SAN JOSE, Calif. — October 28, 2024 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the third quarter of 2024.

•Revenue of $1.215 billion, compared to revenue of $1.023 billion in Q3 2023

•GAAP operating margin of 29%, compared to 29% in Q3 2023

•Non-GAAP operating margin of 45%, compared to 41% in Q3 2023

•GAAP diluted net income per share of $0.87, compared to $0.93 in Q3 2023

•Non-GAAP diluted net income per share of $1.64, compared to $1.26 in Q3 2023

•Quarter-end backlog was $5.6 billion and current remaining performance obligations ("cRPO"), contract revenue expected to be recognized as revenue in the next 12 months, was $2.9 billion

“Cadence delivered exceptional results for the third quarter of 2024, driven by broad-based strength across our portfolio, especially in IP, SD&A, and hardware systems,” said Anirudh Devgan, president and chief executive officer. “Customers are achieving outstanding results with Cadence.AI, and I’m excited by its accelerating proliferation as AI rapidly becomes an integral part of the design workflow.”

“I am pleased to report that Cadence delivered strong Q3 results, with total revenue growing 19% year-over-year. Our Q3 recurring revenue growth returned to low teens on a year-over-year basis, and China revenue continues to improve, representing 13% of our total revenue for Q3,” said John Wall, senior vice president and chief financial officer. “Our Q4 bookings pipeline looks exceptionally strong, and we are well positioned to deliver a strong 2024.”

Commentary on the third quarter of 2024 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

For fiscal year 2024, the company expects:

•Revenue in the range of $4.61 billion to $4.65 billion

•GAAP operating margin in the range of 29% to 30%

•Non-GAAP operating margin in the range of 42% to 43%

•GAAP diluted net income per share in the range of $3.70 to $3.76

•Non-GAAP diluted net income per share in the range of $5.87 to $5.93

The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use the current normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

Reconciliations of the financial results and business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, are included in this press release.

•Cadence.AI portfolio powered by GenAI agents, AI-driven optimization and the big data analytics JedAI platform, offers unparalleled quality of results and productivity benefits, further proliferated with revenue nearly tripling over the last year

•System Design & Analysis business achieved 47 percent year-over-year revenue growth in Q3 with strong growth of Cadence's comprehensive multi-physics portfolio that couples the company's expertise in physics-based modeling with AI driven optimization

•Strong IP business momentum, with 59 percent year-over-year growth as Cadence executed to its profitable and scalable growth strategy. A long-term IP partner signed a major deal for Cadence's hardware, IP and services offering to help deliver its AI product roadmap and next generation subsystems

•Functional Verification delivered 22 percent year-over-year revenue growth, fueled by strong demand for Cadence's new ground-breaking hardware systems, especially at AI, hyperscale and automotive companies

Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the third quarter 2024 financial results audio webcast today, October 28, 2024, 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 October 28, 2024 at 5 p.m. (Pacific) and ending December 17, 2024 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.

Cadence is a pivotal leader in electronic systems design, building upon more than 30 years of computational software expertise. The company applies its underlying Intelligent System Design strategy to deliver software, hardware and IP that turn design concepts into reality. Cadence customers are the world’s most innovative companies, delivering extraordinary electronic products from chips to boards to complete systems for the most dynamic market applications, including hyperscale computing, 5G communications, automotive, mobile, aerospace, consumer, industrial and healthcare. For 10 years in a row, Fortune magazine has named Cadence one of the 100 Best Companies to Work For. Learn more at www.cadence.com.

This press release contains forward-looking statements, including Cadence's outlook on future operating results, financial condition, strategic objectives, business prospects, technology and product developments, industry trends, market growth 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 rate and currency exchange rate fluctuations, inflation rates, Cadence’s increased debt levels and obligations and Cadence’s ability to access capital and debt markets in the future; (vii) Cadence’s 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.

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

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 measures contained within this press release with their most directly comparable GAAP 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 and other significant items not directly related to Cadence’s core business operations, 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
						September 30, 2024						September 30, 2023
						(unaudited)
GAAP operating margin as a percent of total revenue						29%						29%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense						9%						9%
Amortization of acquired intangibles						2%						1%
Acquisition and integration-related costs						3%						1%
Restructuring						2%						1%
Non-qualified deferred compensation expenses (credits)						0%						0%
Non-GAAP operating margin as a percent of total revenue						45%						41%

For more information, please contact:

Cadence Investor Relations

408-944-7100

investor_relations@cadence.com

Cadence Newsroom

408-944-7039

newsroom@cadence.com

 

						September 30, 2024						December 31, 2023
Current assets:
Cash and cash equivalents						$	2,786,040					$	1,008,152
Receivables, net						560,973						489,224
Inventories						293,350						181,661
Prepaid expenses and other						459,560						297,180
Total current assets						4,099,923						1,976,217
Property, plant and equipment, net						448,652						403,213
Goodwill						2,493,467						1,535,845
Acquired intangibles, net						662,343						336,843
Deferred taxes						889,939						880,001
Other assets						572,707						537,372
Total assets						$	9,167,031					$	5,669,491
Current liabilities:
Current portion of long-term debt						$	349,958					$	349,285
Accounts payable and accrued liabilities						627,200						576,558
Current portion of deferred revenue						697,836						665,024
Total current liabilities						1,674,994						1,590,867
Long-term liabilities:
Long-term portion of deferred revenue						102,439						98,931
Long-term debt						2,475,232						299,771
Other long-term liabilities						351,028						275,651
Total long-term liabilities						2,928,699						674,353
Stockholders’ equity						4,563,338						3,404,271
Total liabilities and stockholders’ equity						$	9,167,031					$	5,669,491

 

						Three Months Ended												Nine Months Ended
						September 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Revenue:
Product and maintenance						$	1,100,380					$	965,840					$	2,974,222					$	2,852,372
Services						115,119						57,254						311,061						168,991
Total revenue						1,215,499						1,023,094						3,285,283						3,021,363
Costs and expenses:
Cost of product and maintenance						109,593						85,813						279,351						260,269
Cost of services						53,451						23,768						148,160						70,642
Marketing and sales						189,763						176,215						557,077						509,951
Research and development						407,369						369,642						1,157,067						1,074,353
General and administrative						71,581						58,556						203,733						166,688
Amortization of acquired intangibles						9,148						4,612						21,222						13,181
Restructuring						24,538						11,582						24,785						11,582
Total costs and expenses						865,443						730,188						2,391,395						2,106,666
Income from operations						350,056						292,906						893,888						914,697
Interest expense						(24,495)						(9,059)						(46,092)						(27,196)
Other income, net						7,853						16,106						111,371						32,363
Income before provision for income taxes						333,414						299,953						959,167						919,864
Provision for income taxes						95,303						45,632						243,893						202,619
Net income						$	238,111					$	254,321					$	715,274					$	717,245
Net income per share - basic						$	0.87					$	0.94					$	2.64					$	2.66
Net income per share - diluted						$	0.87					$	0.93					$	2.61					$	2.63
Weighted average common shares outstanding - basic						272,244						269,229						270,925						269,480
Weighted average common shares outstanding - diluted						273,958						272,427						273,679						272,859

 

			2023																														2024
GEOGRAPHY			Q1						Q2						Q3						Q4						Year						Q1						Q2						Q3
Americas			44		%				41		%				43		%				44		%				43		%				46		%				49		%				50		%
China			17		%				18		%				17		%				15		%				17		%				12		%				12		%				13		%
Other Asia			18		%				18		%				19		%				19		%				19		%				20		%				19		%				17		%
Europe, Middle East and Africa			15		%				17		%				15		%				16		%				16		%				17		%				14		%				14		%
Japan			6		%				6		%				6		%				6		%				5		%				5		%				6		%				6		%
Total			100		%				100		%				100		%				100		%				100		%				100		%				100		%				100		%

 

			2023																														2024
PRODUCT CATEGORY			Q1						Q2						Q3						Q4						Year						Q1						Q2						Q3
Custom IC Design and Simulation			20		%				22		%				22		%				22		%				22		%				22		%				21		%				19		%
Digital IC Design and Signoff			25		%				27		%				28		%				29		%				27		%				29		%				27		%				24		%
Functional Verification, including Emulation and Prototyping Hardware			32		%				27		%				26		%				24		%				27		%				25		%				25		%				27		%
Core EDA Total			77		%				76		%				76		%				75		%				76		%				76		%				73		%				70		%
IP			11		%				11		%				11		%				13		%				12		%				12		%				13		%				14		%
System Design and Analysis			12		%				13		%				13		%				12		%				12		%				12		%				14		%				16		%
Total			100		%				100		%				100		%				100		%				100		%				100		%				100		%				100		%

 

						Three Months Ending December 31, 2024						Year Ending December 31, 2024
						Forecast						Forecast
GAAP operating margin as a percent of total revenue						33.2% - 34.2%						29% - 30%
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						2%						2%
Restructuring						0%						1%
Non-qualified deferred compensation expenses						0%						0%
Special charges						0%						0%
Non-GAAP operating margin as a percent of total revenue†						45.2% - 46.2%						42% - 43%

 

						Three Months Ending December 31, 2024						Year Ending December 31, 2024
						Forecast						Forecast
Diluted net income per share on a GAAP basis						$1.09 to $1.15						$3.70 to $3.76
Stock-based compensation expense						0.39						1.44
Amortization of acquired intangibles						0.10						0.33
Acquisition and integration-related costs						0.09						0.35
Restructuring						—						0.09
Non-qualified deferred compensation expenses						—						0.04
Special charges						—						—
Other income or expense related to investments and non-qualified deferred compensation plan assets*						—						(0.27)
Income tax effect of non-GAAP adjustments						0.11						0.19
Diluted net income per share on a non-GAAP basis†						$1.78 to $1.84						$5.87 to $5.93

 

						Three Months Ending December 31, 2024						Year Ending December 31, 2024
($ in millions)						Forecast						Forecast
Net income on a GAAP basis						$300 to $316						$1,015 to $1,031
Stock-based compensation expense						108						393
Amortization of acquired intangibles						27						91
Acquisition and integration-related costs						24						96
Restructuring						—						25
Non-qualified deferred compensation expenses						—						11
Special charges						—						1
Other income or expense related to investments and non-qualified deferred compensation plan assets*						—						(75)
Income tax effect of non-GAAP adjustments						30						52
Net income on a non-GAAP basis†						$489 to $505						$1,609 to $1,625

* 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 outlook.

Profitability Trends

(In Millions)			2018						2019						2020						2021						2022						2023									2024E*
Revenue			$	2,138					$	2,336					$	2,683					$	2,988					$	3,562					$	4,090								$	4,630
Revenue Growth			10%						9%						15%						11%						19%						15%									13%
3-Year Revenue Growth CAGR			8%						9%						11%						12%						15%						15%									16%
GAAP operating margin			19%						21%						24%						26%						30%						31%									29.5%
Non-GAAP operating margin			30.2%						32.1%						35.2%						37.2%						40.3%						42.0%									42.5%
Stock-based compensation			(7.8)%						(7.8)%						(7.4)%						(7.0)%						(7.6)%						(8.0)%									(8.5)%
Non-GAAP operating margin adjusted for stock-based compensation			22.4%						24.3%						27.8%						30.2%						32.7%						34.0%									34.0%
GAAP operating income			$	396					$	492					$	646					$	779					$	1,074					$	1,251								$	1,351
Non-GAAP operating income			$	647					$	749					$	944					$	1,111					$	1,436					$	1,717								$	1,968
Non-GAAP operating income adjusted for stock-based compensation			$	479					$	567					$	747					$	901					$	1,166					$	1,391								$	1,575

* At midpoint of outlook.

Backlog

(In Billions)			2020						2021						2022						2023									Q3 2024
Backlog			$	3.9					$	4.4					$	5.8					$	6.0								$	5.6

Revenue

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Product and Maintenance			$	966					$	982					$	913					$	961								$	1,100
Services			57						87						96						100									115
Total Revenue			$	1,023					$	1,069					$	1,009					$	1,061								$	1,215

Recurring and Up-Front Revenue

			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Revenue recognized over time			83		%				85		%				87		%				85		%							80		%
Revenue from arrangements with non-cancelable commitments			2		%				2		%				3		%				3		%							2		%
Recurring Revenue			85		%				87		%				90		%				88		%							82		%
Up-Front Revenue			15		%				13		%				10		%				12		%							18		%
Total			100		%				100		%				100		%				100		%							100		%

Trailing Twelve Months Recurring and Up-Front Revenue

			Trailing Twelve Months Ended
			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Recurring Revenue			84		%				84		%				87		%				87		%							86		%
Up-Front Revenue			16		%				16		%				13		%				13		%							14		%
Total			100		%				100		%				100		%				100		%							100		%

Revenue Mix by Geography

(% of Total Revenue)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Americas			43		%				44		%				46		%				49		%							50		%
China			17		%				15		%				12		%				12		%							13		%
Other Asia			19		%				19		%				20		%				19		%							17		%
Europe, Middle East and Africa			15		%				16		%				17		%				14		%							14		%
Japan			6		%				6		%				5		%				6		%							6		%
Total			100		%				100		%				100		%				100		%							100		%

Revenue Mix by Product Category

(% of Total Revenue)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Custom IC Design and Simulation			22		%				22		%				22		%				21		%							19		%
Digital IC Design and Signoff			28		%				29		%				29		%				27		%							24		%
Functional Verification			26		%				24		%				25		%				25		%							27		%
Core EDA Total			76		%				75		%				76		%				73		%							70		%
IP			11		%				13		%				12		%				13		%							14		%
System Design and Analysis			13		%				12		%				12		%				14		%							16		%
Total			100		%				100		%				100		%				100		%							100		%

Gross Margin

			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
GAAP Gross Margin			89.3		%				90.3		%				87.6		%				86.9		%							86.6		%
Non-GAAP Gross Margin			90.6		%				91.7		%				89.1		%				88.5		%							88.6		%

Total Costs and Expenses

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Total GAAP Costs and Expenses			$	730					$	732					$	759					$	767								$	865
Total Non-GAAP Costs and Expenses			$	603					$	610					$	627					$	635								$	671

Operating Margin

			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
GAAP Operating Margin			28.6		%				31.5		%				24.8		%				27.7		%							28.8		%
Non-GAAP Operating Margin			41.1		%				42.9		%				37.8		%				40.1		%							44.8		%

Net Income Per Share

			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
GAAP Net Income Per Share			$	0.93					$	1.19					$	0.91					$	0.84								$	0.87
Non-GAAP Net Income Per Share			$	1.26					$	1.38					$	1.17					$	1.28								$	1.64

Total DSO

			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
DSO			39						43						36						49									44

Free Cash Flow

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Net Cash from Operating Activities			$	396					$	272					$	253					$	156								$	410
Capital Expenditures			22						34						49						29									27
Free Cash Flow			$	374					$	238					$	204					$	127								$	383

Cash and Cash Equivalents

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Cash and Cash Equivalents			$	962					$	1,008					$	1,012					$	1,059								$	2,786

•Approximately 74 percent of our cash and cash equivalents were in the U.S. at quarter-end.

Debt

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Debt (principal value)			$	650					$	650					$	650					$	1,350								$	2,850

•In September 2024, Cadence issued $2.5 billion of Senior Notes at a weighted average interest rate of 4.44%.

Share Repurchase

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Share Repurchase			$	185					$	125					$	125					$	125								$	150
Number of Shares			0.811						0.488						0.425						0.423									0.563

•Q3 2023 includes 276,330 shares and $60 million equity forward contract from Q2 2023 ASR settled in Q3 2023.

Employees

			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
Headcount			11,139						11,226						11,753						12,665									12,703

This CFO Commentary contains forward-looking statements, including Cadence's outlook on future operating results, financial condition, strategic objectives, business prospects, technology and product developments, industry trends, market growth 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 rate and currency exchange rate fluctuations, inflation rates, Cadence's increased debt levels and obligations and Cadence’s ability to access capital and debt markets in the future; (vii) Cadence’s 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.

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.

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.

Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Millions)			Q3 2023						Q4 2023						Q1 2024						Q2 2024									Q3 2024
GAAP total costs and expenses			$	730					$	732					$	759					$	767								$	865
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense			(88)						(87)						(88)						(88)									(109)
Amortization of acquired intangibles			(15)						(17)						(17)						(20)									(27)
Acquisition and integration-related costs			(14)						(13)						(22)						(21)									(29)
Restructuring			(12)						1						—						—									(25)
Non-qualified deferred compensation (expenses) credits			2						(6)						(5)						(2)									(4)
Special charges			—						—						—						(1)									—
Non-GAAP total costs and expenses*			$	603					$	610					$	627					$	635								$	671

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Millions)			2018						2019						2020*						2021						2022						2023									2024E
GAAP total costs and expenses			$	1,742					$	1,845					$	2,037					$	2,209					$	2,488					$	2,839								$	3,279
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense			(168)						(182)						(197)						(210)						(270)						(326)									(393)
Amortization of acquired intangibles			(53)						(53)						(64)						(67)						(60)						(62)									(91)
Acquisition and integration-related costs			(20)						(8)						(23)						(23)						(41)						(56)									(96)
Restructuring			(11)						(9)						(9)						1						—						(11)									(25)
Non-qualified deferred compensation (expenses) credits			1						(5)						(5)						(6)						8						(11)									(11)
Special charges**			—						(1)						—						(27)						—						—									(1)
Non-GAAP total costs and expenses***			$	1,491					$	1,587					$	1,739					$	1,877					$	2,125					$	2,373								$	2,662