Cadence Reports Second Quarter 2021 Financial Results

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

Comprised of costs related to a voluntary retirement program.

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.

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 September 17, 2021, 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 third quarter 2021 earnings release is published, which is currently scheduled for October 25, 2021.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
July 3, 2021 and January 2, 2021
(In thousands)
(Unaudited)

			July 3, 2021		January 2, 2021

Current assets:
	Cash and cash equivalents		$	847,160	$	928,432
	Receivables, net			389,986		338,487
	Inventories			90,479		75,956
	Prepaid expenses and other			129,442		135,712
		Total current assets		1,457,067		1,478,587

Property, plant and equipment, net				301,979		311,125
Goodwill				929,525		782,087
Acquired intangibles, net				264,789		210,590
Deferred taxes				729,790		732,290
Other assets				439,398		436,106
Total assets			$	4,122,548	$	3,950,785

Current liabilities:
	Accounts payable and accrued liabilities		$	340,607	$	349,951
	Current portion of deferred revenue			586,109		446,857
		Total current liabilities		926,716		796,808

Long-term liabilities:
	Long-term portion of deferred revenue			98,408		107,064
	Long-term debt			347,186		346,793
	Other long-term liabilities			233,495		207,102
		Total long-term liabilities		679,089		660,959

Stockholders' equity				2,516,743		2,493,018
Total liabilities and stockholders' equity			$	4,122,548	$	3,950,785

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three and Six Months Ended July 3, 2021 and June 27, 2020
(In thousands, except per share amounts)
(Unaudited)


				Three Months Ended						Six Months Ended
				July 3, 2021			June 27, 2020			July 3, 2021			June 27, 2020

Revenue:
	Product and maintenance			$	687,884		$	601,356		$	1,386,938		$	1,183,055
	Services				40,401			37,062			77,375			73,320

		Total revenue			728,285			638,418			1,464,313			1,256,375

Costs and expenses:
	Cost of product and maintenance				55,842			55,669			120,748			111,115
	Cost of services				20,917			19,546			39,978			38,563
	Marketing and sales				135,967			120,476			268,793			246,220
	Research and development				285,227			250,821			556,219			492,489
	General and administrative				40,333			35,641			80,285			69,233
	Amortization of acquired intangibles				5,030			4,590			9,661			8,796
	Restructuring and other credits				(469	)		(275	)		(746	)		(1,342	)

		Total costs and expenses			542,847			486,468			1,074,938			965,074

			Income from operations		185,438			151,950			389,375			291,301

	Interest expense				(4,316	)		(5,914	)		(8,533	)		(10,551	)
	Other income, net				2,143			4,630			4,844			96

			Income before provision for income taxes		183,265			150,666			385,686			280,846

	Provision for income taxes				27,365			19,378			42,617			25,570

			Net income	$	155,900		$	131,288		$	343,069		$	255,276


Net income per share - basic				$	0.57		$	0.48		$	1.25		$	0.93

Net income per share - diluted				$	0.56		$	0.47		$	1.23		$	0.91

Weighted average common shares outstanding - basic					273,565			273,432			273,843			273,488

Weighted average common shares outstanding - diluted					278,558			279,080			279,399			279,207

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 3, 2021 and June 27, 2020
(In thousands)
(Unaudited)


	Six Months Ended
	July 3,			June 27,
	2021			2020

Cash and cash equivalents at beginning of period	$	928,432		$	705,210
Cash flows from operating activities:
Net income		343,069			255,276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		71,799			69,902
Amortization of debt discount and fees		687			512
Stock-based compensation		103,114			93,389
(Gain) loss on investments, net		(795	)		4,036
Deferred income taxes		1,710			(1,609	)
Provisions for losses on receivables		242			922
ROU asset amortization and change in operating lease liabilities		(2,483	)		1,502
Other non-cash items		183			296
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		(48,016	)		(2,497	)
Inventories		(14,527	)		11,020
Prepaid expenses and other		7,690			9,910
Other assets		6,991			(17,687	)
Accounts payable and accrued liabilities		(14,771	)		(11,141	)
Deferred revenue		127,286			148,508
Other long-term liabilities		6,639			504
Net cash provided by operating activities		588,818			562,843

Cash flows from investing activities:
Purchases of property, plant and equipment		(31,139	)		(43,535	)
Cash paid in business combinations, net of cash acquired		(220,660	)		(195,118	)
Net cash used for investing activities		(251,799	)		(238,653	)

Cash flows from financing activities:
Proceeds from revolving credit facility		-			350,000
Payment of debt issuance costs		(1,285	)		-
Proceeds from issuance of common stock		52,252			43,667
Stock received for payment of employee taxes on vesting of restricted stock		(78,053	)		(53,657	)
Payments for repurchases of common stock		(392,290	)		(175,036	)
Net cash provided by (used for) financing activities		(419,376	)		164,974

Effect of exchange rate changes on cash and cash equivalents		1,085			(5,188	)

Increase (decrease) in cash and cash equivalents		(81,272	)		483,976

Cash and cash equivalents at end of period	$	847,160		$	1,189,186

Cadence Design Systems, Inc.
(Unaudited)



Revenue Mix by Geography (% of Total Revenue)
	2020					2021
GEOGRAPHY	Q1	Q2	Q3	Q4	Year	Q1	Q2

Americas	43%	44%	42%	41%	42%	46%	44%
China	13%	12%	17%	17%	15%	12%	14%
Other Asia	18%	19%	19%	18%	18%	18%	19%
Europe, Middle East and Africa	19%	18%	16%	17%	18%	18%	17%
Japan	7%	7%	6%	7%	7%	6%	6%
Total	100%	100%	100%	100%	100%	100%	100%




Revenue Mix by Product Category (% of Total Revenue)
	2020					2021
PRODUCT CATEGORY	Q1	Q2	Q3	Q4	Year	Q1	Q2

Custom IC Design and Simulation	25%	24%	24%	26%	25%	23%	23%
Digital IC Design and Signoff	29%	28%	27%	31%	29%	27%	28%
Functional Verification, including Emulation and Prototyping Hardware	23%	24%	23%	19%	22%	26%	25%
IP	14%	14%	15%	13%	14%	14%	13%
System Design and Analysis	9%	10%	11%	11%	10%	10%	11%
Total	100%	100%	100%	100%	100%	100%	100%

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Operating Margin
As of July 26, 2021
(Unaudited)

		Three Months Ending	Year Ending
		October 2, 2021	January 1, 2022
		Forecast	Forecast

GAAP operating margin as a percent of total revenue		~23%	24.5% - 25.25%

Reconciling items to non-GAAP operating margin as a
percent of total revenue:
	Stock-based compensation expense	8%	7.5%
	Amortization of acquired intangibles	2%	2.3%
	Acquisition and integration-related costs	1%	0.7%
	Restructuring and other credits	0%	0.0%
	Non-qualified deferred compensation expenses	0%	0.1%
	Special charges*	0%	0.9%

Non-GAAP operating margin as a percent of total revenue�nbsp;		~34%	36% - 36.75%

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

*		Comprised of costs related to a voluntary retirement program.

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of July 26, 2021
(Unaudited)

		Three Months Ending	Year Ending
		October 2, 2021	January 1, 2022
		Forecast	Forecast

Diluted net income per share on a GAAP basis		$0.48 to $0.50	$2.15 to $2.21

	Stock-based compensation expense	0.20	0.79
	Amortization of acquired intangibles	0.06	0.24
	Acquisition and integration-related costs	0.02	0.08
	Restructuring and other credits	-	-
	Non-qualified deferred compensation expenses	-	0.01
	Special charges*	-	0.10
	Other income or expense related to investments and non-qualified deferred compensation plan assets**	-	(0.02)
	Income tax effect of non-GAAP adjustments	(0.02)	(0.21)

Diluted net income per share on a non-GAAP basis�nbsp;		$0.74 to $0.76	$3.14 to $3.20




Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of July 26, 2021
(Unaudited)


		Three Months Ending	Year Ending
		October 2, 2021	January 1, 2022
($ in millions)		Forecast	Forecast

Net income on a GAAP basis		$133 to $139	$600 to $616

	Stock-based compensation expense	57	220
	Amortization of acquired intangibles	17	67
	Acquisition and integration-related costs	5	22
	Restructuring and other credits	-	(1)
	Non-qualified deferred compensation expenses	-	4
	Special charges*	-	27
	Other income or expense related to investments and non-qualified deferred compensation plan assets**	-	(5)
	Income tax effect of non-GAAP adjustments	(7)	(57)

Net income on a non-GAAP basis�nbsp;		$205 to $211	$877 to $893

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