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): January 31, 2018

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 January 31, 2018, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter ended December 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 December 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 January 31, 2018.
99.02	CFO Commentary on Results of Quarter Ended December 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:January 31, 2018

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

EX-99.01

Exhibit 99.01

Cadence Reports Fourth Quarter and Fiscal Year 2017 Financial Results

SAN JOSE, Calif. — January 31, 2018 — Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the fourth quarter and fiscal year 2017.

Cadence reported 2017 revenue of $1.943 billion, compared to revenue of $1.816 billion for 2016. On a GAAP basis, Cadence recognized net income of $204 million, or $0.73 per share on a diluted basis, in 2017, compared to net income of $203 million, or $0.70 per share on a diluted basis for 2016. Revenue for the fourth quarter of 2017 totaled $502 million, compared to revenue of $469 million reported for the same period in 2016. Net loss for the fourth quarter of 2017 was $14 million, or $(0.05) per share on a diluted basis, compared to net income of $38 million, or $0.14 per share on a diluted basis, for the same period in 2016.

Due to the U.S. Tax Cuts and Jobs Act enacted in December 2017, GAAP net loss for the fourth quarter of 2017 included a $67 million income tax expense on a provisional basis for a one time transition tax on previously untaxed foreign earnings and a $25 million income tax expense on a provisional basis for the reduction in the value of Cadence’s U.S. deferred tax assets caused by the U.S. corporate tax rate reduction. These provisional amounts may change as Cadence continues to evaluate the impact of the Tax Act.

Using the non-GAAP measure defined below, net income for 2017 was $393 million, or $1.40 per share on a diluted basis, as compared to non-GAAP net income of $351 million, or $1.21 per share on a diluted basis for 2016. For the fourth quarter of 2017, non-GAAP net income was $111 million, or $0.39 per share on a diluted basis, as compared to net income of $95 million, or $0.34 per share on a diluted basis, for the same period in 2016.

“Through the execution of our System Design Enablement Strategy and our innovative solutions, Cadence delivered strong performance for our shareholders,” said Lip-Bu Tan, chief executive officer.  “The Data-Driven Economy is emerging as the new paradigm and has key underlying technology waves including mobile, cloud/datacenter, edge computing and automotive.  We are confident that we are well positioned to provide enablement solutions to fuel and ride with these technology waves.”

“Cadence continues to capitalize on the growth opportunities presented by the new trends. As a result, during the fourth quarter, we met or exceeded our key operating metrics and delivered strong financial results for the fiscal year,” said John Wall, senior vice president and chief financial officer.  “We are excited about the opportunities we see to drive top line growth in 2018.  We also expect to continue to deliver shareholder value by repurchasing approximately $50 million of Cadence common stock per quarter through 2018.”

CFO Commentary

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

Business Outlook

The outlook provided below is on an ASC Topic 606 basis, which Cadence is adopting for its fiscal year 2018 using the modified retrospective transition method. As required by the new standard, the company will report revenue under both methods for the 2018 transition year.  We expect the difference between revenue under the new and old standard to gradually decline over time and be de minimis within two years.

For the first quarter of 2018, the company expects total revenue in the range of $500 million to $510 million. First 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 $0.36 to $0.38.

For 2018, the company expects total revenue in the range of $2.015 billion to $2.055 billion. On a GAAP basis, net income per diluted share for 2018 is expected to be in the range of $0.80 to $0.90. Using the non-GAAP measure defined below, net income per diluted share for 2018 is expected to be in the range of $1.50 to $1.60.

For 2018, the company is forecasting a non-GAAP income tax rate of 16 percent, down from 23 percent used in fiscal 2017, primarily resulting from the tax rate reduction.

For comparison purposes, the company expects the outlook for 2018 on the prior ASC Topic 605 basis to be as follows: revenue in the range of $2.055 billion to $2.095 billion, GAAP net income per diluted share in the range of $0.93 to $1.03 and non-GAAP net income per diluted share in the range of $1.62 to $1.72. 

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, chief executive officer, and John Wall, senior vice president and chief financial officer, will host the fourth quarter and fiscal year 2017 financial results audio webcast today, January 31, 2018, 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 January 31, 2018 at 5 p.m. (Pacific) and ending March 16, 2018 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 fourth quarter and fiscal year 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, changes in tax laws, 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 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.

Cadence's non-GAAP net income for the fourth quarter of 2017 excludes the effect of the transition tax expense and income tax expense related to the reduction in value of the deferred tax assets caused by the U.S. corporate tax rate reduction. Cadence management believes it is useful to exclude these tax expenses since it does not expect these tax expenses to be recorded frequently.

The following tables reconcile the specific items excluded from GAAP net income (loss) and GAAP net income (loss) 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 (Loss) Reconciliation	Three Months Ended
	December 30, 2017			December 31, 2016
	(unaudited)
(in thousands)
Net income (loss) on a GAAP basis	$	(14,442	)	$	38,477
Amortization of acquired intangibles	13,741			14,474
Stock-based compensation expense	36,015			29,231
Non-qualified deferred compensation expenses	1,295			544
Restructuring and other charges	12,178			26,342
Acquisition and integration-related costs	5,712			1,433
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(1,368		)	(655		)
Income tax related to transition tax	67,188			—
Income tax related to tax rate change	25,292			—
Income tax effect of non-GAAP adjustments	(34,328		)	(14,672		)
Net income on a non-GAAP basis	$	111,283		$	95,174

* 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.

Net Income Reconciliation	Years Ended
	December 30, 2017			December 31, 2016
	(unaudited)
(in thousands)
Net income on a GAAP basis	$	204,101		$	203,086
Amortization of acquired intangibles	56,497			60,482
Stock-based compensation expense	130,023			109,217
Non-qualified deferred compensation expenses	6,145			1,741
Restructuring and other charges	9,406			40,955
Acquisition and integration-related costs	8,468			11,268
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(15,693		)	(4,672		)
Income tax related to transition tax	67,188			—
Income tax related to tax rate change	25,292			—
Income tax effect of non-GAAP adjustments	(98,810		)	(70,847		)
Net income on a non-GAAP basis	$	392,617		$	351,230

* 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 (Loss) per Share Reconciliation	Three Months Ended
	December 30, 2017			December 31, 2016
	(unaudited)
(in thousands, except per share data)
Diluted net income (loss) per share on a GAAP basis	$	(0.05	)	$	0.14
Amortization of acquired intangibles	0.05			0.05
Stock-based compensation expense	0.13			0.10
Non-qualified deferred compensation expenses	—			—
Restructuring and other charges	0.04			0.09
Acquisition and integration-related costs	0.02			0.01
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.01		)	—
Income tax related to transition tax	0.24			—
Income tax related to tax rate change	0.09			—
Income tax effect of non-GAAP adjustments	(0.12		)	(0.05		)
Diluted net income per share on a non-GAAP basis	$	0.39		$	0.34
Shares used in calculation of diluted net income (loss) per share — GAAP**	273,157			278,917
Shares used in calculation of diluted net income per share — non-GAAP**	282,206			278,917

* 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 (loss) 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.

Diluted Net Income per Share Reconciliation	Years Ended
	December 30, 2017			December 31, 2016
	(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis	$	0.73		$	0.70
Amortization of acquired intangibles	0.20			0.21
Stock-based compensation expense	0.46			0.37
Non-qualified deferred compensation expenses	0.02			0.01
Restructuring and other charges	0.03			0.14
Acquisition and integration-related costs	0.03			0.04
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.05		)	(0.02		)
Income tax related to transition tax	0.24			—
Income tax related to tax rate change	0.09			—
Income tax effect of non-GAAP adjustments	(0.35		)	(0.24		)
Diluted net income per share on a non-GAAP basis	$	1.40		$	1.21
Shares used in calculation of diluted net income per share — GAAP**	280,221			291,256
Shares used in calculation of diluted net income per share — non-GAAP**	280,221			291,256

* 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 March 16, 2018, Cadence will observe a Quiet Period during which the business outlook as provided in this press release and the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q no longer constitute Cadence’s current expectations. During the Quiet Period, the business outlook in these documents should be considered historical, speaking as of prior to the Quiet Period only and not subject to any update by Cadence. During the Quiet Period, Cadence’s representatives will not comment on Cadence’s business outlook, financial results or expectations. The Quiet Period will extend until Cadence’s first quarter 2018 earnings release is published, which is currently scheduled for April 23, 2018.

For more information, please contact:

Cadence Investor Relations

408-944-7100

investor_relations@cadence.com

Cadence Newsroom

408-944-7039

newsroom@cadence.com

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

December 30, 2017 and December 31, 2016

(In thousands)

(Unaudited)

	December 30, 2017		December 31, 2016
Current assets:
Cash and cash equivalents	$	688,087	$	465,232
Short-term investments	4,455		3,057
Receivables, net	190,426		157,171
Inventories	33,209		39,475
Prepaid expenses and other	63,811		37,099
Total current assets	979,988		702,034
Property, plant and equipment, net of accumulated depreciation of $658,377 and $612,961, respectively	251,342		238,607
Goodwill	666,009		572,764
Acquired intangibles, net of accumulated amortization of $297,456 and $267,723, respectively	278,835		258,814
Long-term receivables	12,239		12,949
Other assets	230,301		311,740
Total assets	$	2,418,714	$	2,096,908
Current liabilities:
Revolving credit facility	$	85,000	$	50,000
Accounts payable and accrued liabilities	221,101		239,496
Current portion of deferred revenue	336,297		296,066
Total current liabilities	642,398		585,562
Long-term liabilities:
Long-term portion of deferred revenue	61,513		66,769
Long-term debt	644,369		643,493
Other long-term liabilities	81,232		59,314
Total long-term liabilities	787,114		769,576
Stockholders’ equity	989,202		741,770
Total liabilities and stockholders’ equity	$	2,418,714	$	2,096,908

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Operations

For the Three Months and Years Ended December 30, 2017 and December 31, 2016

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Years Months Ended
	December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016
Revenue:
Product and maintenance	$	467,504		$	436,694		$	1,813,987		$	1,683,771
Services	34,218			32,286			129,045			132,312
Total revenue	501,722			468,980			1,943,032			1,816,083
Costs and expenses:
Cost of product and maintenance	39,305			57,410			156,676			183,291
Cost of services	20,979			18,638			80,714			73,201
Marketing and sales	107,654			98,091			419,161			395,194
Research and development	203,468			181,516			804,223			735,340
General and administrative	33,289			29,977			134,181			125,106
Amortization of acquired intangibles	3,571			3,889			14,716			18,095
Restructuring and other charges	12,178			26,342			9,406			40,955
Total costs and expenses	420,444			415,863			1,619,077			1,571,182
Income from operations	81,278			53,117			323,955			244,901
Interest expense	(6,712		)	(6,364		)	(25,664		)	(23,670		)
Other income, net	2,385			5,481			16,755			15,922
Income before provision for income taxes	76,951			52,234			315,046			237,153
Provision for income taxes	91,393			13,757			110,945			34,067
Net income (loss)	$	(14,442	)	$	38,477		$	204,101		$	203,086
Net income (loss) per share - basic	$	(0.05	)	$	0.14		$	0.75		$	0.71
Net income (loss) per share - diluted	$	(0.05	)	$	0.14		$	0.73		$	0.70
Weighted average common shares outstanding - basic	273,157			272,578			272,097			284,502
Weighted average common shares outstanding - diluted	273,157			278,917			280,221			291,256

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

For the Years Ended December 30, 2017 and December 31, 2016

(In thousands)

(Unaudited)

	Years Ended
	December 30, 2017			December 31, 2016
Cash and cash equivalents at beginning of year	$	465,232		$	616,686
Cash flows from operating activities:
Net income	204,101			203,086
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	115,524			119,588
Amortization of debt discount and fees	1,211			1,069
Stock-based compensation	130,023			109,217
Gain on investments, net	(13,869		)	(4,725		)
Gain on sale of property, plant and equipment	—			(923		)
Deferred income taxes	79,934			(4,869		)
Other non-cash items	5,068			4,027
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(28,409		)	(3,299		)
Inventories	5,034			4,934
Prepaid expenses and other	(25,793		)	(6,903		)
Other assets	(22,336		)	(6,566		)
Accounts payable and accrued liabilities	(25,987		)	2,655
Deferred revenue	33,614			30,742
Other long-term liabilities	12,625			(3,154		)
Net cash provided by operating activities	470,740			444,879
Cash flows from investing activities:
Purchases of available-for-sale securities	—			(20,525		)
Proceeds from the sale of available-for-sale securities	833			55,619
Proceeds from the maturity of available-for-sale securities	—			57,762
Proceeds from the sale of long-term investments	9,108			2,917
Proceeds from the sale of property, plant and equipment	—			923
Purchases of property, plant and equipment	(57,901		)	(53,712		)
Cash paid in business combinations and asset acquisitions, net of cash acquired	(143,249		)	(41,627		)
Net cash provided by (used for) investing activities	(191,209		)	1,357
Cash flows from financing activities:
Proceeds from term loan	—			300,000
Proceeds from revolving credit facility	135,000			115,000
Payment on revolving credit facility	(100,000		)	(65,000		)
Payment of debt issuance costs	(793		)	(622		)
Proceeds from issuance of common stock	48,965			55,440
Stock received for payment of employee taxes on vesting of restricted stock	(57,161		)	(37,226		)
Payments for repurchases of common stock	(100,025		)	(960,289		)
Change in book overdraft	3,867			—
Net cash used for financing activities	(70,147		)	(592,697		)
Effect of exchange rate changes on cash and cash equivalents	13,471			(4,993		)
Increase (decrease) in cash and cash equivalents	222,855			(151,454		)
Cash and cash equivalents at end of year	$	688,087		$	465,232

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2016										2017
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
Americas	49	%	47	%	46	%	48	%	48	%	45	%	45	%	45	%	44	%	44	%
Asia	22	%	24	%	27	%	25	%	24	%	26	%	28	%	27	%	28	%	27	%
Europe, Middle East and Africa	19	%	20	%	19	%	19	%	19	%	20	%	19	%	19	%	20	%	20	%
Japan	10	%	9	%	8	%	8	%	9	%	9	%	8	%	9	%	8	%	9	%
Total	100	%	100	%	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		Q4		Year
Functional Verification, including Emulation and Prototyping Hardware	26	%	27	%	24	%	25	%	25	%	23	%	23	%	21	%	23	%	22	%
Digital IC Design and Signoff	30	%	27	%	28	%	30	%	29	%	29	%	30	%	30	%	29	%	29	%
Custom IC Design	25	%	26	%	27	%	25	%	25	%	26	%	26	%	28	%	26	%	27	%
System Interconnect and Analysis	9	%	10	%	10	%	9	%	10	%	10	%	10	%	10	%	10	%	10	%
IP	10	%	10	%	11	%	11	%	11	%	12	%	11	%	11	%	12	%	12	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.

As of January 31, 2018

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

(Unaudited)

	Three Months Ending March 31, 2018	Year Ending December 29, 2018
	Forecast	Forecast
Diluted net income per share on a GAAP basis	$0.20 to $0.22	$0.80 to $0.90
Amortization of acquired intangibles	0.05	0.19
Stock-based compensation expense	0.14	0.59
Restructuring and other charges	—	—
Acquisition and integration-related costs	0.03	0.09
Income tax effect of non-GAAP adjustments	(0.06)	(0.17)
Diluted net income per share on a non-GAAP basis†	$0.36 to $0.38	$1.50 to $1.60

Cadence Design Systems, Inc.

As of January 31, 2018

Impact of Non-GAAP Adjustments on Forward Looking Net Income

(Unaudited)

	Three Months Ending March 31, 2018	Year Ending December 29, 2018
($ in millions)	Forecast	Forecast
Net income on a GAAP basis	$58 to $64	$226 to $254
Amortization of acquired intangibles	14	54
Stock-based compensation expense	39	167
Restructuring and other charges	1	1
Acquisition and integration-related costs	7	26
Income tax effect of non-GAAP adjustments	(16)	(48)
Net income on a non-GAAP basis†	$103 to $109	$426 to $454

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

EX-99.02

Exhibit 99.02

CADENCE REPORTS FOURTH QUARTER AND FISCAL YEAR 2017
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
January 31, 2018 Q4 2017 Key Takeaways • Strong, consistent financial results for Q4 with key metrics meeting or exceeding expectations. • Double digit revenue growth for digital, custom/analog and IP product groups for fiscal 2017. • Repurchased $50 million of Cadence shares in Q4.	Q1 2018 Outlook * (ASC Topic 606 Basis) • Revenue : $500 - $510 million. • GAAP operating margin: approximately 14%. • Non-GAAP operating margin: approximately 26%. • GAAP EPS: $0.20 - $0.22. • Non-GAAP EPS: $0.36 - $0.38.	Q4 2017 KEY METRICS
		• Revenue $502 million, +7% y/y. • GAAP operating margin 16%. • Non-GAAP operating margin 30%. • GAAP EPS $(0.05). • Non-GAAP EPS $0.39, +15% y/y. • Operating cash flow $127 million.
FY 2018 Outlook * (ASC Topic 606 Basis) • Revenue: $2.015 - $2.055 billion. • GAAP operating margin: approximately 15%. • Non-GAAP operating margin: approximately 27%. • GAAP EPS: $0.80 - $0.90. • Non-GAAP EPS $1.50 - $1.60. • Operating cash flow: $480 - $530 million. • Expect to repurchase approximately $50 million of Cadence shares per quarter in 2018.	FY 2018 Implied Outlook * (ASC Topic 605 Basis)• Revenue: $2.055 - $2.095 billion. • GAAP operating margin: approximately 16.5%. • Non-GAAP operating margin: approximately 28.4%. • GAAP EPS: $0.93 - $1.03. • Non-GAAP EPS: $1.62 - $1.72. • Operating cash flow: $480 - $530 million. • Expect to repurchase approximately $50 million of Cadence shares per quarter in 2018.	FY 2017 KEY METRICS
		• Revenue $1.943 billion, +7% y/y. • GAAP operating margin 17%. • Non-GAAP operating margin 27.5%. • GAAP EPS $0.73. • Non-GAAP EPS $1.40, +16% y/y. • Operating cash flow $471 million.
* As required by the new standard, Cadence will report revenue under both methods for the 2018 transition year. Cadence expects the difference between revenue under the new and old standard to gradually decline over time and be de minimis within two years.
Financial Results Webcast Our Q4 2018 financial results webcast will begin January 31, 2018 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 January 31, 2018 until 5:00 p.m. (Pacific) on March 16, 2018.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 1

Cadence Design Systems, Inc.

Fiscal Year 2018 Financial Outlook

	ASC 605		ASC 605	ASC 606
	FY 2017A		FY 2018E	FY 2018E
Revenue Recognized Over Time	~90%		~90%	~90%
Total Revenue ($ Billion)	$1.943		$2.055 - $2.095	$2.015 - $2.055
Y/Y Growth	7	%	6% - 8%
Revenue from Beginning Backlog	~70%		~70%	~70%
GAAP Operating Margin	16.7%		~16.5%	~15%
Non-GAAP Operating Margin	27.5%		~28.4%	~27%
GAAP Other Income & Exp ($ Million)	$(8.9)		($30) - ($20)	($30) - ($20)
Non-GAAP Other Income & Exp ($ Million)	$(24.6)		($30) - ($20)	($30) - ($20)
GAAP Tax Rate	35%		12% - 13%	12% - 13%
Non-GAAP Tax Rate	23%		16%	16%
Weighted Average Diluted Shares Outstanding (Million)	280.2		280 - 286	280 - 286
GAAP EPS	$0.73		$0.93 - $1.03	$0.80 - $0.90
Y/Y Growth	4%		27% - 41%
Non-GAAP EPS	$1.40		$1.62 - $1.72	$1.50 - $1.60
Y/Y Growth	16%		16% - 23%
Cash Flow from Operations ($ Million)	$470.7		$480 - $530	$480 - $530
DSO	36		~35	~40
Capital Expenditures ($ Million)	$57.9		~$60	~$60

First Quarter 2018 Financial Outlook

	ASC 605	ASC 605	ASC 606
	Q1 2017A	Q4 2017A	Q1 2018E
Total Revenue ($ Million)	$476.9	$501.7	$500 - $510
Q/Q Growth	2%	3%
Y/Y Growth	6%	7%
GAAP Operating Margin	17%	16%	~14%
Non-GAAP Operating Margin	26%	30%	~26%
GAAP EPS	$0.25	$(0.05)	$0.20 - $0.22
Q/Q Growth	79%	(117)%
Y/Y Growth	47%	(136)%
Non-GAAP EPS	$0.32	$0.39	$0.36 - $0.38
Q/Q Growth	(6)%	11%
Y/Y Growth	14%	15%

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 2

Cadence Design Systems, Inc.

Fourth Quarter and Fiscal Year Financial Results

Backlog

(In Billions)	2014	2015	2016	2017
Backlog	$2.1	$2.3	$2.5	$2.7

Revenue

(In Thousands)	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Product & Maintenance	$436,694	$451,407	$443,847	$451,229	$467,504
Services	32,286	25,504	35,154	34,169	34,218
Total Revenue	$468,980	$476,911	$479,001	$485,398	$501,722
Y/Y Growth	6%	6%	6%	9%	7%

(In Thousands)	2014	2015	2016	2017
Product & Maintenance	$1,479,151	$1,578,944	$1,683,771	$1,813,987
Services	101,781	123,147	132,312	129,045
Total Revenue	$1,580,932	$1,702,091	$1,816,083	$1,943,032
Y/Y Growth	8%	8%	7%	7%

Revenue Mix by Geography

(% of Total Revenue)	Q4 2016		Q1 2017		Q2 2017		Q3 2017		Q4 2017
Americas	48	%	45	%	45	%	45	%	44	%
Asia	25	%	26	%	28	%	27	%	28	%
Europe, Middle East and Africa	19	%	20	%	19	%	19	%	20	%
Japan	8	%	9	%	8	%	9	%	8	%
Total	100	%	100	%	100	%	100	%	100	%

(% of Total Revenue)	2014		2015		2016		2017
Americas	45	%	47	%	48	%	44	%
Asia	23	%	24	%	24	%	27	%
Europe, Middle East and Africa	21	%	19	%	19	%	20	%
Japan	11	%	10	%	9	%	9	%
Total	100	%	100	%	100	%	100	%

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 3

Cadence Design Systems, Inc.

Revenue Mix by Product Group

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

(% of Total Revenue)	2014		2015		2016		2017
Functional Verification	22	%	23	%	25	%	22	%
Digital IC Design and Signoff	29	%	28	%	29	%	29	%
Custom IC Design	27	%	26	%	25	%	27	%
System Interconnect and Analysis	11	%	11	%	10	%	10	%
IP	11	%	12	%	11	%	12	%
Total	100	%	100	%	100	%	100	%

Total Costs and Expenses

(In Thousands)	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Total GAAP Costs & Expenses	$415,863	$397,309	$396,311	$405,013	$420,444
Y/Y Growth	16%	2%	3%	7%	1%
Total Non-GAAP Costs & Expenses	$343,839	$354,601	$350,647	$351,787	$351,503
Y/Y Growth	9%	6%	4%	6%	2%

(In Thousands)	2014	2015	2016	2017
Total GAAP Costs & Expenses	$1,374,288	$1,416,661	$1,571,182	$1,619,077
Y/Y Growth	8%	3%	11%	3%
Total Non-GAAP Costs & Expenses	$1,180,469	$1,247,039	$1,347,519	$1,408,538
Y/Y Growth	7%	6%	8%	5%

Operating Margin

	Q4 2016		Q1 2017		Q2 2017		Q3 2017		Q4 2017
GAAP Operating Margin	11.3	%	16.7	%	17.3	%	16.6	%	16.2	%
Non-GAAP Operating Margin	26.7	%	25.6	%	26.8	%	27.5	%	29.9	%

	2014		2015		2016		2017
GAAP Operating Margin	13.1	%	16.8	%	13.5	%	16.7	%
Non-GAAP Operating Margin	25.3	%	26.7	%	25.8	%	27.5	%

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 4

Cadence Design Systems, Inc.

Earnings (Loss) Per Share

	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
GAAP Net Income (Loss) Per Share	$0.14	$0.25	$0.25	$0.29	$(0.05)
Y/Y Growth	(46)%	47%	47%	26%	(136)%
Non-GAAP Net Income Per Share	$0.34	$0.32	$0.34	$0.35	$0.39
Y/Y Growth	10%	14%	17%	17%	15%

	2014	2015	2016	2017
GAAP Net Income Per Share	$0.52	$0.81	$0.70	$0.73
Y/Y Growth	(7)%	56%	(14)%	4%
Non-GAAP Net Income Per Share	$0.94	$1.09	$1.21	$1.40
Y/Y Growth	9%	16%	11%	16%

Total DSO

	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
DSO	33	37	31	34	36

Balance Sheet and Cash Review

Cash Flow from Operating Activities

(In Thousands)	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Net Cash from Operating Activities	$196,862	$92,430	$162,140	$89,314	$126,856

(In Thousands)	2014	2015	2016	2017
Net Cash from Operating Activities	$316,722	$378,200	$444,879	$470,740

Capital Expenditures

(In Thousands)	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Capital Expenditures	$11,260	$14,843	$12,645	$12,188	$18,225

(In Thousands)	2014	2015	2016	2017
Capital Expenditures	$39,810	$44,808	$53,712	$57,901

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 5

Cadence Design Systems, Inc.

Cash and Short-Term Investments

(In Thousands)	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Cash and Short-Term Investments	$468,289	$547,607	$659,227	$682,419	$692,542

• Approximately 20 percent of our cash and short-term investments were in the U.S. at quarter-end.

(In Thousands)	2014	2015	2016	2017
Cash and Short-Term Investments	$1,022,606	$711,184	$468,289	$692,542

Stock Repurchase

(In Thousands, Except Share Price)	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Share Repurchase	$240,093	—	—	$50,013	$50,012
Number of Shares	9,315	—	—	1,331	1,164
Average Share Price	$25.77	—	—	$37.58	$42.97

(In Thousands, Except Share Price)	2014	2015	2016	2017
Share Repurchase	$100,117	$333,189	$960,289	$100,025
Number of Shares	5,856	16,255	40,493	2,495
Average Share Price	$17.10	$20.50	$23.71	$40.09

Employees

	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017
Headcount	7,094	7,101	7,190	7,233	7,214

	2014	2015	2016	2017
Headcount	6,106	6,664	7,094	7,214

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 6

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, changes in tax laws, 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's non-GAAP net income for the fourth quarter of 2017 excludes the effect of the transition tax expense and income tax expense related to the reduction in value of the deferred tax assets caused by the U.S. corporate tax rate reduction. Cadence management believes it is useful to exclude these tax expenses since it does not expect these tax expenses to be recorded frequently.

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.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 7

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)	Q4 2016		Q1 2017		Q2 2017		Q3 2017		Q4 2017
GAAP total costs and expenses	$415,863		$397,309		$396,311		$405,013		$420,444
Reconciling items to non-GAAP total costs & expenses
Amortization of acquired intangibles	(14,474	)	(14,434	)	(14,704	)	(13,618	)	(13,741	)
Stock-based compensation expense	(29,231	)	(27,436	)	(30,482	)	(36,090	)	(36,015	)
Non-qualified deferred compensation expenses	(544	)	(1,269	)	(756	)	(2,825	)	(1,295	)
Restructuring and other (charges) credits	(26,342	)	1,788		929		55		(12,178	)
Acquisition and integration-related costs	(1,433	)	(1,357	)	(651	)	(748	)	(5,712	)
Non-GAAP total costs and expenses†	$343,839		$354,601		$350,647		$351,787		$351,503

† 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.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 8

Cadence Design Systems, Inc.

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

	ASC 605	ASC 605	ASC 605	ASC 605	ASC 605	ASC 606
	Q4 2016	Q1 2017	Q2 2017	Q3 2017	Q4 2017	Q1 2018E
GAAP operating margin as percent of total revenue	11%	17%	17%	17%	16%	~14%
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	6%	6%	7%	7%	7%	8%
Non-qualified deferred compensation expenses	0%	0%	0%	1%	0%	0%
Restructuring and other charges (credits)	6%	0%	0%	0%	3%	0%
Acquisition and integration-related costs	1%	0%	0%	0%	1%	1%
Non-GAAP operating margin as percent of total revenue†	27%	26%	27%	28%	30%	~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.

	ASC 605	ASC 605	ASC 606
	2016	2017	2018E
GAAP operating margin as percent of total revenue	13%	17%	~15%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	4%	3%	3%
Stock-based compensation expense	6%	7%	8%
Non-qualified deferred compensation expenses	0%	0%	0%
Restructuring and other charges	2%	1%	0%
Acquisition and integration-related costs	1%	0%	1%
Non-GAAP operating margin as percent of total revenue†	26%	28%	~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.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 9

Cadence Design Systems, Inc.

Reconciliation of GAAP Diluted Net Income (Loss) Per Share to Non-GAAP Diluted Net Income Per Share

	ASC 605		ASC 605		ASC 605		ASC 605		ASC 605		ASC 606
(In Thousands, Except Per Share Data)	Q4 2016		Q1 2017		Q2 2017		Q3 2017		Q4 2017		Q1 2018E
Diluted net income (loss) per share on a GAAP basis	$0.14		$0.25		$0.25		$0.29		$(0.05)		$0.20 - $0.22
Amortization of acquired intangibles	0.05		0.05		0.05		0.05		0.05		0.05
Stock-based compensation expense	0.10		0.10		0.11		0.13		0.13		0.14
Non-qualified deferred compensation expenses	—		—		—		0.01		—		—
Restructuring and other charges (credits)	0.09		(0.01	)	—		—		0.04		—
Acquisition and integration-related costs	0.01		—		—		—		0.02		0.03
Other income or expense related to investments and non-qualified deferred compensation plan assets *	—		—		—		(0.04	)	(0.01	)	—
Income tax related to transition tax	—		—		—		—		0.24		—
Income tax related to tax rate change	—		—		—		—		0.09		—
Income tax effect of non-GAAP adjustments	(0.05	)	(0.07	)	(0.07	)	(0.09	)	(0.12	)	(0.06	)
Diluted net income per share on a non-GAAP basis †	$0.34		$0.32		$0.34		$0.35		$0.39		$0.36 - $0.38
Shares used in calculation of diluted net income (loss) per share - GAAP **	278,917		277,736		279,526		281,400		273,157
Shares used in calculation of diluted net income per share - non-GAAP **	278,917		277,736		279,526		281,400		282,206

† 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 (loss) 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.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 10

Cadence Design Systems, Inc.

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

	ASC 605		ASC 605		ASC 605		ASC 605		ASC 606
(In Thousands, Except Per Share Data)	2014		2015		2016		2017		2018E
Diluted net income per share on a GAAP basis	$0.52		$0.81		$0.70		$0.73		$0.80 - $0.90
Amortization of acquired intangibles	0.20		0.21		0.21		0.20		0.19
Stock-based compensation expense	0.27		0.30		0.37		0.46		0.59
Non-qualified deferred compensation expenses (credits)	0.01		—		0.01		0.02		—
Restructuring and other charges	0.03		0.01		0.14		0.03		—
Acquisition and integration-related costs	0.08		0.03		0.04		0.03		0.09
Special charges *	0.04		—		—		—		—
Amortization of debt discount on convertible notes	0.06		0.02		—		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets **	(0.01	)	(0.01	)	(0.02	)	(0.05	)	—
Income tax related to transition tax	—		—		—		0.24		—
Income tax related to tax rate change	—		—		—		0.09		—
Income tax effect of non-GAAP adjustments	(0.26	)	(0.28	)	(0.24	)	(0.35	)	(0.17	)
Diluted net income per share on a non-GAAP basis †	$0.94		$1.09		$1.21		$1.40		$1.50 - $1.60
Shares used in calculation of diluted net income per share - GAAP ***	306,775		312,302		291,256		280,221		280 - 286M
Shares used in calculation of diluted net income per share - non-GAAP ***	306,775		312,302		291,256		280,221		280 - 286M

† 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.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 11

Cadence Design Systems, Inc.

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

	ASC 605	ASC 606
(In Millions)	FY 2017A	FY 2018E
GAAP total other income and expense	$(8.9)	$(30) - $(20)
Reconciling items to non-GAAP total income and expense
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(15.7)	—
Non-GAAP total other income and expense†	$(24.6)	$(30) - $(20)

† 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.

January 31, 2018 Cadence Q4 and Fiscal Year 2017 Financial Results 12