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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Cadence Design Systems Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Net operating profit after taxes (NOPAT)¹	1,001,524)	882,577)	761,220)	708,432)	445,782)
Cost of capital²	14.95%	14.85%	14.90%	14.89%	14.78%
Invested capital³	4,056,689)	3,680,162)	3,138,367)	2,827,971)	2,295,084)

Economic profit⁴	395,159)	336,047)	293,664)	287,427)	106,584)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,001,524 – 14.95% × 4,056,689 = 395,159

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Cadence Design Systems Inc. economic profit increased from 2021 to 2022 and from 2022 to 2023.

Cadence Design Systems Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Net income	1,041,144)	848,952)	695,955)	590,644)	988,979)
Deferred income tax expense (benefit)¹	(36,512)	(107,606)	(43,178)	(26,117)	(576,738)
Increase (decrease) in allowance for doubtful accounts²	2,263)	(1,402)	825)	1,998)	(3,067)
Increase (decrease) in deferred revenue³	(18,107)	126,972)	101,169)	125,038)	27,709)
Increase (decrease) in restructuring plans balance⁴	2,603)	(43)	(8,650)	(945)	(2,386)
Increase (decrease) in equity equivalents⁵	(49,753)	17,921)	50,166)	99,974)	(554,482)
Interest expense	36,185)	22,934)	16,980)	20,749)	18,829)
Interest expense, operating lease liability⁶	6,279)	7,043)	4,766)	5,618)	4,965)
Adjusted interest expense	42,464)	29,977)	21,746)	26,367)	23,794)
Tax benefit of interest expense⁷	(8,917)	(6,295)	(4,567)	(5,537)	(4,997)
Adjusted interest expense, after taxes⁸	33,547)	23,682)	17,179)	20,830)	18,797)
Interest income	(29,637)	(10,099)	(2,634)	(3,817)	(9,509)
Investment income, before taxes	(29,637)	(10,099)	(2,634)	(3,817)	(9,509)
Tax expense (benefit) of investment income⁹	6,224)	2,121)	553)	802)	1,997)
Investment income, after taxes¹⁰	(23,413)	(7,978)	(2,081)	(3,015)	(7,512)
Net operating profit after taxes (NOPAT)	1,001,524)	882,577)	761,220)	708,432)	445,782)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in restructuring plans balance.

⁵ Addition of increase (decrease) in equity equivalents to net income.

⁶ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 156,977 × 4.00% = 6,279

⁷ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 42,464 × 21.00% = 8,917

⁸ Addition of after taxes interest expense to net income.

⁹ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 29,637 × 21.00% = 6,224

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Cadence Design Systems Inc. NOPAT increased from 2021 to 2022 and from 2022 to 2023.

Cadence Design Systems Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Provision for income taxes	240,782)	196,411)	72,480)	42,104)	(510,011)
Less: Deferred income tax expense (benefit)	(36,512)	(107,606)	(43,178)	(26,117)	(576,738)
Add: Tax savings from interest expense	8,917)	6,295)	4,567)	5,537)	4,997)
Less: Tax imposed on investment income	6,224)	2,121)	553)	802)	1,997)
Cash operating taxes	279,988)	308,191)	119,672)	72,956)	69,727)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Cadence Design Systems Inc. cash operating taxes increased from 2021 to 2022 but then slightly decreased from 2022 to 2023.

Cadence Design Systems Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Revolving credit facility	—)	100,000)	—)	—)	—)
Current portion of long-term debt	349,285)	—)	—)	—)	—)
Long-term debt, excluding current portion	299,771)	648,078)	347,588)	346,793)	346,019)
Operating lease liability¹	156,977)	176,074)	132,392)	147,836)	110,340)
Total reported debt & leases	806,033)	924,152)	479,980)	494,629)	456,359)
Stockholders’ equity	3,404,271)	2,745,113)	2,740,675)	2,493,018)	2,102,894)
Net deferred tax (assets) liabilities²	(871,184)	(838,932)	(754,638)	(727,356)	(731,179)
Allowance for doubtful accounts³	4,553)	2,290)	3,692)	2,867)	869)
Deferred revenue⁴	763,955)	782,062)	655,090)	553,921)	428,883)
Restructuring plans balance⁵	2,603)	—)	43)	8,693)	9,638)
Equity equivalents⁶	(100,073)	(54,580)	(95,813)	(161,875)	(291,789)
Accumulated other comprehensive (income) loss, net of tax⁷	94,754)	91,637)	33,311)	17,425)	36,926)
Adjusted stockholders’ equity	3,398,952)	2,782,170)	2,678,173)	2,348,568)	1,848,031)
In-process capital assets⁸	(17,937)	(21,670)	(13,830)	(10,774)	(4,706)
Short-term investments⁹	(130,359)	(4,490)	(5,956)	(4,452)	(4,600)
Invested capital	4,056,689)	3,680,162)	3,138,367)	2,827,971)	2,295,084)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue.

⁵ Addition of restructuring plans balance.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of in-process capital assets.

⁹ Subtraction of short-term investments.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Cadence Design Systems Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Cadence Design Systems Inc., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	81,873,157)	81,873,157)	÷	82,677,105)	=	0.99	0.99	×	15.06%	=	14.91%
Outstanding debt³	646,971)	646,971)	÷	82,677,105)	=	0.01	0.01	×	5.22% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	156,977)	156,977)	÷	82,677,105)	=	0.00	0.00	×	4.00% × (1 – 21.00%)	=	0.01%
Total:	82,677,105)					1.00					14.95%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	50,684,958)	50,684,958)	÷	51,608,391)	=	0.98	0.98	×	15.06%	=	14.79%
Outstanding debt³	747,359)	747,359)	÷	51,608,391)	=	0.01	0.01	×	4.71% × (1 – 21.00%)	=	0.05%
Operating lease liability⁴	176,074)	176,074)	÷	51,608,391)	=	0.00	0.00	×	4.00% × (1 – 21.00%)	=	0.01%
Total:	51,608,391)					1.00					14.85%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	37,498,601)	37,498,601)	÷	38,007,393)	=	0.99	0.99	×	15.06%	=	14.85%
Outstanding debt³	376,400)	376,400)	÷	38,007,393)	=	0.01	0.01	×	4.38% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	132,392)	132,392)	÷	38,007,393)	=	0.00	0.00	×	3.60% × (1 – 21.00%)	=	0.01%
Total:	38,007,393)					1.00					14.90%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	37,148,178)	37,148,178)	÷	37,689,214)	=	0.99	0.99	×	15.06%	=	14.84%
Outstanding debt³	393,200)	393,200)	÷	37,689,214)	=	0.01	0.01	×	4.38% × (1 – 21.00%)	=	0.04%
Operating lease liability⁴	147,836)	147,836)	÷	37,689,214)	=	0.00	0.00	×	3.80% × (1 – 21.00%)	=	0.01%
Total:	37,689,214)					1.00					14.89%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

Dec 28, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,001,194)	20,001,194)	÷	20,489,934)	=	0.98	0.98	×	15.06%	=	14.70%
Outstanding debt³	378,400)	378,400)	÷	20,489,934)	=	0.02	0.02	×	4.38% × (1 – 21.00%)	=	0.06%
Operating lease liability⁴	110,340)	110,340)	÷	20,489,934)	=	0.01	0.01	×	4.50% × (1 – 21.00%)	=	0.02%
Total:	20,489,934)					1.00					14.78%

Based on: 10-K (reporting date: 2019-12-28).

¹ US$ in thousands

² Equity. See details »

³ Outstanding debt. See details »

⁴ Operating lease liability. See details »

Cadence Design Systems Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	395,159)	336,047)	293,664)	287,427)	106,584)
Invested capital²	4,056,689)	3,680,162)	3,138,367)	2,827,971)	2,295,084)
Performance Ratio
Economic spread ratio³	9.74%	9.13%	9.36%	10.16%	4.64%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	4.91%	7.76%	9.60%	10.17%	8.91%
Adobe Inc.	4.64%	10.09%	12.49%	4.76%	2.87%
CrowdStrike Holdings Inc.	0.32%	-2.94%	-5.21%	5.66%	—
International Business Machines Corp.	-1.97%	-9.80%	-4.78%	-4.48%	-0.77%
Intuit Inc.	-7.15%	-6.07%	1.63%	4.99%	18.63%
Microsoft Corp.	15.48%	23.43%	32.45%	30.48%	25.61%
Oracle Corp.	-1.88%	-1.52%	6.55%	0.89%	3.52%
Palantir Technologies Inc.	-14.01%	-37.70%	-45.17%	-85.17%	—
Palo Alto Networks Inc.	13.92%	5.82%	-2.87%	-3.85%	-0.67%
Salesforce Inc.	-13.02%	-10.59%	-8.32%	-11.35%	-7.32%
ServiceNow Inc.	8.10%	3.57%	4.79%	6.41%	5.82%
Synopsys Inc.	-4.05%	2.53%	-3.49%	-3.31%	-6.29%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 395,159 ÷ 4,056,689 = 9.74%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Cadence Design Systems Inc. economic spread ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.

Cadence Design Systems Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 28, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	395,159)	336,047)	293,664)	287,427)	106,584)

Revenue	4,089,986)	3,561,718)	2,988,244)	2,682,891)	2,336,319)
Add: Increase (decrease) in deferred revenue	(18,107)	126,972)	101,169)	125,038)	27,709)
Adjusted revenue	4,071,879)	3,688,690)	3,089,413)	2,807,929)	2,364,028)
Performance Ratio
Economic profit margin²	9.70%	9.11%	9.51%	10.24%	4.51%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	2.53%	3.74%	4.92%	5.18%	4.12%
Adobe Inc.	5.81%	11.75%	15.57%	6.84%	4.32%
CrowdStrike Holdings Inc.	0.43%	-4.61%	-10.82%	4.97%	—
International Business Machines Corp.	-3.51%	-17.02%	-9.11%	-7.78%	-1.32%
Intuit Inc.	-11.71%	-11.69%	2.06%	5.62%	12.41%
Microsoft Corp.	17.63%	22.46%	26.93%	22.62%	18.94%
Oracle Corp.	-3.63%	-2.79%	12.96%	2.03%	6.42%
Palantir Technologies Inc.	-7.52%	-63.24%	-74.40%	-173.50%	—
Palo Alto Networks Inc.	13.82%	6.78%	-3.86%	-6.24%	-0.75%
Salesforce Inc.	-33.16%	-29.41%	-19.07%	-27.93%	-14.42%
ServiceNow Inc.	6.52%	2.87%	4.14%	5.23%	4.27%
Synopsys Inc.	-5.71%	3.57%	-5.55%	-5.68%	-10.88%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-28).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 395,159 ÷ 4,071,879 = 9.70%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Cadence Design Systems Inc. economic profit margin deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.

Cadence Design Systems Inc. (NASDAQ:CDNS)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin