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Fair Value Fair Value (Details Textual)
$ in Millions

3 Months Ended

Apr. 03, 2021

USD ($)

Fair Value Measurement Inputs and Valuation Techniques [Line Items]

Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadence’s market assumptions. These two types of inputs have created the following fair value hierarchy:

•Level 1 – Quoted prices for identical instruments in active markets;

•Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

•Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

This hierarchy requires Cadence to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. Cadence recognizes transfers between levels of the hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the three months ended April 3, 2021.

On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of April 3, 2021 and January 2, 2021:


	Fair Value Measurements as of April 3, 2021
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	283,039	$	283,039	$	—	$	—
Marketable equity securities	5,467		5,467		—		—
Securities held in Non-Qualified Deferred Compensation (“NQDC”) trust	44,301		44,301		—		—

Total Assets	$	332,807	$	332,807	$	—	$	—

	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	7,430	$	—	$	7,430	$	—
Total Liabilities	$	7,430	$	—	$	7,430	$	—

	Fair Value Measurements as of January 2, 2021
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	541,386	$	541,386	$	—	$	—
Marketable equity securities	4,452		4,452		—		—
Securities held in NQDC trust	42,769		42,769		—		—
Foreign currency exchange contracts	8,868		—		8,868		—
Total Assets	$	597,475	$	588,607	$	8,868	$	—

As of January 2, 2021, Cadence did not have any financial liabilities requiring a recurring fair value measurement.

Level 1 Measurements

Cadence’s cash equivalents held in money market funds, marketable equity securities and the trading securities held in Cadence’s NQDC trust are measured at fair value using level 1 inputs.

Level 2 Measurements

The valuation techniques used to determine the fair value of Cadence’s foreign currency forward exchange contracts and 2024 Notes are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 2 in the notes to condensed consolidated financial statements.

Level 3 Measurements

Cadence acquired intangible assets of $72.2 million during the first quarter of fiscal 2021 with its acquisition of NUMECA. The fair value of the definite-lived intangible assets acquired with these acquisitions was determined using variations of the income approach and level 3 inputs.

For existing technology, the fair value was determined by applying the relief-from-royalty method. This method is based on the application of a royalty rate to forecasted revenue to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. To estimate royalty savings over time, Cadence projected revenue from existing technology over the estimated remaining life of the technology, including the effect of technological obsolescence which was estimated at a rate of 6.7% annually, before applying an assumed royalty rate of 22%. The present value of after-tax royalty savings were determined using a discount rate of 10.5%.

The fair value for agreements and relationships was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships considered a customer retention rate of 95%. The present value of operating cash flows from existing customers was determined using a discount rate of 10.5%.

Cadence believes that its estimates and assumptions related to the fair value of its acquired intangible assets are reasonable, but significant judgment is involved.

Fair Value, Inputs, Level 3 [Member] | NUMECA

Fair Value Measurement Inputs and Valuation Techniques [Line Items]

Finite-lived intangible assets acquired during period

$ 72.2

Fair Value, Inputs, Level 3 [Member] | NUMECA | Existing Technology [Member]

Fair Value Measurement Inputs and Valuation Techniques [Line Items]

Estimated Royalty Rate

22.00%

Estimated Technological Obsolescence Rate

6.70%

Fair Value, Inputs, Level 3 [Member] | Measurement Input, Discount Rate [Member] | NUMECA | Existing Technology [Member]

Fair Value Measurement Inputs and Valuation Techniques [Line Items]