Cadence Reports Fourth Quarter and Fiscal Year 2022 Financial

Cadence Reports Fourth Quarter and Fiscal Year 2022 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 17, 2023, 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 2023 earnings release is published, which is currently scheduled for April 24, 2023.

Cadence Design Systems, Inc.
Condensed Consolidated Balance Sheets
December 31, 2022 and January 1, 2022
(In thousands)
(Unaudited)

	December 31, 2022		January 1, 2022

Current assets:
Cash and cash equivalents	$	882,325	$	1,088,940
Receivables, net		486,710		337,596
Inventories		128,005		115,721
Prepaid expenses and other		209,727		173,512
Total current assets		1,706,767		1,715,769

Property, plant and equipment, net		371,451		305,911
Goodwill		1,374,268		928,358
Acquired intangibles, net		354,617		233,265
Deferred taxes		853,691		763,770
Other assets		476,277		439,226
Total assets	$	5,137,071	$	4,386,299

Current liabilities:
Revolving credit facility	$	100,000	$	-
Accounts payable and accrued liabilities		557,158		417,283
Current portion of deferred revenue		690,538		553,942
Total current liabilities		1,347,696		971,225

Long-term liabilities:
Long-term portion of deferred revenue		91,524		101,148
Long-term debt		648,078		347,588
Other long-term liabilities		304,660		225,663
Total long-term liabilities		1,044,262		674,399

Stockholders' equity		2,745,113		2,740,675
Total liabilities and stockholders' equity	$	5,137,071	$	4,386,299

Cadence Design Systems, Inc.
Condensed Consolidated Income Statements
For the Three Months and Years Ended December 31, 2022 and January 1, 2022
(In thousands, except per share amounts)
(Unaudited)


	Three Months Ended						Years Ended
	December 31, 2022			January 1, 2022			December 31, 2022			January 1, 2022

Revenue:
Product and maintenance	$	845,880		$	719,849		$	3,340,197		$	2,812,947
Services		53,997			53,187			221,521			175,297

Total revenue		899,877			773,036			3,561,718			2,988,244

Costs and expenses:
Cost of product and maintenance		69,702			47,714			273,565			222,647
Cost of services		23,813			21,979			98,058			84,359
Marketing and sales		171,817			148,068			604,224			560,262
Research and development		350,423			288,953			1,251,544			1,134,277
General and administrative		68,065			65,743			242,116			189,018
Amortization of acquired intangibles		4,927			4,979			18,470			19,640
Restructuring		13			(80	)		55			(1,048	)

Total costs and expenses		688,760			577,356			2,488,032			2,209,155

Income from operations		211,117			195,680			1,073,686			779,089

Interest expense		(9,082	)		(4,251	)		(22,934	)		(16,980	)
Other income (expense), net		8,490			2,625			(5,389	)		6,326

Income before provision (benefit) for income taxes		210,525			194,054			1,045,363			768,435

Provision (benefit) for income taxes		(29,867	)		17,475			196,411			72,480

Net income	$	240,392		$	176,579		$	848,952		$	695,955


Net income per share - basic	$	0.89		$	0.65		$	3.13		$	2.54

Net income per share - diluted	$	0.88		$	0.63		$	3.09		$	2.50

Weighted average common shares outstanding - basic		269,709			273,066			271,198			273,504

Weighted average common shares outstanding - diluted		272,997			278,253			275,011			278,858

Cadence Design Systems, Inc.
Condensed Consolidated Statements of Cash Flows
For the Years Ended December 31, 2022 and January 1, 2022
(In thousands)
(Unaudited)


	Years Ended
	December 31,			January 1,
		2022			2022

Cash and cash equivalents at beginning of year	$	1,088,940		$	928,432
Cash flows from operating activities:
Net income		848,952			695,955
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		132,088			142,308
Amortization of debt discount and fees		1,134			1,219
Stock-based compensation		270,439			210,090
(Gain) loss on investments, net		5,425			(580	)
Deferred income taxes		(107,606	)		(43,178	)
Provisions for losses on receivables		204			525
ROU asset amortization and change in operating lease liabilities		3,342			(11,606	)
Other non-cash items		371			427
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables		(138,471	)		2,014
Inventories		(23,073	)		(39,027	)
Prepaid expenses and other		(38,927	)		(34,342	)
Other assets		(933	)		(7,133	)
Accounts payable and accrued liabilities		113,945			67,356
Deferred revenue		131,462			100,731
Other long-term liabilities		43,542			16,199
Net cash provided by operating activities		1,241,894			1,100,958

Cash flows from investing activities:
Purchases of non-marketable investments		(1,000	)		-
Proceeds from the sale of non-marketable investments		366			128
Purchases of property, plant and equipment		(123,215	)		(65,298	)
Purchases of intangible assets		(1,000	)		(1,583	)
Cash paid in business combinations, net of cash acquired		(613,785	)		(226,201	)
Net cash used for investing activities		(738,634	)		(292,954	)

Cash flows from financing activities:
Proceeds from revolving credit facility		585,000			-
Payments on revolving credit facility		(485,000	)		-
Proceeds from term loan		300,000			-
Payment of debt issuance costs		(425	)		(1,285	)
Proceeds from issuance of common stock		105,331			87,772
Stock received for payment of employee taxes on vesting of restricted stock		(111,864	)		(117,982	)
Payments for repurchases of common stock		(1,050,091	)		(612,297	)
Net cash used for financing activities		(657,049	)		(643,792	)

Effect of exchange rate changes on cash and cash equivalents		(52,826	)		(3,704	)

Increase (decrease) in cash and cash equivalents		(206,615	)		160,508

Cash and cash equivalents at end of year	$	882,325		$	1,088,940

Cadence Design Systems, Inc.
(Unaudited)

Revenue Mix by Geography (% of Total Revenue)
	2021					2022
GEOGRAPHY	Q1	Q2	Q3	Q4	Year	Q1	Q2	Q3	Q4	Year

Americas	46%	44%	46%	43%	45%	47%	45%	45%	46%	46%
China	12%	14%	13%	12%	13%	16%	13%	17%	13%	15%
Other Asia	18%	19%	18%	21%	19%	18%	18%	17%	18%	18%
Europe, Middle East and Africa	18%	17%	17%	18%	17%	14%	18%	16%	17%	16%
Japan	6%	6%	6%	6%	6%	5%	6%	5%	6%	5%
Total	100%	100%	100%	100%	100%	100%	100%	100%	100%	100%


Revenue Mix by Product Category (% of Total Revenue)
	2021					2022
PRODUCT CATEGORY	Q1	Q2	Q3	Q4	Year	Q1	Q2	Q3	Q4	Year

Custom IC Design and Simulation	23%	23%	23%	24%	23%	22%	23%	22%	22%	22%
Digital IC Design and Signoff	27%	28%	29%	29%	29%	27%	27%	29%	28%	28%
Functional Verification, including Emulation and Prototyping Hardware	26%	25%	23%	21%	24%	28%	24%	25%	25%	26%
IP	14%	13%	14%	14%	13%	13%	14%	12%	12%	12%
System Design and Analysis	10%	11%	11%	12%	11%	10%	12%	12%	13%	12%
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 13, 2023
(Unaudited)

	Three Months Ending	Year Ending
	March 31, 2023	December 31, 2023
	Forecast	Forecast

GAAP operating margin as a percent of total revenue	31% - 32%	30.5% - 32.0%

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

Non-GAAP operating margin as a percent of total revenueï¿½nbsp;	41% - 42%	40.5% - 42.0%

ï¿½nbsp;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 13, 2023
(Unaudited)

	Three Months Ending	Year Ending
	March 31, 2023	December 31, 2023
	Forecast	Forecast

Diluted net income per share on a GAAP basis	$0.84 to $0.88	$3.24 to $3.34

Stock-based compensation expense	0.28	1.21
Amortization of acquired intangibles	0.05	0.21
Acquisition and integration-related costs	0.05	0.15
Income tax effect of non-GAAP adjustments	0.01	0.09

Diluted net income per share on a non-GAAP basisï¿½nbsp;	$1.23 to $1.27	$4.90 to $5.00




Cadence Design Systems, Inc.
Impact of Non-GAAP Adjustments on Forward Looking Net Income
As of February 13, 2023
(Unaudited)


	Three Months Ending	Year Ending
	March 31, 2023	December 31, 2023
($ in millions)	Forecast	Forecast

Net income on a GAAP basis	$230 to $241	$886 to $913

Stock-based compensation expense	77	330
Amortization of acquired intangibles	15	58
Acquisition and integration-related costs	13	40
Income tax effect of non-GAAP adjustments	1	24

Net income on a non-GAAP basisï¿½nbsp;	$336 to $347	$1,338 to $1,365

ï¿½nbsp;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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