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): April 24, 2017

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, Building 5 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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 April 24, 2017, Cadence issued a press release announcing its financial results for the quarter ended April 1, 2017.

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 ended April 1, 2017 is attached hereto as Exhibit 99.02, and the press release and the commentary are incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.01	Press Release issued by Cadence Design Systems, Inc. on April 24, 2017.
99.02	CFO Commentary on Results of Quarter Ended April 1, 2017.

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: April 24, 2017

CADENCE DESIGN SYSTEMS, INC.
By:	/s/ Geoffrey G. Ribar
	Geoffrey G. Ribar
	Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.01	Press Release issued by Cadence Design Systems, Inc. on April 24, 2017.
99.02	CFO Commentary on Results of the Quarter Ended April 1, 2017.

EX-99.01

Exhibit 99.01

Cadence Reports First Quarter 2017 Financial Results

SAN JOSE, Calif. — April 24, 2017 — Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the first quarter 2017.

Cadence reported first quarter 2017 revenue of $477 million, compared to revenue of $448 million reported for the same period in 2016. On a GAAP basis, Cadence recognized net income of $68 million, or $0.25 per share on a diluted basis, in the first quarter of 2017, compared to net income of $51 million, or $0.17 per share on a diluted basis, for the same period in 2016.

Using the non-GAAP measure defined below, net income in the first quarter of 2017 was $89 million, or $0.32 per share on a diluted basis, as compared to net income of $86 million, or $0.28 per share on a diluted basis, for the same period in 2016.

“Consistent execution enabled Cadence to deliver strong results.  Innovation is at the heart of our success and we have introduced three significant new products so far in 2017:  Xcelium™ for parallel logic simulation, Protium™ S1 for advanced FPGA-based prototyping and Pegasus™ Verification System, a next generation physical verification solution,” said Lip-Bu Tan, president and chief executive officer.  “Additionally, our digital and signoff solutions continue to proliferate with market-shaping customers for the most complex designs at the most advanced nodes.” 

“Cadence met or exceeded its key operating metrics in the first quarter, and we are maintaining our outlook for the fiscal year,” said Geoff Ribar, senior vice president and chief financial officer.

CFO Commentary

Commentary on the first quarter 2017 financial results by Geoff Ribar, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

Business Outlook

For the second quarter of 2017, the company expects total revenue in the range of $470 million to $480 million. Second quarter GAAP net income per diluted share is expected to be in the range of $0.20 to $0.22. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.31 to $0.33.

For 2017, the company expects total revenue in the range of $1.900 billion to $1.950 billion. On a GAAP basis, net income per diluted share for 2017 is expected to be in the range of $0.93 to $1.03. Using the non-GAAP measure defined below, net income per diluted share for 2017 is expected to be in the range of $1.32 to $1.42.

A schedule showing a reconciliation of the business outlook from GAAP net income and diluted net income per share to non-GAAP net income and diluted net income per share is included in this release.

Audio Webcast Scheduled

Lip-Bu Tan, president and chief executive officer, and Geoff Ribar, senior vice president and chief financial officer, will host a first quarter 2017 financial results audio webcast today, April 24, 2017, 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 24, 2017 at 5 p.m. (Pacific) and ending June 16, 2017 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.

About Cadence

Cadence enables global electronic design innovation and plays an essential role in the creation of today’s integrated circuits and electronics. Customers use Cadence^® software, hardware, IP, and services to design and verify advanced semiconductors, consumer electronics, networking and telecommunications equipment, and computer systems. The company is headquartered in San Jose, California, with sales offices, design centers, and research facilities around the world to serve the global electronics industry. More information about the company and its products and services is available at www.cadence.com.

Cadence, the Cadence logo, Xcelium, Protium and Pegasus are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above regarding Cadence’s first quarter 2017 financial results, as well as the information in the Business Outlook section, are or include forward-looking statements based on current expectations or beliefs and preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence’s efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence’s products; (iv) change in customer demands, including those resulting from consolidation among Cadence’s customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence’s customers could result in delays in purchases of Cadence’s products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence’s ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence’s efforts to improve operational efficiency in its business, including strategic, customer and supplier relationships, and its ability to retain key employees; (x) events that affect cash flow, liquidity, reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.

For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, which include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.

GAAP to Non-GAAP Reconciliation

Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with their most directly comparable GAAP financial results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance.

To supplement Cadence’s financial results presented on a GAAP basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP. Non-GAAP net income is calculated by Cadence management by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, acquisition and integration-related costs including retention expenses, investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring 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’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.

The following tables reconcile the specific items excluded from GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

Net Income Reconciliation	Three Months Ended
	April 1, 2017			April 2, 2016
	(unaudited)
(in thousands)
Net income on a GAAP basis	$	68,259		$	50,562
Amortization of acquired intangibles	14,434			16,443
Stock-based compensation expense	27,436			24,632
Non-qualified deferred compensation expenses (credits)	1,269			(83		)
Restructuring and other charges (credits)	(1,788		)	14,586
Acquisition and integration-related costs	1,357			804
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(1,228		)	(2,617		)
Income tax effect of non-GAAP adjustments	(20,679		)	(18,698		)
Net income on a non-GAAP basis	$	89,060		$	85,629

* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of 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
	April 1, 2017			April 2, 2016
	(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis	$	0.25		$	0.17
Amortization of acquired intangibles	0.05			0.05
Stock-based compensation expense	0.10			0.08
Non-qualified deferred compensation expenses (credits)	—			—
Restructuring and other charges (credits)	(0.01		)	0.05
Acquisition and integration-related costs	—			—
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—			(0.01		)
Income tax effect of non-GAAP adjustments	(0.07		)	(0.06		)
Diluted net income per share on a non-GAAP basis	$	0.32		$	0.28
Shares used in calculation of diluted net income per share — GAAP**	277,736			303,434
Shares used in calculation of diluted net income per share — non-GAAP**	277,736			303,434

* Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

Cadence expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Cadence may reiterate the business outlook published in this press release. At the same time, Cadence will keep this press release, including the business outlook, publicly available on its website.

Prior to the start of the Quiet Period (described below), the public may continue to rely on the business outlook contained herein as still being Cadence’s current expectations on matters covered unless Cadence publishes a notice stating otherwise.

Beginning June 16, 2017, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute the company’s current expectations. During the Quiet Period, the business outlook in these documents should be considered historical, speaking as of prior to the Quiet Period only and not subject to any update by the company. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until the day when Cadence’s second quarter 2017 earnings release is published, which is currently scheduled for July 24, 2017.

For more information, please contact:

Investors and Shareholders

Alan Lindstrom

Cadence Design Systems, Inc.

408-944-7100

investor_relations@cadence.com

Media and Industry Analysts

Craig Cochran

Cadence Design Systems, Inc.

408-944-7039

newsroom@cadence.com

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

April 1, 2017 and December 31, 2016

(In thousands)

(Unaudited)

	April 1, 2017		December 31, 2016
Current assets:
Cash and cash equivalents	$	544,128	$	465,232
Short-term investments	3,479		3,057
Receivables, net	180,571		157,171
Inventories	30,734		39,475
Prepaid expenses and other	41,092		37,099
Total current assets	800,004		702,034
Property, plant and equipment, net of accumulated depreciation of $623,185 and $612,961, respectively	243,949		238,607
Goodwill	574,545		572,764
Acquired intangibles, net of accumulated amortization of $254,949 and $267,723, respectively	244,445		258,814
Long-term receivables	13,127		12,949
Other assets	315,128		311,740
Total assets	$	2,191,198	$	2,096,908
Current liabilities:
Revolving credit facility	$	50,000	$	50,000
Accounts payable and accrued liabilities	193,978		239,496
Current portion of deferred revenue	331,848		296,066
Total current liabilities	575,826		585,562
Long-term liabilities:
Long-term portion of deferred revenue	66,399		66,769
Long-term debt	643,709		643,493
Other long-term liabilities	64,672		59,314
Total long-term liabilities	774,780		769,576
Stockholders’ equity	840,592		741,770
Total liabilities and stockholders’ equity	$	2,191,198	$	2,096,908

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three Months Ended April 1, 2017 and April 2, 2016

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	April 1, 2017			April 2, 2016
Revenue:
Product and maintenance	$	451,407		$	411,744
Services	25,504			36,118
Total revenue	476,911			447,862
Costs and expenses:
Cost of product and maintenance	43,717			44,181
Cost of services	18,075			17,873
Marketing and sales	103,347			99,200
Research and development	198,286			179,906
General and administrative	31,816			28,300
Amortization of acquired intangibles	3,856			5,780
Restructuring and other charges (credits)	(1,788		)	14,586
Total costs and expenses	397,309			389,826
Income from operations	79,602			58,036
Interest expense	(6,479		)	(5,357		)
Other income, net	1,059			4,763
Income before provision for income taxes	74,182			57,442
Provision for income taxes	5,923			6,880
Net income	$	68,259		$	50,562
Net income per share - basic	$	0.25		$	0.17
Net income per share - diluted	$	0.25		$	0.17
Weighted average common shares outstanding - basic	270,173			296,615
Weighted average common shares outstanding - diluted	277,736			303,434

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended April 1, 2017 and April 2, 2016

(In thousands)

(Unaudited)

	Three Months Ended
	April 1, 2017			April 2, 2016
Cash and cash equivalents at beginning of period	$	465,232		$	616,686
Cash flows from operating activities:
Net income	68,259			50,562
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,894			31,231
Amortization of debt discount and fees	350			255
Stock-based compensation	27,436			24,632
Gain on investments, net	(1,228		)	(2,617		)
Deferred income taxes	1,990			1,623
Other non-cash items	1,359			209
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(22,475		)	11,618
Inventories	6,000			(3,714		)
Prepaid expenses and other	(3,777		)	(10,132		)
Other assets	(3,657		)	(3,595		)
Accounts payable and accrued liabilities	(46,159		)	(42,557		)
Deferred revenue	34,325			30,710
Other long-term liabilities	1,113			(5,034		)
Net cash provided by operating activities	92,430			83,191
Cash flows from investing activities:
Purchases of available-for-sale securities	—			(20,525		)
Proceeds from the sale of available-for-sale securities	107			1,000
Proceeds from the maturity of available-for-sale securities	—			19,000
Proceeds from the sale of long-term investments	—			2,583
Purchases of property, plant and equipment	(14,843		)	(12,116		)
Cash paid in business combinations and asset acquisitions, net of cash acquired	—			(3,853		)
Net cash used for investing activities	(14,736		)	(13,911		)
Cash flows from financing activities:
Proceeds from term loan	—			300,000
Proceeds from revolving credit facility	50,000			50,000
Payment on revolving credit facility	(50,000		)	—
Payment of debt issuance costs	(793		)	(542		)
Proceeds from issuance of common stock	22,715			24,200
Stock received for payment of employee taxes on vesting of restricted stock	(22,470		)	(15,225		)
Payments for repurchases of common stock	—			(240,000		)
Net cash provided by (used for) financing activities	(548		)	118,433
Effect of exchange rate changes on cash and cash equivalents	1,750			6,001
Increase in cash and cash equivalents	78,896			193,714
Cash and cash equivalents at end of period	$	544,128		$	810,400

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2016										2017
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1
Americas	49	%	47	%	46	%	48	%	48	%	45	%
Asia	22	%	24	%	27	%	25	%	24	%	26	%
Europe, Middle East and Africa	19	%	20	%	19	%	19	%	19	%	20	%
Japan	10	%	9	%	8	%	8	%	9	%	9	%
Total	100	%	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group (% of Total Revenue)

	2016										2017
PRODUCT GROUP	Q1		Q2		Q3		Q4		Year		Q1
Functional Verification, including Emulation and Prototyping Hardware	26	%	27	%	24	%	25	%	25	%	23	%
Digital IC Design and Signoff	30	%	27	%	28	%	30	%	29	%	29	%
Custom IC Design	25	%	26	%	27	%	25	%	25	%	26	%
System Interconnect and Analysis	9	%	10	%	10	%	9	%	10	%	10	%
IP	10	%	10	%	11	%	11	%	11	%	12	%
Total	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.

As of April 24, 2017

Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share

(Unaudited)

	Three Months Ending July 1, 2017	Year Ending December 30, 2017
	Forecast	Forecast
Diluted net income per share on a GAAP basis	$0.20 to $0.22	$0.93 to $1.03
Amortization of acquired intangibles	0.05	0.20
Stock-based compensation expense	0.11	0.46
Non-qualified deferred compensation expenses	—	—
Restructuring and other charges (credits)	—	(0.01)
Acquisition and integration-related costs	—	0.01
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—	—
Income tax effect of non-GAAP adjustments	(0.05)	(0.27)
Diluted net income per share on a non-GAAP basis†	$0.31 to $0.33	$1.32 to $1.42

Cadence Design Systems, Inc.

As of April 24, 2017

Impact of Non-GAAP Adjustments on Forward Looking Net Income

(Unaudited)

	Three Months Ending July 1, 2017	Year Ending December 30, 2017
($ in millions)	Forecast	Forecast
Net income on a GAAP basis	$56 to $62	$259 to $287
Amortization of acquired intangibles	14	56
Stock-based compensation expense	31	128
Non-qualified deferred compensation expenses	—	1
Restructuring and other charges (credits)	—	(2)
Acquisition and integration-related costs	1	3
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—	(1)
Income tax effect of non-GAAP adjustments	(15)	(76)
Net income on a non-GAAP basis†	$87 to $93	$368 to $396

† 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 sale of investments and gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

EX-99.02

Exhibit 99.02

CADENCE REPORTS FIRST QUARTER 2017
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
April 24, 2017 Q1 2017 Key Takeaways • Strong, consistent financial results for Q1 with key metrics meeting or exceeding expectations. • Outlook is unchanged for the year (except for GAAP EPS which increased).	Q2 2017 Outlook • Revenue : $470 - $480 million. • GAAP operating margin: approximately 16%. • Non-GAAP operating margin: approximately 26%. • GAAP EPS: $0.20 - $0.22. • Non-GAAP EPS: $0.31 - $0.33.	Q1 2017 KEY METRICS
		• Revenue $477 million, +6% y/y. • GAAP operating margin 17%. • Non-GAAP operating margin 26%. • GAAP EPS $0.25. • Non-GAAP EPS $0.32, +14% y/y. • Operating cash flow $92 million.
FY 2017 Outlook • Revenue: $1.900 - $1.950 billion. • GAAP operating margin: approximately 17%. • Non-GAAP operating margin: approximately 27%. • GAAP EPS: $0.93 - $1.03. • Non-GAAP EPS $1.32 - $1.42. • Operating cash flow: $430 - $470 million.	Financial Results Webcast Our Q1 2017 financial results webcast will begin April 24, 2017 at 2:00 p.m. (Pacific). The webcast may be accessed at cadence.com/cadence/investor_relations. An archive of the webcast will be available on April 24, 2017 until 5:00 p.m. (Pacific) on June 16, 2017.

April 24, 2017 Cadence Q1 2017 Financial Results 1

Cadence Design Systems, Inc.

Fiscal Year 2017 Financial Outlook

			Previous	Current
	FY 2016A		FY 2017E	FY 2017E
Recurring Revenue	>90%		>90%	>90%
Total Revenue ($ Billion)	$1.816		$1.900 - $1.950	$1.900 - $1.950
Y/Y Growth	7	%	5% - 7%	5% - 7%
Revenue from Beginning Backlog	~70%		~70%	~70%
GAAP Operating Margin	13.5%		~17%	~17%
Non-GAAP Operating Margin	25.8%		~27%	~27%
Non-GAAP Other Income & Exp ($ Million)	$(12.4)		($28) - ($19)	($28) - ($19)
Non-GAAP Tax Rate	23%		23%	23%
Weighted Average Diluted Shares Outstanding (Million)	291.3		275 - 285	275 - 285
GAAP EPS	$0.70		$0.89 - $0.99	$0.93 - $1.03
Non-GAAP EPS	$1.21		$1.32 - $1.42	$1.32 - $1.42
Y/Y Growth	11%		9% - 17%	9% - 17%
Cash Flow from Operations ($ Million)	$444.9		$430 - $470	$430 - $470
DSO	33		30 - 35	~35
Capital Expenditures ($ Million)	$53.7		~$50	~$50

Second Quarter 2017 Financial Outlook

			Current
	Q2 2016A	Q1 2017A	Q2 2017E
Total Revenue ($ Million)	$453.0	$476.9	$470 - $480
Q/Q Growth	1%	2%	(1)% - 1%
Y/Y Growth	9%	6%	4% - 6%
GAAP Operating Margin	15%	17%	~16%
Non-GAAP Operating Margin	25%	26%	~26%
GAAP EPS	$0.17	$0.25	$0.20 - $0.22
Non-GAAP EPS	$0.29	$0.32	$0.31 - $0.33
Q/Q Growth	4%	(6)%	(3)% - 3%
Y/Y Growth	7%	14%	7% - 14%

April 24, 2017 Cadence Q1 2017 Financial Results 2

Cadence Design Systems, Inc.

First Quarter Financial Results

Revenue

(In Thousands)	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Product & Maintenance	$411,744	$419,963	$415,370	$436,694	$451,407
Services	36,118	33,058	30,850	32,286	25,504
Total Revenue	$447,862	$453,021	$446,220	$468,980	$476,911
Y/Y Growth	9%	9%	3%	6%	6%

Revenue Mix by Geography

(% of Total Revenue)	Q1 2016		Q2 2016		Q3 2016		Q4 2016		Q1 2017
Americas	49	%	47	%	46	%	48	%	45	%
Asia	22	%	24	%	27	%	25	%	26	%
Europe, Middle East and Africa	19	%	20	%	19	%	19	%	20	%
Japan	10	%	9	%	8	%	8	%	9	%
Total	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group

(% of Total Revenue)	Q1 2016		Q2 2016		Q3 2016		Q4 2016		Q1 2017
Functional Verification	26	%	27	%	24	%	25	%	23	%
Digital IC Design and Signoff	30	%	27	%	28	%	30	%	29	%
Custom IC Design	25	%	26	%	27	%	25	%	26	%
System Interconnect and Analysis	9	%	10	%	10	%	9	%	10	%
IP	10	%	10	%	11	%	11	%	12	%
Total	100	%	100	%	100	%	100	%	100	%

Total Costs and Expenses

(In Thousands)	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Total GAAP Costs & Expenses	$389,826	$386,115	$379,378	$415,863	$397,309
Y/Y Growth	8%	14%	7%	16%	2%
Total Non-GAAP Costs & Expenses	$333,444	$338,201	$332,035	$343,839	$354,601
Y/Y Growth	6%	13%	5%	9%	6%

Operating Margin

	Q1 2016		Q2 2016		Q3 2016		Q4 2016		Q1 2017
GAAP Operating Margin	13.0	%	14.8	%	15.0	%	11.3	%	16.7	%
Non-GAAP Operating Margin	25.5	%	25.3	%	25.6	%	26.7	%	25.6	%

April 24, 2017 Cadence Q1 2017 Financial Results 3

Cadence Design Systems, Inc.

Earnings Per Share

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
GAAP Net Income Per Share	$0.17	$0.17	$0.23	$0.14	$0.25
Y/Y Growth	42%	(11)%	(8)%	(46)%	47%
Non-GAAP Net Income Per Share	$0.28	$0.29	$0.30	$0.34	$0.32
Y/Y Growth	22%	7%	7%	10%	14%

Total DSO

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
DSO	32	35	34	33	37

Balance Sheet and Cash Review

Cash Flow from Operating Activities

(In Thousands)	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Net Cash from Operating Activities	$83,191	$80,366	$84,460	$196,862	$92,430

Capital Expenditures

(In Thousands)	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Capital Expenditures	$12,116	$16,171	$14,165	$11,260	$14,843

Cash and Short-Term Investments

(In Thousands)	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Cash and Short-Term Investments	$906,717	$704,318	$532,836	$468,289	$547,607

• Approximately 38 percent of our cash and short-term investments were in the U.S. at quarter-end.

Stock Repurchase

(In Thousands, Except Share Price)	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Share Repurchase	$240,000	$240,100	$240,096	$240,093	—
Number of Shares	11,556	10,026	9,596	9,315	—
Average Share Price	$20.77	$23.95	$25.02	$25.77	—

Employees

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017
Headcount	6,786	6,945	7,113	7,094	7,101

April 24, 2017 Cadence Q1 2017 Financial Results 4

Cadence Design Systems, Inc.

Forward Looking Statements

The statements in this CFO Commentary contain forward-looking statements based on current expectations or beliefs and preliminary assumptions about future events that are subject to factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, including, among others: (i) Cadence’s ability to compete successfully in the electronic design automation product and the commercial electronic design and methodology services industries; (ii) the success of Cadence’s efforts to improve operational efficiency and growth; (iii) the mix of products and services sold and the timing of significant orders for Cadence’s products; (iv) change in customer demands, including those resulting from consolidation among Cadence’s customers and the possibility that the restructurings and other efforts to improve operational efficiency of Cadence’s customers could result in delays in purchases of Cadence’s products and services; (v) economic and industry conditions in regions in which Cadence does business; (vi) fluctuations in rates of exchange between the U.S. dollar and the currencies of other countries in which Cadence does business; (vii) capital expenditure requirements, legislative or regulatory requirements, interest rates and Cadence’s ability to access capital and debt markets; (viii) the acquisition of other companies or technologies or the failure to successfully integrate and operate these companies or technologies Cadence acquires, including the potential inability to retain customers, key employees or vendors; (ix) the effects of Cadence’s efforts to improve operational efficiency in its business, including strategic, customer and supplier relationships, and its ability to retain key employees; (x) events that affect cash flow, liquidity, reserves or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation or other matters; and (xi) the effects of any litigation or other proceedings to which Cadence is or may become a party.

For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, which include Cadence’s most recent reports on Form 10-K and Form 10-Q, including Cadence’s future filings.

GAAP to Non-GAAP Reconciliation

Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with 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.

Cadence and the Cadence logo are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

April 24, 2017 Cadence Q1 2017 Financial Results 5

Cadence Design Systems, Inc.

APPENDIX

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

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Thousands)	Q1 2016		Q2 2016		Q3 2016		Q4 2016		Q1 2017
GAAP total costs and expenses	$389,826		$386,115		$379,378		$415,863		$397,309
Reconciling items to non-GAAP total costs & expenses
Amortization of acquired intangibles	(16,443	)	(15,083	)	(14,482	)	(14,474	)	(14,434	)
Stock-based compensation expense	(24,632	)	(25,356	)	(29,998	)	(29,231	)	(27,436	)
Non-qualified deferred compensation (expenses) credits	83		(359	)	(921	)	(544	)	(1,269	)
Restructuring and other (charges) credits	(14,586	)	74		(101	)	(26,342	)	1,788
Acquisition and integration-related costs	(804	)	(7,190	)	(1,841	)	(1,433	)	(1,357	)
Non-GAAP total costs and expenses†	$333,444		$338,201		$332,035		$343,839		$354,601

† 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.

April 24, 2017 Cadence Q1 2017 Financial Results 6

Cadence Design Systems, Inc.

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

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	Q1 2017	Forecast Q2 2017
GAAP operating margin as percent of total revenue	13%	15%	15%	11%	17%	~16%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	4%	3%	3%	3%	3%	3%
Stock-based compensation expense	6%	6%	7%	6%	6%	7%
Non-qualified deferred compensation expenses (credits)	0%	0%	0%	0%	0%	0%
Restructuring and other charges (credits)	3%	0%	0%	6%	0%	0%
Acquisition and integration-related costs	0%	1%	1%	1%	0%	0%
Non-GAAP operating margin as percent of total revenue†	26%	25%	26%	27%	26%	~26%

† 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.

	2015	2016	Forecast 2017
GAAP operating margin as percent of total revenue	17%	13%	~17%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	4%	4%	3%
Stock-based compensation expense	5%	6%	7%
Non-qualified deferred compensation expenses (credits)	0%	0%	0%
Restructuring and other charges (credits)	0%	2%	0%
Acquisition and integration-related costs	1%	1%	0%
Special charges *	0%	0%	0%
Non-GAAP operating margin as percent of total revenue†	27%	26%	~27%

† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

* Comprised of executive severance costs.

April 24, 2017 Cadence Q1 2017 Financial Results 7

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)	Q1 2016		Q2 2016		Q3 2016		Q4 2016		Q1 2017		Forecast Q2 2017
Diluted net income per share on a GAAP basis	$0.17		$0.17		$0.23		$0.14		$0.25		$0.20 - $0.22
Amortization of acquired intangibles	0.05		0.05		0.05		0.05		0.05		0.05
Stock-based compensation expense	0.08		0.09		0.10		0.10		0.10		0.11
Non-qualified deferred compensation expenses (credits)	—		—		—		—		—		—
Restructuring and other charges (credits)	0.05		—		—		0.09		(0.01	)	—
Acquisition and integration-related costs	—		0.02		0.01		0.01		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets *	(0.01	)	—		—		—		—		—
Income tax effect of non-GAAP adjustments	(0.06	)	(0.04	)	(0.09	)	(0.05	)	(0.07	)	(0.05	)
Diluted net income per share on a non-GAAP basis †	$0.28		$0.29		$0.30		$0.34		$0.32		$0.31 - $0.33
Shares used in calculation of diluted net income per share - GAAP **	303,434		295,201		287,473		278,917		277,736
Shares used in calculation of diluted net income per share - non-GAAP **	303,434		295,201		287,473		278,917		277,736

† 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 non-qualified deferred compensation plan assets recorded in other income or expense.

** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

April 24, 2017 Cadence Q1 2017 Financial Results 8

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)	2013		2014		2015		2016		Forecast 2017
Diluted net income per share on a GAAP basis	$0.56		$0.52		$0.81		$0.70		$0.93 - $1.03
Amortization of acquired intangibles	0.15		0.20		0.21		0.21		0.20
Stock-based compensation expense	0.23		0.27		0.30		0.37		0.46
Non-qualified deferred compensation expenses (credits)	0.01		0.01		—		0.01		—
Restructuring and other charges (credits)	0.06		0.03		0.01		0.14		(0.01	)
Acquisition and integration-related costs	0.11		0.08		0.03		0.04		0.01
Special charges *	—		0.04		—		—		—
Amortization of debt discount on convertible notes	0.08		0.06		0.02		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets **	(0.02	)	(0.01	)	(0.01	)	(0.02	)	—
Income tax benefit due to a release of an uncertain tax position	(0.11	)	—		—		—		—
Income tax effect of non-GAAP adjustments	(0.21	)	(0.26	)	(0.28	)	(0.24	)	(0.27	)
Diluted net income per share on a non-GAAP basis †	$0.86		$0.94		$1.09		$1.21		$1.32 - $1.42
Shares used in calculation of diluted net income per share - GAAP ***	294,564		306,775		312,302		291,256
Shares used in calculation of diluted net income per share - non-GAAP ***	294,564		306,775		312,302		291,256

† The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

* Comprised of costs related to a voluntary retirement program and executive severance costs.

** Includes, as applicable, equity in losses or income from investments, write-down of investments, gains or losses on non-qualified deferred compensation plan assets recorded in other income or expense.

*** Shares used in the calculation of GAAP net income per share are expected to be the same as shares used in the calculation of non-GAAP net income per share, except when the company reports a GAAP net loss and non-GAAP net income, or GAAP net income and a non-GAAP net loss.

April 24, 2017 Cadence Q1 2017 Financial Results 9

Cadence Design Systems, Inc.

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

		Previous	Current
(In Millions)	FY 2016A	FY 2017E	FY 2017E
GAAP total other income and expense	$(7.7)	$(28) - $(19)	$(27) - $(18)
Reconciling items to non-GAAP total income and expense
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(4.7)	—	(1)
Non-GAAP total other income and expense†	$(12.4)	$(28) - $(19)	$(28) - $(19)

† 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 non-qualified deferred compensation plan assets recorded in other income or expense.

April 24, 2017 Cadence Q1 2017 Financial Results 10