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 22, 2019

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 22, 2019, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter ended March 30, 2019.

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 March 30, 2019 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 22, 2019.
99.02	CFO Commentary on Results of Quarter Ended March 30, 2019.

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 22, 2019

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 First Quarter 2019 Financial Results

SAN JOSE, Calif. — April 22, 2019 — Cadence Design Systems, Inc. (NASDAQ: CDNS) today announced results for the first quarter of 2019.

Cadence reported first quarter 2019 revenue of $577 million, compared to revenue of $517 million reported for the same period in 2018. On a GAAP basis, Cadence achieved operating margin of 22 percent and recognized net income of $121 million, or $0.43 per share on a diluted basis, in the first quarter of 2019, compared to operating margin of 17 percent and net income of $73 million, or $0.26 per share on a diluted basis, for the same period in 2018.

Using the non-GAAP measure defined below, operating margin for the first quarter of 2019 was 32 percent and net income was $152 million, or $0.54 per share on a diluted basis, compared to operating margin of 28 percent and net income of $113 million, or $0.40 per share on a diluted basis, for the same period in 2018.

“Cadence achieved excellent operating results for the first quarter delivering 11 percent revenue growth and 32 percent non-GAAP operating margin.  Our business is mission critical to silicon development, which is the cornerstone of all design activity,” said Lip-Bu Tan, chief executive officer.  “We announced Clarity™ 3D Solver, our first product in the System Analysis space, as we introduced the next phase of our System Design Enablement strategy to provide more capabilities and value to customers and expand our TAM.”

“I’m pleased with our financial discipline and continued broad-based growth,” said John Wall, senior vice president and chief financial officer. “We are raising our outlook for the year as technology trends like AI and 5G continue to drive strong design activity across all lines of our business.”

CFO Commentary

Commentary on the first quarter 2019 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 second quarter of 2019, the company expects total revenue in the range of $575 million to $585 million. Second quarter GAAP operating margin is expected to be in the range of 21 percent to 22 percent and GAAP net income per diluted share is expected to be in the range of $0.34 to $0.36. Using the non-GAAP measure defined below, operating margin is expected to be in the range of 31 percent to 32 percent and net income per diluted share is expected to be in the range of $0.52 to $0.54.

For 2019, the company expects total revenue in the range of $2.305 billion to $2.335 billion. On a GAAP basis, operating margin is expected to be approximately 21 percent and net income per diluted share for 2019 is expected to be in the range of $1.39 to $1.47. Using the non-GAAP measure defined below, operating margin for 2019 is expected to be approximately 31 percent and net income per diluted share for 2019 is expected to be in the range of $2.04 to $2.12.

A schedule showing a reconciliation of the business outlook from GAAP operating margin, GAAP net income and diluted net income per share to non-GAAP operating margin and 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 first quarter 2019 financial results audio webcast today, April 22, 2019, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting April 22, 2019 at 5 p.m. (Pacific) and ending June 14, 2019 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 www.cadence.com.

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

The statements contained above, 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 timing and amount of Cadence's repurchase of its common stock under the authorizations will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, 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.

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

Operating Margin Reconciliation	Three Months Ended
	March 30, 2019	March 31, 2018
	(unaudited)
GAAP operating margin as a percent of total revenue	22%	17%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Amortization of acquired intangibles	2%	3%
Stock-based compensation expense	7%	7%
Non-qualified deferred compensation expenses	1%	0%
Restructuring and other credits	0%	0%
Acquisition and integration-related costs	0%	1%
Non-GAAP operating margin as a percent of total revenue	32%	28%

Net Income Reconciliation	Three Months Ended
	March 30, 2019			March 31, 2018
	(unaudited)
(in thousands)
Net income on a GAAP basis	$	120,555		$	72,885
Amortization of acquired intangibles	13,162			13,907
Stock-based compensation expense	42,253			37,901
Non-qualified deferred compensation expenses	2,540			127
Restructuring and other credits	(689		)	(1,991		)
Acquisition and integration-related costs	914			7,783
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(5,187		)	(1,123		)
Income tax effect of non-GAAP adjustments	(21,307		)	(16,280		)
Net income on a non-GAAP basis	$	152,241		$	113,209

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

Diluted Net Income Per Share Reconciliation	Three Months Ended
	March 30, 2019			March 31, 2018
	(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis	$	0.43		$	0.26
Amortization of acquired intangibles	0.05			0.05
Stock-based compensation expense	0.15			0.13
Non-qualified deferred compensation expenses	0.01			—
Restructuring and other credits	—			(0.01		)
Acquisition and integration-related costs	—			0.03
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.02		)	—
Income tax effect of non-GAAP adjustments	(0.08		)	(0.06		)
Diluted net income per share on a non-GAAP basis	$	0.54		$	0.40
Shares used in calculation of diluted net income per share — GAAP**	280,615			281,651
Shares used in calculation of diluted net income per share — non-GAAP**	280,615			281,651

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

** 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 14, 2019, 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 second quarter 2019 earnings release is published, which is currently scheduled for July 22, 2019.

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

March 30, 2019 and December 29, 2018

(In thousands)

(Unaudited)

	March 30, 2019		December 29, 2018
Current assets:
Cash and cash equivalents	$	538,898	$	533,298
Receivables, net of allowances of $3,566 and $3,936, respectively	264,767		297,082
Inventories	37,480		28,162
Prepaid expenses and other	76,802		92,550
Total current assets	917,947		951,092
Property, plant and equipment, net of accumulated depreciation of $712,996 and $698,493, respectively	253,392		252,630
Goodwill	662,871		662,272
Acquired intangibles, net of accumulated amortization of $324,393 and $333,687, respectively	212,298		225,457
Long-term receivables	3,241		5,972
Other assets	496,562		371,231
Total assets	$	2,546,311	$	2,468,654
Current liabilities:
Revolving credit facility	$	50,000	$	100,000
Accounts payable and accrued liabilities	235,688		256,526
Current portion of deferred revenue	345,751		352,456
Total current liabilities	631,439		708,982
Long-term liabilities:
Long-term portion of deferred revenue	51,312		48,718
Long-term debt	345,470		345,291
Other long-term liabilities	152,253		77,262
Total long-term liabilities	549,035		471,271
Stockholders’ equity	1,365,837		1,288,401
Total liabilities and stockholders’ equity	$	2,546,311	$	2,468,654

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three Months Ended March 30, 2019 and March 31, 2018

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 30, 2019			March 31, 2018
Revenue:
Product and maintenance	$	543,518		$	480,609
Services	33,224			36,704
Total revenue	576,742			517,313
Costs and expenses:
Cost of product and maintenance	50,522			41,730
Cost of services	20,063			21,479
Marketing and sales	116,830			109,148
Research and development	228,210			224,185
General and administrative	30,102			33,299
Amortization of acquired intangibles	3,308			3,630
Restructuring and other credits	(689		)	(1,991		)
Total costs and expenses	448,346			431,480
Income from operations	128,396			85,833
Interest expense	(5,391		)	(6,975		)
Other income (expense), net	5,241			(689		)
Income before provision for income taxes	128,246			78,169
Provision for income taxes	7,691			5,284
Net income	$	120,555		$	72,885
Net income per share - basic	$	0.44		$	0.27
Net income per share - diluted	$	0.43		$	0.26
Weighted average common shares outstanding - basic	273,066			273,773
Weighted average common shares outstanding - diluted	280,615			281,651

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 30, 2019 and March 31, 2018

(In thousands)

(Unaudited)

	Three Months Ended
	March 30, 2019			March 31, 2018
Cash and cash equivalents at beginning of period	$	533,298		$	688,087
Cash flows from operating activities:
Net income	120,555			72,885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	29,740			29,389
Amortization of debt discount and fees	247			292
Stock-based compensation	42,253			37,901
Gain on investments, net	(2,646		)	(996		)
Deferred income taxes	(4,966		)	1,363
Provisions for losses (recoveries) on receivables	(183		)	666
Other non-cash items	122			(170		)
Changes in operating assets and liabilities:
Receivables	35,681			(10,988		)
Inventories	(10,618		)	2,105
Prepaid expenses and other	15,618			8,392
Other assets	10,729			8,025
Accounts payable and accrued liabilities	(43,954		)	(46,956		)
Deferred revenue	(4,451		)	59,854
Other long-term liabilities	(2,713		)	(4,115		)
Net cash provided by operating activities	185,414			157,647
Cash flows from investing activities:
Purchases of non-marketable investments	(33,664		)	—
Proceeds from the sale of non-marketable investments	2,952			—
Purchases of property, plant and equipment	(15,275		)	(13,128		)
Net cash used for investing activities	(45,987		)	(13,128		)
Cash flows from financing activities:
Proceeds from revolving credit facility	50,000			—
Payment on revolving credit facility	(100,000		)	(40,000		)
Proceeds from issuance of common stock	29,858			23,339
Stock received for payment of employee taxes on vesting of restricted stock	(32,822		)	(26,515		)
Payments for repurchases of common stock	(81,114		)	(50,013		)
Change in book overdraft	—			(3,867		)
Net cash used for financing activities	(134,078		)	(97,056		)
Effect of exchange rate changes on cash and cash equivalents	251			11,418
Increase in cash and cash equivalents	5,600			58,881
Cash and cash equivalents at end of period	$	538,898		$	746,968

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2018										2019
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1
Americas	45	%	46	%	44	%	44	%	45	%	44	%
China	9	%	8	%	9	%	13	%	10	%	10	%
Other Asia	18	%	18	%	20	%	18	%	18	%	19	%
Europe, Middle East and Africa	20	%	20	%	19	%	17	%	19	%	18	%
Japan	8	%	8	%	8	%	8	%	8	%	9	%
Total	100	%	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group (% of Total Revenue)

	2018										2019
PRODUCT GROUP	Q1		Q2		Q3		Q4		Year		Q1
Functional Verification, including Emulation and Prototyping Hardware	26	%	23	%	22	%	25	%	24	%	24	%
Digital IC Design and Signoff	30	%	30	%	30	%	28	%	29	%	30	%
Custom IC Design and Simulation	26	%	26	%	26	%	25	%	26	%	25	%
System Interconnect and Analysis	9	%	9	%	9	%	9	%	9	%	9	%
IP	9	%	12	%	13	%	13	%	12	%	12	%
Total	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Operating Margin

As of April 22, 2019

(Unaudited)

	Three Months Ending June 29, 2019	Year Ending December 28, 2019
	Forecast	Forecast
GAAP operating margin as a percent of total revenue	21% - 22%	~21%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Amortization of acquired intangibles	2%	2%
Stock-based compensation expense	8%	8%
Non-qualified deferred compensation expenses	0%	0%
Restructuring and other charges (credits)	0%	0%
Acquisition and integration-related costs	0%	0%
Non-GAAP operating margin as a percent of total revenue†	31% - 32%	~31%

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

Cadence Design Systems, Inc.

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

As of April 22, 2019

(Unaudited)

	Three Months Ending June 29, 2019	Year Ending December 28, 2019
	Forecast	Forecast
Diluted net income per share on a GAAP basis	$0.34 to $0.36	$1.39 to $1.47
Amortization of acquired intangibles	0.05	0.19
Stock-based compensation expense	0.16	0.65
Non-qualified deferred compensation expenses	—	0.01
Restructuring and other charges (credits)	—	—
Acquisition and integration-related costs	0.01	0.02
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—	(0.02)
Income tax effect of non-GAAP adjustments	(0.04)	(0.20)
Diluted net income per share on a non-GAAP basis†	$0.52 to $0.54	$2.04 to $2.12

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Net Income

As of April 22, 2019

(Unaudited)

	Three Months Ending June 29, 2019	Year Ending December 28, 2019
($ in millions)	Forecast	Forecast
Net income on a GAAP basis	$96 to $102	$390 to $412
Amortization of acquired intangibles	14	53
Stock-based compensation expense	44	182
Non-qualified deferred compensation expenses	—	3
Restructuring and other charges (credits)	—	(1)
Acquisition and integration-related costs	2	6
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—	(5)
Income tax effect of non-GAAP adjustments	(11)	(56)
Net income on a non-GAAP basis†	$145 to $151	$572 to $594

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

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

EX-99.02

Exhibit 99.02

CADENCE REPORTS FIRST QUARTER 2019
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
April 22, 2019 Q1 2019 Key Takeaways • Q1 results exceeded our expectations for revenue, operating margin, EPS and operating cash flow; raising outlook. • Operating cash flow strong - raising outlook to midpoint of $685 million for 2019, which represents 13% growth over 2018. • Repurchased $81 million of Cadence stock in Q1.	Q2 2019 Outlook • Revenue : $575 - $585 million. • GAAP operating margin: 21% - 22%. • Non-GAAP operating margin: 31% - 32%. • GAAP EPS: $0.34 - $0.36 • Non-GAAP EPS: $0.52 - $0.54	Q1 2019 KEY METRICS
		• Revenue $577 million • GAAP operating margin 22% • Non-GAAP operating margin 32% • GAAP EPS $0.43 • Non-GAAP EPS $0.54 • Operating cash flow $185 million
FY 2019 Outlook • Revenue: $2.305 - $2.335 billion. • GAAP operating margin: ~21%. • Non-GAAP operating margin: ~31%. • GAAP EPS: $1.39 - $1.47 • Non-GAAP EPS $2.04 - $2.12 • Operating cash flow: $665 - $705 million. • Expect to repurchase approximately $75 million of Cadence stock per quarter in 2019.	Financial Results Webcast
	Our Q1 2019 financial results webcast will begin April 22, 2019 at 2:00 p.m. (Pacific). The webcast may be accessed at www.cadence.com/cadence/investor_relations. An archive of the webcast will be available on April 22, 2019 until 5:00 p.m. (Pacific) on June 14, 2019.

April 22, 2019 Cadence Q1 2019 Financial Results 1

Cadence Design Systems, Inc.

Second Quarter 2019 Financial Outlook

	Q1 2018A	Q1 2019A	Q2 2019E
Total Revenue ($ Million)	$517.3	$576.7	$575 - $585
Q/Q Growth		1%	(0)% - 1%
Y/Y Growth		11%	11% - 13%
GAAP Operating Margin	17%	22%	21% - 22%
Non-GAAP Operating Margin	28%	32%	31% - 32%
GAAP EPS	$0.26	$0.43	$0.34 - $0.36
Non-GAAP EPS	$0.40	$0.54	$0.52 - $0.54
Q/Q Growth		4%	(4)% - 0%
Y/Y Growth		35%	16% - 20%

Fiscal Year 2019 Financial Outlook

		Previous	Current
	FY 2018A	FY 2019E	FY 2019E
Revenue Recognized Over Time	~90%	~90%	85% - 90%
Total Revenue ($ Billion)	$2.138	$2.270 - $2.310	$2.305 - $2.335
Y/Y Growth		6% - 8%	8% - 9%
Revenue from Beginning Remaining Performance Obligations		~75%	~75%
GAAP Operating Margin	18.5%	20% - 21%	~21%
Non-GAAP Operating Margin	30.2%	30% - 31%	~31%
GAAP Other Income & Expense ($ Million)	$(19.8)	$(23) - $(33)	$(15) - $(23)
Non-GAAP Other Income & Expense ($ Million)	$(21.1)	$(23) - $(33)	$(20) - $(28)
GAAP Tax Rate	8%	~10%	~12%
Non-GAAP Tax Rate	16%	16%	16%
Weighted Average Diluted Shares Outstanding (Million)	281.1	278 - 281	279 - 282
GAAP EPS	$1.23	$1.33 - $1.43	$1.39 - $1.47
Y/Y Growth		8% - 16%	13% - 20%
Non-GAAP EPS	$1.87	$1.97 - $2.07	$2.04 - $2.12
Y/Y Growth		5% - 11%	9% - 13%
Cash Flow from Operations ($ Million)	$605	$640 - $690	$665 - $705
DSO	48	~45	~45
Capital Expenditures ($ Million)	$62	~$90	~$90

April 22, 2019 Cadence Q1 2019 Financial Results 2

Cadence Design Systems, Inc.

First Quarter Financial Results

Revenue

(In Thousands)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Product and Maintenance	$480,609	$487,870	$494,990	$534,418	$543,518
Services	36,704	30,521	37,478	35,432	33,224
Total Revenue	$517,313	$518,391	$532,468	$569,850	$576,742

Revenue Mix by Geography

(% of Total Revenue)	Q1 2018		Q2 2018		Q3 2018		Q4 2018		Q1 2019
Americas	45	%	46	%	44	%	44	%	44	%
China	9	%	8	%	9	%	13	%	10	%
Other Asia	18	%	18	%	20	%	18	%	19	%
Europe, Middle East and Africa	20	%	20	%	19	%	17	%	18	%
Japan	8	%	8	%	8	%	8	%	9	%
Total	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group

(% of Total Revenue)	Q1 2018		Q2 2018		Q3 2018		Q4 2018		Q1 2019
Functional Verification	26	%	23	%	22	%	25	%	24	%
Digital IC Design and Signoff	30	%	30	%	30	%	28	%	30	%
Custom IC Design and Simulation	26	%	26	%	26	%	25	%	25	%
System Interconnect and Analysis	9	%	9	%	9	%	9	%	9	%
IP	9	%	12	%	13	%	13	%	12	%
Total	100	%	100	%	100	%	100	%	100	%

Gross Margin

	Q1 2018		Q2 2018		Q3 2018		Q4 2018		Q1 2019
GAAP Gross Margin	87.8	%	88.6	%	88.6	%	86.6	%	87.8	%
Non-GAAP Gross Margin	90.0	%	90.8	%	90.8	%	88.6	%	89.7	%

Total Costs and Expenses

(In Thousands)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Total GAAP Costs and Expenses	$431,480	$425,335	$428,838	$456,160	$448,346
Total Non-GAAP Costs and Expenses	$373,753	$364,084	$361,981	$391,471	$390,166

Operating Margin

	Q1 2018		Q2 2018		Q3 2018		Q4 2018		Q1 2019
GAAP Operating Margin	16.6	%	18.0	%	19.5	%	20.0	%	22.3	%
Non-GAAP Operating Margin	27.8	%	29.8	%	32.0	%	31.3	%	32.3	%

April 22, 2019 Cadence Q1 2019 Financial Results 3

Cadence Design Systems, Inc.

Earnings Per Share

	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
GAAP Net Income Per Share	$0.26	$0.27	$0.35	$0.35	$0.43
Non-GAAP Net Income Per Share	$0.40	$0.45	$0.49	$0.52	$0.54

Total DSO

	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
DSO	41	39	42	48	42

Balance Sheet and Cash Review

Cash Flow from Operating Activities

(In Thousands)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Net Cash from Operating Activities	$157,647	$205,266	$109,954	$131,884	$185,414

Capital Expenditures

(In Thousands)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Capital Expenditures	$13,128	$17,977	$10,656	$19,742	$15,275

Cash and Cash Equivalents

(In Thousands)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Cash and Cash Equivalents	$746,968	$819,540	$544,585	$533,298	$538,898

• Approximately 16 percent of our cash and cash equivalents were in the U.S. at quarter-end.

Stock Repurchase

(In Thousands, Except Share Price)	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Share Repurchase	$50,013	$50,012	$50,011	$100,023	$81,114
Number of Shares	1,289	1,224	1,098	2,323	1,529
Average Share Price	$38.80	$40.86	$45.55	$43.06	$53.05

Employees

	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
Headcount	7,229	7,288	7,417	7,499	7,570

April 22, 2019 Cadence Q1 2019 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, 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 timing and amount of Cadence's repurchase of its common stock under the authorizations will be subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

For a detailed discussion of these and other cautionary statements related to Cadence’s business, please refer to Cadence’s filings with the U.S. Securities and Exchange Commission, 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 22, 2019 Cadence Q1 2019 Financial Results 5

Cadence Design Systems, Inc.

APPENDIX I

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

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Thousands)	Q1 2018		Q2 2018		Q3 2018		Q4 2018		Q1 2018
GAAP total costs and expenses	$431,480		$425,335		$428,838		$456,160		$448,346
Reconciling items to non-GAAP total costs and expenses
Amortization of acquired intangibles	(13,907	)	(13,509	)	(12,975	)	(12,942	)	(13,162	)
Stock-based compensation expense	(37,901	)	(40,956	)	(46,264	)	(42,594	)	(42,253	)
Non-qualified deferred compensation (expenses) credits	(127	)	(468	)	(1,120	)	3,186		(2,540	)
Restructuring and other (charges) credits	1,991		447		172		(13,699	)	689
Acquisition and integration-related (costs) credits	(7,783	)	(6,765	)	(6,670	)	1,360		(914	)
Non-GAAP total costs and expenses†	$373,753		$364,084		$361,981		$391,471		$390,166

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

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

	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019
GAAP gross margin as percent of total revenue	87.8%	88.6%	88.6%	86.6%	87.8%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Amortization of acquired intangibles	2.0%	1.9%	1.8%	1.7%	1.7%
Stock-based compensation expense	0.2%	0.3%	0.4%	0.3%	0.2%
Non-qualified deferred compensation expenses (credits)	0.0%	0.0%	0.0%	0.0%	0.0%
Non-GAAP gross margin as percent of total revenue†	90.0%	90.8%	90.8%	88.6%	89.7%

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

April 22, 2019 Cadence Q1 2019 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 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019E
GAAP operating margin as percent of total revenue	17%	18%	19%	20%	22%	21% - 22%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	3%	3%	3%	2%	2%	2%
Stock-based compensation expense	7%	8%	9%	7%	7%	8%
Non-qualified deferred compensation expenses (credits)	0%	0%	0%	0%	1%	0%
Restructuring and other charges (credits)	0%	0%	0%	2%	0%	0%
Acquisition and integration-related costs (credits)	1%	1%	1%	0%	0%	0%
Non-GAAP operating margin as percent of total revenue†	28%	30%	32%	31%	32%	31% - 32%

† 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.

	2018	2019E
GAAP operating margin as percent of total revenue	19%	~21%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	2%	2%
Stock-based compensation expense	8%	8%
Non-qualified deferred compensation expenses (credits)	0%	0%
Restructuring and other charges	0%	0%
Acquisition and integration-related costs	1%	0%
Non-GAAP operating margin as percent of total revenue†	30%	~31%

† 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 22, 2019 Cadence Q1 2019 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 2018		Q2 2018		Q3 2018		Q4 2018		Q1 2019		Q2 2019E
Diluted net income per share on a GAAP basis	$0.26		$0.27		$0.35		$0.35		$0.43		$0.34 - $0.36
Amortization of acquired intangibles	0.05		0.05		0.05		0.05		0.05		0.05
Stock-based compensation expense	0.13		0.14		0.16		0.15		0.15		0.16
Non-qualified deferred compensation expenses (credits)	—		—		—		(0.01	)	0.01		—
Restructuring and other charges (credits)	(0.01	)	—		—		0.05		—		—
Acquisition and integration-related costs (credits)	0.03		0.02		0.02		(0.01	)	—		0.01
Other income or expense related to investments and non-qualified deferred compensation plan assets *	—		—		—		—		(0.02	)	—
Income tax effect of non-GAAP adjustments	(0.06	)	(0.03	)	(0.09	)	(0.06	)	(0.08	)	(0.04	)
Diluted net income per share on a non-GAAP basis †	$0.40		$0.45		$0.49		$0.52		$0.54		$0.52 - $0.54
Shares used in calculation of diluted net income per share - GAAP **	281,651		280,774		281,646		280,321		280,615
Shares used in calculation of diluted net income per share - non-GAAP **	281,651		280,774		281,646		280,321		280,615

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

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

** 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 22, 2019 Cadence Q1 2019 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)	2018		2019E
Diluted net income per share on a GAAP basis	$1.23		$1.39 - $1.47
Amortization of acquired intangibles	0.19		0.19
Stock-based compensation expense	0.60		0.65
Non-qualified deferred compensation expenses (credits)	(0.01	)	0.01
Restructuring and other charges (credits)	0.04		—
Acquisition and integration-related costs	0.07		0.02
Other income or expense related to investments and non-qualified deferred compensation plan assets *	—		(0.02	)
Income tax effect of non-GAAP adjustments	(0.25	)	(0.20	)
Diluted net income per share on a non-GAAP basis †	$1.87		$2.04 - $2.12
Shares used in calculation of diluted net income per share - GAAP **	281,144		279 - 282M
Shares used in calculation of diluted net income per share - non-GAAP **	281,144		279 - 282M

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

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

** 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 22, 2019 Cadence Q1 2019 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 2018A	FY 2019E	FY 2019E
GAAP total other income and expense	$(19.8)	$(23) - $(33)	$(15) - $(23)
Reconciling items to non-GAAP total income and expense
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(1.3)	—	(5	)
Non-GAAP total other income and expense†	$(21.1)	$(23) - $(33)	$(20) - $(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.

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

April 22, 2019 Cadence Q1 2019 Financial Results 10