Cadence Reports First Quarter 2018 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 June 15, 2018, 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 second quarter 2018 earnings release is published, which is currently scheduled for July 23, 2018.


Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
March 31, 2018 and December 30, 2017
(In thousands)
(Unaudited)

	March 31, 2018		December 30, 2017

Current assets:
Cash and cash equivalents	$	746,968	$	688,087
Short-term investments		5,466		4,455
Receivables, net of allowances of $666 and $0, respectively		225,822		190,426
Inventories		30,090		33,209
Prepaid expenses and other		61,597		63,811
Total current assets		1,069,943		979,988

Property, plant and equipment, net of accumulated depreciation of $673,265 and $658,377, respectively		249,810		251,342
Goodwill		665,615		666,009
Acquired intangibles, net of accumulated amortization of $295,018 and $297,456, respectively		264,927		278,835
Long-term receivables		9,380		12,239
Other assets		226,998		230,301
Total assets	$	2,486,673	$	2,418,714

Current liabilities:
Revolving credit facility	$	45,000	$	85,000
Current portion of long-term debt		299,826		-
Accounts payable and accrued liabilities		210,784		221,101
Current portion of deferred revenue		310,639		336,297
Total current liabilities		866,249		642,398

Long-term liabilities:
Long-term portion of deferred revenue		56,276		61,513
Long-term debt		344,766		644,369
Other long-term liabilities		77,084		81,232
Total long-term liabilities		478,126		787,114

Stockholders' equity		1,142,298		989,202
Total liabilities and stockholders' equity	$	2,486,673	$	2,418,714


Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months Ended March 31, 2018 and April 1, 2017
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended
	March 31, 2018			April 1, 2017

Revenue:
Product and maintenance	$	480,609		$	451,407
Services		36,704			25,504

Total revenue		517,313			476,911

Costs and expenses:
Cost of product and maintenance		41,730			43,717
Cost of services		21,479			18,075
Marketing and sales		109,148			103,347
Research and development		224,185			198,286
General and administrative		33,299			31,816
Amortization of acquired intangibles		3,630			3,856
Restructuring and other credits		(1,991	)		(1,788	)

Total costs and expenses		431,480			397,309

Income from operations		85,833			79,602

Interest expense		(6,975	)		(6,479	)
Other income (expense), net		(689	)		1,059

Income before provision for income taxes		78,169			74,182

Provision for income taxes		5,284			5,923

Net income	$	72,885		$	68,259


Net income per share - basic	$	0.27		$	0.25

Net income per share - diluted	$	0.26		$	0.25

Weighted average common shares outstanding - basic		273,773			270,173

Weighted average common shares outstanding - diluted		281,651			277,736


Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2018 and April 1, 2017
(In thousands)
(Unaudited)

	Three Months Ended
	March 31,			April 1,
	2018			2017

Cash and cash equivalents at beginning of period	$	688,087		$	465,232
Cash flows from operating activities:
Net income		72,885			68,259
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		29,389			28,894
Amortization of debt discount and fees		292			350
Stock-based compensation		37,901			27,436
Gain on investments, net		(1,123	)		(1,228	)
Deferred income taxes		1,363			1,990
Provisions for losses on receivables		666			-
Other non-cash items		(43	)		1,359
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		(10,988	)		(22,475	)
Inventories		2,105			6,000
Prepaid expenses and other		8,392			(3,777	)
Other assets		8,152			(3,657	)
Accounts payable and accrued liabilities		(46,956	)		(46,159	)
Deferred revenue		59,854			34,325
Other long-term liabilities		(4,242	)		1,113
Net cash provided by operating activities		157,647			92,430

Cash flows from investing activities:
Proceeds from the sale of available-for-sale securities		-			107
Purchases of property, plant and equipment		(13,128	)		(14,843	)
Net cash used for investing activities		(13,128	)		(14,736	)

Cash flows from financing activities:
Proceeds from revolving credit facility		-			50,000
Payment on revolving credit facility		(40,000	)		(50,000	)
Payment of debt issuance costs		-			(793	)
Proceeds from issuance of common stock		23,339			22,715
Stock received for payment of employee taxes on vesting of restricted stock		(26,515	)		(22,470	)
Payments for repurchases of common stock		(50,013	)		-
Change in book overdraft		(3,867	)		-
Net cash used for financing activities		(97,056	)		(548	)

Effect of exchange rate changes on cash and cash equivalents		11,418			1,750

Increase in cash and cash equivalents		58,881			78,896

Cash and cash equivalents at end of period	$	746,968		$	544,128


Cadence Design Systems, Inc.
(Unaudited)

Revenue Mix by Geography (% of Total Revenue)	ASC 605					ASC 605	ASC 606
	2017					2018	2018
GEOGRAPHY	Q1	Q2	Q3	Q4	Year	Q1	Q1

Americas	45%	45%	45%	44%	44%	45%	45%
Asia	26%	28%	27%	28%	27%	26%	27%
Europe, Middle East and Africa	20%	19%	19%	20%	20%	21%	20%
Japan	9%	8%	9%	8%	9%	8%	8%
Total	100%	100%	100%	100%	100%	100%	100%


Revenue Mix by Product Group (% of Total Revenue)	ASC 605					ASC 605	ASC 606
	2017					2018	2018
PRODUCT GROUP	Q1	Q2	Q3	Q4	Year	Q1	Q1

Functional Verification, including Emulation and Prototyping Hardware	23%	23%	21%	23%	22%	26%	26%
Digital IC Design and Signoff	29%	30%	30%	29%	29%	29%	30%
Custom IC Design	26%	26%	28%	26%	27%	26%	26%
System Interconnect and Analysis	10%	10%	10%	10%	10%	9%	9%
IP	12%	11%	11%	12%	12%	10%	9%
Total	100%	100%	100%	100%	100%	100%	100%


Cadence Design Systems, Inc.
As of April 23, 2018
Impact of Non-GAAP Adjustments on Forward Looking Diluted Net Income Per Share
(Unaudited)

	Three Months Ending	Year Ending	Year Ending
	June 30, 2018	December 29, 2018	December 29, 2018
	ASC 606 Forecast	ASC 606 Forecast	ASC 605 Forecast **

Diluted net income per share on a GAAP basis	$0.20 to $0.22	$0.86 to $0.94	$0.97 to $1.05

Amortization of acquired intangibles	0.05	0.19	0.19
Stock-based compensation expense	0.14	0.59	0.59
Restructuring and other charges (credits)	-	(0.01)	(0.01)
Acquisition and integration-related costs	0.02	0.09	0.09
Other income or expense related to investments and non-qualified deferred compensation plan assets*	-	-	-
Income tax effect of non-GAAP adjustments	(0.02)	(0.15)	(0.17)

Diluted net income per share on a non-GAAP basis�nbsp;	$0.39 to $0.41	$1.57 to $1.65	$1.66 to $1.74

Cadence Design Systems, Inc.
As of April 23, 2018
Impact of Non-GAAP Adjustments on Forward Looking Net Income
(Unaudited)

	Three Months Ending	Year Ending	Year Ending
	June 30, 2018	December 29, 2018	December 29, 2018
($ in millions)	ASC 606 Forecast	ASC 606 Forecast	ASC 605 Forecast **

Net income on a GAAP basis	$57 to $63	$243 to $265	$273 to $296

Amortization of acquired intangibles	14	54	54
Stock-based compensation expense	39	166	166
Restructuring and other charges (credits)	-	(2)	(2)
Acquisition and integration-related costs	7	26	26
Other income or expense related to investments and non-qualified deferred compensation plan assets*	-	(1)	(1)
Income tax effect of non-GAAP adjustments	(7)	(43)	(48)

Net income on a non-GAAP basis�nbsp;	$110 to $116	$443 to $465	$468 to $491

�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.

* 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.

** As required by the new standard, Cadence will report revenue under both methods for the 2018 transition year.

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