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): February 12, 2020

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, 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:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CDNS	Nasdaq Global Select Market

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 February 12, 2020, Cadence Design Systems, Inc. ("Cadence") issued a press release announcing its financial results for the quarter and fiscal year ended December 28, 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 and fiscal year ended December 28, 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 February 12, 2020.
99.02	CFO Commentary on Results of Quarter and Fiscal Year Ended December 28, 2019.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

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: February 12, 2020

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 2019 Financial Results

SAN JOSE, Calif. — February 12, 2020 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the fourth quarter and fiscal year 2019.

Cadence reported 2019 revenue of $2.336 billion, compared to revenue of $2.138 billion for 2018. On a GAAP basis, Cadence achieved operating margin of 21 percent and recognized net income of $989 million, or $3.53 per share on a diluted basis, in 2019, compared to operating margin of 19 percent and net income of $346 million, or $1.23 per share on a diluted basis for 2018. Revenue for the fourth quarter of 2019 totaled $600 million, compared to revenue of $570 million for the same period in 2018. Cadence achieved operating margin of 18 percent and recognized net income of $660 million, or $2.36 per share on a diluted basis, in the fourth quarter of 2019, compared to operating margin of 20 percent and net income of $98 million, or $0.35 per share on a diluted basis, for the same period in 2018. GAAP net income for the fourth quarter of 2019 and fiscal 2019 included a one-time non-cash tax benefit of $576 million related to intercompany transfers of certain intellectual property rights to Cadence's Irish subsidiary.

Using the non-GAAP measure defined below, operating margin for 2019 was 32 percent and net income was $618 million, or $2.20 per share on a diluted basis, compared to operating margin of 30 percent and net income of $526 million, or $1.87 per share on a diluted basis, for 2018. For the fourth quarter of 2019, operating margin was 31 percent and net income was $152 million, or $0.54 per share on a diluted basis, compared to operating margin of 31 percent and net income of $147 million, or $0.52 per share on a diluted basis, for the same period in 2018.

“Generational trends such as 5G, AI and hyperscale computing are driving strong design activity and our Intelligent System Design strategy has us very well positioned to maximize the resulting opportunities,” said Lip-Bu Tan, chief executive officer. “We introduced seven significant new products, including two in the System Analysis space, and coupled with strong execution, drove 9% revenue growth and 32% non-GAAP operating margin in 2019, and I look forward to driving further customer and shareholder success this year.”

“We are pleased with our performance in Q4 and for the full year,” said John Wall, senior vice president and chief financial officer.  “Thanks to the efforts of the entire Cadence team, we achieved broad based strength across all of our businesses and look forward to building upon our success in 2020.”

CFO Commentary

Commentary on the fourth quarter and fiscal year 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 first quarter of 2020, the company expects total revenue in the range of $610 million to $620 million. First quarter GAAP operating margin is expected to be approximately 19 percent and GAAP net income per diluted share is expected to be in the range of $0.32 to $0.34. Using the non-GAAP measure defined below, operating margin is expected to be approximately 30 percent and net income per diluted share is expected to be in the range of $0.53 to $0.55.

For 2020, the company expects total revenue in the range of $2.545 billion to $2.585 billion. On a GAAP basis, operating margin is expected to be in the range of 21 percent to 22 percent and net income per diluted share for 2020 is expected to be in the range of $1.46 to $1.56. Using the non-GAAP measure defined below, operating margin for 2020 is expected to be in the range of 32 percent to 33 percent and net income per diluted share for 2020 is expected to be in the range of $2.40 to $2.50.

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 fourth quarter and fiscal year 2019 financial results audio webcast today, February 12, 2020, 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 February 12, 2020 at 5 p.m. (Pacific) and ending March 13, 2020 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's software, hardware and semiconductor IP are used by customers to deliver products to market faster. The company’s Intelligent System Design™ strategy helps customers develop differentiated products—from chips to boards to intelligent systems—in mobile, consumer, cloud, data center, 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.

© 2020 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

The statements contained above, as well as the information in the Business Outlook section, are or include forward-looking statements based on current expectations and preliminary assumptions 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 and delivery of Cadence’s products and services; (iv) change in customer demands that could result in delays in purchases or deliveries of Cadence's products and services, including those resulting from consolidation among Cadence’s customers, restructurings and other efforts to improve operational efficiency of Cadence’s customers, economic conditions, government regulations or trade restrictions; (v) economic and industry conditions and trade restrictions 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, executive severance and other significant items not directly related to Cadence’s core business operations, including a one-time non-cash tax benefit related to intercompany transfers of certain intellectual property rights, 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
	December 28, 2019	December 29, 2018
	(unaudited)
GAAP operating margin as a percent of total revenue	18%	20%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Amortization of acquired intangibles	2%	2%
Stock-based compensation expense	8%	7%
Non-qualified deferred compensation expenses (credits)	0%	0%
Restructuring and other charges	2%	2%
Acquisition and integration-related costs (credits)	1%	0%
Special charges	0%	0%
Non-GAAP operating margin as a percent of total revenue	31%	31%

Operating Margin Reconciliation	Years Ended
	December 28, 2019	December 29, 2018
	(unaudited)
GAAP operating margin as a percent of total revenue	21%	19%
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	1%	0%
Acquisition and integration-related costs	0%	1%
Special charges	0%	0%
Non-GAAP operating margin as a percent of total revenue	32%	30%

Net Income Reconciliation	Three Months Ended
	December 28, 2019			December 29, 2018
	(unaudited)
(in thousands)
Net income on a GAAP basis	$	659,675		$	98,425
Amortization of acquired intangibles	12,660			12,942
Stock-based compensation expense	46,758			42,594
Non-qualified deferred compensation expenses (credits)	1,948			(3,186		)
Restructuring and other charges	9,809			13,699
Acquisition and integration-related costs (credits)	3,466			(1,360		)
Special charges	875			—
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(513		)	1,356
Income tax benefit related to intercompany transfers of certain intellectual property rights	(575,618		)	—
Income tax effect of non-GAAP adjustments	(7,500		)	(17,737		)
Net income on a non-GAAP basis	$	151,560		$	146,733

* 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.

Net Income Reconciliation	Years Ended
	December 28, 2019			December 29, 2018
	(unaudited)
(in thousands)
Net income on a GAAP basis	$	988,979		$	345,777
Amortization of acquired intangibles	53,079			53,333
Stock-based compensation expense	181,547			167,715
Non-qualified deferred compensation expenses (credits)	5,402			(1,471		)
Restructuring and other charges	8,621			11,089
Acquisition and integration-related costs	8,107			19,858
Special charges	875			—
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(1,314		)	(1,278		)
Income tax benefit related to intercompany transfers of certain intellectual property rights	(575,618		)	—
Income tax effect of non-GAAP adjustments	(52,037		)	(69,489		)
Net income on a non-GAAP basis	$	617,641		$	525,534

* 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
	December 28, 2019			December 29, 2018
	(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis	$	2.36		$	0.35
Amortization of acquired intangibles	0.05			0.05
Stock-based compensation expense	0.17			0.15
Non-qualified deferred compensation expenses (credits)	0.01			(0.01		)
Restructuring and other charges	0.03			0.05
Acquisition and integration-related costs (credits)	0.01			(0.01		)
Special charges	—			—
Other income or expense related to investments and non-qualified deferred compensation plan assets*	—			—
Income tax benefit related to intercompany transfers of certain intellectual property rights	(2.06		)	—
Income tax effect of non-GAAP adjustments	(0.03		)	(0.06		)
Diluted net income per share on a non-GAAP basis	$	0.54		$	0.52
Shares used in calculation of diluted net income per share — GAAP**	279,557			280,321
Shares used in calculation of diluted net income per share — non-GAAP**	279,557			280,321

* 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.

Diluted Net Income Per Share Reconciliation	Years Ended
	December 28, 2019			December 29, 2018
	(unaudited)
(in thousands, except per share data)
Diluted net income per share on a GAAP basis	$	3.53		$	1.23
Amortization of acquired intangibles	0.19			0.19
Stock-based compensation expense	0.65			0.60
Non-qualified deferred compensation expenses (credits)	0.02			(0.01		)
Restructuring and other charges	0.03			0.04
Acquisition and integration-related costs	0.03			0.07
Special charges	—			—
Other income or expense related to investments and non-qualified deferred compensation plan assets*	(0.01		)	—
Income tax benefit related to intercompany transfers of certain intellectual property rights	(2.05		)	—
Income tax effect of non-GAAP adjustments	(0.19		)	(0.25		)
Diluted net income per share on a non-GAAP basis	$	2.20		$	1.87
Shares used in calculation of diluted net income per share — GAAP**	280,515			281,144
Shares used in calculation of diluted net income per share — non-GAAP**	280,515			281,144

* 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 March 13, 2020, 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 2020 earnings release is published, which is currently scheduled for April 20, 2020.

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 28, 2019 and December 29, 2018

(In thousands)

(Unaudited)

	December 28, 2019		December 29, 2018
Current assets:
Cash and cash equivalents	$	705,210	$	533,298
Receivables, net	304,546		297,082
Inventories	55,802		28,162
Prepaid expenses and other	103,785		92,550
Total current assets	1,169,343		951,092
Property, plant and equipment, net	275,855		252,630
Goodwill	661,856		662,272
Acquired intangibles, net	172,375		225,457
Deferred taxes	732,367		154,894
Other assets	345,429		222,309
Total assets	$	3,357,225	$	2,468,654
Current liabilities:
Revolving credit facility	$	—	$	100,000
Accounts payable and accrued liabilities	316,908		256,526
Current portion of deferred revenue	355,483		352,456
Total current liabilities	672,391		708,982
Long-term liabilities:
Long-term portion of deferred revenue	73,400		48,718
Long-term debt	346,019		345,291
Other long-term liabilities	162,521		77,262
Total long-term liabilities	581,940		471,271
Stockholders’ equity	2,102,894		1,288,401
Total liabilities and stockholders’ equity	$	3,357,225	$	2,468,654

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

For the Three Months and Years Ended December 28, 2019 and December 29, 2018

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Years Ended
	December 28, 2019			December 29, 2018			December 28, 2019			December 29, 2018
Revenue:
Product and maintenance	$	564,964		$	534,418		$	2,204,615		$	1,997,887
Services	34,591			35,432			131,704			140,135
Total revenue	599,555			569,850			2,336,319			2,138,022
Costs and expenses:
Cost of product and maintenance	53,521			54,748			189,146			173,011
Cost of services	19,807			21,376			77,211			85,736
Marketing and sales	127,267			112,613			481,673			439,669
Research and development	235,372			218,271			935,938			884,816
General and administrative	42,093			31,985			139,806			133,406
Amortization of acquired intangibles	2,787			3,468			12,128			14,086
Restructuring and other charges	9,809			13,699			8,621			11,089
Total costs and expenses	490,656			456,160			1,844,523			1,741,813
Income from operations	108,899			113,690			491,796			396,209
Interest expense	(4,222		)	(4,318		)	(18,829		)	(23,139		)
Other income (expense), net	748			(735		)	6,001			3,320
Income before provision (benefit) for income taxes	105,425			108,637			478,968			376,390
Provision (benefit) for income taxes	(554,250		)	10,212			(510,011		)	30,613
Net income	$	659,675		$	98,425		$	988,979		$	345,777
Net income per share - basic	$	2.41		$	0.36		$	3.62		$	1.26
Net income per share - diluted	$	2.36		$	0.35		$	3.53		$	1.23
Weighted average common shares outstanding - basic	273,234			273,680			273,239			273,729
Weighted average common shares outstanding - diluted	279,557			280,321			280,515			281,144

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

For the Years Ended December 28, 2019 and December 29, 2018

(In thousands)

(Unaudited)

	Years Ended
	December 28, 2019			December 29, 2018
Cash and cash equivalents at beginning of year	$	533,298		$	688,087
Cash flows from operating activities:
Net income	988,979			345,777
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	122,789			118,721
Amortization of debt discount and fees	1,001			1,196
Stock-based compensation	181,547			167,715
(Gain) loss on investments, net	4,090			(2,732		)
Deferred income taxes	(576,738		)	(11,676		)
Provisions for losses on receivables	632			5,102
ROU asset amortization and change in operating lease liabilities	562			—
Other non-cash items	428			2,607
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(4,718		)	(87,083		)
Inventories	(33,024		)	752
Prepaid expenses and other	(11,031		)	(19,622		)
Other assets	(8,011		)	(14,606		)
Accounts payable and accrued liabilities	33,915			1,553
Deferred revenue	27,498			100,696
Other long-term liabilities	1,681			(3,649		)
Net cash provided by operating activities	729,600			604,751
Cash flows from investing activities:
Purchases of non-marketable investments	(33,717		)	(115,839		)
Proceeds from the sale of non-marketable investments	2,952			3,497
Purchases of property, plant and equipment	(74,605		)	(61,503		)
Cash paid in business combinations	(338		)	—
Net cash used for investing activities	(105,708		)	(173,845		)
Cash flows from financing activities:
Proceeds from revolving credit facility	150,000			100,000
Payment on revolving credit facility	(250,000		)	(85,000		)
Principal payments on term loan	—			(300,000		)
Proceeds from issuance of common stock	52,842			40,908
Stock received for payment of employee taxes on vesting of restricted stock	(90,580		)	(69,921		)
Payments for repurchases of common stock	(306,148		)	(250,059		)
Change in book overdraft	—			(3,867		)
Net cash used for financing activities	(443,886		)	(567,939		)
Effect of exchange rate changes on cash and cash equivalents	(8,094		)	(17,756		)
Increase (decrease) in cash and cash equivalents	171,912			(154,789		)
Cash and cash equivalents at end of year	$	705,210		$	533,298

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

	2018										2019
GEOGRAPHY	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
Americas	45	%	46	%	44	%	44	%	45	%	44	%	42	%	44	%	46	%	44	%
China	9	%	8	%	9	%	13	%	10	%	10	%	12	%	10	%	9	%	10	%
Other Asia	18	%	18	%	20	%	18	%	18	%	19	%	19	%	21	%	20	%	20	%
Europe, Middle East and Africa	20	%	20	%	19	%	17	%	19	%	18	%	20	%	18	%	18	%	18	%
Japan	8	%	8	%	8	%	8	%	8	%	9	%	7	%	7	%	7	%	8	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Revenue Mix by Product Group (% of Total Revenue)

	2018										2019
PRODUCT GROUP	Q1		Q2		Q3		Q4		Year		Q1		Q2		Q3		Q4		Year
Functional Verification, including hardware for emulation and prototyping	26	%	23	%	22	%	25	%	24	%	24	%	22	%	20	%	24	%	23	%
Digital IC Design and Signoff	30	%	30	%	30	%	28	%	29	%	30	%	31	%	30	%	29	%	30	%
Custom IC Design and Simulation	26	%	26	%	26	%	25	%	26	%	25	%	26	%	26	%	25	%	25	%
System Interconnect and Analysis	9	%	9	%	9	%	9	%	9	%	9	%	10	%	9	%	9	%	9	%
IP	9	%	12	%	13	%	13	%	12	%	12	%	11	%	15	%	13	%	13	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Operating Margin

As of February 12, 2020

(Unaudited)

	Three Months Ending March 28, 2020	Year Ending January 2, 2021
	Forecast	Forecast
GAAP operating margin as a percent of total revenue	~19%	21% - 22%
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%
Acquisition and integration-related costs	1%	1%
Non-GAAP operating margin as a percent of total revenue†	~30%	32% - 33%

† 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 February 12, 2020

(Unaudited)

	Three Months Ending March 28, 2020	Year Ending January 2, 2021
	Forecast	Forecast
Diluted net income per share on a GAAP basis	$0.32 to $0.34	$1.46 to $1.56
Amortization of acquired intangibles	0.05	0.23
Stock-based compensation expense	0.17	0.71
Acquisition and integration-related costs	0.01	0.07
Other income or expense related to investments and non-qualified deferred compensation plan assets*	0.01	0.01
Income tax effect of non-GAAP adjustments	(0.03)	(0.08)
Diluted net income per share on a non-GAAP basis†	$0.53 to $0.55	$2.40 to $2.50

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Net Income

As of February 12, 2020

(Unaudited)

	Three Months Ending March 28, 2020	Year Ending January 2, 2021
($ in millions)	Forecast	Forecast
Net income on a GAAP basis	$91 to $97	$410 to $438
Amortization of acquired intangibles	15	65
Stock-based compensation expense	47	198
Acquisition and integration-related costs	4	18
Other income or expense related to investments and non-qualified deferred compensation plan assets*	2	4
Income tax effect of non-GAAP adjustments	(10)	(23)
Net income on a non-GAAP basis†	$149 to $155	$672 to $700

† 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 FOURTH QUARTER AND FISCAL YEAR 2019
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
Key Takeaways • Q4 results met or exceeded our expectations for key financial metrics. • Operating cash flow for 2019 was $730 million. • Repurchased $75 million of Cadence stock in Q4 and $306 million for the year. • Projecting revenue growth of 10% at midpoint of FY 2020 outlook.	Q1 2020 Outlook • Revenue : $610 - $620 million. • GAAP operating margin: ~19%. • Non-GAAP operating margin: ~30%. • GAAP EPS: $0.32 - $0.34 • Non-GAAP EPS: $0.53 - $0.55	Q4 2019 KEY METRICS
		• Revenue $600 million • GAAP operating margin 18% • Non-GAAP operating margin 31% • GAAP EPS $2.36 • Non-GAAP EPS $0.54 • Operating cash flow $159 million
FY 2020 Outlook • Revenue: $2.545 - $2.585 billion. • GAAP operating margin: 21% - 22%. • Non-GAAP operating margin: 32% - 33%. • GAAP EPS: $1.46 - $1.56 • Non-GAAP EPS $2.40 - $2.50 • Operating cash flow: $775 - $825 million. • Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year.	Financial Results Webcast	FY 2019 KEY METRICS
	Our Q4 2019 financial results webcast will begin February 12, 2020 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 February 12, 2020 until 5:00 p.m. (Pacific) on March 13, 2020.	• Revenue $2.336 billion, up $198 million over 2018. • GAAP operating expenses $1.845 billion, up $103 million over 2018. • Non-GAAP operating expenses $1.587 billion, up $96 million over 2018. • GAAP operating margin 21% • Non-GAAP operating margin 32% • GAAP EPS $3.53 • Non-GAAP EPS $2.20 • Operating cash flow $730 million

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 1

Cadence Design Systems, Inc.

Financial Metrics

(In Millions, except per share data)	2016*	2017*	2018	2019	2020E
Revenue	$1,816	$1,943	$2,138	$2,336	$2,545 - $2,585
Revenue growth		7%	10%	9%	9% - 11%
GAAP operating expenses	1,571	1,619	1,742	1,845	~2,013
Non-GAAP operating expenses	1,348	1,409	1,491	1,587	~1,732
Non-GAAP operating expense growth		5%	6%	6%	~9%
GAAP operating margin	13%	17%	19%	21%
Implied GAAP operating margin**					21.5%
Non-GAAP operating margin	26%	28%	30%	32%
Implied Non-GAAP operating margin**					32.5%
GAAP earnings per share	$0.70	$0.73	$1.23	$3.53	$1.46 - $1.56
Non-GAAP earning per share	$1.21	$1.40	$1.87	$2.20	$2.40 - $2.50
Weighted average shares diluted outstanding	291.3	280.2	281.1	280.5	279 - 282
Cash flow from operations	445	471	605	730	$775 - $825
Capital expenditures	54	58	62	75	~$90

* Fiscal years 2016 and 2017 accounted for under ASC Topic 605, prior to adoption of ASC Topic 606 in 2018.

** At midpoint

First Quarter 2020 Financial Outlook

	Q1 2019A	Q4 2019A	Q1 2020E
Total Revenue ($ Million)	$576.7	$599.6	$610 - $620
Q/Q Growth		3%	2% - 3%
Y/Y Growth		4%	6% - 8%
GAAP Operating Margin	22%	18%	~19%
Non-GAAP Operating Margin	32%	31%	~30%
GAAP EPS	$0.43	$2.36	$0.32 - $0.34
Non-GAAP EPS	$0.54	$0.54	$0.53 - $0.55
Q/Q Growth		0%	(2)% - 2%
Y/Y Growth		0%	(2)% - 2%

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 2

Cadence Design Systems, Inc.

Fiscal Year 2020 Financial Outlook

	FY 2019A	FY 2020E
Recurring Revenue	85% - 90%	85% - 90%
Total Revenue ($ Billion)	$2.336	$2.545 - $2.585
Y/Y Growth	9%	9% - 11%
Revenue from Beginning Remaining Performance Obligations	~75%	~75%
GAAP Operating Margin	21.1%	21% - 22%
Non-GAAP Operating Margin	32.1%	32% - 33%
GAAP Other Income & Expense ($ Million)	$(12.8)	$(16) - $(25)
Non-GAAP Other Income & Expense ($ Million)	$(14.1)	$(12) - $(21)
GAAP Tax Rate	-106%	~20%
Non-GAAP Tax Rate	16%	16%
Weighted Average Diluted Shares Outstanding (Million)	280.5	279 - 282
GAAP EPS	$3.53	$1.46 - $1.56
Non-GAAP EPS	$2.20	$2.40 - $2.50
Y/Y Growth	18%	9% - 14%
Cash Flow from Operations ($ Million)	$730	$775 - $825
DSO	47	~45
Capital Expenditures ($ Million)	$75	~$90

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 3

Cadence Design Systems, Inc.

Fourth Quarter and Fiscal Year Financial Results

Backlog

(In Billions)	2018	2019
Backlog*	$3.0	$3.6

*Backlog = Remaining Performance Obligations + IP Access Agreements

Revenue

(In Thousands)	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Product and Maintenance	$534,418	$543,518	$548,028	$548,105	$564,964
Services	35,432	33,224	32,391	31,498	34,591
Total Revenue	$569,850	$576,742	$580,419	$579,603	$599,555

(In Thousands)	2018	2019
Product and Maintenance	$1,997,887	$2,204,615
Services	140,135	131,704
Total Revenue	$2,138,022	$2,336,319

Revenue Mix by Geography

(% of Total Revenue)	Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019
Americas	44	%	44	%	42	%	44	%	46	%
China	13	%	10	%	12	%	10	%	9	%
Other Asia	18	%	19	%	19	%	21	%	20	%
Europe, Middle East and Africa	17	%	18	%	20	%	18	%	18	%
Japan	8	%	9	%	7	%	7	%	7	%
Total	100	%	100	%	100	%	100	%	100	%

(% of Total Revenue)	2018		2019
Americas	45	%	44	%
China	10	%	10	%
Other Asia	18	%	20	%
Europe, Middle East and Africa	19	%	18	%
Japan	8	%	8	%
Total	100	%	100	%

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 4

Cadence Design Systems, Inc.

Revenue Mix by Product Group

(% of Total Revenue)	Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019
Functional Verification	25	%	24	%	22	%	20	%	24	%
Digital IC Design and Signoff	28	%	30	%	31	%	30	%	29	%
Custom IC Design and Simulation	25	%	25	%	26	%	26	%	25	%
System Interconnect and Analysis	9	%	9	%	10	%	9	%	9	%
IP	13	%	12	%	11	%	15	%	13	%
Total	100	%	100	%	100	%	100	%	100	%

(% of Total Revenue)	2018		2019
Functional Verification	24	%	23	%
Digital IC Design and Signoff	29	%	30	%
Custom IC Design and Simulation	26	%	25	%
System Interconnect and Analysis	9	%	9	%
IP	12	%	13	%
Total	100	%	100	%

Gross Margin

	Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019
GAAP Gross Margin	86.6	%	87.8	%	89.4	%	89.5	%	87.8	%
Non-GAAP Gross Margin	88.6	%	89.7	%	91.6	%	91.5	%	89.7	%

	2018		2019
GAAP Gross Margin	87.9	%	88.6	%
Non-GAAP Gross Margin	90.0	%	90.6	%

Total Costs and Expenses

(In Thousands)	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Total GAAP Costs and Expenses	$456,160	$448,346	$446,744	$458,777	$490,656
Total Non-GAAP Costs and Expenses	$391,471	$390,166	$385,591	$395,995	$415,140

(In Thousands)	2018	2019
Total GAAP Costs and Expenses	$1,741,813	$1,844,523
Total Non-GAAP Costs and Expenses	$1,491,289	$1,586,892

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 5

Cadence Design Systems, Inc.

Operating Margin

	Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019
GAAP Operating Margin	20.0	%	22.3	%	23.0	%	20.8	%	18.2	%
Non-GAAP Operating Margin	31.3	%	32.3	%	33.6	%	31.7	%	30.8	%

	2018		2019
GAAP Operating Margin	18.5	%	21.1	%
Non-GAAP Operating Margin	30.2	%	32.1	%

Earnings Per Share

	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
GAAP Net Income Per Share	$0.35	$0.43	$0.38	$0.36	$2.36
Non-GAAP Net Income Per Share	$0.52	$0.54	$0.57	$0.54	$0.54

	2018	2019
GAAP Net Income Per Share	$1.23	$3.53
Non-GAAP Net Income Per Share	$1.87	$2.20

Total DSO

	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
DSO	48	42	38	43	47

Balance Sheet and Cash Review

Cash Flow from Operating Activities

(In Thousands)	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Net Cash from Operating Activities	$131,884	$185,414	$246,360	$138,530	$159,296

(In Thousands)	2016	2017	2018	2019
Net Cash from Operating Activities	$444,879	$470,740	$604,751	$729,600

Capital Expenditures

(In Thousands)	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Capital Expenditures	$19,742	$15,275	$15,287	$16,965	$27,078

(In Thousands)	2016	2017	2018	2019
Capital Expenditures	$53,712	$57,901	$61,503	$74,605

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 6

Cadence Design Systems, Inc.

Cash and Cash Equivalents

(In Thousands)	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Cash and Cash Equivalents	$533,298	$538,898	$633,415	$655,216	$705,210

• Approximately 57 percent of our cash and cash equivalents were in the U.S. at quarter-end.

(In Thousands)	2016	2017	2018	2019
Cash and Cash Equivalents	$465,232	$688,087	$533,298	$705,210

Stock Repurchase

(In Thousands, Except Share Price)	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Share Repurchase	$100,023	$81,114	$75,006	$75,011	$75,017
Number of Shares	2,323	1,529	1,125	1,065	1,122
Average Share Price	$43.06	$53.05	$66.67	$70.43	$66.86

(In Thousands, Except Share Price)	2016	2017	2018	2019
Share Repurchase	$960,289	$100,025	$250,059	$306,148
Number of Shares	40,493	2,495	5,934	4,841
Average Share Price	$23.71	$40.09	$42.14	$63.24

Employees

	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
Headcount	7,499	7,570	7,743	8,016	8,078

	2016	2017	2018	2019
Headcount	7,094	7,214	7,499	8,078

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 7

Cadence Design Systems, Inc.

Forward Looking Statements

The statements in this CFO Commentary contain forward-looking statements based on current expectations and preliminary assumptions 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 and delivery of Cadence’s products and services; (iv) change in customer demands that could result in delays in purchases or deliveries of Cadence's products and services, including those resulting from consolidation among Cadence’s customers, restructurings and other efforts to improve operational efficiency of Cadence’s customers, economic conditions, government regulations or trade restrictions; (v) economic and industry conditions and trade restrictions 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.

© 2020 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective owners.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 8

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)	Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019
GAAP total costs and expenses	$456,160		$448,346		$446,744		$458,777		$490,656
Reconciling items to non-GAAP total costs and expenses
Amortization of acquired intangibles	(12,942	)	(13,162	)	(14,458	)	(12,799	)	(12,660	)
Stock-based compensation expense	(42,594	)	(42,253	)	(44,257	)	(48,279	)	(46,758	)
Non-qualified deferred compensation (expenses) credits	3,186		(2,540	)	(862	)	(52	)	(1,948	)
Restructuring and other (charges) credits	(13,699	)	689		313		186		(9,809	)
Acquisition and integration-related (costs) credits	1,360		(914	)	(1,889	)	(1,838	)	(3,466	)
Special charges	—		—		—		—		(875	)
Non-GAAP total costs and expenses†	$391,471		$390,166		$385,591		$395,995		$415,140

† 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 Total Expenses to Non-GAAP Total Expenses

(In Millions)	2016		2017		2018		2019		2020E
GAAP total costs and expenses	$1,571		$1,619		$1,742		$1,845		~$2,013
Reconciling items to non-GAAP total costs and expenses
Amortization of acquired intangibles	(60	)	(57	)	(53	)	(53	)	~(65)
Stock-based compensation expense	(109	)	(130	)	(168	)	(182	)	~(198)
Non-qualified deferred compensation (expenses) credits	(2	)	(6	)	1		(5	)	—
Restructuring and other charges	(41	)	(9	)	(11	)	(9	)	—
Acquisition and integration-related costs	(11	)	(8	)	(20	)	(8	)	~(18)
Special charges	—		—		—		(1	)	—
Non-GAAP total costs and expenses†	$1,348		$1,409		$1,491		$1,587		~$1,732

† 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.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 9

Cadence Design Systems, Inc.

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

	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019
GAAP gross margin as percent of total revenue	86.6%	87.8%	89.4%	89.5%	87.8%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Amortization of acquired intangibles	1.7%	1.7%	1.9%	1.7%	1.6%
Stock-based compensation expense	0.3%	0.2%	0.3%	0.3%	0.3%
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†	88.6%	89.7%	91.6%	91.5%	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.

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

	2018	2019
GAAP gross margin as percent of total revenue	87.9%	88.6%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Amortization of acquired intangibles	1.8%	1.7%
Stock-based compensation expense	0.3%	0.3%
Non-qualified deferred compensation expenses (credits)	0.0%	0.0%
Non-GAAP gross margin as percent of total revenue†	90.0%	90.6%

† 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.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 10

Cadence Design Systems, Inc.

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

	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020E
GAAP operating margin as percent of total revenue	20%	22%	23%	21%	18%	~19%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	2%	2%	3%	2%	2%	2%
Stock-based compensation expense	7%	7%	8%	9%	8%	8%
Non-qualified deferred compensation expenses (credits)	0%	1%	0%	0%	0%	0%
Restructuring and other charges (credits)	2%	0%	0%	0%	2%	0%
Acquisition and integration-related costs (credits)	0%	0%	0%	0%	1%	1%
Special charges	0%	0%	0%	0%	0%	0%
Non-GAAP operating margin as percent of total revenue†	31%	32%	34%	32%	31%	~30%

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

	2016	2017	2018	2019	2020E
GAAP operating margin as percent of total revenue	13%	17%	19%	21%	21% - 22%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Amortization of acquired intangibles	4%	3%	2%	2%	2%
Stock-based compensation expense	6%	7%	8%	8%	8%
Non-qualified deferred compensation expenses (credits)	0%	0%	0%	0%	0%
Restructuring and other charges	2%	1%	0%	1%	0%
Acquisition and integration-related costs	1%	0%	1%	0%	1%
Special charges	0%	0%	0%	0%	0%
Non-GAAP operating margin as percent of total revenue†	26%	28%	30%	32%	32% - 33%

† 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.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 11

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)	Q4 2018		Q1 2019		Q2 2019		Q3 2019		Q4 2019		Q1 2020E
Diluted net income per share on a GAAP basis	$0.35		$0.43		$0.38		$0.36		$2.36		$0.32 - $0.34
Amortization of acquired intangibles	0.05		0.05		0.05		0.04		0.05		0.05
Stock-based compensation expense	0.15		0.15		0.16		0.17		0.17		0.17
Non-qualified deferred compensation expenses (credits)	(0.01	)	0.01		—		—		0.01		—
Restructuring and other charges (credits)	0.05		—		—		—		0.03		—
Acquisition and integration-related costs (credits)	(0.01	)	—		—		0.01		0.01		0.01
Special charges	—		—		—		—		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets *	—		(0.02	)	0.01		0.01		—		0.01
Income tax benefit related to intercompany transfers of certain intellectual property rights	—		—		—		—		(2.06	)	—
Income tax effect of non-GAAP adjustments	(0.06	)	(0.08	)	(0.03	)	(0.05	)	(0.03	)	(0.03	)
Diluted net income per share on a non-GAAP basis †	$0.52		$0.54		$0.57		$0.54		$0.54		$0.53 - $0.55
Shares used in calculation of diluted net income per share - GAAP **	280,321		280,615		281,054		280,666		279,557
Shares used in calculation of diluted net income per share - non-GAAP **	280,321		280,615		281,054		280,666		279,557

† 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.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 12

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)	2016		2017		2018		2019		2020E
Diluted net income per share on a GAAP basis	$0.70		$0.73		$1.23		$3.53		$1.46 - $1.56
Amortization of acquired intangibles	0.21		0.20		0.19		0.19		0.23
Stock-based compensation expense	0.37		0.46		0.60		0.65		0.71
Non-qualified deferred compensation expenses (credits)	0.01		0.02		(0.01	)	0.02		—
Restructuring and other charges	0.14		0.03		0.04		0.03		—
Acquisition and integration-related costs	0.04		0.03		0.07		0.03		0.07
Special charges	—		—		—		—		—
Other income or expense related to investments and non-qualified deferred compensation plan assets *	(0.02	)	(0.05	)	—		(0.01	)	0.01
Income tax benefit related to intercompany transfers of certain intellectual property rights	—		—		—		(2.05	)	—
Income tax related to transition tax	—		0.24		—		—		—
Income tax related to tax rate change	—		0.09		—		—		—
Income tax effect of non-GAAP adjustments	(0.24	)	(0.35	)	(0.25	)	(0.19	)	(0.08	)
Diluted net income per share on a non-GAAP basis †	$1.21		$1.40		$1.87		$2.20		$2.40 - $2.50
Shares used in calculation of diluted net income per share - GAAP **	291,256		280,221		281,144		280,515		279 - 282M
Shares used in calculation of diluted net income per share - non-GAAP **	291,256		280,221		281,144		280,515		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.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 13

Cadence Design Systems, Inc.

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

(In Millions)	FY 2018	FY 2019	FY 2020E
GAAP total other income and expense	$(19.8)	$(12.8)	$(16) - $(25)
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)	(1.3)	4
Non-GAAP total other income and expense†	$(21.1)	$(14.1)	$(12) - $(21)

† 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.

February 12, 2020 Cadence Q4 and Fiscal Year 2019 Financial Results 14

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Document and Entity Information	Feb. 12, 2020
Cover page.
Document Type	8-K
Document Period End Date	Feb. 12, 2020
Entity Registrant Name	CADENCE DESIGN SYSTEMS INC
Entity Incorporation, State or Country Code	DE
Entity File Number	000-15867
Entity Tax Identification Number	00-0000000
Entity Address, Address Line One	2655 Seely Avenue,
Entity Address, City or Town	San Jose,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95134
City Area Code	(408)
Local Phone Number	943-1234
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	CDNS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0000813672
Amendment Flag	false