Cadence Reports Fourth Quarter and Fiscal Year 2021 Financial

Cadence Reports Fourth Quarter and Fiscal Year 2021 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 18, 2022, 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 2022 earnings release is published, which is currently scheduled for April 25, 2022.


Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
January 1, 2022 and January 2, 2021
(In thousands)
(Unaudited)

	January 1, 2022		January 2, 2021

Current assets:
Cash and cash equivalents	$	1,088,940	$	928,432
Receivables, net		337,596		338,487
Inventories		115,721		75,956
Prepaid expenses and other		173,512		135,712
Total current assets		1,715,769		1,478,587

Property, plant and equipment, net		305,911		311,125
Goodwill		928,358		782,087
Acquired intangibles, net		233,265		210,590
Deferred taxes		763,770		732,290
Other assets		439,226		436,106
Total assets	$	4,386,299	$	3,950,785

Current liabilities:
Accounts payable and accrued liabilities	$	417,283	$	349,951
Current portion of deferred revenue		553,942		446,857
Total current liabilities		971,225		796,808

Long-term liabilities:
Long-term portion of deferred revenue		101,148		107,064
Long-term debt		347,588		346,793
Other long-term liabilities		225,663		207,102
Total long-term liabilities		674,399		660,959

Stockholders' equity		2,740,675		2,493,018
Total liabilities and stockholders' equity	$	4,386,299	$	3,950,785

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended January 1, 2022 and January 2, 2021
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended						Years Ended
	January 1, 2022			January 2, 2021			January 1, 2022			January 2, 2021

Revenue:
Product and maintenance	$	719,849		$	723,233		$	2,812,947		$	2,536,617
Services		53,187			36,676			175,297			146,274

Total revenue		773,036			759,909			2,988,244			2,682,891

Costs and expenses:
Cost of product and maintenance		47,714			55,111			222,647			231,026
Cost of services		21,979			18,425			84,359			74,472
Marketing and sales		148,068			146,502			560,262			516,460
Research and development		288,953			290,309			1,134,277			1,033,732
General and administrative		65,743			49,264			189,018			154,425
Amortization of acquired intangibles		4,979			4,775			19,640			18,009
Restructuring		(80	)		10,544			(1,048	)		9,215

Total costs and expenses		577,356			574,930			2,209,155			2,037,339

Income from operations		195,680			184,979			779,089			645,552

Interest expense		(4,251	)		(4,873	)		(16,980	)		(20,749	)
Other income, net		2,625			6,083			6,326			7,945

Income before provision for income taxes		194,054			186,189			768,435			632,748

Provision for income taxes		17,475			12,451			72,480			42,104

Net income	$	176,579		$	173,738		$	695,955		$	590,644


Net income per share - basic	$	0.65		$	0.63		$	2.54		$	2.16

Net income per share - diluted	$	0.63		$	0.62		$	2.50		$	2.11

Weighted average common shares outstanding - basic		273,066			273,985			273,504			273,728

Weighted average common shares outstanding - diluted		278,253			280,173			278,858			279,641

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended January 1, 2022 and January 2, 2021
(In thousands)
(Unaudited)


	Years Ended
	January 1,			January 2,
		2022			2021

Cash and cash equivalents at beginning of year	$	928,432		$	705,210
Cash flows from operating activities:
Net income		695,955			590,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		142,308			145,653
Amortization of debt discount and fees		1,219			1,053
Stock-based compensation		210,090			197,268
(Gain) loss on investments, net		(580	)		4,954
Deferred income taxes		(43,178	)		(26,117	)
Provisions for losses on receivables		525			1,628
ROU asset amortization and change in operating lease liabilities		(11,606	)		4,483
Other non-cash items		427			773
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		2,014			(25,934	)
Inventories		(39,027	)		(25,685	)
Prepaid expenses and other		(34,342	)		(31,167	)
Other assets		(7,133	)		(71,606	)
Accounts payable and accrued liabilities		67,356			18,394
Deferred revenue		100,731			110,173
Other long-term liabilities		16,199			10,408
Net cash provided by operating activities		1,100,958			904,922

Cash flows from investing activities:
Proceeds from the sale of non-marketable investments		128			217
Purchases of property, plant and equipment		(65,298	)		(94,813	)
Purchases of intangible assets		(1,583	)		-
Cash paid in business combinations, net of cash acquired		(226,201	)		(197,562	)
Net cash used for investing activities		(292,954	)		(292,158	)

Cash flows from financing activities:
Proceeds from revolving credit facility		-			350,000
Payment on revolving credit facility		-			(350,000	)
Payment of debt issuance costs		(1,285	)		-
Proceeds from issuance of common stock		87,772			74,803
Stock received for payment of employee taxes on vesting of restricted stock		(117,982	)		(110,028	)
Payments for repurchases of common stock		(612,297	)		(380,064	)
Net cash used for financing activities		(643,792	)		(415,289	)

Effect of exchange rate changes on cash and cash equivalents		(3,704	)		25,747

Increase in cash and cash equivalents		160,508			223,222

Cash and cash equivalents at end of year	$	1,088,940		$	928,432

Cadence Design Systems, Inc.
(Unaudited)

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

Americas	43%	44%	42%	41%	42%	46%	44%	46%	43%	45%
China	13%	12%	17%	17%	15%	12%	14%	13%	12%	13%
Other Asia	18%	19%	19%	18%	18%	18%	19%	18%	21%	19%
Europe, Middle East and Africa	19%	18%	16%	17%	18%	18%	17%	17%	18%	17%
Japan	7%	7%	6%	7%	7%	6%	6%	6%	6%	6%
Total	100%	100%	100%	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	Q3	Q4	Year

Custom IC Design and Simulation	25%	24%	24%	26%	25%	23%	23%	23%	24%	23%
Digital IC Design and Signoff	29%	28%	27%	31%	29%	27%	28%	29%	29%	29%
Functional Verification, including Emulation and Prototyping Hardware	23%	24%	23%	19%	22%	26%	25%	23%	21%	24%
IP	14%	14%	15%	13%	14%	14%	13%	14%	14%	13%
System Design and Analysis	9%	10%	11%	11%	10%	10%	11%	11%	12%	11%
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, 2022
(Unaudited)

	Three Months Ending	Year Ending
	April 2, 2022	December 31, 2022
	Forecast	Forecast

GAAP operating margin as a percent of total revenue	30% - 31%	27.5% - 29%

Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense	7%	8%
Amortization of acquired intangibles	2%	2%
Acquisition and integration-related costs	1%	0%

Non-GAAP operating margin as a percent of total revenue�nbsp;	40% - 41%	37.5% - 39%

�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, 2022
(Unaudited)

	Three Months Ending	Year Ending
	April 2, 2022	December 31, 2022
	Forecast	Forecast

Diluted net income per share on a GAAP basis	$0.70 to $0.74	$2.46 to $2.56

Stock-based compensation expense	0.22	0.97
Amortization of acquired intangibles	0.06	0.19
Acquisition and integration-related costs	0.01	0.03
Income tax effect of non-GAAP adjustments	0.01	0.05

Diluted net income per share on a non-GAAP basis�nbsp;	$1.00 to $1.04	$3.70 to $3.80


Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of February 22, 2022
(Unaudited)

	Three Months Ending	Year Ending
	April 2, 2022	December 31, 2022
($ in millions)	Forecast	Forecast

Net income on a GAAP basis	$193 to $204	$685 to $713

Stock-based compensation expense	61	268
Amortization of acquired intangibles	17	52
Acquisition and integration-related costs	4	8
Income tax effect of non-GAAP adjustments	3	15

Net income on a non-GAAP basis�nbsp;	$278 to $289	$1,028 to $1,056

�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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