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Published: 2024-02-12 00:00:00 ET
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EX-99.02 3 cfocommentary02122024ex9902.htm CFO COMMENTARY Document
Exhibit 99.02
image0a22a.jpg

CADENCE REPORTS FOURTH QUARTER
AND FISCAL YEAR 2023
CADENCE DESIGN SYSTEMS, INC.
CFO COMMENTARY
Key Takeaways for 2023
• Revenue growth of 15%, and EPS growth of >20%
• A seventh consecutive year of >50% incremental non-GAAP operating margin, resulting in non-GAAP operating margin of 42%
• Record year-end backlog of $6.0B and current RPO of $3.2B

Q1 2024 Outlook
• Revenue : $990 million - $1.010 billion
• GAAP operating margin: 24.5% - 25.5%
• Non-GAAP operating margin: 36.5% - 37.5%
• GAAP EPS: $0.74 - $0.78
• Non-GAAP EPS: $1.10 - $1.14
• Expect to use approximately $125 million to repurchase Cadence shares in Q1
Q4 2023 KEY METRICS
• Revenue $1.069 billion
• GAAP operating margin 31%
• Non-GAAP operating margin 43%
• GAAP EPS $1.19
• Non-GAAP EPS $1.38
• Operating cash flow $272 million

FY 2024 Outlook
• Revenue: $4.55 - $4.61 billion
• GAAP operating margin: 32% - 33%
• Non-GAAP operating margin: 42% - 43%
• GAAP EPS: $4.08 - $4.18
• Non-GAAP EPS $5.87 - $5.97
• Operating cash flow: $1.35 - $1.45 billion
• Expect to use approximately 50% of free cash flow to repurchase Cadence shares for the year
Financial Results Webcast
FY 2023 KEY METRICS
Our Q4 2023 financial results webcast will begin February 12, 2024 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, 2024 until 5:00 p.m. (Pacific) on March 15, 2024.
• Revenue $4.090 billion
• GAAP operating margin 31%
• Non-GAAP operating margin 42%
• GAAP EPS $3.82
• Non-GAAP EPS $5.15
• Operating cash flow $1.349 billion
February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
1

Cadence Design Systems, Inc.
Financial Metrics
(In Millions, except per share data)201820192020*20212022
2023*
2024E
Revenue$2,138 $2,336 $2,683 $2,988 $3,562 $4,090 
$4,550- $4,610
Revenue growth*10%9%15%11%19%
15%
11% - 13%
3-year CAGR8%9%11%12%15%15%~15%
3-year CAGR without 53rd week impact11%
16%
GAAP operating expenses$1,742 $1,845 $2,037 $2,209 $2,488 $2,839 
~$3,109
GAAP operating expense growth8%6%10%8%13%
14%
~10%
Non-GAAP operating expenses$1,491 $1,587 $1,739 $1,877 $2,125 $2,373 
~$2,634
Non-GAAP operating expense growth6%6%10%8%13%
12%
~11%
GAAP operating margin**19%21%24%26%30%
31%
32.5 %
Non-GAAP operating margin**30%32%35%37%40%
42%
42.5 %
GAAP earnings per share$1.23 $3.53 $2.11 $2.50 $3.09 $3.82 $4.08 - $4.18
Non-GAAP earning per share$1.87 $2.20 $2.80 $3.29 $4.27 $5.15 
$5.87 - $5.97
Non-GAAP EPS growth**34%18%27%18%30%
21%
15 %
3-year Non-GAAP EPS CAGR**20%22%26%21%25%
23%
22 %
Weighted average shares diluted outstanding281.1280.5279.6278.9275.0
272.7
271.5 - 273.5
Cash flow from operations6057309051,1011,242
1,349
$1,350 - $1,450
Capital expenditures62759565123
102
~$120
* Fiscal 2020 was a 53-week year, compared to all other years which were 52 week years. 2020 (which impacts the 3 year CAGR in 2023) included approximately $45 million revenue impact for the extra week.
** At midpoint of guidance.
Profitability Trends
(In Millions)20182019202020212022
2023
2024E*
Revenue$2,138 $2,336 $2,683 $2,988 $3,562 $4,090 $4,580 
Revenue Growth 10%9%15%11%19%
15%
12%
3-Year Revenue Growth CAGR 8%9%11%12%15%15%
15%
GAAP operating margin19%21%24%26%30%
31%
32.5%
Non-GAAP operating margin30%32%35%37%40%
42%
42.5%
Stock-based compensation(8)%(8)%(7)%(7)%(8)%(8)%
(8)%
Non-GAAP operating margin adjusted for stock-based compensation22%24%28%30%32%
34%
34.5%
GAAP operating income$396 $492 $646 $779 $1,074 $1,251 $1,471 
Non-GAAP operating income $647 $749 $944 $1,111 $1,436 $1,717 $1,946 
Non-GAAP operating income adjusted for stock-based compensation$479 $567 $747 $901 $1,166 $1,391 $1,576 
* At midpoint of guidance.
February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
2
Cadence Design Systems, Inc.
First Quarter 2024 Financial Outlook
Q1 2023
Q4 2023
Q1 2024E
Total Revenue ($ Millions)$1,022 $1,069 
$990 - $1,010
   Q/Q Growth
4%
(7)% - (6)%
   Y/Y Growth
19%
(3)% - (1)%
GAAP Operating Margin
32%
31%
24.5% - 25.5%
Non-GAAP Operating Margin
42%
43%
36.5% - 37.5%
GAAP EPS$0.89 $1.19 $0.74 - $0.78
Non-GAAP EPS$1.29 $1.38 
$1.10 - $1.14

Fiscal Year 2024 Financial Outlook
FY 2023
FY 2024E
Recurring Revenue
84%
80% - 85%
Total Revenue ($ Millions)$4,090 
$4,550 - $4,610
   Y/Y Growth
15%
11% - 13%
Revenue from Beginning Backlog
~75%
~70%
GAAP Operating Margin
30.6%
32% - 33%
Non-GAAP Operating Margin
42.0%
42% - 43%
GAAP Other Income & Expense ($ Millions)$31 
$(10) - $(18)
Non-GAAP Other Income & Expense ($ Millions)$(15)
$(10) - $(18)
GAAP Tax Rate19%
~23%
Non-GAAP Tax Rate17.5%
16.5%
Weighted Average Diluted Shares Outstanding (Millions)
272.7
271.5 - 273.5
GAAP EPS$3.82 
$4.08 - $4.18
   Y/Y Growth
24%
7% - 9%
Non-GAAP EPS$5.15 
$5.87 - $5.97
   Y/Y Growth
21%
14% - 16%
Cash Flow from Operations ($ Millions)$1,349 
$1,350 - $1,450
DSO
43
~45
Capital Expenditures ($ Millions)$102 
~$120


February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
3
Cadence Design Systems, Inc.
Fourth Quarter and Fiscal Year Financial Results
Backlog
(In Billions)2019202020212022
2023
Backlog$3.6 $3.9 $4.4 $5.8 $6.0 
Revenue
(In Millions)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Product and Maintenance$846 $964 $923 $966 $982 
Services54 58 54 57 87 
   Total Revenue$900 $1,022 $977 $1,023 $1,069 
(In Millions)
2019
2020*
2021
2022
2023
Product and Maintenance$2,204 $2,537 $2,813 $3,340 $3,834 
Services132 146 175 222 256 
   Total Revenue$2,336 $2,683 $2,988 $3,562 $4,090 
* Fiscal 2020 was a 53-week year.
Recurring and Up-Front Revenue
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Revenue recognized over time84 %77 %82 %83 %85 %
Revenue from arrangements with non-cancelable commitments3 %3 %3 %2 %2 %
Recurring Revenue87 %80 %85 %85 %87 %
Up-Front Revenue13 %20 %15 %15 %13 %
Total100 %100 %100 %100 %100 %
2020
2021
2022
2023
Revenue recognized over time85 %85 %83 %81 %
Revenue from arrangements with non-cancelable commitments3 %3 %2 %3 %
Recurring Revenue88 %88 %85 %84 %
Up-Front Revenue12 %12 %15 %16 %
Total100 %100 %100 %100 %
Trailing Twelve Months Recurring and Up-Front Revenue
Trailing Twelve Months Ended
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Recurring Revenue85 %84 %84 %84 %84 %
Up-Front Revenue15 %16 %16 %16 %16 %
   Total 100 %100 %100 %100 %100 %
February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
4
Cadence Design Systems, Inc.
Revenue Mix by Geography
(% of Total Revenue)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Americas46 %44 %41 %43 %44 %
China13 %17 %18 %17 %15 %
Other Asia18 %18 %18 %19 %19 %
Europe, Middle East and Africa17 %15 %17 %15 %16 %
Japan6 %6 %6 %6 %6 %
   Total100 %100 %100 %100 %100 %
(% of Total Revenue)
2019
2020
2021
2022
2023
Americas44 %42 %45 %46 %43 %
China10 %15 %13 %15 %17 %
Other Asia20 %18 %19 %18 %19 %
Europe, Middle East and Africa18 %18 %17 %16 %16 %
Japan8 %7 %6 %5 %5 %
   Total100 %100 %100 %100 %100 %
Revenue Mix by Product Category
(% of Total Revenue)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Custom IC Design and Simulation22 %20 %22 %22 %22 %
Digital IC Design and Signoff28 %25 %27 %28 %29 %
Functional Verification25 %32 %27 %26 %24 %
IP12 %11 %11 %11 %13 %
System Design and Analysis13 %12 %13 %13 %12 %
   Total100 %100 %100 %100 %100 %
(% of Total Revenue)
2019
2020
2021
2022
2023
Custom IC Design and Simulation25 %25 %23 %22 %22 %
Digital IC Design and Signoff30 %29 %29 %28 %27 %
Functional Verification23 %22 %24 %26 %27 %
IP13 %14 %13 %12 %12 %
System Design and Analysis9 %10 %11 %12 %12 %
   Total100 %100 %100 %100 %100 %




February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
5
Cadence Design Systems, Inc.
3 Year Revenue CAGR by Product Category
(% of Total Revenue)201920202021
2022
2023
Custom IC Design and Simulation9 %9 %8 %10 %10 %
Digital IC Design and Signoff10 %11 %11 %13 %13 %
Functional Verification5 %11 %11 %20 %23 %
IP16 %18 %16 %15 %8 %
System Design and Analysis7 %13 %19 %24 %22 %
   Total 3 Year CAGR9 %11 %12 %15 %15 %
3 Year Revenue CAGR by Product Category Without 53rd Week Impact*
(% of Total Revenue)2019
2020*
2021
2022
2023
Custom IC Design and Simulation9 %8 %8 %10 %11 %
Digital IC Design and Signoff10 %10 %11 %13 %14 %
Functional Verification5 %10 %11 %20 %24 %
IP16 %18 %16 %15 %9 %
System Design and Analysis7 %12 %19 %24 %23 %
   Total 3 Year CAGR9 %11 %12 %15 %16 %
* Fiscal 2020 was a 53-week year and included approximately $45 million revenue impact for the extra week.
Gross Margin
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
GAAP Gross Margin89.6 %87.8 %90.1 %89.3 %90.3 %
Non-GAAP Gross Margin91.1 %89.1 %91.4 %90.6 %91.7 %
2019
2020
2021
2022
2023
GAAP Gross Margin88.6 %88.6 %89.7 %89.6 %89.4 %
Non-GAAP Gross Margin90.6 %90.6 %91.7 %91.0 %90.7 %
Total Costs and Expenses
(In Millions)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Total GAAP Costs and Expenses$689 $699 $677 $730 $732 
Total Non-GAAP Costs and Expenses$579 $591 $569 $603 $610 
(In Millions)
2019
2020*
2021
2022
2023
Total GAAP Costs and Expenses$1,845 $2,037 $2,209 $2,488 $2,839 
Total Non-GAAP Costs and Expenses$1,587 $1,739 $1,877 $2,125 $2,373 
* Fiscal 2020 was a 53-week year.




February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
6
Cadence Design Systems, Inc.
Operating Margin
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
GAAP Operating Margin23.5 %31.6 %30.7 %28.6 %31.5 %
Non-GAAP Operating Margin35.6 %42.1 %41.8 %41.1 %42.9 %
2019
2020
2021
2022
2023
GAAP Operating Margin21.1 %24.1 %26.1 %30.1 %30.6 %
Non-GAAP Operating Margin32.1 %35.2 %37.2 %40.3 %42.0 %
Net Income Per Share
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
GAAP Net Income Per Share$0.88 $0.89 $0.81 $0.93 $1.19 
Non-GAAP Net Income Per Share$0.96 $1.29 $1.22 $1.26 $1.38 
2019
2020
2021
2022
2023
GAAP Net Income Per Share$3.53 $2.11 $2.50 $3.09 $3.82 
Non-GAAP Net Income Per Share$2.20 $2.80 $3.29 $4.27 $5.15 
Total DSO
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
DSO494442
39
43
Balance Sheet and Cash Review
Free Cash Flow
(In Millions)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Net Cash from Operating Activities$264 $267 $414 $396 $272 
Capital Expenditures37 26 20 22 34 
Free Cash Flow$227 $241 $394 $374 $238 
(In Millions)
2019
2020
2021
2022
2023
Net Cash from Operating Activities$730 $905 $1,101 $1,242 $1,349 
Capital Expenditures75 95 65 123 102 
Free Cash Flow$655 $810 $1,036 $1,119 $1,247 
Cash and Cash Equivalents
(In Millions)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Cash and Cash Equivalents$882 $917 $874 $962 $1,008 
(In Millions)
2019
2020
2021
2022
2023
Cash and Cash Equivalents$705 $928 $1,089 $882 $1,008 
•Approximately 45 percent of our cash and cash equivalents were in the U.S. at quarter-end.
February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
7
Cadence Design Systems, Inc.
Share Repurchase
(In Millions)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Share Repurchase$300 $125 $265 $185 $125 
Number of Shares1.939 0.668 1.178 0.811 0.488 
•Q3 2023 includes 276,330 shares and $60 million equity forward contract from Q2 2023 ASR settled in Q3 2023.
(In Millions)
2019
2020
2021
2022
2023
Share Repurchase$306 $380 $612 $1,050 $700 
Number of Shares4.841 4.247 4.401 6.602 3.145 
Employees
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Headcount10,228 10,579 10,832 11,139 11,226 
2019
2020
2021
2022
2023
Headcount8,078 8,746 9,298 10,228 11,226 
February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
8
Cadence Design Systems, Inc.
Forward Looking Statements
This CFO Commentary contains forward-looking statements, including Cadence's outlook on future operating results, strategic objectives, business prospects, technology and product developments, industry trends and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) change in customer demands or supply constraints that could result in delays in purchases, development, installations or deliveries of Cadence's products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic, geopolitical and industry conditions, including that of the semiconductor and electronics industries, government regulations and trade restrictions, and rising tensions and conflicts around the world such as in the Middle East and with respect to Taiwan; (vi) capital expenditure requirements, legislative or regulatory requirements, changes in tax laws, interest rates, currency exchange rate fluctuations, inflation rates, Cadence's upcoming debt maturities and Cadence’s ability to access capital and debt markets; (vii) the continued acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (viii) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (ix) events that affect cash flow, liquidity, or reserves, or settlement assumptions Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation, regulatory or other matters; (x) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject; and (xi) Cadence's ability to successfully meet corporate governance, environmental and social targets and strategies. In addition, the timing and amount of Cadence’s repurchases of its common stock are 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, including its most recent report on Form 10-K, subsequent reports on Form 10-Q and future filings.

All forward-looking statements in this document are based on management's expectations as of the date of this document and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

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.

© 2024 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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
9
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 Millions)Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
GAAP total costs and expenses$689 $699 $677 $730 $732 
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense(73)(74)(76)(88)(87)
Amortization of acquired intangibles(16)(15)(15)(15)(17)
Acquisition and integration-related costs(18)(16)(14)(14)(13)
Restructuring— — — (12)1 
Non-qualified deferred compensation (expenses) credits(3)(3)(3)2 (6)
Non-GAAP total costs and expenses*$579 $591 $569 $603 $610 
*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)201820192020*20212022
2023
2024E
GAAP total costs and expenses$1,742 $1,845 $2,037 $2,209 $2,488 $2,839 $3,109 
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense(168)(182)(197)(210)(270)(326)(370)
Amortization of acquired intangibles(53)(53)(64)(67)(60)(62)(66)
Acquisition and integration-related costs(20)(8)(23)(23)(41)(56)(39)
Restructuring (11)(9)(9)1 — (11)— 
Non-qualified deferred compensation (expenses) credits1 (5)(5)(6)8 (11)— 
Special charges**— (1)— (27)— — — 
Non-GAAP total costs and expenses***$1,491 $1,587 $1,739 $1,877 $2,125 $2,373 $2,634 
*Fiscal 2020 was a 53-week year.
**2021 includes costs related to a voluntary retirement program.
***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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
10
Cadence Design Systems, Inc.
Reconciliation of GAAP Operating Income to Non-GAAP Operating Income and Non-GAAP Operating Income Adjusted for Stock-based Compensation
(In Millions)201820192020*20212022
2023
2024E
GAAP operating income
$396 $492 $646 $779 $1,074 $1,251 $1,471 
Reconciling items to non-GAAP operating income
Stock-based compensation expense168 182 197 210 270 326 370 
Amortization of acquired intangibles53 53 64 67 60 62 66 
Acquisition and integration-related costs20 8 23 23 41 56 39 
Restructuring 11 9 9 (1)— 11 — 
Non-qualified deferred compensation expenses (credits)
(1)5 5 6 (8)11 — 
Special charges**— 1 — 27 — — — 
Non-GAAP operating income***
$647 $749 $944 $1,111 $1,436 $1,717 $1,946 
Stock-based compensation expense(168)(182)(197)(210)(270)(326)$(370)
Non-GAAP operating income adjusted for stock-based compensation***
$479 $567 $747 $901 $1,166 $1,391 $1,576 
Table may not foot due to rounding
*Fiscal 2020 was a 53-week year.
**2021 includes costs related to a voluntary retirement program.
***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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
11
Cadence Design Systems, Inc.
Reconciliation of GAAP Gross Margin as a Percent of Total Revenue to Non-GAAP Gross Margin as a Percent of Total Revenue
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
GAAP gross margin as a percent of total revenue89.6%87.8%90.1%
89.3%
90.3%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Stock-based compensation expense0.3%0.3%0.2%0.2%
0.3%
Amortization of acquired intangibles1.2%1.0%1.1%1.1%
1.1%
Non-qualified deferred compensation expenses (credits)0.0%0.0%0.0%0.0%0.0%
Acquisition and integration-related costs0.0%0.0%0.0%0.0%0.0%
Non-GAAP gross margin as a percent of total revenue*91.1%89.1%91.4%
90.6%
91.7%
*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 a Percent of Total Revenue to Non-GAAP Gross Margin as a Percent of Total Revenue
2019
2020
2021
2022
2023
GAAP gross margin as a percent of total revenue
88.6%
88.6%
89.7%
89.6%
89.4%
Reconciling items to non-GAAP gross margin as a percent of total revenue
Stock-based compensation expense
0.3%
0.3%
0.3%0.2%
0.2%
Amortization of acquired intangibles
1.7%
1.7%
1.6%
1.2%
1.1%
Non-qualified deferred compensation expenses (credits)0.0%0.0%0.0%0.0%0.0%
Acquisition and integration-related costs0.0%0.0%0.0%0.0%0.0%
Special charges *
0.0%0.0%
0.1%
0.0%0.0%
Non-GAAP gross margin as a percent of total revenue**
90.6%
90.6%
91.7%
91.0%
90.7%
*
2021 includes costs related to a voluntary retirement program.
**
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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
12
Cadence Design Systems, Inc.
Reconciliation of GAAP Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue
Q4 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Q1 2024E
GAAP operating margin as a percent of total revenue23%32%31%
29%
31%
24.5% - 25.5%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Stock-based compensation expense8%7%8%
9%
8%
9%
Amortization of acquired intangibles2%1%2%
1%
2%
2%
Acquisition and integration-related costs2%2%1%1%
1%
1%
Restructuring 0%0%0%
1%
0%
0%
Non-qualified deferred compensation expenses (credits)1%0%0%0%
1%
0%
Non-GAAP operating margin as a percent of total revenue*36%42%42%
41%
43%
36.5% - 37.5%
*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 Operating Margin as a Percent of Total Revenue to Non-GAAP Operating Margin as a Percent of Total Revenue
20182019202020212022
2023
2024E
GAAP operating margin as a percent of total revenue19%21%24%26%30%
31%
32% - 33%
Reconciling items to non-GAAP operating margin as a percent of total revenue
Stock-based compensation expense8%8%7%7%8%
8%
8%
Amortization of acquired intangibles2%2%3%2%2%
2%
1%
Acquisition and integration-related costs1%0%1%1%1%
1%
1%
Restructuring 0%1%0%0%0%
0%
0%
Non-qualified deferred compensation expenses (credits)0%0%0%0%(1)%
0%
0%
Special charges *0%0%0%1%0%0%0%
Non-GAAP operating margin as a percent of total revenue**30%32%35%37%40%
42%
42% - 43%
*2021 includes costs related to a voluntary retirement program.
**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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
13
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 2022Q1 2023Q2 2023
Q3 2023
Q4 2023
Q1 2024E
Diluted net income per share on a GAAP basis$0.88 $0.89 $0.81 $0.93 $1.19 
$0.74 - $0.78
Stock-based compensation expense0.27 0.27 0.28 0.32 0.32 0.32 
Amortization of acquired intangibles0.06 0.05 0.06 0.06 0.06 0.06 
Acquisition and integration-related costs0.06 0.06 0.05 0.05 0.04 0.04 
Restructuring — — — 0.04 — — 
Non-qualified deferred compensation expenses (credits)0.01 0.01 0.01 — 0.02 — 
Other income or expense related to investments and non-qualified deferred compensation plan assets**(0.01)(0.01)(0.01)(0.04)(0.10)— 
Income tax effect of non-GAAP adjustments(0.31)0.02 0.02 (0.10)(0.15)(0.06)
Diluted net income per share on a non-GAAP basis*$0.96 $1.29 $1.22 $1.26 $1.38 
$1.10 - $1.14
Shares used in calculation of diluted net income per share272,997 273,159 272,996 272,427 272,419 
*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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
14
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)20182019202020212022
2023
2024E
Diluted net income per share on a GAAP basis$1.23 $3.53 $2.11 $2.50 $3.09 $3.82 $4.08 - $4.18
Stock-based compensation expense0.60 0.65 0.71 0.75 0.98 1.19 1.36 
Amortization of acquired intangibles0.19 0.19 0.23 0.24 0.22 0.23 0.24 
Acquisition and integration-related costs0.07 0.03 0.08 0.08 0.15 0.21 0.14 
Restructuring 0.04 0.03 0.03 — — 0.04 — 
Non-qualified deferred compensation expenses (credits)(0.01)0.02 0.02 0.02 (0.03)0.04 — 
Special charges**— — — 0.10 — — — 
Other income or expense related to investments and non-qualified deferred compensation plan assets***— (0.01)— (0.03)0.05 (0.17)— 
Income tax benefit related to intercompany transfers of certain intellectual property rights— (2.05)— — — — — 
Income tax effect of non-GAAP adjustments(0.25)(0.19)(0.38)(0.37)(0.19)(0.21)0.05 
Diluted net income per share on a non-GAAP basis*$1.87 $2.20 $2.80 $3.29 $4.27 $5.15 
$5.87 - $5.97
Shares used in calculation of diluted net income per share 281,144 280,515 279,641 278,858 275,011 272,748 
271.5 - 273.5M
*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.
**2021 includes 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.








February 12, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
15
Cadence Design Systems, Inc.
Reconciliation of GAAP Total Other Income and Expense to Non-GAAP Total Other Income and Expense
(In Millions)
FY 2022
FY 2023
FY 2024E
GAAP total other income and expense$(28)$31 
$(10) - $(18)
Reconciling items to non-GAAP total income and expense
Other income or expense related to investments and non-qualified deferred compensation plan assets**14 (46)— 
Non-GAAP total other income and expense*$(14)$(15)
$(10) - $(18)
*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, 2024
Cadence Q4 and Fiscal Year 2023 Financial Results
16