Cadence Reports Fourth Quarter and Fiscal Year 2020 Financial

Cadence Reports Fourth Quarter and Fiscal Year 2020 Financial Results

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 19, 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 first quarter 2021 earnings release is published, which is currently scheduled for April 26, 2021.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
January 2, 2021 and December 28, 2019
(In thousands)
(Unaudited)

	January 2, 2021		December 28, 2019

Current assets:
Cash and cash equivalents	$	928,432	$	705,210
Receivables, net		338,487		304,546
Inventories		75,956		55,802
Prepaid expenses and other		135,712		103,785
Total current assets		1,478,587		1,169,343

Property, plant and equipment, net		311,125		275,855
Goodwill		782,087		661,856
Acquired intangibles, net		210,590		172,375
Deferred taxes		732,290		732,367
Other assets		436,106		345,429
Total assets	$	3,950,785	$	3,357,225

Current liabilities:
Accounts payable and accrued liabilities	$	349,951	$	316,908
Current portion of deferred revenue		446,857		355,483
Total current liabilities		796,808		672,391

Long-term liabilities:
Long-term portion of deferred revenue		107,064		73,400
Long-term debt		346,793		346,019
Other long-term liabilities		207,102		162,521
Total long-term liabilities		660,959		581,940

Stockholders' equity		2,493,018		2,102,894
Total liabilities and stockholders' equity	$	3,950,785	$	3,357,225

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended January 2, 2021 and December 28, 2019
(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended						Years Ended
	January 2, 2021			December 28, 2019			January 2, 2021			December 28, 2019

Revenue:
Product and maintenance	$	723,233		$	564,964		$	2,536,617		$	2,204,615
Services		36,676			34,591			146,274			131,704

Total revenue		759,909			599,555			2,682,891			2,336,319

Costs and expenses:
Cost of product and maintenance		55,111			53,521			231,026			189,146
Cost of services		18,425			19,807			74,472			77,211
Marketing and sales		146,502			127,267			516,460			481,673
Research and development		290,309			235,372			1,033,732			935,938
General and administrative		49,264			42,093			154,425			139,806
Amortization of acquired intangibles		4,775			2,787			18,009			12,128
Restructuring and other charges		10,544			9,809			9,215			8,621

Total costs and expenses		574,930			490,656			2,037,339			1,844,523

Income from operations		184,979			108,899			645,552			491,796

Interest expense		(4,873	)		(4,222	)		(20,749	)		(18,829	)
Other income, net		6,083			748			7,945			6,001

Income before provision (benefit) for income taxes		186,189			105,425			632,748			478,968

Provision (benefit) for income taxes		12,451			(554,250	)		42,104			(510,011	)

Net income	$	173,738		$	659,675		$	590,644		$	988,979


Net income per share - basic	$	0.63		$	2.41		$	2.16		$	3.62

Net income per share - diluted	$	0.62		$	2.36		$	2.11		$	3.53

Weighted average common shares outstanding - basic		273,985			273,234			273,728			273,239

Weighted average common shares outstanding - diluted		280,173			279,557			279,641			280,515

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended January 2, 2021 and December 28, 2019
(In thousands)
(Unaudited)


	Years Ended
	January 2,			December, 28
	2021			2019

Cash and cash equivalents at beginning of year	$	705,210		$	533,298
Cash flows from operating activities:
Net income		590,644			988,979
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		145,653			122,789
Amortization of debt discount and fees		1,053			1,001
Stock-based compensation		197,268			181,547
Loss on investments, net		4,954			4,090
Deferred income taxes		(26,117	)		(576,738	)
Provisions for losses on receivables		1,628			632
ROU asset amortization and change in operating lease liabilities		4,483			562
Other non-cash items		773			428
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		(25,934	)		(4,718	)
Inventories		(25,685	)		(33,024	)
Prepaid expenses and other		(31,167	)		(11,031	)
Other assets		(71,606	)		(8,011	)
Accounts payable and accrued liabilities		18,394			33,915
Deferred revenue		110,173			27,498
Other long-term liabilities		10,408			1,681
Net cash provided by operating activities		904,922			729,600

Cash flows from investing activities:
Purchases of non-marketable investments		-			(33,717	)
Proceeds from the sale of non-marketable investments		217			2,952
Purchases of property, plant and equipment		(94,813	)		(74,605	)
Cash paid in business combinations, net of cash acquired		(197,562	)		(338	)
Net cash used for investing activities		(292,158	)		(105,708	)

Cash flows from financing activities:
Proceeds from revolving credit facility		350,000			150,000
Payment on revolving credit facility		(350,000	)		(250,000	)
Proceeds from issuance of common stock		74,803			52,842
Stock received for payment of employee taxes on vesting of restricted stock		(110,028	)		(90,580	)
Payments for repurchases of common stock		(380,064	)		(306,148	)
Net cash used for financing activities		(415,289	)		(443,886	)

Effect of exchange rate changes on cash and cash equivalents		25,747			(8,094	)

Increase in cash and cash equivalents		223,222			171,912

Cash and cash equivalents at end of year	$	928,432		$	705,210

Cadence Design Systems, Inc.
(Unaudited)



Revenue Mix by Geography (% of Total Revenue)
	2019					2020
GEOGRAPHY	Q1	Q2	Q3	Q4	Year	Q1	Q2	Q3	Q4	Year

Americas	44%	42%	44%	46%	44%	43%	44%	42%	41%	42%
China	10%	12%	10%	9%	10%	13%	12%	17%	17%	15%
Other Asia	19%	19%	21%	20%	20%	18%	19%	19%	18%	18%
Europe, Middle East and Africa	18%	20%	18%	18%	18%	19%	18%	16%	17%	18%
Japan	9%	7%	7%	7%	8%	7%	7%	6%	7%	7%
Total	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%




Revenue Mix by Product Category (% of Total Revenue)
	2019					2020
PRODUCT CATEGORY	Q1	Q2	Q3	Q4	Year	Q1	Q2	Q3	Q4	Year

Custom IC Design and Simulation	25%	26%	26%	25%	25%	25%	24%	24%	26%	25%
Digital IC Design and Signoff	30%	31%	30%	29%	30%	29%	28%	27%	31%	29%
Functional Verification, including Emulation and Prototyping Hardware	24%	22%	20%	24%	23%	23%	24%	23%	19%	22%
IP	12%	11%	15%	13%	13%	14%	14%	15%	13%	14%
System Design and Analysis	9%	10%	9%	9%	9%	9%	10%	11%	11%	10%
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 22, 2021
(Unaudited)

	Three Months Ending	Year Ending
	April 3, 2021	January 1, 2022
	Forecast	Forecast

GAAP operating margin as a percent of total revenue	~25%	24.5% - 26%

Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense	8%	8%
Amortization of acquired intangibles	2%	2%
Acquisition and integration-related costs	0%	0%

Non-GAAP operating margin as a percent of total revenue�nbsp;	~35%	34.5% - 36%

�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.

Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
As of February 22, 2021
(Unaudited)

	Three Months Ending	Year Ending
	April 3, 2021	January 1, 2022
	Forecast	Forecast

Diluted net income per share on a GAAP basis	$0.55 to $0.59	$2.09 to $2.19

Stock-based compensation expense	0.20	0.80
Amortization of acquired intangibles	0.06	0.26
Acquisition and integration-related costs	0.01	0.03
Income tax effect of non-GAAP adjustments	(0.10)	(0.23)

Diluted net income per share on a non-GAAP basis�nbsp;	$0.72 to $0.76	$2.95 to $3.05




Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of February 22, 2021
(Unaudited)


	Three Months Ending	Year Ending
	April 3, 2021	January 1, 2022
($ in millions)	Forecast	Forecast

Net income on a GAAP basis	$154 to $166	$586 to $614

Stock-based compensation expense	55	225
Amortization of acquired intangibles	17	72
Acquisition and integration-related costs	3	8
Income tax effect of non-GAAP adjustments	(27)	(64)

Net income on a non-GAAP basis�nbsp;	$202 to $214	$827 to $855

�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.

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