The significant increase in cash in Q3 2024 was primarily driven by the **issuance of $2.5 billion of Senior Notes**, which contributed a major cash inflow. In addition, **strong operating cash flow** of **$819,192 thousand** and **net cash provided by financing activities** (partially offset by share repurchases and other items) further supported the cash increase, while **exchange rate changes** added an extra **$5,423 thousand** to the total.  **[0000813672-24-000188_cfocommentary10282024ex9902.htm:2]** **[CDNS_3404207_3]** **[0000813672-24-000192_cdns-20240930.htm:43]** **[0000813672-24-000192_cdns-20240930.htm:6]** 

What drove the significant increase in cash in Q3 2024?

The sharp rise in total assets in Q3 2024 was mainly driven by a substantial increase in **cash and cash equivalents** following a **$2.5 billion senior notes offering** and strong operating cash flows, alongside significant increases in **goodwill** due to acquisitions. Additionally, there were notable increases in **acquired intangibles** and **inventories**, all of which contributed to the overall rise in total assets.  **[0000813672-24-000188_cdns10282024ex9901.htm:6]** **[CDNS_3404207_3]** **[0000813672-24-000192_cdns-20240930.htm:6]** 

What contributed to the sharp rise in total assets in Q3 2024?

The dramatic surge in **long-term debt** in Q3 2024 occurred primarily due to Cadence Design Systems, Inc. issuing **$2.5 billion in senior notes**. The proceeds from this debt issuance were used to retire maturing notes, prepay term loans, and for other general corporate purposes.  **[0000813672-24-000188_cdns10282024ex9901.htm:6]** **[CDNS_3404207_3]** 

Why did long-term debt surge so dramatically in Q3 2024?

1763a2e30c598372c58aa39c58669a2907f5d06a3e287ed311b1f2672bb91e59

The lower operating cash flow in Q2 2024 is primarily attributed to the **timing of cash receipts from customers** and an **increase in disbursements for operating assets and liabilities**. This suggests that although the overall operating cash flow figure in Q2 2024 was lower, the changes were driven by when cash was received and how much was paid out for day‐to‐day operational needs.  **[0000813672-24-000155_cdns-20240630.htm:6]** **[0000813672-24-000155_cdns-20240630.htm:42]** 

Why is operating cash flow so low in Q2 2024?

The huge jump in Q3 2024 was driven by several factors. **Operating activities** contributed a strong positive cash flow due to net income and non‑cash adjustments (e.g., depreciation, amortization, stock‑based compensation). **Financing activities** played a major role with significant proceeds from debt issuance, which more than offset cash outflows from financing activities like term loan repayments and stock repurchases. Additionally, **investing activities** registered a substantial cash outflow, and a small positive impact came from **exchange rate changes**. These factors combined to result in the substantial increase in cash for Q3 2024.  **[0000813672-24-000192_cdns-20240930.htm:6]** 

What drove the huge jump in cash increases in Q3 2024?

In Q4 2023, the amortization of debt discount and fees reached a notably negative figure of **(941,548)** (USD, thousands).  **[0000813672-24-000034_cdns-20231231.htm:101]**  This significant swing is attributed to the fact that the **2025 Term Loan was outstanding for the full year in 2023**, unlike in 2022 when it was only partially outstanding. This extension in exposure resulted in higher contractual cash interest expense, along with increased amortization of the debt discount and related fees, which drove the more negative outcome observed in Q4 2023.  **[0000813672-24-000034_cdns-20231231.htm:70]** 

Why did amortization of debt discount and fees turn so negative in Q4 2023?

The swing in Q3 2024 was mainly driven by several key financing activities. **Proceeds from debt issuance** contributed significantly with **$3.2 billion** in inflows, a move absent in the previous year, while there was an increase in **proceeds from common stock issuance** to **$193.9 million**. Additionally, the company reduced its **repurchases of common stock** to **$400 million** from **$575 million**, and made a **$1 billion** payment to prepay term loans—an activity that did not occur in Q3 2023. However, these positive moves were partly offset by an increase in **employee taxes on restricted stock vesting** to **$217.5 million** from **$122.2 million**. Together, these factors led to the significant change in financing cash flow in Q3 2024.  **[0000813672-24-000188_cdns10282024ex9901.htm:7]** **[0000813672-24-000192_cdns-20240930.htm:6]** 

What factors contributed to the swing in financing cash flow in Q3 2024?

67a8cfae883e67fb22a1c4a4b5b45853c00c6a2fbf1a548cc3654fd1e83cbedf

The jump in **Services revenue** in Q4 2023 was driven primarily by **increased revenue from Cadence's cloud-based offerings**, including computational molecular modeling and simulation solutions associated with the acquisition of OpenEye, as well as by the **timing of fulfillment of services and IP performance obligations**, which can vary significantly from period to period.  **[0000813672-24-000034_cdns-20231231.htm:66]** **[0000813672-24-000030_cdns02122024ex9901.htm:7]** 

What drove the jump in Services revenue in Q4 2023?

EPS increased sharply in Q4 2023 primarily due to **robust revenue growth** and **improved operating margins**, which boosted overall net income, combined with **share repurchases** that reduced the number of outstanding shares and thus magnified the impact on earnings per share.  **[0000813672-24-000030_cdns02122024ex9901.htm:0]** **[CDNS_3372994_4]** **[0000813672-24-000030_cfocommentary02122024ex9902.htm:3]** **[0000813672-24-000030_cdns02122024ex9901.htm:5]** **[0000813672-24-000034_cdns-20231231.htm:100]** **[0000813672-24-000030_cfocommentary02122024ex9902.htm:3]** **[CDNS_3372994_8]** 

Why did EPS increase so sharply in Q4 2023?

The drop in operating income in Q1 2024 was driven by a combination of **declining revenues** and **rising expenses**. Total revenue declined by about **1%**, with a notable **5% drop in product and maintenance revenue**. At the same time, the company experienced **increased costs and expenses** across multiple areas, including higher expenditures in marketing and sales, research and development, and general and administrative expenses, along with a significant increase in the cost of services from **$24,234 thousand to $49,802 thousand**.  **[0000813672-24-000083_cdns04222024ex9901.htm:0]** **[0000813672-24-000083_cdns04222024ex9901.htm:7]** **[0000813672-24-000083_cfocommentary04222024ex9902.htm:2]** **[0000813672-24-000092_cdns-20240331.htm:26]** 

What led to the drop in operating income in Q1 2024?

The spike in restructuring costs in Q3 2024 was due to **Cadence's recent restructuring plans initiated in August 2024** to better align its resources with its business strategy. Additionally, the restructuring charges and related benefits were determined based on management's estimates during the formulation of these plans.  **[0000813672-24-000188_cdns10282024ex9901.htm:6]** **[0000813672-24-000192_cdns-20240930.htm:40]** 

Why did Restructuring costs spike in Q3 2024?

The significant jump in **Product and Maintenance revenue** in Q3 2024 was driven by several factors: **growth in IP, software, and hardware product offerings**; **increased customer investments in complex designs**; **improved hardware installations** fueled by strong demand from AI, hyperscale, and automotive sectors; and the accelerated adoption of **AI-driven solutions** such as Cadence Cerebrus AI and Virtuoso Studio.  **[0000813672-24-000192_cdns-20240930.htm:34]** **[0000813672-24-000192_cdns-20240930.htm:2]** **[CDNS_3404207_2]** 

What factors contributed to the jump in Product and maintenance revenue in Q3 2024?

9ec11dce58fdb78d3ebc115511581e5768dc07b1edfbba4c4c862777970beada

Revenue: Product and maintenance (USD, thousands)

Revenue: Services (USD, thousands)

Total revenue (USD, thousands)

Costs and expenses: Cost of product and maintenance (USD, thousands)

Costs and expenses: Cost of services (USD, thousands)

Costs and expenses: Marketing and sales (USD, thousands)

Costs and expenses: Research and development (USD, thousands)

Costs and expenses: General and administrative (USD, thousands)

Costs and expenses: Amortization of acquired intangibles (USD, thousands)

Costs and expenses: Restructuring (USD, thousands)

Total costs and expenses (USD, thousands)

Income from operations (USD, thousands)

Interest expense (USD, thousands)

Other income, net (USD, thousands)

Income before provision for income taxes (USD, thousands)

Provision for income taxes (USD, thousands)

Net income (USD, thousands)

Net income per share – basic (USD)

Net income per share – diluted (USD)

Weighted average common shares outstanding – basic (shares)

Weighted average common shares outstanding – diluted (shares)

10557462edf3e8aa55002684c1be22cfe225df0d9ac2ba48810027d03124b53d

Cash and cash equivalents (USD, thousands)

Receivables, net (USD, thousands)

Inventories (USD, thousands)

Prepaid expenses and other (USD, thousands)

Total current assets (USD, thousands)

Property, plant and equipment, net (USD, thousands)

Goodwill (USD, thousands)

Acquired intangibles, net (USD, thousands)

Deferred taxes (USD, thousands)

Other assets (USD, thousands)

Total assets (USD, thousands)

Accounts payable and accrued liabilities (USD, thousands)

Current portion of deferred revenue (USD, thousands)

Total current liabilities (USD, thousands)

Long-term portion of deferred revenue (USD, thousands)

Long-term debt (USD, thousands)

Other long-term liabilities (USD, thousands)

Total long-term liabilities (USD, thousands)

Total stockholders’ equity (USD, thousands)

Total liabilities and stockholders’ equity (USD, thousands)

1aeb93abc0153bfdea72de394b80f1521360382a23986c35c72d6a6fdf891f01

Depreciation and amortization (USD, thousands)

Stock-based compensation (USD, thousands)

(Gain) loss on investments, net (USD, thousands)

ROU asset amortization and change in operating lease liabilities (USD, thousands)

Other non-cash items (USD, thousands)

Net cash provided by operating activities (USD, thousands)

Purchases of investments (USD, thousands)

Proceeds from the sale and maturity of investments (USD, thousands)

Purchases of property, plant and equipment (USD, thousands)

Cash paid in business combinations, net of cash acquired (USD, thousands)

Net cash used for investing activities (USD, thousands)

Proceeds from issuance of common stock (USD, thousands)

Stock received for payment of employee taxes on vesting of restricted stock (USD, thousands)

Payments for repurchases of common stock (USD, thousands)

Net cash provided by (used for) financing activities (USD, thousands)

Effect of exchange rate changes on cash and cash equivalents (USD, thousands)

Increase in cash and cash equivalents (USD, thousands)

Cash and cash equivalents at beginning of period (USD, thousands)

Deferred income taxes (USD, thousands)

Cash and cash equivalents at end of period (USD, thousands)

41b37f1f191ed19df8277a1084e690c40a6e9919f0b003764add63492fef0ce6

Total Revenue [USD, Thousands]

Cost of Goods Sold (COGS) [USD, Thousands]

SG&A [USD, Thousands]

R&D [USD, Thousands]

D&A [USD, Thousands]

Interest Expense [USD, Thousands]

Operating Income (EBIT) [USD, Thousands]

Net Income [USD, Thousands]

EPS - Basic [USD, Units]

EPS - Diluted [USD, Units]

a8bc32eab39d01c6292c2daf59253723809ae0e33a95aed7c9d267b802154eb9

875eb780bc39829461d6bc11a558639214ab63792ac8bc90eedcbe5952e40afd

Adjustments for Non-Cash Items

Stock-Based Compensation

Changes in Working Capital

Capital Expenditures (CapEx)

Proceeds from / Repayments of Debt

Share Repurchases

Dividend Payments

Net Change in Cash

364b644611fc70d640188a706557feebd3a9b9c9572c6ebfc50bc3237dbef414

c00be59f1aa617d0b08beb0a1805258f4fd493c14043af785464b1fe57333989

United States

Other Americas

China

Other Asia

Asia

EMEA

Japan

Americas

Total Revenue

eaf1d2e753eed3c1790586663a6fbfd540efa9148b4a78acc2466bb6f30a02b8

CADENCE DESIGN SYSTEMS (CDNS)

Financials