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): October 26, 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 October 26, 2017, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter ended September 30, 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 September 30, 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 October 26, 2017.
99.02	CFO Commentary on Results of Quarter Ended September 30, 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: October 26, 2017

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

EX-99.01

Exhibit 99.01

Cadence Reports Third Quarter 2017 Financial Results

SAN JOSE, Calif. — October 26, 2017 — Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the third quarter 2017.

Cadence reported third quarter 2017 revenue of $485 million, compared to revenue of $446 million reported for the same period in 2016. On a GAAP basis, Cadence recognized net income of $81 million, or $0.29 per share on a diluted basis, in the third quarter of 2017, compared to net income of $65 million, or $0.23 per share on a diluted basis, for the same period in 2016.

Using the non-GAAP measure defined below, net income in the third quarter of 2017 was $98 million, or $0.35 per share on a diluted basis, as compared to net income of $85 million, or $0.30 per share on a diluted basis, for the same period in 2016.

“Broad-based proliferation and adoption of our digital and signoff, custom analog tools and IP products with consistent execution enabled Cadence to achieve excellent operating results for the third quarter,” said Lip-Bu Tan, president and chief executive officer.

“During the third quarter, we met or exceeded our key operating metrics and we are on track to deliver strong financial results for the fiscal year,” said John Wall, senior vice president and chief financial officer.

CFO Commentary

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

Business Outlook

For the fourth quarter of 2017, the company expects total revenue in the range of $490 million to $500 million. Fourth quarter GAAP net income per diluted share is expected to be in the range of $0.26 to $0.28. Net income per diluted share using the non-GAAP measure defined below is expected to be in the range of $0.38 to $0.40.

For 2017, the company expects total revenue in the range of $1.931 billion to $1.941 billion. On a GAAP basis, net income per diluted share for 2017 is expected to be in the range of $1.04 to $1.06. Using the non-GAAP measure defined below, net income per diluted share for 2017 is expected to be in the range of $1.39 to $1.41.

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 John Wall, senior vice president and chief financial officer, will host the third quarter 2017 financial results audio webcast today, October 26, 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 October 26, 2017 at 5 p.m. (Pacific) and ending December 15, 2017 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.

About Cadence

Cadence enables electronic systems and semiconductor companies to create the innovative end products that are transforming the way people live, work and play. Cadence^® software, hardware and semiconductor IP are used by customers to deliver products to market faster. The company’s System Design Enablement strategy helps customers develop differentiated products-from chips to boards to systems-in mobile, consumer, cloud datacenter, automotive, aerospace, IoT, industrial and other market segments. Cadence is listed as one of Fortune Magazine's 100 Best Companies to Work For. Learn more at cadence.com.

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.

The statements contained above regarding Cadence’s third 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. In addition, the actual timing and amount of Cadence's repurchase of its common stock under the existing authorization will be subject to business and market conditions, corporate and regulatory requirements, acquisition opportunities and other factors.

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

GAAP to Non-GAAP Reconciliation

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

To supplement Cadence’s financial results presented on a GAAP basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP. Non-GAAP net income is calculated by Cadence management by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, acquisition and integration-related costs including retention expenses, investment gains or losses, income or expenses related to Cadence’s non-qualified deferred compensation plan, restructuring 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
	September 30, 2017			October 1, 2016
	(unaudited)
(in thousands)
Net income on a GAAP basis	$	81,157		$	64,712
Amortization of acquired intangibles	13,618			14,482
Stock-based compensation expense	36,090			29,998
Non-qualified deferred compensation expenses	2,825			921
Restructuring and other charges (credits)	(55		)	101
Acquisition and integration-related costs	748			1,841
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(12,242		)	(806		)
Income tax effect of non-GAAP adjustments	(23,942		)	(26,424		)
Net income on a non-GAAP basis	$	98,199		$	84,825

* 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
	September 30, 2017			October 1, 2016
	(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis	$	0.29		$	0.23
Amortization of acquired intangibles	0.05			0.05
Stock-based compensation expense	0.13			0.10
Non-qualified deferred compensation expenses	0.01			—
Restructuring and other charges (credits)	—			—
Acquisition and integration-related costs	—			0.01
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.04		)	—
Income tax effect of non-GAAP adjustments	(0.09		)	(0.09		)
Diluted net income per share on a non-GAAP basis	$	0.35		$	0.30
Shares used in calculation of diluted net income per share — GAAP**	281,400			287,473
Shares used in calculation of diluted net income per share — non-GAAP**	281,400			287,473

* 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 December 15, 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 Cadence’s fourth quarter 2017 earnings release is published, which is currently scheduled for January 31, 2018.

For more information, please contact:

Cadence Investor Relations

Alan Lindstrom

408-428-5020

alind@cadence.com

Cadence Newsroom

408-944-7039

newsroom@cadence.com

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

September 30, 2017 and December 31, 2016

(In thousands)

(Unaudited)

	September 30, 2017		December 31, 2016
Current assets:
Cash and cash equivalents	$	678,284	$	465,232
Short-term investments	4,135		3,057
Receivables, net	170,312		157,171
Inventories	36,000		39,475
Prepaid expenses and other	42,374		37,099
Total current assets	931,105		702,034
Property, plant and equipment, net of accumulated depreciation of $648,298 and $612,961, respectively	244,620		238,607
Goodwill	574,912		572,764
Acquired intangibles, net of accumulated amortization of $283,632 and $267,723, respectively	216,177		258,814
Long-term receivables	11,590		12,949
Other assets	326,823		311,740
Total assets	$	2,305,227	$	2,096,908
Current liabilities:
Revolving credit facility	$	—	$	50,000
Accounts payable and accrued liabilities	199,672		239,496
Current portion of deferred revenue	320,462		296,066
Total current liabilities	520,134		585,562
Long-term liabilities:
Long-term portion of deferred revenue	57,865		66,769
Long-term debt	644,146		643,493
Other long-term liabilities	72,342		59,314
Total long-term liabilities	774,353		769,576
Stockholders’ equity	1,010,740		741,770
Total liabilities and stockholders’ equity	$	2,305,227	$	2,096,908

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three and Nine Months Ended September 30, 2017 and October 1, 2016

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Revenue:
Product and maintenance	$	451,229		$	415,370		$	1,346,483		$	1,247,077
Services	34,169			30,850			94,827			100,026
Total revenue	485,398			446,220			1,441,310			1,347,103
Costs and expenses:
Cost of product and maintenance	34,825			38,740			117,371			125,881
Cost of services	19,657			17,867			59,735			54,563
Marketing and sales	104,263			96,793			311,507			297,103
Research and development	206,568			191,547			600,755			553,824
General and administrative	36,302			30,441			100,892			95,129
Amortization of acquired intangibles	3,453			3,889			11,145			14,206
Restructuring and other charges (credits)	(55		)	101			(2,772		)	14,613
Total costs and expenses	405,013			379,378			1,198,633			1,155,319
Income from operations	80,385			66,842			242,677			191,784
Interest expense	(6,225		)	(6,053		)	(18,952		)	(17,306		)
Other income, net	12,387			2,836			14,370			10,441
Income before provision (benefit) for income taxes	86,547			63,625			238,095			184,919
Provision (benefit) for income taxes	5,390			(1,087		)	19,552			20,310
Net income	$	81,157		$	64,712		$	218,543		$	164,609
Net income per share - basic	$	0.30		$	0.23		$	0.80		$	0.57
Net income per share - diluted	$	0.29		$	0.23		$	0.78		$	0.56
Weighted average common shares outstanding - basic	273,156			280,622			271,739			288,476
Weighted average common shares outstanding - diluted	281,400			287,473			279,554			295,369

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2017 and October 1, 2016

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30, 2017			October 1, 2016
Cash and cash equivalents at beginning of period	$	465,232		$	616,686
Cash flows from operating activities:
Net income	218,543			164,609
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	86,605			89,726
Amortization of debt discount and fees	920			792
Stock-based compensation	94,008			79,986
Gain on investments, net	(12,502		)	(4,070		)
Gain on sale of property, plant and equipment	—			(482		)
Deferred income taxes	212			8,657
Other non-cash items	3,763			1,869
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(8,040		)	2,873
Inventories	2,282			(16,339		)
Prepaid expenses and other	(4,627		)	(12,135		)
Other assets	(14,469		)	(3,822		)
Accounts payable and accrued liabilities	(41,127		)	(46,585		)
Deferred revenue	14,245			(10,823		)
Other long-term liabilities	4,071			(6,239		)
Net cash provided by operating activities	343,884			248,017
Cash flows from investing activities:
Purchases of available-for-sale securities	—			(20,525		)
Proceeds from the sale of available-for-sale securities	421			55,418
Proceeds from the maturity of available-for-sale securities	—			52,362
Proceeds from the sale of long-term investments	9,108			2,913
Proceeds from the sale of property, plant and equipment	—			482
Purchases of property, plant and equipment	(39,676		)	(42,452		)
Cash paid in business combinations and asset acquisitions, net of cash acquired	(550		)	(41,627		)
Net cash provided by (used for) investing activities	(30,697		)	6,571
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	(100,000		)	—
Payment of debt issuance costs	(793		)	(622		)
Proceeds from issuance of common stock	45,419			50,293
Stock received for payment of employee taxes on vesting of restricted stock	(54,130		)	(35,532		)
Payments for repurchases of common stock	(50,013		)	(720,196		)
Net cash used for financing activities	(109,517		)	(356,057		)
Effect of exchange rate changes on cash and cash equivalents	9,382			9,116
Increase (decrease) in cash and cash equivalents	213,052			(92,353		)
Cash and cash equivalents at end of period	$	678,284		$	524,333

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2016										2017
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3
Americas	49	%	47	%	46	%	48	%	48	%	45	%	45	%	45	%
Asia	22	%	24	%	27	%	25	%	24	%	26	%	28	%	27	%
Europe, Middle East and Africa	19	%	20	%	19	%	19	%	19	%	20	%	19	%	19	%
Japan	10	%	9	%	8	%	8	%	9	%	9	%	8	%	9	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group (% of Total Revenue)

	2016										2017
PRODUCT GROUP	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3
Functional Verification, including Emulation and Prototyping Hardware	26	%	27	%	24	%	25	%	25	%	23	%	23	%	21	%
Digital IC Design and Signoff	30	%	27	%	28	%	30	%	29	%	29	%	30	%	30	%
Custom IC Design	25	%	26	%	27	%	25	%	25	%	26	%	26	%	28	%
System Interconnect and Analysis	9	%	10	%	10	%	9	%	10	%	10	%	10	%	10	%
IP	10	%	10	%	11	%	11	%	11	%	12	%	11	%	11	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.

As of Ocober 26, 2017

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

(Unaudited)

	Three Months Ending December 30, 2017	Year Ending December 30, 2017
	Forecast	Forecast
Diluted net income per share on a GAAP basis	$0.26 to $0.28	$1.04 to $1.06
Amortization of acquired intangibles	0.05	0.20
Stock-based compensation expense	0.13	0.46
Non-qualified deferred compensation expenses	—	0.02
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*	—	(0.05)
Income tax effect of non-GAAP adjustments	(0.06)	(0.28)
Diluted net income per share on a non-GAAP basis†	$0.38 to $0.40	$1.39 to $1.41

Cadence Design Systems, Inc.

As of October 26, 2017

Impact of Non-GAAP Adjustments on Forward Looking Net Income

(Unaudited)

	Three Months Ending December 30, 2017	Year Ending December 30, 2017
($ in millions)	Forecast	Forecast
Net income on a GAAP basis	$74 to $80	$292 to $298
Amortization of acquired intangibles	14	56
Stock-based compensation expense	35	129
Non-qualified deferred compensation expenses	—	5
Restructuring and other charges (credits)	—	(3)
Acquisition and integration-related costs	1	4
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—	(14)
Income tax effect of non-GAAP adjustments	(16)	(80)
Net income on a non-GAAP basis†	$108 to $114	$389 to $395

† 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 THIRD QUARTER 2017
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
October 26, 2017 Q3 2017 Key Takeaways • Strong, consistent financial results for Q3 with key metrics meeting or exceeding expectations. • Increasing our Outlook for revenue, earnings per share and cash flow for fiscal 2017. • Repurchased 1.3 million shares of stock for $50 million. $475 million remains on current authorization.	Q4 2017 Outlook • Revenue : $490 - $500 million. • GAAP operating margin: approximately 20%. • Non-GAAP operating margin: approximately 30%. • GAAP EPS: $0.26 - $0.28. • Non-GAAP EPS: $0.38 - $0.40.	Q3 2017 KEY METRICS
		• Revenue $485 million, +9% y/y. • GAAP operating margin 17%. • Non-GAAP operating margin 28%. • GAAP EPS $0.29. • Non-GAAP EPS $0.35, +17% y/y. • Operating cash flow $89 million.
FY 2017 Outlook • Revenue: $1.931 - $1.941 billion. • GAAP operating margin: 17% to 18%. • Non-GAAP operating margin: 27% to 28%. • GAAP EPS: $1.04 - $1.06. • Non-GAAP EPS $1.39 - $1.41. • Operating cash flow: $450 - $480 million.	Financial Results Webcast Our Q3 2017 financial results webcast will begin October 26, 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 October 26, 2017 until 5:00 p.m. (Pacific) on December 15, 2017.

October 26, 2017 Cadence Q3 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		$1.910 - $1.950	$1.931 - $1.941
Y/Y Growth	7	%	5% - 7%	6% - 7%
Revenue from Beginning Backlog	~70%		~70%	~70%
GAAP Operating Margin	13.5%		~17%	17% to 18%
Non-GAAP Operating Margin	25.8%		~27%	27% to 28%
Non-GAAP Other Income & Exp ($ Million)	$(12.4)		($28) - ($20)	($26) - ($22)
Non-GAAP Tax Rate	23%		23%	23%
Weighted Average Diluted Shares Outstanding (Million)	291.3		276 - 284	278 - 282
GAAP EPS	$0.70		$0.98 - $1.04	$1.04 - $1.06
Non-GAAP EPS	$1.21		$1.36 - $1.42	$1.39 - $1.41
Y/Y Growth	11%		12% - 17%	15% - 17%
Cash Flow from Operations ($ Million)	$444.9		$430 - $470	$450 - $480
DSO	33		~35	~35
Capital Expenditures ($ Million)	$53.7		~$50	~$55

Fourth Quarter 2017 Financial Outlook

			Current
	Q4 2016A	Q3 2017A	Q4 2017E
Total Revenue ($ Million)	$469.0	$485.4	$490 - $500
Q/Q Growth	5%	1%	1% - 3%
Y/Y Growth	6%	9%	4% - 7%
GAAP Operating Margin	11%	17%	~20%
Non-GAAP Operating Margin	27%	28%	~30%
GAAP EPS	$0.14	$0.29	$0.26 - $0.28
Non-GAAP EPS	$0.34	$0.35	$0.38 - $0.40
Q/Q Growth	13%	3%	9% - 14%
Y/Y Growth	10%	17%	12% - 18%

October 26, 2017 Cadence Q3 2017 Financial Results 2

Cadence Design Systems, Inc.

Third Quarter Financial Results

Revenue

(In Thousands)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Product & Maintenance	$415,370	$436,694	$451,407	$443,847	$451,229
Services	30,850	32,286	25,504	35,154	34,169
Total Revenue	$446,220	$468,980	$476,911	$479,001	$485,398
Y/Y Growth	3%	6%	6%	6%	9%

Revenue Mix by Geography

(% of Total Revenue)	Q3 2016		Q4 2016		Q1 2017		Q2 2017		Q3 2017
Americas	46	%	48	%	45	%	45	%	45	%
Asia	27	%	25	%	26	%	28	%	27	%
Europe, Middle East and Africa	19	%	19	%	20	%	19	%	19	%
Japan	8	%	8	%	9	%	8	%	9	%
Total	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group

(% of Total Revenue)	Q3 2016		Q4 2016		Q1 2017		Q2 2017		Q3 2017
Functional Verification	24	%	25	%	23	%	23	%	21	%
Digital IC Design and Signoff	28	%	30	%	29	%	30	%	30	%
Custom IC Design	27	%	25	%	26	%	26	%	28	%
System Interconnect and Analysis	10	%	9	%	10	%	10	%	10	%
IP	11	%	11	%	12	%	11	%	11	%
Total	100	%	100	%	100	%	100	%	100	%

Total Costs and Expenses

(In Thousands)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Total GAAP Costs & Expenses	$379,378	$415,863	$397,309	$396,311	$405,013
Y/Y Growth	7%	16%	2%	3%	7%
Total Non-GAAP Costs & Expenses	$332,035	$343,839	$354,601	$350,647	$351,787
Y/Y Growth	5%	9%	6%	4%	6%

Operating Margin

	Q3 2016		Q4 2016		Q1 2017		Q2 2017		Q3 2017
GAAP Operating Margin	15.0	%	11.3	%	16.7	%	17.3	%	16.6	%
Non-GAAP Operating Margin	25.6	%	26.7	%	25.6	%	26.8	%	27.5	%

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Cadence Design Systems, Inc.

Earnings Per Share

	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
GAAP Net Income Per Share	$0.23	$0.14	$0.25	$0.25	$0.29
Y/Y Growth	(8)%	(46)%	47%	47%	26%
Non-GAAP Net Income Per Share	$0.30	$0.34	$0.32	$0.34	$0.35
Y/Y Growth	7%	10%	14%	17%	17%

Total DSO

	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
DSO	34	33	37	31	34

Balance Sheet and Cash Review

Cash Flow from Operating Activities

(In Thousands)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Net Cash from Operating Activities	$84,460	$196,862	$92,430	$162,140	$89,314

Capital Expenditures

(In Thousands)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Capital Expenditures	$14,165	$11,260	$14,843	$12,645	$12,188

Cash and Short-Term Investments

(In Thousands)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Cash and Short-Term Investments	$532,836	$468,289	$547,607	$659,227	$682,419

• Approximately 27 percent of our cash and short-term investments were in the U.S. at quarter-end.

Stock Repurchase

(In Thousands, Except Share Price)	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Share Repurchase	$240,096	$240,093	—	—	$50,013
Number of Shares	9,596	9,315	—	—	1,331
Average Share Price	$25.02	$25.77	—	—	$37.58

Employees

	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017
Headcount	7,113	7,094	7,101	7,190	7,233

October 26, 2017 Cadence Q3 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. In addition, the actual timing and amount of Cadence's repurchase of its common stock under the existing authorization will be subject to business and market conditions, corporate and regulatory requirements, acquisition opportunities and other factors.

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

GAAP to Non-GAAP Reconciliation

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

October 26, 2017 Cadence Q3 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)	Q3 2016		Q4 2016		Q1 2017		Q2 2017		Q3 2017
GAAP total costs and expenses	$379,378		$415,863		$397,309		$396,311		$405,013
Reconciling items to non-GAAP total costs & expenses
Amortization of acquired intangibles	(14,482	)	(14,474	)	(14,434	)	(14,704	)	(13,618	)
Stock-based compensation expense	(29,998	)	(29,231	)	(27,436	)	(30,482	)	(36,090	)
Non-qualified deferred compensation expenses	(921	)	(544	)	(1,269	)	(756	)	(2,825	)
Restructuring and other (charges) credits	(101	)	(26,342	)	1,788		929		55
Acquisition and integration-related costs	(1,841	)	(1,433	)	(1,357	)	(651	)	(748	)
Non-GAAP total costs and expenses†	$332,035		$343,839		$354,601		$350,647		$351,787

† 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.

October 26, 2017 Cadence Q3 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

	Q3 2016	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Forecast Q4 2017
GAAP operating margin as percent of total revenue	15%	11%	17%	17%	17%	~20%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	3%	3%	3%	3%	3%	3%
Stock-based compensation expense	7%	6%	6%	7%	7%	7%
Non-qualified deferred compensation expenses	0%	0%	0%	0%	1%	0%
Restructuring and other charges (credits)	0%	6%	0%	0%	0%	0%
Acquisition and integration-related costs	1%	1%	0%	0%	0%	0%
Non-GAAP operating margin as percent of total revenue†	26%	27%	26%	27%	28%	~30%

† 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% -18%
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% - 28%

† 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.

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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)	Q3 2016		Q4 2016		Q1 2017		Q2 2017		Q3 2017		Forecast Q4 2017
Diluted net income per share on a GAAP basis	$0.23		$0.14		$0.25		$0.25		$0.29		$0.26 - $0.28
Amortization of acquired intangibles	0.05		0.05		0.05		0.05		0.05		0.05
Stock-based compensation expense	0.10		0.10		0.10		0.11		0.13		0.13
Non-qualified deferred compensation expenses	—		—		—		—		0.01		—
Restructuring and other charges (credits)	—		0.09		(0.01	)	—		—		—
Acquisition and integration-related costs	0.01		0.01		—		—		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets *	—		—		—		—		(0.04	)	—
Income tax effect of non-GAAP adjustments	(0.09	)	(0.05	)	(0.07	)	(0.07	)	(0.09	)	(0.06	)
Diluted net income per share on a non-GAAP basis †	$0.30		$0.34		$0.32		$0.34		$0.35		$0.38 - $0.40
Shares used in calculation of diluted net income per share - GAAP **	287,473		278,917		277,736		279,526		281,400
Shares used in calculation of diluted net income per share - non-GAAP **	287,473		278,917		277,736		279,526		281,400

† 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.

October 26, 2017 Cadence Q3 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		$1.04 - $1.06
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		0.02
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	)	(0.05	)
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	)	(0.28	)
Diluted net income per share on a non-GAAP basis †	$0.86		$0.94		$1.09		$1.21		$1.39 - $1.41
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.

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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)	$(26) - $(18)		$(12) - $(8)
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)	(2	)	(14	)
Non-GAAP total other income and expense†	$(12.4)	$(28) - $(20)		$(26) - $(22)

† 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.

October 26, 2017 Cadence Q3 2017 Financial Results 10