three Months Ended March 31, 2024 and March 31, 2023 (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2024 March 31, 2023 Revenue: Product and maintenance $ 913,385 $ 963,742 Services 95,718 57,948 Total revenue 1,009,103 1,021,690 Costs and expenses: Cost of product and maintenance 75,395 100,238 Cost of services 49,802 24,234 Marketing and sales 180,589 166,666 Research and development 378,958 350,295 General and administrative 68,716 53,527 Amortization of acquired intangibles 5,407 4,267 Restructuring 280 - Total costs and expenses 759,147 699,227 Income from operations 249,956 322,463 Interest expense (8,692 ) (9,260 ) Other income, net 68,779 8,284 Income before provision for income taxes 310,043 321,487 Provision for income taxes 62,400 79,683 Net income $ 247,643 $ 241,804 Net income per share - basic $ 0.92 $ 0.90 Net income per share - diluted $ 0.91 $ 0.89 Weighted average common shares outstanding - basic 269,606 269,501 Weighted average common shares outstanding - diluted 273,544 273,159 Cadence Design Systems, Inc. Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2024 and March 31, 2023 (In thousands) (Unaudited) Three Months Ended March 31, March 31, 2024 2023 Cash and cash equivalents at beginning of period $ 1,008,152 $ 882,325 Cash flows from operating activities: Net income 247,643 241,804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39,556 34,400 Amortization of debt discount and fees 320 311 Stock-based compensation 88,129 74,288 Gain on investments, net (55,394 ) (123 ) Deferred income taxes (1,523 ) (11,640 ) Provisions for losses on receivables 158 214 ROU asset amortization and change in operating lease liabilities (917 ) (1,392 ) Other non-cash items 78 99 Changes in operating assets and liabilities, net of effect of acquired businesses: Receivables 102,991 (8,719 ) Inventories (10,689 ) 399 Prepaid expenses and other (15,073 ) 56,212 Other assets (7,535 ) (42,084 ) Accounts payable and accrued liabilities (117,291 ) (117,915 ) Deferred revenue (23,941 ) 40,650 Other long-term liabilities 6,720 897 Net cash provided by operating activities 253,232 267,401 Cash flows from investing activities: Purchases of investments (2,095 ) (9,055 ) Proceeds from the sale and maturity of investments 43,377 102 Purchases of property, plant and equipment (49,601 ) (26,719 ) Cash paid in business combinations, net of cash acquired (71,450 ) - Net cash used for investing activities (79,769 ) (35,672 ) Cash flows from financing activities: Proceeds from revolving credit facility - 50,000 Payments on revolving credit facility - (120,000 ) Proceeds from issuance of common stock 116,725 65,370 Stock received for payment of employee taxes on vesting of restricted stock (151,123 ) (67,712 ) Payments for repurchases of common stock (125,006 ) (125,010 ) Net cash used for financing activities (159,404 ) (197,352 ) Effect of exchange rate changes on cash and cash equivalents (9,793 ) 261 Increase in cash and cash equivalents 4,266 34,638 Cash and cash equivalents at end of period $ 1,012,418 $ 916,963 Cadence Design Systems, Inc. (Unaudited) Revenue Mix by Geography (% of Total Revenue) 2023 2024 GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Americas 44% 41% 43% 44% 43% 46% China 17% 18% 17% 15% 17% 12% Other Asia 18% 18% 19% 19% 19% 20% Europe, Middle East and Africa 15% 17% 15% 16% 16% 17% Japan 6% 6% 6% 6% 5% 5% Total 100% 100% 100% 100% 100% 100% Revenue Mix by Product Category (% of Total Revenue) 2023 2024 PRODUCT CATEGORY Q1 Q2 Q3 Q4 Year Q1 Custom IC Design and Simulation 20% 22% 22% 22% 22% 22% Digital IC Design and Signoff 25% 27% 28% 29% 27% 29% Functional Verification, including Emulation and Prototyping Hardware 32% 27% 26% 24% 27% 25% IP 11% 11% 11% 13% 12% 12% System Design and Analysis 12% 13% 13% 12% 12% 12% Total 100% 100% 100% 100% 100% 100% Cadence Design Systems, Inc. Impact of Non-GAAP Adjustments on Forward Looking Operating Margin As of April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30, 2024 December 31, 2024 Forecast Forecast GAAP operating margin as a percent of total revenue 26.5% - 27.5% 31% - 32% Reconciling items to non-GAAP operating margin as a percent of total revenue: Stock-based compensation expense 9% 8% Amortization of acquired intangibles 2% 2% Acquisition and integration-related costs 1% 1% Non-qualified deferred compensation expenses 0% 0% Non-GAAP operating margin as a percent of total revenue† 38.5% - 39.5% 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 April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30, 2024 December 31, 2024 Forecast Forecast Diluted net income per share on a GAAP basis $0.73 to $0.77 $4.04 to $4.14 Stock-based compensation expense 0.32 1.41 Amortization of acquired intangibles 0.06 0.25 Acquisition and integration-related costs 0.06 0.20 Non-qualified deferred compensation expenses - 0.02 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (0.22) Income tax effect of non-GAAP adjustments 0.03 0.18 Diluted net income per share on a non-GAAP basis† $1.20 to $1.24 $5.88 to $5.98 †The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP * Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. Cadence Design Systems, Inc. Impact of Non-GAAP Adjustments on Forward Looking Net Income As of April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30,2024 December 31, 2024 Forecast Forecast ($ in millions) Net income on a GAAP basis $200 to $211 $1,105 to $1,132 Stock-based compensation expense 89 386 Amortization of acquired intangibles 17 68 Acquisition and integration-related costs 15 56 Non-qualified deferred compensation expenses - 5 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (60) Income tax effect of non-GAAP adjustments 8 48 Net income on a non-GAAP basis† $329 to $340 $1,608 to $1,635 †The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP * Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. CDNS-IR Category: Financial, Featured View source version on businesswire.com: https://www.businesswire.com/news/home/20240421912206/en/Contacts 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. (Nasdaq: CDNS) today announced results for the first quarter of 2024. First Quarter 2024 Financial Results Revenue of $1.009 billion, compared to revenue of $1.022 billion in Q1 2023 GAAP operating margin of 25%, compared to 32% in Q1 2023 Non-GAAP operating margin of 38%, compared to 42% in Q1 2023 GAAP diluted net income per share of $0.91, compared to $0.89 in Q1 2023 Non-GAAP diluted net income per share of $1.17, compared to $1.29 in Q1 2023 Quarter-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 $3.1 billion. “Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer. “I’m pleased with our record Q1 backlog that reflects our broad-based strength and product leadership. We’re thrilled with the momentum of our Cadence.AI portfolio which is providing customers with the most comprehensive and impactful chip-to-systems design capabilities and are excited about the launch of our innovative third generation Dynamic Duo hardware platforms that further expands our leadership.” “Our strong Q1 results reflect our continued technology leadership supporting our customers and partners, and solid execution from the Cadence team,” said John Wall, senior vice president and chief financial officer. “I am pleased that we delivered record Q1 bookings and achieved record Q1 backlog of approximately $6.0 billion.” CFO Commentary Commentary on the first quarter of 2024 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 $4.56 billion to $4.62 billion GAAP operating margin in the range of 31% to 32% Non-GAAP operating margin in the range of 42% to 43% GAAP diluted net income per share in the range of $4.04 to $4.14 Non-GAAP diluted net income per share in the range of $5.88 to $5.98 For the second quarter of 2024, the company expects: Revenue in the range of $1.03 billion to $1.05 billion GAAP operating margin in the range of 26.5% to 27.5% Non-GAAP operating margin in the range of 38.5% to 39.5% GAAP diluted net income per share in the range of $0.73 to $0.77 Non-GAAP diluted net income per share in the range of $1.20 to $1.24 Cadence’s outlook does not include the impact of its pending acquisition of BETA CAE, the company’s expectations for which are largely unchanged from announcement. 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 Built upon AI-enhanced core design engines, the company's generative AI solutions boosted by foundational LLM co-pilots, are delivering unparalleled productivity, quality of results and time to market benefits for customers. Last week, at CadenceLIVE Silicon Valley, several top tier customers shared their remarkable successes with Cadence.AI products Launched the company's third generation hardware accelerated verification platforms - the Palladium Z3 emulation and Protium X3 prototyping platforms delivering more than 2x the capacity and 1.5x higher performance than the previous generation Introduced the Cadence Reality Digital Twin Platform that virtualizes the entire data center and uses AI, high-performance computing and physics-based simulation to significantly improve data center energy efficiency by up to 30% Announced a collaboration with Arm to develop a chiplet-based reference design and software development platform to accelerate software-defined vehicle innovation Audio Webcast Scheduled Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the first quarter 2024 financial results audio webcast today, April 22, 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 April 22, 2024 at 5 p.m. (Pacific) and ending June 14, 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 10 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, pending transactions 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) Cadence's pending acquisition of BETA CAE Systems International AG, which remains subject to certain closing conditions, the 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. Forward-looking statements regarding the pending BETA CAE acquisition and its impact are subject to additional risks and uncertainties including: the markets for BETA CAE’s or Cadence’s products and services may develop more slowly than expected or than they have in the past; operating results and cash flows may fluctuate more than expected; risks associated with tax liabilities or changes in applicable tax laws or interpretations to which the pending transaction or parties thereto are subject; BETA CAE or Cadence may fail to satisfy the closing conditions, including obtaining required regulatory approvals, in a timely manner or at all; uncertainties as to the availability of financing for the pending transaction upon acceptable terms on a timely basis and associated costs and expenses, including applicable interest rates; uncertainty as to the amount of shares to be issued by Cadence to acquire BETA CAE due to fluctuations in the trading prices of Cadence’s common stock; Cadence may fail to successfully acquire and integrate BETA CAE; Cadence may fail to realize the anticipated benefits of the pending acquisition; Cadence may incur unanticipated costs or other liabilities in connection with acquiring or integrating BETA CAE; Cadence may not repay debt or maintain share repurchases as anticipated, including as a result of insufficient free cash flow or use of cash for other purposes; the potential impact of the pending acquisition on relationships with third parties, including employees, customers, partners and competitors; Cadence may be unable to motivate and retain key personnel; and changes in or failure to comply with legislation or government regulations could affect the closing of the pending transaction or post-closing operations and results of operations. 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 March 31, 2024 March 31, 2023 (unaudited) GAAP operating margin as a percent of total revenue 25 % 32 % Reconciling items to non-GAAP operating margin as a percent of total revenue: Stock-based compensation expense 9 % 7 % Amortization of acquired intangibles 2 % 1 % Acquisition and integration-related costs 2 % 2 % Restructuring 0 % 0 % Non-qualified deferred compensation expenses 0 % 0 % Non-GAAP operating margin as a percent of total revenue 38 % 42 % Net Income Reconciliation Three Months Ended March 31, 2024 March 31, 2023 (in thousands) (unaudited) Net income on a GAAP basis $ 247,643 $ 241,804 Stock-based compensation expense 88,129 74,288 Amortization of acquired intangibles 16,755 14,527 Acquisition and integration-related costs 22,086 15,800 Restructuring 280 — Non-qualified deferred compensation expenses 4,588 3,150 Other income or expense related to investments and non-qualified deferred compensation plan assets* (59,986 ) (3,273 ) Income tax effect of non-GAAP adjustments (613 ) 5,137 Net income on a non-GAAP basis $ 318,882 $ 351,433 * 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 March 31, 2024 March 31, 2023 (in thousands, except per share data) (unaudited) Diluted net income per share on a GAAP basis $ 0.91 $ 0.89 Stock-based compensation expense 0.32 0.27 Amortization of acquired intangibles 0.06 0.05 Acquisition and integration-related costs 0.08 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* (0.22 ) (0.01 ) Income tax effect of non-GAAP adjustments — 0.02 Diluted net income per share on a non-GAAP basis $ 1.17 $ 1.29 Shares used in calculation of diluted net income per share 273,544 273,159 * 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 Design Systems, Inc. Condensed Consolidated Balance Sheets March 31, 2024 and December 31, 2023 (In thousands) (Unaudited) March 31, 2024 December 31, 2023 Current assets: Cash and cash equivalents $ 1,012,418 $ 1,008,152 Receivables, net 389,865 489,224 Inventories 185,784 181,661 Prepaid expenses and other 341,865 297,180 Total current assets 1,929,932 1,976,217 Property, plant and equipment, net 433,016 403,213 Goodwill 1,575,107 1,535,845 Acquired intangibles, net 334,644 336,843 Deferred taxes 886,576 880,001 Other assets 562,855 537,372 Total assets $ 5,722,130 $ 5,669,491 Current liabilities: Current portion of long-term debt $ 349,507 $ 349,285 Accounts payable and accrued liabilities 456,608 576,558 Current portion of deferred revenue 659,628 665,024 Total current liabilities 1,465,743 1,590,867 Long-term liabilities: Long-term portion of deferred revenue 87,003 98,931 Long-term debt 299,805 299,771 Other long-term liabilities 301,983 275,651 Total long-term liabilities 688,791 674,353 Stockholders' equity 3,567,596 3,404,271 Total liabilities and stockholders' equity $ 5,722,130 $ 5,669,491 Cadence Design Systems, Inc. Condensed Consolidated Income Statements For the Three Months Ended March 31, 2024 and March 31, 2023 (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2024 March 31, 2023 Revenue: Product and maintenance $ 913,385 $ 963,742 Services 95,718 57,948 Total revenue 1,009,103 1,021,690 Costs and expenses: Cost of product and maintenance 75,395 100,238 Cost of services 49,802 24,234 Marketing and sales 180,589 166,666 Research and development 378,958 350,295 General and administrative 68,716 53,527 Amortization of acquired intangibles 5,407 4,267 Restructuring 280 - Total costs and expenses 759,147 699,227 Income from operations 249,956 322,463 Interest expense (8,692 ) (9,260 ) Other income, net 68,779 8,284 Income before provision for income taxes 310,043 321,487 Provision for income taxes 62,400 79,683 Net income $ 247,643 $ 241,804 Net income per share - basic $ 0.92 $ 0.90 Net income per share - diluted $ 0.91 $ 0.89 Weighted average common shares outstanding - basic 269,606 269,501 Weighted average common shares outstanding - diluted 273,544 273,159 Cadence Design Systems, Inc. Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2024 and March 31, 2023 (In thousands) (Unaudited) Three Months Ended March 31, March 31, 2024 2023 Cash and cash equivalents at beginning of period $ 1,008,152 $ 882,325 Cash flows from operating activities: Net income 247,643 241,804 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39,556 34,400 Amortization of debt discount and fees 320 311 Stock-based compensation 88,129 74,288 Gain on investments, net (55,394 ) (123 ) Deferred income taxes (1,523 ) (11,640 ) Provisions for losses on receivables 158 214 ROU asset amortization and change in operating lease liabilities (917 ) (1,392 ) Other non-cash items 78 99 Changes in operating assets and liabilities, net of effect of acquired businesses: Receivables 102,991 (8,719 ) Inventories (10,689 ) 399 Prepaid expenses and other (15,073 ) 56,212 Other assets (7,535 ) (42,084 ) Accounts payable and accrued liabilities (117,291 ) (117,915 ) Deferred revenue (23,941 ) 40,650 Other long-term liabilities 6,720 897 Net cash provided by operating activities 253,232 267,401 Cash flows from investing activities: Purchases of investments (2,095 ) (9,055 ) Proceeds from the sale and maturity of investments 43,377 102 Purchases of property, plant and equipment (49,601 ) (26,719 ) Cash paid in business combinations, net of cash acquired (71,450 ) - Net cash used for investing activities (79,769 ) (35,672 ) Cash flows from financing activities: Proceeds from revolving credit facility - 50,000 Payments on revolving credit facility - (120,000 ) Proceeds from issuance of common stock 116,725 65,370 Stock received for payment of employee taxes on vesting of restricted stock (151,123 ) (67,712 ) Payments for repurchases of common stock (125,006 ) (125,010 ) Net cash used for financing activities (159,404 ) (197,352 ) Effect of exchange rate changes on cash and cash equivalents (9,793 ) 261 Increase in cash and cash equivalents 4,266 34,638 Cash and cash equivalents at end of period $ 1,012,418 $ 916,963 Cadence Design Systems, Inc. (Unaudited) Revenue Mix by Geography (% of Total Revenue) 2023 2024 GEOGRAPHY Q1 Q2 Q3 Q4 Year Q1 Americas 44% 41% 43% 44% 43% 46% China 17% 18% 17% 15% 17% 12% Other Asia 18% 18% 19% 19% 19% 20% Europe, Middle East and Africa 15% 17% 15% 16% 16% 17% Japan 6% 6% 6% 6% 5% 5% Total 100% 100% 100% 100% 100% 100% Revenue Mix by Product Category (% of Total Revenue) 2023 2024 PRODUCT CATEGORY Q1 Q2 Q3 Q4 Year Q1 Custom IC Design and Simulation 20% 22% 22% 22% 22% 22% Digital IC Design and Signoff 25% 27% 28% 29% 27% 29% Functional Verification, including Emulation and Prototyping Hardware 32% 27% 26% 24% 27% 25% IP 11% 11% 11% 13% 12% 12% System Design and Analysis 12% 13% 13% 12% 12% 12% Total 100% 100% 100% 100% 100% 100% Cadence Design Systems, Inc. Impact of Non-GAAP Adjustments on Forward Looking Operating Margin As of April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30, 2024 December 31, 2024 Forecast Forecast GAAP operating margin as a percent of total revenue 26.5% - 27.5% 31% - 32% Reconciling items to non-GAAP operating margin as a percent of total revenue: Stock-based compensation expense 9% 8% Amortization of acquired intangibles 2% 2% Acquisition and integration-related costs 1% 1% Non-qualified deferred compensation expenses 0% 0% Non-GAAP operating margin as a percent of total revenue† 38.5% - 39.5% 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 April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30, 2024 December 31, 2024 Forecast Forecast Diluted net income per share on a GAAP basis $0.73 to $0.77 $4.04 to $4.14 Stock-based compensation expense 0.32 1.41 Amortization of acquired intangibles 0.06 0.25 Acquisition and integration-related costs 0.06 0.20 Non-qualified deferred compensation expenses - 0.02 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (0.22) Income tax effect of non-GAAP adjustments 0.03 0.18 Diluted net income per share on a non-GAAP basis† $1.20 to $1.24 $5.88 to $5.98 †The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP * Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense. Cadence Design Systems, Inc. Impact of Non-GAAP Adjustments on Forward Looking Net Income As of April 22, 2024 (Unaudited) Three Months Ending Year Ending June 30,2024 December 31, 2024 Forecast Forecast ($ in millions) Net income on a GAAP basis $200 to $211 $1,105 to $1,132 Stock-based compensation expense 89 386 Amortization of acquired intangibles 17 68 Acquisition and integration-related costs 15 56 Non-qualified deferred compensation expenses - 5 Other income or expense related to investments and non-qualified deferred compensation plan assets* - (60) Income tax effect of non-GAAP adjustments 8 48 Net income on a non-GAAP basis† $329 to $340 $1,608 to $1,635 †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. 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