Cadence Design Systems · Earnings release

Cadence Reports Fourth Quarter and Fiscal Year 2024 Financial Results

Record Backlog of $6.8 Billion

Exceeded Q4 and 2024 Outlook for Revenue and EPS

SAN JOSE, Calif. — February 18, 2025 — Cadence Design Systems, Inc. (Nasdaq: CDNS) today announced results for the fourth quarter and fiscal year 2024.

Fourth Quarter 2024 Financial Results

•Non-GAAP diluted net income per share of $1.88, compared to $1.38 in Q4 2023

Fiscal Year 2024 Financial Results

•GAAP diluted net income per share of $3.85, compared to $3.82 in 2023

•Non-GAAP diluted net income per share of $5.97, compared to $5.15 in 2023

•Year-end backlog was $6.8 billion and current remaining performance obligations ("cRPO"), contract revenue expected to be recognized as revenue in the next 12 months, was $3.4 billion

“Cadence delivered exceptional results in the fourth quarter, capping off a strong 2024 with 13.5% revenue growth and 42.5% non-GAAP operating margin for the year,” said Anirudh Devgan, president and chief executive officer. “Our momentum continues to build as we exited 2024 with record bookings and record backlog. Cadence is very well positioned to benefit from the various phases of AI, including the current AI infrastructure buildout, applying AI to our own products, and expanding into new markets such as life sciences.”

“We had a strong finish to 2024, driven by broad based strength across all our businesses,” said John Wall, senior vice president and chief financial officer. “I’m pleased with our record year-end backlog of $6.8 billion and cRPO of $3.4 billion, and I look forward to building on that strength in 2025.”

CFO Commentary

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

Business Outlook

For fiscal year 2025, the company expects:

•G1Revenue in the range of $5.14 billion to $5.22 billion

•G2GAAP operating margin in the range of 30.25% to 31.25%

•G3Non-GAAP operating margin in the range of 43.25% to 44.25%

•G4GAAP diluted net income per share in the range of $4.19 to $4.29

•G5Non-GAAP diluted net income per share in the range of $6.65 to $6.75

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.

Business Highlights

•The Cadence.ai portfolio continued to gain momentum with market shaping customers, as Cadence's AI-driven optimization products including Cadence Cerebrus, Verisium SimAI and Allegro X AI are proliferating at scale. Additionally, Cadence's LLM based Design Agents powered by JedAI data platform, are showing promising results in early engagements.

•System Design & Analysis achieved strong results with over 40% growth in 2024 driven by Cadence's multi-physics analysis platform and AI-driven optimization, which delivered superior results to a rapidly expanding customer base across multiple verticals, especially Aerospace & Defense and Automotive.

•Cadence's IP business grew 28% year over year in Q4 as Cadence's AI HPC protocols including Cadence's flagship HBM, DDR, PCIe and UCIe solutions continued propelling Cadence's business with significant expansions and competitive displacements at top tier customers.

•Core EDA, which comprises of Cadence's digital, custom/analog and verification portfolios grew 15% year over year in Q4.

•The hardware business, consisting of the Palladium Z3 and Protium X3, delivered another record year, with Q4 being the best quarter ever.

Audio Webcast Scheduled

Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the fourth quarter and fiscal year 2024 financial results audio webcast today, February 18, 2025, 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 February 18, 2025 at 5 p.m. (Pacific) and ending March 17, 2025 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.

About Cadence

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.

© 2025 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.

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) changes 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 export controls, tariffs, other trade restrictions and other government regulations, as well as rising tensions and armed conflicts around the world; (vi) 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) legislative or regulatory requirements; (viii) Cadence’s acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (ix) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (x) capital expenditure requirements and events that affect cash flow, liquidity or reserves, or estimates Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation, regulatory or other matters; (xi) 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 (xii) Cadence’s ability to successfully meet any 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 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.

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 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

(unaudited)

GAAP operating margin as a percent of total revenue

Reconciling items to non-GAAP operating margin as a percent of total revenue:

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Restructuring

Non-qualified deferred compensation expenses

Special charges*

Non-GAAP operating margin as a percent of total revenue

*

Includes costs related to adjustments to estimated legal liabilities and executive severance.

Operating Margin Reconciliation

Years Ended

(unaudited)

GAAP operating margin as a percent of total revenue

Reconciling items to non-GAAP operating margin as a percent of total revenue:

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Restructuring

Non-qualified deferred compensation expenses

Special charges*

Non-GAAP operating margin as a percent of total revenue

*

Includes costs related to adjustments to estimated legal liabilities and executive severance.

Net Income Reconciliation

Three Months Ended

(in thousands)

(unaudited)

Net income on a GAAP basis

$

$

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Restructuring

Non-qualified deferred compensation expenses

Special charges*

—

Other income or expense related to investments and non-qualified deferred compensation plan assets**

Income tax effect of non-GAAP adjustments

Net income on a non-GAAP basis

$

$

*

Includes costs related to adjustments to estimated legal liabilities and executive severance.

**

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.

Net Income Reconciliation

Years Ended

(in thousands)

(unaudited)

Net income on a GAAP basis

$

$

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Restructuring

Non-qualified deferred compensation expenses

Special charges*

—

Other income or expense related to investments and non-qualified deferred compensation plan assets**

Income tax effect of non-GAAP adjustments

Net income on a non-GAAP basis

$

$

*

Includes costs related to adjustments to estimated legal liabilities and executive severance.

**

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.

Diluted Net Income Per Share Reconciliation

Three Months Ended

(in thousands, except per share data)

(unaudited)

Diluted net income per share on a GAAP basis

$

$

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Restructuring

—

—

Non-qualified deferred compensation expenses

—

Special charges*

—

Other income or expense related to investments and non-qualified deferred compensation plan assets**

Income tax effect of non-GAAP adjustments

Diluted net income per share on a non-GAAP basis

$

$

Shares used in calculation of diluted net income per share

*

Includes costs related to adjustments to estimated legal liabilities and executive severance.

**

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.

Diluted Net Income Per Share Reconciliation

Years Ended

(in thousands, except per share data)

(unaudited)

Diluted net income per share on a GAAP basis

$

$

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Restructuring

Non-qualified deferred compensation expenses

Special charges*

—

Other income or expense related to investments and non-qualified deferred compensation plan assets**

Income tax effect of non-GAAP adjustments

Diluted net income per share on a non-GAAP basis

$

$

Shares used in calculation of diluted net income per share

*

Includes costs related to adjustments to estimated legal liabilities and executive severance.

**

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.

For more information, please contact:

Cadence Investor Relations

investor_relations@cadence.com

Cadence Newsroom

newsroom@cadence.com

Cadence Design Systems, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

Current assets:

Cash and cash equivalents

$

$

Receivables, net

Inventories

Prepaid expenses and other

Total current assets

Property, plant and equipment, net

Goodwill

Acquired intangibles, net

Deferred taxes

Other assets

Total assets

$

$

Current liabilities:

Current portion of long-term debt

$

—

$

Accounts payable and accrued liabilities

Current portion of deferred revenue

Total current liabilities

Long-term liabilities:

Long-term portion of deferred revenue

Long-term debt

Other long-term liabilities

Total long-term liabilities

Stockholders’ equity

Total liabilities and stockholders’ equity

$

$

Cadence Design Systems, Inc.

Condensed Consolidated Income Statements

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Years Ended

Revenue:

Product and maintenance

$

$

$

$

Services

Total revenue

Costs and expenses:

Cost of product and maintenance

Cost of services

Marketing and sales

Research and development

General and administrative

Amortization of acquired intangibles

Restructuring

Total costs and expenses

Income from operations

Interest expense

Other income, net

Income before provision for income taxes

Provision for income taxes

Net income

$

$

$

$

Net income per share - basic

$

$

$

$

Net income per share - diluted

$

$

$

$

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - diluted

Cadence Design Systems, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Years Ended

Cash and cash equivalents at beginning of year

$

$

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of debt discount and fees

Stock-based compensation

Gain on investments, net

Deferred income taxes

Provisions for losses on receivables

ROU asset amortization and change in operating lease liabilities

Other non-cash items

Changes in operating assets and liabilities, net of effect of acquired businesses:

Receivables

Inventories

Prepaid expenses and other

Other assets

Accounts payable and accrued liabilities

Deferred revenue

Other long-term liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of investments

Proceeds from the sale and maturity of investments

Purchases of property, plant and equipment

Purchases of intangible assets

—

Cash paid in business combinations, net of cash acquired

Net cash used for investing activities

Cash flows from financing activities:

Proceeds from revolving credit facility

—

Payments on revolving credit facility

—

Proceeds from issuance of debt

—

Payments of debt

—

Payments of debt issuance costs

—

Proceeds from issuance of common stock

Stock received for payment of employee taxes on vesting of restricted stock

Payments for repurchases of common stock

Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase in cash and cash equivalents

Cash and cash equivalents at end of year

$

$

Cadence Design Systems, Inc.

(Unaudited)

Revenue Mix by Geography (% of Total Revenue)

GEOGRAPHY

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

Americas

%

%

%

%

%

%

%

%

%

%

China

%

%

%

%

%

%

%

%

%

%

Other Asia

%

%

%

%

%

%

%

%

%

%

Europe, Middle East and Africa

%

%

%

%

%

%

%

%

%

%

Japan

6

%

6

%

6

%

6

%

5

%

5

%

6

%

6

%

6

%

6

%

Total

%

%

%

%

%

%

%

%

%

%

Revenue Mix by Product Category (% of Total Revenue)

PRODUCT CATEGORY

Q1

Q2

Q3

Q4

Year

Q1

Q2

Q3

Q4

Year

Core EDA

%

%

%

%

%

%

%

%

%

%

IP

%

%

%

%

%

%

%

%

%

%

System Design and Analysis

%

%

%

%

%

%

%

%

%

%

Total

%

%

%

%

%

%

%

%

%

%

Cadence Design Systems, Inc.

Impact of Non-GAAP Adjustments on Forward Looking Operating Margin

(Unaudited)

Three Months Ending

Year Ending

Forecast

Forecast

G6GAAP operating margin as a percent of total revenue

Reconciling items to non-GAAP operating margin as a percent of total revenue:

Stock-based compensation expense

9%

9%

Amortization of acquired intangibles

2%

2%

Acquisition and integration-related costs

2%

2%

Non-GAAP operating margin as a percent of total revenue†

†

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

(Unaudited)

Three Months Ending

Year Ending

Forecast

Forecast

G7Diluted net income per share on a GAAP basis

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Income tax effect of non-GAAP adjustments

Diluted net income per share on a non-GAAP basis†

†

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 Net Income

(Unaudited)

Three Months Ending

Year Ending

($ in millions)

Forecast

Forecast

G8Net income on a GAAP basis

Stock-based compensation expense

Amortization of acquired intangibles

Acquisition and integration-related costs

Income tax effect of non-GAAP adjustments

Net income on a non-GAAP basis†

†

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.