10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________ 

FORM 10-Q

_____________________________________  

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission file number 000-15867

_____________________________________ 

CADENCE DESIGN SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

_____________________________________ 

Delaware			00-0000000
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
2655 Seely Avenue, Building 5,	San Jose,	California	95134
(Address of Principal Executive Offices)			(Zip Code)

(408) 943-1234

Registrant’s Telephone Number, including Area Code

_____________________________________ 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CDNS	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐	Smaller Reporting Company	☐
Non-accelerated Filer	☐			Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

On October 1, 2022, approximately 274,316,000 shares of the registrant’s common stock, $0.01 par value, were outstanding.

CADENCE DESIGN SYSTEMS, INC.

INDEX

 

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of October 1, 2022 and January 1, 2022	1
	Condensed Consolidated Income Statements for the three and nine months ended October 1, 2022 and October 2, 2021	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 1, 2022 and October 2, 2021	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended October 1, 2022 and October 2, 2021	4
	Condensed Consolidated Statements of Cash Flows for the three and nine months ended October 1, 2022 and October 2, 2021	6
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signatures	39

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

	As of
	October 1, 2022		January 1, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	1,026,051	$	1,088,940
Receivables, net	391,181		337,596
Inventories	114,283		115,721
Prepaid expenses and other	138,968		173,512
Total current assets	1,670,483		1,715,769
Property, plant and equipment, net	348,238		305,911
Goodwill	1,348,494		928,358
Acquired intangibles, net	353,912		233,265
Deferred taxes	783,315		763,770
Other assets	463,645		439,226
Total assets	$	4,968,087	$	4,386,299
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving credit facility	$	150,000	$	—
Accounts payable and accrued liabilities	454,688		417,283
Current portion of deferred revenue	652,306		553,942
Total current liabilities	1,256,994		971,225
Long-term liabilities:
Long-term portion of deferred revenue	102,167		101,148
Long-term debt	647,799		347,588
Other long-term liabilities	252,999		225,663
Total long-term liabilities	1,002,965		674,399
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock and capital in excess of par value	2,697,632		2,467,701
Treasury stock, at cost	(3,522,219)		(2,740,003)
Retained earnings	3,654,848		3,046,288
Accumulated other comprehensive loss	(122,133)		(33,311)
Total stockholders’ equity	2,708,128		2,740,675
Total liabilities and stockholders’ equity	$	4,968,087	$	4,386,299

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

 

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenue:
Product and maintenance	$	845,788	$	706,160	$	2,494,317	$	2,093,098
Services	56,766		44,735		167,524		122,110
Total revenue	902,554		750,895		2,661,841		2,215,208
Costs and expenses:
Cost of product and maintenance	62,351		54,185		203,863		174,933
Cost of services	25,249		22,402		74,245		62,380
Marketing and sales	152,925		143,401		432,407		412,194
Research and development	323,629		289,105		901,121		845,324
General and administrative	73,688		42,990		174,051		123,275
Amortization of acquired intangibles	3,946		5,000		13,543		14,661
Restructuring	14		(222)		42		(968)
Total costs and expenses	641,802		556,861		1,799,272		1,631,799
Income from operations	260,752		194,034		862,569		583,409
Interest expense	(5,463)		(4,196)		(13,852)		(12,729)
Other income (expenses), net	(3,017)		(1,143)		(13,879)		3,701
Income before provision for income taxes	252,272		188,695		834,838		574,381
Provision for income taxes	65,967		12,388		226,278		55,005
Net income	$	186,305	$	176,307	$	608,560	$	519,376
Net income per share – basic	$	0.69	$	0.65	$	2.24	$	1.90
Net income per share – diluted	$	0.68	$	0.63	$	2.21	$	1.86
Weighted average common shares outstanding – basic	271,131		273,194		271,694		273,636
Weighted average common shares outstanding – diluted	274,957		278,311		275,683		279,046

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net income	$	186,305	$	176,307	$	608,560	$	519,376
Other comprehensive income (loss), net of tax effects:
Foreign currency translation adjustments	(40,768)		(5,483)		(90,764)		(9,618)
Changes in defined benefit plan liabilities	15		(288)		1,942		(520)
Total other comprehensive loss, net of tax effects	(40,753)		(5,771)		(88,822)		(10,138)
Comprehensive income	$	145,552	$	170,536	$	519,738	$	509,238

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three Months Ended October 1, 2022
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, July 2, 2022	273,870	$	2,590,893	$	(3,352,827)	$	3,468,543	$	(81,380)	$	2,625,229
Net income	—	—		—		186,305		—		$	186,305
Other comprehensive loss, net of taxes	—	—		—		—		(40,753)		$	(40,753)
Purchase of treasury stock	(959)	—		(150,013)		—		—		$	(150,013)
Equity forward contract	—	17,965		(17,965)						$	—
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	1,574	23,095		30,363		—		—		$	53,458
Stock received for payment of employee taxes on vesting of restricted stock	(169)	(7,772)		(31,777)		—		—		$	(39,549)
Stock-based compensation expense	—	73,451		—		—		—		$	73,451
Balance, October 1, 2022	274,316	$	2,697,632	$	(3,522,219)	$	3,654,848	$	(122,133)	$	2,708,128
	Three Months Ended October 2, 2021
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, July 3, 2021	276,780	$	2,354,801	$	(2,509,668)	$	2,693,402	$	(21,792)	$	2,516,743
Net income	—	—		—		176,307		—		$	176,307
Other comprehensive loss, net of taxes	—	—		—		—		(5,771)		$	(5,771)
Purchase of treasury stock	(723)	—		(110,011)		—		—		$	(110,011)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	1,249	9,319		22,061		—		—		$	31,380
Stock received for payment of employee taxes on vesting of restricted stock	(165)	(5,075)		(25,057)		—		—		$	(30,132)
Stock-based compensation expense	—	52,746		—		—		—		$	52,746
Balance, October 2, 2021	277,141	$	2,411,791	$	(2,622,675)	$	2,869,709	$	(27,563)	$	2,631,262

	Nine Months Ended October 1, 2022
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, January 1, 2022	276,796	$	2,467,701	$	(2,740,003)	$	3,046,288	$	(33,311)	$	2,740,675
Net income	—	—		—		608,560		—		$	608,560
Other comprehensive loss, net of taxes	—	—		—		—		(88,822)		$	(88,822)
Purchase of treasury stock	(4,664)	—		(720,062)		—		—		$	(720,062)
Equity forward contract	—	(12,035)		(17,965)		—		—		$	(30,000)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	2,738	60,327		43,353		—		—		$	103,680
Stock received for payment of employee taxes on vesting of restricted stock	(554)	(15,551)		(87,542)		—		—		$	(103,093)
Stock-based compensation expense	—	197,190		—		—		—		$	197,190
Balance, October 1, 2022	274,316	$	2,697,632	$	(3,522,219)	$	3,654,848	$	(122,133)	$	2,708,128
	Nine Months Ended October 2, 2021
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, January 2, 2021	278,941	$	2,217,939	$	(2,057,829)	$	2,350,333	$	(17,425)	$	2,493,018
Net income	—	—		—		519,376		—		$	519,376
Other comprehensive loss, net of taxes	—	—		—		—		(10,138)		$	(10,138)
Purchase of treasury stock	(3,766)	—		(502,301)		—		—		$	(502,301)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	2,640	52,236		31,396		—		—		$	83,632
Stock received for payment of employee taxes on vesting of restricted stock	(674)	(14,244)		(93,941)		—		—		$	(108,185)
Stock-based compensation expense	—	155,860		—		—		—		$	155,860
Balance, October 2, 2021	277,141	$	2,411,791	$	(2,622,675)	$	2,869,709	$	(27,563)	$	2,631,262

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	October 1, 2022		October 2, 2021
Cash and cash equivalents at beginning of period	$	1,088,940	$	928,432
Cash flows from operating activities:
Net income	608,560		519,376
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	98,178		106,962
Amortization of debt discount and fees	810		952
Stock-based compensation	197,190		155,860
(Gain) loss on investments, net	4,777		(330)
Deferred income taxes	(49,834)		(34,566)
Provisions for losses on receivables	471		234
ROU asset amortization and change in operating lease liabilities	(883)		(2,917)
Other non-cash items	158		146
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(57,309)		15,132
Inventories	(8,020)		(25,608)
Prepaid expenses and other	30,596		36,632
Other assets	17,644		8,127
Accounts payable and accrued liabilities	24,514		10,501
Deferred revenue	113,712		84,183
Other long-term liabilities	(2,305)		10,417
Net cash provided by operating activities	978,259		885,101
Cash flows from investing activities:
Purchases of non-marketable investments	(1,000)		—
Proceeds from the sale of non-marketable investments	—		128
Purchases of property, plant and equipment	(86,295)		(49,977)
Purchases of intangible assets	(1,000)		—
Cash paid in business combinations, net of cash acquired	(586,163)		(220,026)
Net cash used for investing activities	(674,458)		(269,875)
Cash flows from financing activities:
Proceeds from term loan	300,000		—
Proceeds from revolving credit facility	450,000		—
Payment on revolving credit facility	(300,000)		—
Payment of debt issuance costs	(425)		(1,285)
Proceeds from issuance of common stock	103,682		83,632
Stock received for payment of employee taxes on vesting of restricted stock	(103,093)		(108,185)
Payments for repurchases of common stock	(750,062)		(502,301)
Net cash used for financing activities	(299,898)		(528,139)
Effect of exchange rate changes on cash and cash equivalents	(66,792)		(1,700)
Increase (decrease) in cash and cash equivalents	(62,889)		85,387
Cash and cash equivalents at end of period	$	1,026,051	$	1,013,819
Supplemental cash flow information:
Cash paid for interest	$	8,508	$	8,117
Cash paid for taxes, net	148,151		47,687

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Cadence Design Systems, Inc. (“Cadence”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, Cadence believes that the disclosures contained in this Quarterly Report on Form 10-Q comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These condensed consolidated financial statements are meant to be, and should be, read in conjunction with the consolidated financial statements and the Notes thereto included in Cadence’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q reflect all adjustments (which include only normal, recurring adjustments and those items discussed in these Notes) that are, in the opinion of management, necessary to state fairly the results of operations, cash flows and financial position for the periods and dates presented. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year. Certain prior period balances have been reclassified to conform to the current period presentation. Management has evaluated subsequent events through the issuance date of the unaudited condensed consolidated financial statements.

Fiscal Year End

On September 7, 2022, Cadence’s Board of Directors approved a change in its fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year. Cadence’s fiscal quarters will end on March 31, June 30, and September 30. The fiscal year change is effective beginning with Cadence’s 2023 fiscal year, which will begin on January 1, 2023.

Cadence’s fiscal year end date for fiscal 2022 will remain December 31, 2022 as previously disclosed. Consistent with SEC guidance, no transition report is required in connection with the change in Cadence’s fiscal year end. Accordingly, Cadence intends to file an Annual Report on Form 10-K for the year ended December 31, 2022, and the new fiscal year will take effect from January 1, 2023 to December 31, 2023.

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Despite continued uncertainty and disruption in the global economy and financial markets, Cadence is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of October 24, 2022, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events or developments occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Recently Adopted Accounting Standards

Lessors - Certain Leases with Variable Lease Payments

In July 2021, the Financial Accounting Standards Board (“FASB”), issued ASU 2021-05, “Lessors - Certain Leases with Variable Lease Payments,” which allows lessors to classify and account for a lease with variable payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: (1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria as defined in ASC Topic 842 and (2) the lessor would have otherwise recognized a day-one loss on the lease arrangement. This standard better aligns the accounting with the underlying economics of these arrangements as lessors are not permitted to include most variable payments which do not depend on a reference index or a rate in the lease receivable while assets are derecognized at lease commencement. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Cadence adopted this standard on January 2, 2022, the first day of fiscal 2022, on a prospective basis. The adoption of this standard did not have a material impact on Cadence’s condensed consolidated financial statements and related disclosures.

6

Business Combinations

In October 2021, the FASB issued ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with “Revenue from Contracts with Customers (Topic 606)” as if the acquiring entity had originated the contracts. This approach differs from the previous requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. Cadence adopted this standard on January 2, 2022, the first day of fiscal 2022. The adoption of this standard did not impact acquired contract assets or liabilities from business combinations that occurred prior to the date of adoption, and the impact in current and future periods will depend on the contract assets and contract liabilities acquired. For business combinations completed during the third quarter of fiscal 2022, Cadence recognized deferred revenue of $11.8 million from the acquired businesses as if Cadence had originated the contracts in accordance with Topic 606 rather than at fair value. For additional information relating to Cadence’s acquisitions, see Note 5 in the notes to condensed consolidated financial statements.

NOTE 2. REVENUE

Cadence groups its products and services into five categories related to major design activities. The following table shows the percentage of revenue contributed by each of Cadence’s five product categories for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Custom Integrated Circuit (“IC”) Design and Simulation	22	%	23	%	22	%	23	%
Digital IC Design and Signoff	29	%	29	%	28	%	28	%
Functional Verification, including Emulation and Prototyping Hardware*	25	%	23	%	26	%	25	%
Intellectual Property (“IP”)	12	%	14	%	13	%	13	%
System Design and Analysis	12	%	11	%	11	%	11	%
Total	100	%	100	%	100	%	100	%

_____________

* Includes immaterial amount of revenue accounted for under leasing arrangements.

Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them. No single customer accounted for 10% or more of total revenue during the three and nine months ended October 1, 2022 or the three and nine months ended October 2, 2021.

Generally, between 85% and 90% of Cadence’s annual revenue is characterized as recurring revenue. Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products or services. These arrangements do not meet the definition of a revenue contract until the customer executes a separate selection form to identify the products and services that they are purchasing. Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations.

The remainder of Cadence’s revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by sales of emulation and prototyping hardware and individual IP licenses. The percentage of Cadence’s recurring and up-front revenue may be impacted by delivery of hardware and IP products to its customers in any single fiscal period. 

7

The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenue recognized over time	81	%	86	%	82	%	84	%
Revenue from arrangements with non-cancelable commitments	3	%	3	%	2	%	3	%
Recurring revenue	84	%	89	%	84	%	87	%
Up-front revenue	16	%	11	%	16	%	13	%
Total	100	%	100	%	100	%	100	%

Significant Judgments

Cadence’s contracts with customers often include promises to transfer to a customer multiple software and/or IP licenses and services, including professional services, technical support services, and rights to unspecified updates. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some arrangements, such as most of Cadence’s IP license arrangements, Cadence has concluded that the licenses and associated services are distinct from each other. In others, like Cadence’s time-based software arrangements, the licenses and certain services are not distinct from each other. Cadence’s time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and Cadence has concluded that these promised goods and services are a single, combined performance obligation.

The accounting for contracts with multiple performance obligations requires the contract’s transaction price to be allocated to each distinct performance obligation based on relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation because Cadence rarely licenses or sells products on a standalone basis. In instances where the SSP is not directly observable because Cadence does not sell the license, product or service separately, Cadence determines the SSP using information that maximizes the use of observable inputs and may include market conditions. Cadence typically has more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, Cadence may use information such as the size of the customer and geographic region of the customer in determining the SSP.

Revenue is recognized over time for Cadence’s combined performance obligations that include software licenses, updates, technical support and maintenance that are separate performance obligations with the same term. For Cadence’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. For Cadence’s other performance obligations recognized over time, revenue is generally recognized using a time-based measure of progress reflecting generally consistent efforts to satisfy those performance obligations throughout the arrangement term.

If a group of agreements are so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be one arrangement for revenue recognition purposes. Cadence exercises significant judgment to evaluate the relevant facts and circumstances in determining whether the separate agreements should be accounted for separately or as, in substance, a single arrangement. Cadence’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

Cadence is required to estimate the total consideration expected to be received from contracts with customers. In limited circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on Cadence’s expectations of the term of the contract. Generally, Cadence has not experienced significant returns or refunds to customers. These estimates require significant judgment and a change in these estimates could have an effect on its results of operations during the periods involved.

8

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on Cadence’s condensed consolidated balance sheets. For certain software, hardware and IP agreements with payment plans, Cadence records an unbilled receivable related to revenue recognized upon transfer of control because it has an unconditional right to invoice and receive payment in the future related to those transferred products or services. Cadence records a contract asset when revenue is recognized prior to invoicing and Cadence does not have the unconditional right to invoice or retains performance risk with respect to that performance obligation. Cadence records deferred revenue when revenue is recognized subsequent to invoicing. For Cadence’s time-based software agreements, customers are generally invoiced in equal, quarterly amounts, although some customers prefer to be invoiced in single or annual amounts.

The contract assets indicated below are included in prepaid expenses and other in the condensed consolidated balance sheets and primarily relate to Cadence’s rights to consideration for work completed but not billed as of the balance sheet date on services and customized IP contracts. The contract assets are transferred to receivables when the rights become unconditional, usually upon completion of a milestone.

Cadence’s contract balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Contract assets	$	38,442	$	6,811
Deferred revenue	754,473		655,090

Cadence recognized revenue of $63.9 million and $488.9 million during the three and nine months ended October 1, 2022, and $59.8 million and $389.8 million during the three and nine months ended October 2, 2021, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue, with the exception of deferred revenue assumed from acquisitions, is due to the timing of invoices in relation to the timing of revenue as described above.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, Cadence has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing Cadence’s products and services, and not to facilitate financing arrangements.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $5.5 billion as of October 1, 2022, which included $433.5 million of non-cancelable commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. As of October 1, 2022, Cadence expected to recognize 54% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months and the remainder thereafter.

Cadence recognized revenue of $12.1 million and $35.2 million during the three and nine months ended October 1, 2022, and $13.3 million and $35.0 million during the three and nine months ended October 2, 2021, from performance obligations satisfied in previous periods. These amounts represent royalties earned during the period and exclude contracts with nonrefundable prepaid royalties. Nonrefundable prepaid royalties are recognized upon delivery of the IP because Cadence’s right to the consideration is not contingent upon customers’ future shipments.

9

NOTE 3. RECEIVABLES, NET

Cadence’s current and long-term receivables balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Accounts receivable	$	240,369	$	185,599
Unbilled accounts receivable	153,376		155,689
Long-term receivables	9,473		5,098
Total receivables	403,218		346,386
Less allowance for doubtful accounts	(2,564)		(3,692)
Total receivables, net	$	400,654	$	342,694

Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of October 1, 2022 and January 1, 2022, no single customer accounted for 10% or more of Cadence’s total receivables.

NOTE 4. DEBT

Cadence’s outstanding debt as of October 1, 2022 and January 1, 2022 was as follows:

	October 1, 2022						January 1, 2022
	(In thousands)
	Principal		Unamortized Discount		Carrying Value		Principal		Unamortized Discount		Carrying Value
Revolving Credit Facility	$	150,000	$	—	$	150,000	$	—	$	—	$	—
2024 Notes	350,000		(1,794)		348,206		350,000		(2,412)		347,588
2025 Term Loan	300,000		(407)		299,593		—		—		—
Total outstanding debt	$	800,000	$	(2,201)	$	797,799	$	350,000	$	(2,412)	$	347,588

Revolving Credit Facility

In June 2021, Cadence entered into a five-year senior unsecured revolving credit facility with a group of lenders led by Bank of America, N.A., as administrative agent (the “2021 Credit Facility”). In September 2022, Cadence amended the 2021 Credit Facility to, among other things, allow Cadence to change its fiscal year to match the calendar year commencing in 2023 and change the interest rate benchmark for loans under the 2021 Credit Facility from LIBOR to Term SOFR. The material terms of the 2021 Credit Facility otherwise remain unchanged.

The 2021 Credit Facility provides for borrowings up to $700 million, with the right to request increased capacity up to an additional $350 million upon the receipt of lender commitments, for total maximum borrowings of $1.05 billion. The 2021 Credit Facility expires on June 30, 2026. Any outstanding loans drawn under the 2021 Credit Facility are due at maturity on June 30, 2026, subject to an option to extend the maturity date. Outstanding borrowings may be repaid at any time prior to maturity. Debt issuance costs of $1.3 million were recorded to other assets in Cadence’s condensed consolidated balance sheet at the inception of the agreement and are being amortized to interest expense over the term of the 2021 Credit Facility.

Interest accrues on borrowings under the 2021 Credit Facility at a rate equal to, at Cadence’s option, either (1) SOFR plus a margin between 0.750% and 1.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10% or (2) the base rate plus a margin between 0.000% and 0.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of October 1, 2022, the interest rate on the 2021 Credit Facility was 3.82%. Interest is payable quarterly. A commitment fee ranging from 0.070% to 0.175% is assessed on the daily average undrawn portion of revolving commitments.

The 2021 Credit Facility contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness and grant liens. In addition, the 2021 Credit Facility contains financial covenants that require Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250.0 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of October 1, 2022, Cadence was in compliance with all financial covenants associated with the 2021 Credit Facility.

10

2024 Notes

In October 2014, Cadence issued $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024 (the “2024 Notes”). Cadence received net proceeds of $342.4 million from the issuance of the 2024 Notes, net of a discount of $1.4 million and issuance costs of $6.2 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2024 Notes using the effective interest method. Interest is payable in cash semi-annually in April and October. The 2024 Notes are unsecured and rank equal in right of payment to all of Cadence’s existing and future senior indebtedness. The carrying value of the 2024 Notes was $348.2 million and $347.6 million as of October 1, 2022 and January 1, 2022, respectively. The fair value of the 2024 Notes was approximately $345.8 million as of October 1, 2022.

Cadence may redeem the 2024 Notes, in whole or in part, at a redemption price equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, and (b) the sum of the present values of the remaining scheduled payments of principal and interest, plus any accrued and unpaid interest, as more particularly described in the indenture governing the 2024 Notes.

The indenture governing the 2024 Notes includes customary representations, warranties and restrictive covenants, including, but not limited to, restrictions on Cadence’s ability to grant liens on assets, enter into sale and lease-back transactions, or merge, consolidate or sell assets, and also includes customary events of default.

2025 Term Loan

In September 2022, Cadence entered into a $300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025 with a group of lenders led by Bank of America, N.A., as administrative agent (the “2025 Term Loan”). The 2025 Term Loan is unsecured and ranks equal in right of payment to all of Cadence’s unsecured indebtedness. Proceeds from the loan were used to fund Cadence’s acquisition of OpenEye Scientific Software, Inc. (“OpenEye”).

Amounts outstanding under the 2025 Term Loan accrue interest at a rate equal to, at Cadence’s option, either (1) Term SOFR plus a margin between 0.625% per annum and 1.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10% or (2) base rate plus a margin between 0.000% per annum and 0.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of October 1, 2022, the interest rate on the 2025 Term Loan was 4.08%. Interest is payable quarterly. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2025 Term Loan approximates fair value.

The 2025 Term Loan contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness, grant liens and make certain asset dispositions. In addition, the 2025 Term Loan contains a financial covenant that requires Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step-up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250.0 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of October 1, 2022, Cadence was in compliance with all financial covenants associated with the 2025 Term Loan.

NOTE 5. ACQUISITIONS

Acquisition of OpenEye Scientific Software, Inc.

On August 31, 2022, Cadence acquired all of the outstanding equity of OpenEye, a leading provider of computational molecular modeling and simulation software used by pharmaceutical and biotechnology companies for drug discovery. The addition of OpenEye’s technologies and experienced team with its deep scientific expertise is expected to accelerate Cadence’s Intelligent System Design™ strategy and broadens Cadence’s System Design and Analysis technology portfolio. The acquisition expands Cadence’s total addressable market, bringing Cadence’s computational software expertise to apply proven algorithmic, simulation and solver advances to life sciences. The aggregate cash consideration for Cadence’s acquisition of OpenEye, net of cash acquired of $13.2 million, was $461.1 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former OpenEye shareholders, now employed by Cadence, through the first quarter of fiscal 2026.

11

The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	24,890
Goodwill	368,148
Acquired intangibles	117,400
Other long-term assets	6,542
Total assets acquired	516,980
Current liabilities	15,489
Long-term liabilities	27,225
Total liabilities assumed	42,714
Total purchase consideration	$	474,266

The allocation of purchase consideration to certain assets and liabilities has not been finalized. Cadence will continue to evaluate certain estimates and assumptions, primarily related to taxes and assumed liabilities, during the measurement period (up to one year from the acquisition date). The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and will not be deductible for tax purposes.

Acquired Intangibles

	Fair Value		Weighted-Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	53,900	7.0 years
Agreements and relationships	61,400		12.3 years
Tradenames, trademarks and patents	2,100		7.0 years
Total acquired intangibles with definite lives	$	117,400	9.8 years

Acquisition of FFG Holdings Limited

On July 14, 2022, Cadence acquired all of the outstanding equity of FFG Holdings Limited (“Future Facilities”), a provider of electronics cooling analysis and energy performance optimization solutions for data center design and operations using physics-based 3D digital twins. The addition of Future Facilities’ technologies and expertise supports Cadence’s Intelligent System Design strategy and broadens its System Design and Analysis technology portfolio with the addition of solutions that enable companies to make informed business decisions about data center design, operations and lifecycle management that reduce their carbon footprint. The aggregate cash consideration for Cadence’s acquisition of Future Facilities, net of cash acquired of $2.8 million, was $100.1 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former Future Facilities shareholders, now employed by Cadence, subject to service and other conditions, through the third quarter of fiscal 2025.

The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	7,992
Goodwill	67,868
Acquired intangibles	38,100
Other long-term assets	3,102
Total assets acquired	117,062
Current liabilities	4,952
Long-term liabilities	9,210
Total liabilities assumed	14,162
Total purchase consideration	$	102,900

12

The allocation of purchase consideration to certain assets and liabilities has not been finalized. Cadence will continue to evaluate certain estimates and assumptions, primarily related to taxes and assumed liabilities, during the measurement period (up to one year from the acquisition date). The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies from combining operations of Future Facilities with Cadence. The goodwill will not be deductible for tax purposes.

Acquired Intangibles

	Fair Value		Weighted-Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	20,900	6.0 years
Agreements and relationships	15,600		9.0 years
Tradenames, trademarks and patents	1,600		8.0 years
Total acquired intangibles with definite lives	$	38,100	7.3 years

Other Acquisitions

During the second quarter of fiscal 2022, Cadence completed one business combination for aggregate cash consideration of $25.0 million. The total purchase consideration was allocated to assets acquired based on their respective estimated fair values on the acquisition date. Cadence recorded $15.0 million of acquired intangible assets, which consisted of $8.2 million of existing technology and $6.8 million of in-process technology. Cadence also recognized $10.0 million of goodwill, which is primarily attributed to an assembled workforce. The goodwill recognized is expected to be deductible for tax purposes.

Pro Forma Financial Information

Cadence has not presented pro forma financial information for acquisitions completed during the first three quarters of fiscal 2022 because the results of operations from the acquired businesses are not material to Cadence’s condensed consolidated financial statements.

Transaction Costs

Transaction costs associated with acquisitions are included in general and administrative expense in Cadence’s condensed consolidated income statement. During the three and nine months ended October 1, 2022, transaction costs associated with acquisitions were $3.6 million and $10.1 million, respectively. During the three and nine months ended October 2, 2021, transaction costs associated with acquisitions were $0.1 million and $2.0 million, respectively.

NOTE 6. GOODWILL AND ACQUIRED INTANGIBLES

Goodwill

The changes in the carrying amount of goodwill during the nine months ended October 1, 2022 were as follows:

	Gross Carrying Amount
	(In thousands)
Balance as of January 1, 2022	$	928,358
Goodwill resulting from acquisitions	446,000
Effect of foreign currency translation	(25,864)
Balance as of October 1, 2022	$	1,348,494

13

Acquired Intangibles, Net

Acquired intangibles as of October 1, 2022 were as follows, excluding intangibles that were fully amortized as of January 1, 2022:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	468,489	$	(267,918)	$	200,571
Agreements and relationships	269,597		(133,089)		136,508
Tradenames, trademarks and patents	12,545		(2,512)		10,033
Total acquired intangibles with definite lives	750,631		(403,519)		347,112
In-process technology	6,800		—		6,800
Total acquired intangibles	$	757,431	$	(403,519)	$	353,912

In-process technology as of October 1, 2022 consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of October 1, 2022, these projects were expected to be completed during the fourth quarter of fiscal 2023. During the three and nine months ended October 1, 2022, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of January 1, 2022 were as follows, excluding intangibles that were fully amortized as of January 2, 2021:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	405,481	$	(254,599)	$	150,882
Agreements and relationships	205,057		(130,187)		74,870
Tradenames, trademarks and patents	10,666		(3,153)		7,513
Total acquired intangibles	$	621,204	$	(387,939)	$	233,265

Amortization expense from existing technology and maintenance agreements is included in cost of product and maintenance. Amortization expense for the three and nine months ended October 1, 2022 and October 2, 2021 by condensed consolidated income statement caption was as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Cost of product and maintenance	$	8,867	$	11,774	$	30,906	$	35,774
Amortization of acquired intangibles	3,946		5,000		13,543		14,661
Total amortization of acquired intangibles	$	12,813	$	16,774	$	44,449	$	50,435

As of October 1, 2022, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

	(In thousands)
2022 - remaining period	$	14,870
2023	56,040
2024	54,280
2025	42,213
2026	36,298
2027	34,056
Thereafter	109,355
Total estimated amortization expense	$	347,112

14

NOTE 7. STOCK-BASED COMPENSATION

Stock-based compensation expense is reflected in Cadence’s condensed consolidated income statements for the three and nine months ended October 1, 2022 and October 2, 2021 as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Cost of product and maintenance	$	1,046	$	885	$	2,751	$	2,601
Cost of services	1,331		1,158		3,494		3,177
Marketing and sales	14,991		10,784		39,650		32,284
Research and development	43,327		32,957		115,516		97,101
General and administrative	12,756		6,962		35,779		20,697
Total stock-based compensation expense	$	73,451	$	52,746	$	197,190	$	155,860

Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $534.9 million as of October 1, 2022, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.4 years.

NOTE 8. STOCK REPURCHASE PROGRAM

In August 2022, Cadence’s Board of Directors increased the prior authorization to repurchase shares of Cadence common stock by authorizing an additional $1 billion. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

During the three and nine months ended October 1, 2022, Cadence repurchased approximately 0.9 million shares and 4.1 million shares, respectively, on the open market, for an aggregate purchase price of $150.0 million and $650.0 million, respectively.

In June 2022, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with Royal Bank of Canada to repurchase an aggregate of $100.0 million of Cadence common stock. The ASR agreement was accounted for as two separate transactions (1) a repurchase of common stock and (2) an equity-linked contract on Cadence’s own stock. In June 2022, Cadence received an initial share delivery of approximately 0.5 million shares, which represented the number of shares at a market price equal to $70.0 million. An equity-linked contract for $30.0 million, representing the remaining shares to be delivered by Royal Bank of Canada under the ASR agreement, was recorded to stockholders’ equity as of July 2, 2022. In September 2022, the ASR agreement settled and resulted in a delivery to Cadence of approximately 0.1 million additional shares. In total, approximately 0.6 million shares were repurchased under the ASR agreement at an average price per share of $167.07. The shares received were treated as a repurchase of common stock for purposes of calculating earnings per share.

As of October 1, 2022, approximately $1.4 billion of Cadence’s share repurchase authorizations remained available to repurchase shares of Cadence common stock.

The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during the three and nine months ended October 1, 2022 and October 2, 2021 were as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022*		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Shares repurchased	959		723		4,664		3,766
Total cost of repurchased shares	$	180,013	$	110,011	$	750,062	$	502,301

_____________

* Includes 109,365 shares and $30.0 million equity forward contract from the June 2022 ASR settled in September 2022.

15

NOTE 9. NET INCOME PER SHARE

Basic net income per share is computed by dividing net income during the period by the weighted average number of shares of common stock outstanding during that period, less unvested restricted stock awards. Diluted net income per share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting.

The calculations for basic and diluted net income per share for the three and nine months ended October 1, 2022 and October 2, 2021 are as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands, except per share amounts)
Net income	$	186,305	$	176,307	$	608,560	$	519,376
Weighted average common shares used to calculate basic net income per share	271,131		273,194		271,694		273,636
Stock-based awards	3,826		5,117		3,989		5,410
Weighted average common shares used to calculate diluted net income per share	274,957		278,311		275,683		279,046
Net income per share - basic	$	0.69	$	0.65	$	2.24	$	1.90
Net income per share - diluted	$	0.68	$	0.63	$	2.21	$	1.86

The following table presents shares of Cadence’s common stock outstanding for the three and nine months ended October 1, 2022 and October 2, 2021 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:

	Three Months Ended		Nine Months Ended
	October 1, 2022	October 2, 2021	October 1, 2022	October 2, 2021
	(In thousands)
Long-term market-based awards	1,761	—	1,485	—
Options to purchase shares of common stock	514	331	678	267
Non-vested shares of restricted stock	26	5	63	46
Total potential common shares excluded	2,301	336	2,226	313

NOTE 10. FAIR VALUE

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 nine months ended October 1, 2022.

16

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 October 1, 2022 and January 1, 2022:

	Fair Value Measurements as of October 1, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	587,205	$	587,205	$	—	$	—
Marketable equity securities	3,963		3,963		—		—
Securities held in Non-Qualified Deferred Compensation (“NQDC”) trust	50,509		50,509		—		—
Total Assets	$	641,677	$	641,677	$	—	$	—
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	16,748	$	—	$	16,748	$	—
Total Liabilities	$	16,748	$	—	$	16,748	$	—
	Fair Value Measurements as of January 1, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	658,474	$	658,474	$	—	$	—
Marketable equity securities	5,956		5,956		—		—
Securities held in NQDC trust	56,165		56,165		—		—
Total Assets	$	720,595	$	720,595	$	—	$	—
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	306	$	—	$	306	$	—
Total Liabilities	$	306	$	—	$	306	$	—

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, the 2024 Notes and the 2025 Term Loan are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Level 3 Measurements

During the second quarter of fiscal 2022, Cadence acquired intangible assets of $15.0 million. The fair value of the intangible assets acquired was determined using the multi-period excess earnings method, a variation of the income approach that utilizes unobservable inputs classified as Level 3 measurements. This method estimates the revenues and cash flows derived from the acquired assets, net of investment in supporting assets. The resulting cash flow, which is attributable solely to the assets acquired, is then discounted at a rate of return commensurate with the associated risk of the asset to calculate the present value. Cadence assumed discount rates between 23% and 25%.

17

During the third quarter of fiscal 2022, Cadence acquired combined intangible assets of $155.5 million through its acquisitions of OpenEye and Future Facilities. For existing technology acquired during the third quarter of fiscal 2022, 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 the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate. For both OpenEye and Future Facilities, Cadence assumed technological obsolescence at a rate of 10% annually, before applying an assumed royalty rate of 25%.

The fair value for agreements and relationships acquired during the third quarter of fiscal 2022 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 was determined using customer retention rates between 95% and 100% for OpenEye and 95% for Future Facilities. The present value of operating cash flows from existing customers was determined using discount rates ranging from 10% to 11%.

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

NOTE 11. INVENTORY

Cadence’s inventory balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Inventories:
Raw materials	$	106,299	$	88,629
Finished goods	7,984		27,092
Total inventories	$	114,283	$	115,721

NOTE 12. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, Cadence is involved in various disputes and legal proceedings that arise in the ordinary course of business. These include disputes and legal proceedings related to intellectual property, indemnification obligations, mergers and acquisitions, licensing, contracts, customers, products, distribution and other commercial arrangements and employee relations matters. At least quarterly, Cadence reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on Cadence’s judgments using the best information available at the time. As additional information becomes available, Cadence reassesses the potential liability related to pending claims and legal proceedings and may revise estimates.

Other Contingencies

Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. Cadence did not incur any significant costs related to warranty obligations during the three and nine months ended October 1, 2022 and October 2, 2021.

Cadence’s product license and services agreements typically include a limited indemnification provision for claims from third parties relating to Cadence’s intellectual property. If the potential loss from any indemnification claim is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. The indemnification is generally limited to the amount paid by the customer. Cadence did not incur any significant losses from indemnification claims during the three and nine months ended October 1, 2022 and October 2, 2021.

18

NOTE 13. ACCUMULATED OTHER COMPREHENSIVE LOSS

Cadence’s accumulated other comprehensive loss is comprised of the aggregate impact of foreign currency translation gains and losses and changes in defined benefit plan liabilities and is presented in Cadence’s condensed consolidated statements of comprehensive income.

Accumulated other comprehensive loss was comprised of the following as of October 1, 2022 and January 1, 2022:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Foreign currency translation loss	$	(117,317)	$	(26,553)
Changes in defined benefit plan liabilities	(4,816)		(6,758)
Total accumulated other comprehensive loss	$	(122,133)	$	(33,311)

For the three and nine months ended October 1, 2022 and October 2, 2021 there were no significant amounts related to foreign currency translation loss or changes in defined benefit plan liabilities reclassified from accumulated other comprehensive loss to net income.

NOTE 14. SEGMENT REPORTING

Segment reporting is based on the “management approach,” following the method that management organizes the company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the chief operating decision maker in allocating resources and in assessing performance. Cadence’s chief operating decision maker is its CEO, who reviews Cadence’s consolidated results as one operating segment. In making operating decisions, the CEO primarily considers consolidated financial information, accompanied by disaggregated information about revenues by geographic region.

Outside the United States, Cadence markets and supports its products and services primarily through its subsidiaries. Revenue is attributed to geography based upon the country in which the product is used, or services are delivered. Long-lived assets are attributed to geography based on the country where the assets are located.

The following table presents a summary of revenue by geography for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Americas:
United States	$	392,222	$	331,463	$	1,174,734	$	970,925
Other Americas	15,165		11,487		39,010		31,353
Total Americas	407,387		342,950		1,213,744		1,002,278
Asia:
China	148,325		98,325		401,460		287,357
Other Asia	156,250		136,272		466,891		404,509
Total Asia	304,575		234,597		868,351		691,866
Europe, Middle East and Africa	142,983		129,606		431,660		384,341
Japan	47,609		43,742		148,086		136,723
Total	$	902,554	$	750,895	$	2,661,841	$	2,215,208

19

The following table presents a summary of long-lived assets by geography as of October 1, 2022 and January 1, 2022:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Americas:
United States	$	328,455	$	267,202
Other Americas	7,376		975
Total Americas	335,831		268,177
Asia:
China	52,158		56,403
Other Asia	69,859		54,677
Total Asia	122,017		111,080
Europe, Middle East and Africa	55,560		53,748
Japan	4,504		3,030
Total	$	517,912	$	436,035

20

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (our “Annual Report”). This Quarterly Report contains statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other forward-looking statements. Statements including, but not limited to, statements regarding the extent and timing of future revenues and expenses and customer demand, statements regarding the deployment of our products and services, statements regarding our reliance on third parties, statements regarding the impact on our business of the COVID-19 pandemic and related public health measures or mandates, statements regarding the impact of government actions and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including, but not limited to, those expressed in these statements. We refer you to the “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report for the fiscal year ended January 1, 2022, and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.

We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report. All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this Quarterly Report are made only as of the date of this Quarterly Report. We do not intend, and disclaim any obligation, to update these forward-looking statements.

Business Overview

Cadence is a leader in electronic system design, building upon more than 30 years of computational software expertise. We enable our customers to develop electronic products. Our products and services are designed to give our customers a competitive edge in their development of integrated circuits (“ICs”), systems-on-chip (“SoCs”), and increasingly sophisticated electronic devices and systems. Our products and services do this by optimizing performance, minimizing power consumption, shortening the time to bring our customers’ products to market, improving engineering productivity and reducing their design, development and manufacturing costs. We offer software, hardware, services and reusable IC design blocks, which are commonly referred to as intellectual property (“IP”).

Our strategy, which we call Intelligent System Design™, is to provide the technology necessary for our customers to develop electronic products across a variety of vertical markets including consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, industrial and healthcare. Our products and services enable our customers to develop complex and innovative electronic products, so demand for our technology is driven by our customers’ investment in new designs and products. Historically, the industry that provided the tools used by IC engineers was referred to as Electronic Design Automation (“EDA”). Today, our offerings include and extend beyond EDA.

We group our products into categories related to major design activities:

•Custom IC Design and Simulation;

•Digital IC Design and Signoff;

•Functional Verification;

•IP; and

•System Design and Analysis.

Consistent with our Intelligent System Design strategy, in the third quarter of fiscal 2022, we completed our acquisitions of OpenEye Scientific Software, Inc. (“OpenEye”) and FFG Holdings Limited (“Future Facilities”). Both of these acquisitions are expected to add important new technologies and capabilities to our System Design and Analysis technology portfolio that we believe will enhance our ability to pursue attractive opportunities in the markets we serve. These acquisitions are expected to increase expenses, including amortization of acquired intangible assets, more than revenue for at least the remainder of fiscal 2022.

For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Products and Product Strategy,” in our Annual Report for the fiscal year ended January 1, 2022.

Management uses certain performance indicators to manage our business, including revenue, certain elements of operating expenses and cash flow from operations, and we describe these items further below under the headings “Results of Operations” and “Liquidity and Capital Resources.”

21

Fiscal Year End

On September 7, 2022, our Board of Directors approved a change in our fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year. Our fiscal quarters will end on March 31, June 30, and September 30. The fiscal year change is effective beginning with our 2023 fiscal year, which will begin on January 1, 2023.

COVID-19 Pandemic

Since its inception, the COVID-19 pandemic has posed a variety of challenges to our day-to-day operations. Despite these challenges, the pandemic has not had a material, adverse impact on our results of operations, financial condition, liquidity or cash flows. Going forward, and as the COVID-19 pandemic reaches endemic stages, the degree of impact on our business will depend on factors such as the duration and severity of the pandemic, the spread of new variants, actions taken by government authorities, and measures taken by our customers and suppliers.

While we are unable to accurately predict the full impact that COVID-19 and its continuing repercussions will have on our results of operations, financial condition, liquidity and cash flows, we have implemented policies and practices that have enabled us to support critical operations and execute our strategy. For example, to support the health and well-being of our employees, we currently have a large number of employees who operate in a hybrid work environment, choosing to alternate between working from home and working from our facilities. Because these and similar measures may not fully mitigate the direct and indirect impacts of the COVID-19 pandemic on our business, our management continues to actively monitor and respond to ongoing developments of the COVID-19 pandemic.

Russia-Ukraine Conflict

During the first half of fiscal 2022, due to the ongoing conflict between Russia and Ukraine and the corresponding sanctions imposed by the United States and other countries, we terminated our operations in Russia. The termination of our operations in Russia has not limited our ability to develop or support our products and has not had a material impact on our results of operations, financial condition, liquidity or cash flows. We do not have operations or employees in Ukraine. We will continue to monitor the future developments relative to this conflict and the potential impacts it could have on our employees and our ability to provide products and services to our global customer base.

Expansion of Trade Restrictions

On October 7, 2022, the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce released broad changes in export control regulations, including new restrictions concerning advanced node IC production in China and the inclusion of additional Chinese technology companies on the BIS’s “Unverified List.” In addition, on October 14, 2022, a new rule went into effect imposing U.S. export controls on additional technologies, including electronic computer-aided design software specially designed for the development of ICs with Gate-All-Around Field-Effect Transistor (GAAFET) structure. Based on our current assessments, we expect the impact of these expanded trade restrictions on our business to be limited. We will continue to monitor for any further trade restrictions, other regulatory or policy changes by the U.S. or foreign governments and any actions in response. For additional information regarding risks related to international relations and changes in governmental regulations and policies, including existing restrictions imposed by the BIS, see Part I, Item 1A, “Risk Factors,” in our Annual Report.

Critical Accounting Estimates

In preparing our condensed consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. At least quarterly, we evaluate our assumptions, judgments and estimates, and make changes as deemed necessary.

For further information about our critical accounting estimates, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Estimates” in our Annual Report.

New Accounting Standards

For additional information about the adoption of new accounting standards, see Note 1 in the notes to condensed consolidated financial statements.

22

Results of Operations

Financial results for the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, reflect the following:

•revenue growth that exceeded the growth of our costs and expenses;

•increased revenue from software, IP and other arrangements where revenue is recognized over time;

•growth in revenue from emulation and prototyping hardware and IP where revenue is recognized up-front;

•continued investment in research and development activities and technical sales support; and

•increased provision for income taxes primarily due to changes to tax laws in the United States.

Revenue

We primarily generate revenue from licensing our software and IP, selling or leasing our emulation and prototyping hardware technology, providing maintenance for our software, hardware and IP, providing engineering services and earning royalties generated from the use of our IP. The timing of our revenue is significantly affected by the mix of software, hardware and IP products generating revenue in any given period and whether the revenue is recognized over time or at a point in time, upon completion of delivery.

Generally, between 85% and 90% of our annual revenue is characterized as recurring revenue. Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products or services.

The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by our sales of emulation and prototyping hardware and individual IP licenses. The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies are impacted by delivery of hardware and IP products to our customers in any single fiscal period. 

The following table shows the percentage of our revenue that is classified as recurring or up-front for the three months ended October 1, 2022 and October 2, 2021: 

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenue recognized over time	81	%	86	%	82	%	84	%
Revenue from arrangements with non-cancelable commitments	3	%	3	%	2	%	3	%
Recurring revenue	84	%	89	%	84	%	87	%
Up-front revenue	16	%	11	%	16	%	13	%
Total	100	%	100	%	100	%	100	%

While the percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters, the overall mix of revenue is relatively consistent on an annual basis or over the course of twelve consecutive months. The following table shows the percentage of recurring revenue for the twelve-month periods ending concurrently with our five most recent fiscal quarters:

	Trailing Twelve Months Ended
	October 1, 2022		July 2, 2022		April 2, 2022		January 1, 2022		October 2, 2021
Recurring revenue	86	%	87	%	87	%	88	%	87	%
Up-front revenue	14	%	13	%	13	%	12	%	13	%
Total	100	%	100	%	100	%	100	%	100	%

23

Revenue by Period

The following table shows our revenue for the three months ended October 1, 2022 and October 2, 2021 and the change in revenue between periods:

	Three Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Product and maintenance	$	845.8	$	706.2	$	139.6	20	%
Services	56.8		44.7		12.1		27	%
Total revenue	$	902.6	$	750.9	$	151.7	20	%

The following table shows our revenue for the nine months ended October 1, 2022 and October 2, 2021 and the change in revenue between periods:

	Nine Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Product and maintenance	$	2,494.3	$	2,093.1	$	401.2	19	%
Services	167.5		122.1		45.4		37	%
Total revenue	$	2,661.8	$	2,215.2	$	446.6	20	%

Product and maintenance revenue increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, due to increased revenue in each of our five product categories. This growth was driven by our customers investing in new, complex designs for their products that include the design of electronic systems for consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, industrial and healthcare.

Services revenue increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to increased revenue from our custom IP offerings. Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations.

No single customer accounted for 10% or more of total revenue during the three and nine months ended October 1, 2022 or October 2, 2021.

Revenue by Product Category

The following table shows the percentage of revenue contributed by each of our five product categories and services for the past five consecutive quarters:

	Three Months Ended
	October 1, 2022		July 2, 2022		April 2, 2022		January 1, 2022		October 2, 2021
Custom IC Design and Simulation	22	%	23	%	22	%	24	%	23	%
Digital IC Design and Signoff	29	%	27	%	27	%	29	%	29	%
Functional Verification, including Emulation and Prototyping Hardware	25	%	24	%	28	%	21	%	23	%
IP	12	%	14	%	13	%	14	%	14	%
System Design and Analysis	12	%	12	%	10	%	12	%	11	%
Total	100	%	100	%	100	%	100	%	100	%

Revenue by product category fluctuates from period to period based on demand for our products and services, our available resources and our ability to deliver and support them. Certain of our licensing arrangements allow customers the ability to remix among software products. Additionally, we have arrangements with customers that include a combination of our products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, we estimate the allocation of the revenue to product categories based upon the expected usage of our products. The actual usage of our products by these customers may differ and, if that proves to be the case, the revenue allocation in the table above would differ.

24

Revenue by Geography

	Three Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
United States	$	392.2	$	331.5	$	60.7	18	%
Other Americas	15.2		11.5		3.7		32	%
China	148.3		98.3		50.0		51	%
Other Asia	156.3		136.3		20.0		15	%
Europe, Middle East and Africa	143.0		129.6		13.4		10	%
Japan	47.6		43.7		3.9		9	%
Total revenue	$	902.6	$	750.9	$	151.7	20	%

The increase in revenue in the United States, China, Other Asia, and Europe, Middle East and Africa during the three months ended October 1, 2022, as compared to the three months ended October 2, 2021, was primarily due to increased revenue from our software and hardware offerings.

	Nine Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
United States	$	1,174.7	$	970.9	$	203.8	21	%
Other Americas	39.0		31.4		7.6		24	%
China	401.5		287.4		114.1		40	%
Other Asia	466.9		404.5		62.4		15	%
Europe, Middle East and Africa	431.6		384.3		47.3		12	%
Japan	148.1		136.7		11.4		8	%
Total revenue	$	2,661.8	$	2,215.2	$	446.6	20	%

The increase in revenue in the United States and China during the nine months ended October 1, 2022, as compared to the nine months ended October 2, 2021, was primarily due to increased revenue from our software, hardware and IP offerings. The increase in revenue in Other Asia and Europe, Middle East and Africa during the nine months ended October 1, 2022, as compared to the nine months ended October 2, 2021, was primarily due to increased revenue from our software and hardware offerings.

Revenue by Geography as a Percent of Total Revenue

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
United States	43	%	44	%	44	%	44	%
Other Americas	2	%	2	%	1	%	2	%
China	17	%	13	%	15	%	13	%
Other Asia	17	%	18	%	18	%	18	%
Europe, Middle East and Africa	16	%	17	%	16	%	17	%
Japan	5	%	6	%	6	%	6	%
Total	100	%	100	%	100	%	100	%

The substantial majority of our revenue is transacted in the United States dollar. However, certain revenue transactions are denominated in foreign currencies. For an additional description of how changes in foreign exchange rates affect our condensed consolidated financial statements, see the discussion under Item 3, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk.”

25

Cost of Revenue

The following tables show our cost of revenue for the three and nine months ended October 1, 2022 and October 2, 2021 and the change in cost of revenue between periods:

	Three Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Cost of product and maintenance	$	62.4	$	54.2	$	8.2	15	%
Cost of services	25.2		22.4		2.8		13	%

	Nine Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Cost of product and maintenance	$	203.9	$	174.9	$	29.0	17	%
Cost of services	74.2		62.4		11.8		19	%

Cost of Product and Maintenance

Cost of product and maintenance includes costs associated with the sale and lease of our emulation and prototyping hardware and licensing of our software and IP products, certain employee salary and benefits and other employee-related costs, cost of our customer support services, amortization of technology-related and maintenance-related acquired intangibles, costs of technical documentation and royalties payable to third-party vendors. Cost of product and maintenance depends primarily on our hardware product sales in any given period, but is also affected by employee salary and benefits and other employee-related costs, reserves for inventory, and the timing and extent to which we acquire intangible assets, license third-party technology or IP, and sell our products that include such acquired or licensed technology or IP.

A summary of cost of product and maintenance is as follows:

	Three Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Product and maintenance-related costs	$	53.5	$	42.4	$	11.1	26	%
Amortization of acquired intangibles	8.9		11.8		(2.9)		(25)	%
Total cost of product and maintenance	$	62.4	$	54.2	$	8.2	15	%

	Nine Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Product and maintenance-related costs	$	173.0	$	139.1	$	33.9	24	%
Amortization of acquired intangibles	30.9		35.8		(4.9)		(14)	%
Total cost of product and maintenance	$	203.9	$	174.9	$	29.0	17	%

The changes in product and maintenance-related costs for the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, were due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Emulation and prototyping hardware costs	$	10.3	$	32.3
Other items	0.8		1.6
Total change in product and maintenance-related costs	$	11.1	$	33.9

26

Costs associated with our emulation and prototyping hardware products include components, assembly, testing, applicable reserves and overhead. These costs make our cost of emulation and prototyping hardware products higher, as a percentage of revenue, than our cost of software and IP products. Emulation and prototyping hardware costs increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to increased revenue from emulation and prototyping hardware products.

Cost of Services

Cost of services primarily includes employee salary, benefits and other employee-related costs to perform work on revenue-generating projects and costs to maintain the infrastructure necessary to manage a services organization. Cost of services may fluctuate from period to period based on our utilization of design services engineers on revenue-generating projects rather than internal development projects.

Operating Expenses

Our operating expenses include marketing and sales, research and development, and general and administrative expenses. Factors that tend to cause our operating expenses to fluctuate include changes in the number of employees due to hiring and acquisitions, our annual, mid-year promotion and pay raise cycle, stock-based compensation, restructuring and other employment separation activities (such as the voluntary retirement program we offered to certain employees during the second quarter of fiscal 2021), foreign exchange rate movements, acquisition-related costs, volatility in variable compensation programs that are driven by operating results, and charitable donations.

Stock-based compensation for the three and nine months ended October 1, 2022 increased, as compared to the three and nine months ended October 2, 2021, due to an increased number of grants under our equity incentive plans, including long-term market-based awards, to attract and retain talent.

Many of our operating expenses are transacted in various foreign currencies. We recognize lower expenses in periods when the United States dollar strengthens in value against other currencies and we recognize higher expenses when the United States dollar weakens against other currencies. For an additional description of how changes in foreign exchange rates affect our condensed consolidated financial statements, see the discussion in Item 3, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk.”

Our operating expenses for the three and nine months ended October 1, 2022 and October 2, 2021 were as follows:

	Three Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Marketing and sales	$	152.9	$	143.4	$	9.5	7	%
Research and development	323.6		289.1		34.5		12	%
General and administrative	73.7		43.0		30.7		71	%
Total operating expenses	$	550.2	$	475.5	$	74.7	16	%

	Nine Months Ended				Change
	October 1, 2022		October 2, 2021		Amount		Percentage
	(In millions, except percentages)
Marketing and sales	$	432.4	$	412.2	$	20.2	5	%
Research and development	901.1		845.3		55.8		7	%
General and administrative	174.1		123.3		50.8		41	%
Total operating expenses	$	1,507.6	$	1,380.8	$	126.8	9	%

27

Our operating expenses, as a percentage of total revenue, for the three and nine months ended October 1, 2022 and October 2, 2021 were as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Marketing and sales	17	%	19	%	16	%	19	%
Research and development	36	%	40	%	34	%	39	%
General and administrative	8	%	6	%	7	%	6	%
Total operating expenses	61	%	65	%	57	%	64	%

Marketing and Sales

The increase in marketing and sales expense for the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, was due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Salary, benefits and other employee-related costs	$	0.3	$	9.7
Stock-based compensation	4.2		7.4
Marketing programs and events	3.6		6.9
Travel and sales meetings	1.3		1.9
Voluntary retirement program	—		(6.7)
Other items	0.1		1.0
Total change in marketing and sales expense	$	9.5	$	20.2

Salary, benefits and other employee-related costs included in marketing and sales expense increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to increased compensation costs related to additional headcount. Costs related to marketing programs and events increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to an increased number of in-person meetings and events.

Research and Development

The increase in research and development expense for the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, was due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Salary, benefits and other employee-related costs	$	16.6	$	34.5
Stock-based compensation	10.4		18.4
Facilities and other infrastructure costs	3.4		7.7
Professional services	2.6		7.0
Travel	1.8		2.7
Voluntary retirement program	—		(14.7)
Other items	(0.3)		0.2
Total change in research and development expense	$	34.5	$	55.8

Salary, benefits and other employee-related costs included in research and development expense increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to increased compensation costs related to additional headcount from hiring.

28

General and Administrative

The increase in general and administrative expense for the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, was due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Contributions to non-profit organizations	$	22.0	$	25.3
Professional services	4.9		16.0
Stock-based compensation	5.8		15.1
Salary, benefits and other employee-related costs	1.8		4.4
Voluntary retirement program	—		(2.6)
Foreign service tax refund	(4.0)		(9.0)
Other items	0.2		1.6
Total change in general and administrative expense	$	30.7	$	50.8

The increase in contributions to non-profit organizations during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, is the result of our continued commitment to support charitable initiatives, including the Cadence Giving Foundation. Professional services included in general and administrative expense increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to an increase in acquisition-related professional services and legal fees and costs for other matters. Stock-based compensation included in general and administrative expense increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily due to equity awards granted to executives.

Operating Margin

Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three and nine months ended October 1, 2022, and the three and nine months ended October 2, 2021 was as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Operating margin	29	%	26	%	32	%	26	%

Generally, our operating margin during the second half of the fiscal year is impacted by incremental costs associated with our annual, mid-year promotion and pay raise cycle. Operating margin increased during the three and nine months ended October 1, 2022, as compared to the three and nine months ended October 2, 2021, primarily because revenue growth in each of our five product categories exceeded growth in cost of revenue and operating expense. For the remainder of fiscal 2022, we expect our operating margin to be impacted by the operating expenses from our acquisitions, including amortization of acquired intangibles, exceeding the revenue contributed from our acquisitions.

Interest Expense

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In millions)
Contractual interest expense:
2024 Notes	3.8		3.8		$	11.4	$	11.4
2025 Term Loan	0.9		—		0.9		—
Revolving credit facility	0.7		0.2		1.1		0.5
Amortization of debt discount:
2024 Notes	0.2		0.2		0.6		0.6
Other	(0.1)		—		(0.1)		0.2
Total interest expense	$	5.5	$	4.2	$	13.9	$	12.7

29

Income Taxes

The following table presents the provision for income taxes and the effective tax rate for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended						Nine Months Ended
	October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
							(In millions, except percentages)
Provision for income taxes	$	66.0		$	12.4		$	226.3		$	55.0
Effective tax rate	26.1		%	6.6		%	27.1		%	9.6		%

The United States enacted the Tax Cuts and Jobs Act in December 2017, which requires companies to capitalize all of their R&D costs, including software development costs, incurred in tax years beginning after December 31, 2021. Beginning in fiscal 2022, we began capitalizing and amortizing R&D costs over five years for domestic research and 15 years for international research rather than expensing these costs as incurred. As a result, we expect our fiscal 2022 effective tax rate and our cash tax payments to increase significantly as compared to fiscal 2021. We also expect to recognize increases to our deferred tax assets as we begin to capitalize domestic research costs.

Our provision for income taxes for the three and nine months ended October 1, 2022 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2022 income. We also recognized tax benefits of $18.0 million and $36.9 million related to stock-based compensation that vested or was exercised during each period. Our provision for income taxes for the three and nine months ended October 1, 2022, reflected the impact of the Tax Cuts and Jobs Act, which requires the capitalization and amortization of R&D costs incurred after December 31, 2021.

Our provision for income taxes for the three and nine months ended October 2, 2021 was primarily attributable to federal, state and foreign income taxes on our then anticipated fiscal 2021 income, partially offset by the tax benefit of $13.7 million for the three and nine months ended October 2, 2021 related to an increase in our foreign-derived intangible income, and tax benefits of $14.3 million and $59.1 million for the three and nine months ended October 2, 2021, respectively, related to stock-based compensation that vested or was exercised during the period.

We maintain valuation allowances on certain federal, state, and foreign deferred tax assets. While we believe our current valuation allowance is sufficient, we assess the need for an adjustment to the valuation allowance on a quarterly basis. The assessment is based on our estimates of future sources of taxable income in the jurisdictions in which we operate and the periods over which our deferred tax assets will be realizable. In the event we determine that we will be able to realize all or part of our net deferred tax assets in the future, the valuation allowance will be reversed in the period in which we make such determination. The release of a valuation allowance would result in an increase to our net deferred tax assets and a decrease to income tax expense in the period in which the release is recorded.

Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates. We currently expect that our fiscal 2022 effective tax rate will be approximately 28%. We expect that our quarterly effective tax rates will vary from our fiscal 2022 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate. For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors,” in our Annual Report.

Liquidity and Capital Resources

	As of
	October 1, 2022		January 1, 2022		Change
	(In millions)
Cash and cash equivalents	$	1,026.1	$	1,088.9	$	(62.8)
Net working capital	413.5		744.5		(331.0)

Cash and Cash Equivalents

As of October 1, 2022, our principal sources of liquidity consisted of approximately $1.0 billion of cash and cash equivalents as compared to $1.1 billion as of January 1, 2022.

30

Our primary sources of cash and cash equivalents during the nine months ended October 1, 2022 were cash generated from operations, proceeds from our revolving credit facility, proceeds from our term loan and proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period.

Our primary uses of cash and cash equivalents during the nine months ended October 1, 2022 were payments related to employee salaries and benefits, operating expenses, repurchases of our common stock, cash paid for business combinations, payments on our revolving credit facility, payment of employee taxes on vesting of restricted stock, and purchases of property, plant and equipment.

Approximately 72% of our cash and cash equivalents were held by our foreign subsidiaries as of October 1, 2022. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections and repatriation of foreign earnings. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our domestic and international operating activities and other capital and liquidity requirements, including acquisitions and share repurchases, for at least the next 12 months and thereafter for the foreseeable future.

Net Working Capital

Net working capital is comprised of current assets less current liabilities, as shown on our condensed consolidated balance sheets. The decrease in our net working capital as of October 1, 2022, as compared to January 1, 2022, is primarily due to our use of cash for investing and financing activities and the timing of cash receipts from customers and disbursements made to vendors.

Cash Flows from Operating Activities

	Nine Months Ended
	October 1, 2022		October 2, 2021		Change
	(In millions)
Cash provided by operating activities	$	978.3	$	885.1	$	93.2

Cash flows from operating activities include net income, adjusted for certain non-cash items, as well as changes in the balances of certain assets and liabilities. Our cash flows provided by operating activities are significantly influenced by business levels and the payment terms set forth in our customer agreements. The increase in cash flows from operating activities for the nine months ended October 1, 2022, as compared to the nine months ended October 2, 2021, was primarily due to improved results from operations and timing of cash receipts from customers and disbursements made to vendors.

Cash Flows from Investing Activities

	Nine Months Ended
	October 1, 2022		October 2, 2021		Change
	(In millions)
Cash used for investing activities	$	(674.5)	$	(269.9)	$	(404.6)

Cash used for investing activities increased during the nine months ended October 1, 2022, as compared to the nine months ended October 2, 2021, primarily due to increases in payments for business combinations and purchases of property, plant and equipment. We expect to continue our investing activities, including purchasing property, plant and equipment, purchasing intangible assets, acquiring other companies and businesses, purchasing software licenses, and making strategic investments.

Cash Flows from Financing Activities

	Nine Months Ended
	October 1, 2022		October 2, 2021		Change
	(In millions)
Cash used for financing activities	$	(299.9)	$	(528.1)	$	228.2

Cash used for financing activities decreased during the nine months ended October 1, 2022, as compared to the nine months ended October 2, 2021, primarily due to an increase in proceeds from borrowings, partially offset by an increase in payments for repurchases of our common stock.

31

Other Factors Affecting Liquidity and Capital Resources

Stock Repurchase Program

In August 2022, our Board of Directors increased the prior authorization to repurchase shares of our common stock by authorizing an additional $1 billion. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. As of October 1, 2022, approximately $1.4 billion of the share repurchase authorizations remained available to repurchase shares of our common stock. See Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds” for additional information on share repurchases.

Revolving Credit Facility

In June 2021, we entered into a five-year senior unsecured revolving credit facility with a group of lenders led by Bank of America, N.A., as administrative agent, as amended in September 2022 (the “2021 Credit Facility”). The 2021 Credit Facility provides for borrowings up to $700.0 million, with the right to request increased capacity up to an additional $350.0 million upon receipt of lender commitments, for total maximum borrowings of $1.05 billion. The 2021 Credit Facility expires on June 30, 2026. Any outstanding loans drawn under the 2021 Credit Facility are due at maturity on June 30, 2026, subject to an option to extend the maturity date. Outstanding borrowings may be repaid at any time prior to maturity. As of October 1, 2022, there were $150.0 million of borrowings outstanding under the 2021 Credit Facility, and we were in compliance with all financial covenants associated with such credit facility.

2024 Notes

In October 2014, we issued $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024 (the “2024 Notes”). We received net proceeds of $342.4 million from the issuance of the 2024 Notes, net of a discount of $1.4 million and issuance costs of $6.2 million. Interest is payable in cash semi-annually. The 2024 Notes are unsecured and rank equal in right of payment to all of our existing and future senior indebtedness. As of October 1, 2022, we were in compliance with all covenants associated with the 2024 Notes.

2025 Term Loan

In September 2022, we entered into a $300 million three-year senior non-amortizing term loan facility due on September 7, 2025 with a group of lenders led by Bank of America, N.A., as administrative agent (the “2025 Term Loan”). The 2025 Term Loan is unsecured and ranks equal in right of payment to all of our unsecured indebtedness. Proceeds from the 2025 Term Loan were used to fund our acquisition of OpenEye. As of October 1, 2022, we were in compliance with all financial covenants associated with the 2025 Term Loan.

For additional information relating to our debt arrangements, see Note 4 in the notes to condensed consolidated financial statements. For additional information relating to OpenEye and other acquisitions, see Note 5 in the notes to condensed consolidated financial statements.

Other Liquidity Requirements

During the nine months ended October 1, 2022, there were no material changes to our other liquidity requirements as reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report for the fiscal year ended January 1, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

A material portion of our revenue, expenses and business activities are transacted in the United States dollar (“U.S. dollar”). In certain foreign countries where we price our products and services in U.S. dollars, a decrease in value of the local currency relative to the U.S. dollar results in an increase in the prices for our products and services compared to those products of our competitors that are priced in local currency. This could result in our prices being uncompetitive in certain markets.

In certain countries where we may invoice customers in the local currency our revenues benefit from a weaker dollar and are adversely affected by a stronger dollar. The opposite impact occurs in countries where we record expenses in local currencies. In those cases, our costs and expenses benefit from a stronger dollar and are adversely affected by a weaker dollar. The fluctuations in our operating expenses outside the United States resulting from volatility in foreign exchange rates are not generally moderated by corresponding fluctuations in revenues from existing contracts.

32

We enter into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. These forward contracts are not designated as accounting hedges, so the unrealized gains and losses are recognized in other income, net, in advance of the actual foreign currency cash flows with the fair value of these forward contracts being recorded as accrued liabilities or other current assets.

We do not use forward contracts for trading purposes. Our forward contracts generally have maturities of 90 days or less. We enter into foreign currency forward exchange contracts based on estimated future asset and liability exposures, and the effectiveness of our hedging program depends on our ability to estimate these future asset and liability exposures. Recognized gains and losses with respect to our current hedging activities will ultimately depend on how accurately we are able to match the amount of foreign currency forward exchange contracts with actual underlying asset and liability exposures.

The following table provides information about our foreign currency forward exchange contracts as of October 1, 2022. The information is provided in U.S. dollar equivalent amounts. The table presents the notional amounts, at contract exchange rates, and the weighted average contractual foreign currency exchange rates expressed as units of the foreign currency per U.S. dollar, which in some cases may not be the market convention for quoting a particular currency. All of these forward contracts mature before or during November, 2022.

	Notional Principal		Weighted Average Contract Rate
	(In millions)
Forward Contracts:
European Union euro	$	135.4	0.98
British pound	102.7		0.84
Israeli shekel	63.5		3.32
Japanese yen	61.6		138.28
Swedish krona	36.7		10.83
Indian rupee	24.4		80.16
Canadian dollar	16.9		1.29
Chinese renminbi	14.0		6.85
Taiwan dollar	12.5		31.3
South Korean won	12.3		1328.46
Singapore dollar	3.6		1.39
Total	$	483.6
Estimated fair value	$	(16.7)

We actively monitor our foreign currency risks, but our foreign currency hedging activities may not substantially offset the impact of fluctuations in currency exchange rates on our results of operations, cash flows and financial position.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our portfolio of cash and cash equivalents and any balances outstanding on our 2021 Credit Facility and 2025 Term Loan. We are exposed to interest rate fluctuations in many of the world’s leading industrialized countries, but our interest income and expense is most sensitive to fluctuations in the general level of United States interest rates. In this regard, changes in United States interest rates affect the interest earned on our cash and cash equivalents and the costs associated with foreign currency hedges.

All highly liquid securities with a maturity of three months or less at the date of purchase are considered to be cash equivalents. The carrying value of our interest-bearing instruments approximated fair value as of October 1, 2022.

Interest rates under our 2021 Credit Facility and 2025 Term Loan are variable, so interest expense could be adversely affected by changes in interest rates, particularly for periods when we maintain a balance outstanding under the revolving credit facility. As of October 1, 2022, there were $150.0 million of borrowings outstanding under our 2021 Credit Facility and $300.0 million of borrowings outstanding under our 2025 Term Loan.

33

Interest rates for our 2021 Credit Facility and 2025 Term Loan can fluctuate based on changes in market interest rates and in interest rate margins that vary based on the credit ratings of our unsecured debt. Assuming all loans were fully drawn and we were to fully exercise our right to increase borrowing capacity under our 2021 Credit Facility and made no prepayments on our 2025 Term Loan, each quarter point change in interest rates would result in a $3.4 million change in annual interest expense on our indebtedness under our 2021 Credit Facility and 2025 Term Loan. For an additional description of the 2021 Credit Facility and 2025 Term Loan, see Note 4 in the notes to condensed consolidated financial statements.

Equity Price Risk

Equity Investments

We have a portfolio of equity investments that includes marketable equity securities and non-marketable investments. Our equity investments are made primarily in connection with our strategic investment program. Under our strategic investment program, from time to time, we make cash investments in companies with technologies that are potentially of strategic importance to us.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of October 1, 2022.

The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this Quarterly Report on Form 10-Q. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures, to determine whether we had identified any acts of fraud involving personnel who have a significant role in our disclosure controls and procedures, and to confirm that any necessary corrective action, including process improvements, was taken. This type of evaluation is done every fiscal quarter so that our conclusions concerning the effectiveness of these controls can be reported in our periodic reports filed with the SEC. The overall goals of these evaluation activities are to monitor our disclosure controls and procedures and to make modifications as necessary. We intend to maintain these disclosure controls and procedures, modifying them as circumstances warrant.

Based on their evaluation as of October 1, 2022, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended October 1, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. Internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control are met. Further, the design of internal control must reflect the fact that there are resource constraints, and the benefits of the control must be considered relative to their costs. While our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Cadence, have been detected.

34

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information about disputes and legal proceedings in which we are involved from time to time, see Note 12 in the notes to condensed consolidated financial statements.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in the “Risk Factors” section in our Annual Report for the fiscal year ended January 1, 2022, that could adversely affect our business, financial condition, results of operations, cash flows, liquidity, revenue, growth, prospects, demand, reputation, and the trading price of our common stock, and make an investment in us speculative or risky. There have been no material changes to our risk factors since our Annual Report for the fiscal year ended January 1, 2022. The risk factors summarized in our Annual Report do not include all of the risks that we face, and there may be additional risks or uncertainties that are currently unknown or not believed to be material that occur or become material.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In August 2022, our Board of Directors increased the prior authorization to repurchase shares of our common stock by authorizing an additional $1 billion. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

During the three months ended October 1, 2022, we repurchased approximately 0.9 million shares on the open market, for an aggregate purchase price of $150.0 million.

In June 2022, we also entered into an accelerated share repurchase (“ASR”) agreement with Royal Bank of Canada to repurchase an aggregate of $100.0 million of our common stock. The ASR agreement was accounted for as two separate transactions (1) a repurchase of common stock and (2) an equity-linked contract on our own stock. In June 2022, we received an initial share delivery of approximately 0.5 million shares, which represented the number of shares at a market price equal to $70.0 million. An equity-linked contract for $30.0 million, representing the remaining shares to be delivered by Royal Bank of Canada under the ASR agreement, was recorded to stockholders’ equity as of July 2, 2022. In September 2022, the ASR agreement settled and resulted in a delivery to us of approximately 0.1 million additional shares. In total, approximately 0.6 million shares were repurchased under the ASR agreement at an average price per share of $167.07.

As of October 1, 2022, approximately $1.4 billion of the share repurchase authorizations remained available to repurchase shares of our common stock.

The following table presents repurchases made under our publicly announced repurchase authorizations and shares surrendered by employees to satisfy income tax withholding obligations during the three months ended October 1, 2022:

Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plan or Program (1) (In millions)
July 3, 2022 - August 6, 2022	104,054	$	180.66	92,923	$	510
August 7, 2022 - September 3, 2022	516,070	$	187.51	369,344	$	1,441
September 4, 2022 - October 1, 2022	508,244	$	190.06	497,101	$	1,377
Total	1,128,368	$	188.03	959,368

 ______________________________

(1)Shares purchased that were not part of our publicly announced repurchase programs represent employee surrender of shares of restricted stock to satisfy employee income tax withholding obligations due upon vesting, and do not reduce the dollar value that may yet be purchased under our publicly announced repurchase programs.

(2)The weighted average price paid per share of common stock does not include the cost of commissions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

35

Item 5. Other Information

None.

36

Item 6. Exhibits

			Incorporated by Reference
Exhibit Number		Exhibit Title	Form	File No.	Exhibit No.	Filing Date	Provided Herewith
10.01		Loan Agreement, dated September 7, 2022, by and among Cadence Design Systems, Inc., Bank of America, N.A., and other lenders party thereto.	8-K	000-15867	10.01	9/8/2022
10.02		First Amendment to Credit Agreement, dated September 7, 2022, by and among Cadence Design Systems, Inc., Bank of America, N.A. and other lenders party thereto.	8-K	000-15867	10.02	9/8/2022
10.03	*	Form of Incentive Stock Award Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.					X
10.04	*	Form of Restricted Stock Unit Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.					X
31.01	*	Certification of the Registrant’s Chief Executive Officer, Anirudh Devgan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.					X
31.02	*	Certification of the Registrant’s Chief Financial Officer, John M. Wall, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.					X
32.01	†	Certification of the Registrant’s Chief Executive Officer, Anirudh Devgan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.02	†	Certification of the Registrant’s Chief Financial Officer, John M. Wall, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document.					X
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	*	Inline XBRL Definition Linkbase Document.					X
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.					X

37

104 Cover Page Interactive Data File - The cover page from this Quarterly Report on Form 10-Q is formatted in Inline XBRL (included as Exhibit 101). X

___________________

*	Filed herewith.
†	Furnished herewith.

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		CADENCE DESIGN SYSTEMS, INC. (Registrant)
DATE:	October 24, 2022	By:	/s/ Anirudh Devgan
			Anirudh Devgan
			President and Chief Executive Officer
DATE:	October 24, 2022	By:	/s/ John M. Wall
			John M. Wall
			Senior Vice President and Chief Financial Officer

39

EX-10.03

CADENCE DESIGN SYSTEMS, INC.

Incentive Stock Award Agreement

Omnibus Equity Incentive Plan

(the “Plan”)

Cadence Design Systems, Inc. (the “Company”) grants the participant named below (the “Participant”) an Incentive Stock Award pursuant to the Plan as set forth below (the “Award”). This Award is subject to the terms and conditions set forth in this Incentive Stock Award Agreement, including the country-specific terms and conditions contained in the appendix attached hereto (the “Appendix”) (collectively, this “Agreement”), and in the Plan located at the Company’s Employee Stock Services’ intranet webpage; provided, however, if there is a conflict between the terms of this Agreement and the terms of the Plan, the terms of this Agreement will govern. Capitalized terms that are not defined herein will have the meanings set forth in the Plan.

Participant: [l]

ID Number: [l]

Incentive Stock Award Number: [l]

Date of Award: [l]    

Number of Shares Subject to the Incentive Stock Award (“Shares”): [l]

Vesting Commencement Date: [l]

Vesting Schedule: [l]        

Status of Award. On the Date of Award, the total number of Shares subject to the Award, as set forth above, will be issued in the Participant’s name and will be deposited into an escrow account with the Company’s designated stock transfer agent, pending vesting of the Shares. The Shares are subject to forfeiture until the Awards have vested and the restrictions on the Shares have lapsed in accordance with the Vesting Schedule (as set forth above) and the terms and conditions set forth in this Agreement.

Voting Rights / Rights to Dividends. The Participant will have all voting rights and rights to dividends and other distributions with respect to such Shares as of the Date of Award. The Company will determine whether any such dividends or distributions will be automatically reinvested in additional Shares or will be payable in cash; provided that such additional Shares and/or cash will be subject to the same restrictions and vesting conditions as the Shares with respect to which they were distributed.  In addition, any dividends or distributions payable in cash will be withheld and paid to the Participant only as and when such vesting conditions are satisfied in the manner determined by the Company at its sole discretion.

Vesting Restrictions. On the applicable vesting date, the restrictions on each Share (subject to adjustment under the Plan) will lapse and the Shares will be made available to the Participant or, in the event of the Participant’s death, to the Participant’s estate or heirs, provided that the Participant has remained in Continuous Status as an Employee or Consultant through such vesting date, has satisfied all obligations with regard to the Tax-Related Items (as defined below) in connection with the Award, and that the Participant has completed, signed and returned any documents and taken any additional action that the Company deems appropriate to enable it to accomplish the delivery of the Shares. No fractional shares will be issued under this Agreement.

Omnibus Equity Incentive Plan - ISA Agreement - 1 Rev. Jun. 2022

Termination of Continuous Status as an Employee or Consultant. For purposes of the Participant’s participation in the Plan, in the event of termination of the Participant’s Continuous Status as an Employee or Consultant (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any) for any reason, other than his or her death, the Participant’s Award will immediately cease to vest and any rights to the Shares subject to the Award will be forfeited without consideration to the Participant on the effective date of termination of his or her Continuous Status as an Employee or Consultant.The Participant’s Continuous Status as an Employee or Consultant will terminate effective as of the date the Participant is no longer providing services as an Employee or Consultant, with such date being as of the end of any notice period mandated under the employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement (if applicable). The Board (as defined below) will have the exclusive discretion to determine when the Participant’s Continuous Status as an Employee or Consultant has terminated for purposes of the Award.

Death of Participant. In the event of the Participant’s death before all the Shares subject to this Award have vested, if the Participant will have been in Continuous Status since the Date of Award, the number of Shares scheduled to vest one year after the Participant’s date of death will be deemed to have vested immediately prior to the Participant’s death. All other Shares will cease vesting and any rights to the Shares subject to the Award will be forfeited without compensation to the Participant.

Board Authority. Any question concerning the interpretation of this Agreement or the Plan, any adjustments required to be made under the Plan, and any controversy that may arise under the Plan or this Agreement will be determined by the Company’s Board of Directors or a committee of directors designated by the Board pursuant to Section 4(a) of the Plan (including any subcommittee or other person(s) to whom the committee has delegated its authority) in its sole and absolute discretion (collectively, the “Board”). Such decision will be final and binding.

Transfer Restrictions. Any sale, transfer, assignment, encumbrance, pledge, hypothecation, conveyance in trust, gift, transfer by bequest, devise or descent, or other transfer or disposition of any kind, whether voluntary or by operation of law, directly or indirectly, of the Shares subject to the Award prior to the date the restrictions on the Shares lapse and the Shares are made available to the Participant pursuant to this Agreement will be strictly prohibited and void.

Securities Law Compliance. The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales or other subsequent transfers of any Shares issued as a result of or under this Award, including without limitation (i) restrictions under the Company’s Securities Trading Policy, (ii) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act or any other similar applicable law (whether U.S. or foreign law) covering the Award and/or the Shares subject to the Award, and (iii) restrictions as to the use of a specified brokerage firm or other agent for such resales or other transfers. Any sale of the Shares must also comply with other applicable laws and regulations governing the sale of such Shares.

Insider Trading / Market Abuse Laws. By participating in the Plan, the Participant agrees to comply with the Company’s Securities Trading Policy. Further, the Participant acknowledges that he or she may be subject to insider-trading restrictions and/or market-abuse laws in applicable jurisdictions including, but not limited to, the United States and, if different, the Participant's country of residence, which may affect his or her ability to sell or otherwise dispose of the Shares or rights to Shares (e.g., the Incentive Stock Award) or rights linked to the value of Shares during such times as the Participant is considered to have “material non-public information” regarding the Company (as defined by the laws in applicable jurisdictions). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s Securities Trading Policy. The Participant understands and agrees that he or she should consult

Omnibus Equity Incentive Plan - ISA Agreement - 2 Rev. Jun. 2022

his or her personal legal advisor for details regarding any insider trading restrictions and/or market-abuse laws in his or her country and that the Participant is solely responsible for complying with such laws or regulations.

Certain Conditions of the Award. By accepting the Award, the Participant acknowledges and agrees that:

(a)The Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b)The grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of awards, or benefits in lieu of awards, even if awards have been granted in the past;

(c)All decisions with respect to future award grants, if any, will be at the sole discretion of the Company;

(d)The Participant’s participation in the Plan will not create a right to further Continuous Status as an Employee or Consultant and will not interfere with any applicable ability of the Company (or any Affiliate) to terminate the Participant’s Continuous Status as an Employee or Consultant at any time;

(e)The Award and the Participant’s participation in the Plan will not be interpreted to form or amend an employment contract or service contract or relationship with the Company or any Affiliate;

(f)The Participant is voluntarily participating in the Plan;

(g)The Award and the Shares subject to the Award, and the income and value of the same, are not intended to replace any pension rights or compensation;

(h)The Award and the Shares subject to the Award, and the income and value of the same, are not part of normal or expected compensation for any purpose, including but not limited to calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, leave-related payments, holiday pay, pension or retirement benefits or payments or welfare benefits or similar mandatory payments;

(i)The future value of the Shares subject to the Award is unknown and cannot be predicted with certainty;

(j)Unless otherwise provided in the Plan or by the Company in its discretion, the Award and the benefits evidenced by this Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and

(k)If the Participant resides outside of the United States, in addition to subsections (a) through (j) above, the following provisions will also apply:

a.The Award and the Shares subject to the Award, and the income and value of the same, are not part of normal or expected compensation for any purpose;

Omnibus Equity Incentive Plan - ISA Agreement - 3 Rev. Jun. 2022

b.None of the Company, any Affiliate nor the Company or the Affiliate employing or engaging the Participant (the “Employer”) will be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the settlement of the Award or the subsequent sale of any Shares acquired upon settlement;

c.No claim or entitlement to compensation or damages will arise from forfeiture of the Award resulting from termination of the Participant’s Continuous Status as an Employee or Consultant (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any); and

d.Unless otherwise agreed with the Company, the Award and the Shares subject to the Award, and the income and value of the same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of an Affiliate of the Company.

Data Privacy Notice and Consent: This section applies if the Participant resides and/or works outside of the European Union or European Economic Area.

(a)The Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of his or her personal data as described in the paragraph below of this Agreement and any other Plan documents (collectively, the “Data”) by and among, as applicable, the Employer, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing his or her participation in the Plan.

(b)The Participant understands that Data may include certain personal information about him or her including, but not limited to, the Participant's name, home address, email address and telephone number, date of birth, social insurance number, passport number, or other identification number (e.g., resident registration number), salary, nationality, job title, any Shares or directorships held in the Company, details of all Incentive Stock Awards or any other entitlement to Shares awarded, canceled, exercised, purchased, vested, unvested or outstanding in his or her favor.

(c)The Participant understands that Data will be transferred to E*TRADE Corporate Financial Services, Inc. and its affiliated companies, Charles Schwab & Co. and its affiliated companies, or such other equity plan service provider as may be selected by the Company presently or in the future (the “Designated Broker”), which is assisting the Company with the implementation, administration and management of the Plan. The Participant understands that the recipients of Data may be located in the Participant’s country or elsewhere and that the recipient’s country may have different data privacy laws and protections than the Participant's country. The Participant understands that if he or she resides outside the United States, the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative.

(d)The Participant authorizes the Company, the Designated Broker and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer Data, in electronic or other form, for the sole purpose of implementing, administering and managing the Participant's participation in the Plan. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage his or her participation in the Plan. The Participant understands that he or she may, at any

Omnibus Equity Incentive Plan - ISA Agreement - 4 Rev. Jun. 2022

time, view Data, request information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents in this Agreement, in any case without cost, by contacting his or her local human resources representative. The Participant understands that he or she is providing the consents in this Agreement on a purely voluntary basis. If the Participant does not consent, or if he or she later seeks to revoke his or her consent, the Participant's status as an Employee and/or Consultant and service with the Employer will not be affected; the only consequence of refusing or withdrawing his or her consent is that the Company would not be able to grant the Incentive Stock Award to the Participant, or administer or maintain the Incentive Stock Award. Therefore, the Participant understands that refusing or withdrawing his or her consent may affect his or her ability to participate in the Plan. For more information on the consequences of the Participant's refusal to consent or withdrawal of consent, the Participant understands that he or she may contact his or her local human resources representative.

(e)Upon request of the Company or the Employer, the Participant agrees to provide any other executed data privacy consent form or agreement that the Company and/or the Employer may deem necessary to obtain under the data privacy laws in his or her country, either now or in the future. The Participant understands that he or she will not be able to participate in the Plan if he or she fails to execute any such consent or agreement.

Data Privacy Notice and Consent. This section applies if the Participant resides and/or works in the European Union or European Economic Area:

(a)The Participant understands information about the Company’s data processing practices in connection with the Participant’s participation in the Plan is available in the Company’s Employee and Staff Privacy Policy provided here.

(b)The Participant understands that the Company will collect the Participant’s personal data for purposes of allocating the Shares and implementing, administering and managing the Plan. The Company will also transfer the Participant’s personal data to E*TRADE Corporate Financial Services, Inc. and its affiliated companies, Charles Schwab & Co. and its affiliated companies, or such other equity plan service provider as may be selected by the Company presently or in the future (the “Designated Broker”) so that the Designated Broker can assist the Company with the implementation, administration and management of the Plan. Without limiting any other rights the Company may have, the Participant declares his or her consent to the use of his or her personal data in connection with the Plan.

(c)The Participant’s participation in the Plan and grant of consent is purely voluntary. The Participant may deny or withdraw his or her consent at any time. If the Participant does not consent, or the Participant withdraws his or her consent, the Participant cannot participate in the Plan. This would not affect the Participant’s salary as an Employee of the Employer or payment as a Consultant of the Employer, or the Participant’s service with the Employer. Instead, the Company would not be able to grant the Participant the Incentive Stock Award or other awards, or administer or maintain such awards. The Participant understands that refusing or withdrawing his or consent may affect his or her ability to participate in the Plan.

Tax Obligations

(a)Responsibility for Taxes. The Participant acknowledges that, regardless of any action the Company or the Employer takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the

Omnibus Equity Incentive Plan - ISA Agreement - 5 Rev. Jun. 2022

Participant (the “Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the responsibility of the Participant and may exceed the amount actually withheld by the Company or the Employer, if any.

The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items, including but not limited to, the grant or vesting of the Award, the subsequent sale of the Shares acquired pursuant to the vesting of the Award or the receipt of dividends, and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result.

Further, if the Participant has become subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

The Company may refuse to issue, deliver or make available the Shares or the proceeds of the sale of Shares if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items.

(b)Withholding in Shares. Subject to applicable local law and to the extent that the Company or the Employer is required to withhold Tax-Related Items with respect to the Award, the Company will require the Participant to satisfy his or her obligation for Tax-Related Items, subject to subsection (d) below, by deducting from the Shares otherwise deliverable to the Participant in settlement of the Award a number of whole Shares having a Fair Market Value on the applicable vesting date (or other applicable date on which the Tax-Related Items arise) not in excess of the amount of such Tax-Related Items; provided that, if the applicable date falls on a non-trading day, the Fair Market Value will be determined based on the closing price of the Common Stock on the next available trading day.

To avoid negative accounting treatment, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates.For tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the vested Award, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due.

(c)    Alternative Withholding Methods. If the Company determines in its discretion that withholding in Shares is not permissible or advisable under applicable local law, the Company may satisfy its obligations for Tax-Related Items by one or a combination of the following:

(i)withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer;

(ii)withholding from proceeds of the sale of Shares made available upon vesting of the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); or

(iii)requiring the Participant to pay an amount equal to the Tax-Related Items to the Company or the Employer.

(d)Withholding Rate. The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable

Omnibus Equity Incentive Plan - ISA Agreement - 6 Rev. Jun. 2022

withholding rates, including up to the maximum statutory tax rate for the applicable tax jurisdiction(s), to the extent consistent with the Plan and applicable laws. If the Company determines the withholding amount using maximum applicable rates, the Participant may be entitled to a refund of any over-withheld amount in cash (with no entitlement to the equivalent in Shares), or if not refunded by the Company or the Employer, the Participant may seek a refund from the local tax authorities to the extent the Participant wishes to recover the over-withheld amount in the form of a refund. In the event of under-withholding, the Participant may be required to pay any additional Tax-Related Items directly to the applicable tax authority or to the Company and/or the Employer.

Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder will be given in writing and will be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by the Company or an Affiliate, or upon deposit in the U.S. Post Office or non-U.S. postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address shown below that party’s signature to this Agreement or at such other address as such party may designate in writing from time to time to the other party.

(a)Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, including the Appendix, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. Such means of electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery. The Participant acknowledges that the Participant has read the “Delivery of Documents and Notices” section of this Agreement and consents to the electronic delivery of the Plan documents and Agreement, as described in this section. The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails. The Participant may revoke his or her consent to the electronic delivery of documents described in this section or may change the electronic mail address to which such documents are to be delivered (if the Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. The Participant understands that he or she is not required to consent to electronic delivery of documents as described in this section.

Language. By participating in the Plan, the Participant acknowledges that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English to allow the Participant to understand the terms and conditions of this Agreement and Plan. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

Omnibus Equity Incentive Plan - ISA Agreement - 7 Rev. Jun. 2022

Severability.The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

Governing Law; Venue. This Agreement will be construed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to its conflict of laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Agreement, the parties submit to and consent to the exclusive jurisdiction of the State of Californiaand agree that such litigation will be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.

Appendix. Notwithstanding any provisions in this Agreement, the grant of this Award will be subject to any special terms and conditions set forth in any Appendix to this Agreement for the Participant’s country. Moreover, if the Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Participant to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.

Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

Foreign Asset / Account Reporting Requirements; Exchange Controls. The Participant acknowledges that his or her country may have certain foreign asset and/or foreign account reporting requirements and exchange controls which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any sale proceeds or dividends paid on Shares acquired under the Plan). The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. The Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to his or her country through a designated bank or broker and/or within a certain time after receipt. The Participant acknowledges that it is his or her responsibility to be compliant with such regulations and the Participant should consult his or her personal legal advisor for any details.

Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement will not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant.

[Remainder of Page Left Intentionally Blank]

Omnibus Equity Incentive Plan - ISA Agreement - 8 Rev. Jun. 2022

Acceptance. Failure by the Participant to accept and acknowledge this Agreement prior to the first vesting shall result in a delay of the issuance of the Shares until the Agreement has been accepted or forfeiture of the Award if the Agreement is not accepted prior to such date that allows the Company to issue the Shares by March 15th of the year following the year the Award vests).

CADENCE DESIGN SYSTEMS, INC.
By:	_________________________________
Name:	John Wall
Title:	Sr. Vice President Chief Financial Officer
Date:	[l], 2022

ACKNOWLEDGED AND AGREED:
By:	_________________________________
Name:
Date:	_________________________________

Omnibus Equity Incentive Plan - ISA Agreement - 9 Rev. Jun. 2022

APPENDIX

TERMS AND CONDITIONS

This Appendix includes additional terms and conditions that govern the Award granted to the Participant under the Plan if the Participant works and/or resides in one of the countries listed below.  If the Participant is a citizen or resident of a country other than the one in which the Participant is currently working and/or residing (or is considered as such for local law purposes), or if the Participant transfers employment and/or residency to a different country after the Award is granted, the Company will, in its discretion, determine the extent to which the terms and conditions contained herein will be applicable to the Participant.

Certain capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Agreement.

NOTIFICATIONS

This Appendix also includes notifications regarding exchange controls, securities laws and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. These notifications are based on the securities, exchange control and other laws in effect in the respective countries as of June 2022. Such laws are often complex and change frequently. As a result, the Participant understands that he or she should not rely on the notifications contained in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out-of-date at the time the Participant vests in the Incentive Stock Award or sells any Shares obtained upon such vesting.

In addition, the notifications contained in this Appendix are general in nature, may not apply to the Participant’s particular situation and relate to the Participant’s personal obligations with respect to participation in the Plan and, as a result, the Company is not in a position to assure the Participant of any particular result. Accordingly, the Participant should seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s individual situation.

If the Participant is a citizen or resident of a country other than the one in which the Participant is currently working and/or residing (or is considered as such for local law purposes), or if the Participant relocates to a different country after the Award is granted, the notifications contained in this Appendix may not be applicable to the Participant in the same manner.

The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or his or her acquisition or sale of the Shares subject to the Award. The Participant understands and agrees that he or she should consult with his or her personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan.

Omnibus Equity Incentive Plan - ISA Agreement - 10 Rev. Jun. 2022

BELGIUM

NOTIFICATIONS

Foreign Asset/Account Reporting Information. Belgian residents are required to report any securities (e.g., Shares) or bank accounts (including brokerage accounts) held outside Belgium on their annual tax return. The first time a Belgian resident reports the foreign security and/or bank accounts, he or she will have to provide the National Bank of Belgium Central Contact Point with the account number, the name of the bank and the country in which the account was opened in a separate form. The form, as well as additional information on how to complete it, can be found on the website of the National Bank of Belgium, www.nbb.be, under the caption Kredietcentrales / Centrales des crédits.

Stock Exchange Act.A stock exchange tax applies to transactions executed by a Belgian resident through a non-Belgian financial intermediary, such as a U.S. broker. The stock exchange tax likely will apply when Shares acquired under the Plan are sold. The Participant should consult his or her personal tax or financial advisor for additional details.

Annual Securities Accounts Tax Information. An “annual securities accounts tax” imposes a 0.15% annual tax on the value of the qualifying securities held in a Belgian or foreign securities account. The tax will not apply unless the total value of securities held in such account exceeds EUR 1 million on average on four reference dates within the relevant reporting period (i.e., December 31, March 31, June 30 and September 30). Different payment obligations apply depending on whether the securities account is held with a Belgian or foreign financial institution. The Participant understands the Participant should consult his or her personal tax advisor for more information regarding the Participant’s annual securities accounts tax payment obligations.

BRAZIL

TERMS AND CONDITIONS

Compliance with Law. By accepting the Award, the Participant agrees to comply with any applicable Brazilian laws and is responsible for paying and reporting any and all applicable Tax-Related Items associated with the Participant’s participation in the Plan.

Certain Conditions of the Award. This provision supplements the “Certain Conditions of the Award” section of this Agreement:

In accepting the Award, the Participant acknowledges and agrees that (i) the Participant is making an investment decision, (ii) the Shares will be issued to the Participant only if the vesting conditions are met and any necessary services are rendered by the Participant during the vesting period set forth in the Vesting Schedule, and (iii) the value of the underlying Shares is not fixed and may increase or decrease over the vesting period without compensation to the Participant.

NOTIFICATIONS

Exchange Control Information.A Brazilian resident is required to submit a declaration of assets and rights (including Shares acquired under the Plan) held outside of Brazil if the aggregate value of such assets exceeds a threshold amount that is established annually by the Central Bank. The Participant should consult with his or her personal legal advisor to determine whether he or she will be subject to this reporting requirement.

Omnibus Equity Incentive Plan - ISA Agreement - 11 Rev. Jun. 2022

CANADA

TERMS AND CONDITIONS

Form of Settlement. Notwithstanding any discretion contained in the Plan, the Award will be settled in Shares only.

Termination of Employment. This provision replaces the “Termination of Continuous Status as an Employee or Consultant” section of the Agreement:

For purposes of the Participant’s participation in the Plan, in the event of termination of the Participant’s Continuous Status as an Employee or Consultant (regardless of the reason for such termination and whether or not later found to be invalid, unlawful or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any) for any reason, other than his or her death, the Participant’s Incentive Stock Awards will immediately cease to vest and any rights to the underlying Shares will be forfeited without consideration to the Participant upon the earliest of: (i) the Employee receiving notice of termination of employment or the Consultant receiving notice of termination of the applicable service contract, (ii) the Employee providing notice of resignation from his or her employment or the Consultant providing notice of termination of the applicable service contract, and (iii) the Employee or Consultant ceasing to provide active services, regardless of any period during which notice, pay in lieu of notice or related payments or damages are provided or required to be provided under statute, common law, civil law, contract or otherwise. The Participant will not earn or be entitled to any pro-rated vesting for that portion of time before the date on which the Participant's right to vest ceases, nor will the Participant be entitled to any compensation for lost vesting. In the event that the date when the Participant’s Continuous Status as an Employee or Consultant has terminated cannot be reasonably determined under the terms of the Agreement and/or the Plan, the Board will have the exclusive discretion to determine when the Participant’s Continuous Status as an Employee or Consultant has terminated for purposes of the Award (including whether the Participant may still be considered to be providing services while on a leave of absence).

Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to vesting during a statutory notice period, the Participant's right to vest in the Incentive Stock Awards, if any, will terminate effective as of the last day of the Participant's minimum statutory notice period, but the Participant will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of the Participant's statutory notice period, nor will the Participant be entitled to any compensation for lost vesting. Similarly, if the Participant is a Consultant and the applicable service contract explicitly requires continued entitlement to vesting during the contractual notice period, the Participant's right to vest in the Incentive Stock Awards, if any, will terminate effective as of the last day of the minimum contractual notice period, but the Participant will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of the Participant's contractual notice period, nor will the Participant be entitled to any compensation for lost vesting.

Data Privacy Notice and Consent. The following provisions will apply if the Participant is a resident of Quebec:

This provision supplements the “Data Privacy Notice and Consent” section of this Agreement:

The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company, the Employer, its Affiliates and the plan administrator to disclose and discuss the Plan with their respective advisors, including the Designated Broker. The Participant further authorizes the Employer, the Company and its Affiliates to record such information and to keep such information in the Participant’s employee file. The Participant acknowledges and agrees that the Participant’s

Omnibus Equity Incentive Plan - ISA Agreement - 12 Rev. Jun. 2022

personal information, including any sensitive personal information, may be transferred or disclosed outside the province of Quebec, including to the U.S. If applicable, the Participant also acknowledges and authorizes the Company, the Employer, its Affiliates and the Designated Broker to use technology for profiling purposes and to make automated decisions that may have an impact on the Participant or the administration of the Plan.

Language Consent. The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Consentement Relatif à la Langue Utilisée. Les parties reconnaissent avoir exigé la redaction en anglais de cette convention, ainsi que de tous documents exécutés, avis donnés et procedures judiciaries intentées, directement ou indirectement, relativement à la présente convention.

NOTIFICATIONS

Securities Law Information. Shares acquired through the Plan may be sold through the Designated Broker, provided that the resale of such Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., the Nasdaq Global Select Market).

Foreign Asset/Account Reporting Information. Specified foreign property, including Shares acquired under the Plan and other rights to receive Shares (e.g., Incentive Stock Awards) of a non-Canadian company held by a Canadian resident must generally be reported annually on a Form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time during the year. Thus, such rights must be reported – generally at a nil cost – if the C$100,000 cost threshold is exceeded because other specified foreign property the Participant holds. When Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the shares. The ACB would ordinarily equal the fair market value of the Shares at the time of acquisition, but if the Participant owns other shares of the same company, this ACB may have to be averaged with the ACB of the other shares.

CHINA

TERMS AND CONDITIONS

Mandatory Sale Restriction. Due to exchange control restrictions in the People’s Republic of China (“PRC”), the Participant understands and agrees that the Company reserves the right to require the sale of the Shares issued to the Participant upon vesting of the Award, either (i) immediately upon the vesting of the Award, (ii) no later than ninety (90) days after the date the Participant ceases to be an Employee of the Company or a Related Entity or Affiliate, or (iii) within any other such time frame as may be permitted by the Company, or required by the PRC State Administration of Foreign Exchange, subject to insider-trading restrictions and/or market-abuse laws.

By accepting the Award, the Company is authorized to instruct its Designated Broker to assist with a mandatory sale of such Shares (on the Participant’s behalf pursuant to this authorization), subject to insider-trading restrictions and/or market-abuse laws, and the Participant expressly authorizes the Company’s Designated Broker to complete the sale of such Shares. Upon any such sale of the Shares, the proceeds, less any broker’s fees or commissions, will be remitted to me in accordance with any applicable exchange control laws and regulations.

Exchange Control Restrictions. By accepting the Award, the Participant understands and agrees that, due to exchange control laws in China, the Participant is not permitted to transfer any Shares acquired under the Plan out of the Participant’s account established with the Designated Broker, and that the Participant will be required to immediately repatriate all proceeds due to the

Omnibus Equity Incentive Plan - ISA Agreement - 13 Rev. Jun. 2022

Participants as a result of his or her participation in the Plan, including any proceeds from the sale of Shares acquired under the Plan to China.

The Participant further understands that such repatriation of the proceeds will need to be effected through a special exchange control account established by the Company, the Employer, or an Affiliate in China, and the Participant hereby consents and agrees that the proceeds may be transferred to such special account prior to being delivered to the Participant in China. The proceeds may be paid in U.S. dollars or local currency at the Company’s discretion. If the proceeds are paid in U.S. dollars, the Participant understands that he or she may be required to set up a U.S. dollar bank account in China so that the proceeds may be deposited into this account. If the proceeds are converted to local currency, the Participant acknowledges that the Company is under no obligation to secure any particular currency conversion rate, and that it may face delays in converting the proceeds to local currency due to exchange control restrictions in China. The Participant acknowledges and agrees that he or she bears the risk of any currency conversion rate fluctuation between the date that the Shares are sold and the date of conversion of the proceeds to local currency. The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

FINLAND

There are no country-specific provisions.

FRANCE

TERMS AND CONDITIONS

Consent to Receive Information in English.By accepting the Award, the Participant confirms having read and understood the Plan and this Agreement, including all terms and conditions included therein, which were provided in the English language. The Participant accepts the terms of those documents accordingly.

En acceptant l’attribution, le Participant confirme avoir lu et compris le Plan et le Contrat y relatifs, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Le Participant accepte les dispositions de ces documents en connaissance de cause.

NOTIFICATIONS

Foreign Asset/Account Reporting. French residents must report all foreign bank and brokerage accounts on an annual basis (including accounts opened or closed during the tax year) on a specific form together with the income tax return.

GERMANY

NOTIFICATIONS

Exchange Control Information.Cross-border payments in excess of EUR 12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with securities (including proceeds realized upon the sale of Shares), the report must be filed electronically by the 5th day of the month following the month in which the payment was received. The form of report (Allgemeine Meldeportal Statistik) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English. The Participant understands that if he or she makes or receives a payment in excess of this amount, the Participant is responsible for obtaining the appropriate form and complying with applicable reporting requirements. In addition, the Participant may be required to report the acquisition of

Omnibus Equity Incentive Plan - ISA Agreement - 14 Rev. Jun. 2022

Shares to the Bundesbank via email or telephone if the value of the Shares acquired exceeds EUR 12,500.

Foreign Asset/Account Reporting Information. The Participant understands that if his or her acquisition of Shares under the Plan leads to a so-called qualified participation at any point during the calendar year, the Participant may need to report the acquisition when he or she files his or her tax return for the relevant year. A qualified participation is attained if (i) the value of the Shares acquired exceeds EUR 150,000 and the Participant holds Shares reaching or exceeding 1% of the Company’s total Common Stock or (ii) in the unlikely event the Participant holds Shares exceeding 10% of the Company's total Common Stock.

HUNGARY

There are no country-specific provisions.

INDIA

TERMS AND CONDITIONS

Form of Settlement. Notwithstanding any discretion contained in the Plan, the Award will be settled in Shares only.

NOTIFICATIONS

Exchange Control Information. Any proceeds from the sale of Shares acquired under the Plan and any cash dividends must be repatriated to India within such time as prescribed under applicable Indian exchange control laws as may be amended from time to time. Any foreign inward remittance certificate received from the bank where the foreign currency is deposited should be retained in the event that the Reserve Bank of India or the Employer requests proof of repatriation.

Foreign Asset/Account Reporting Information. The Participant is required to declare any foreign bank accounts and any foreign financial assets (including Shares held outside India) in the Participant’s annual income tax return. The Participant is responsible for complying with this reporting obligation and is advised to confer with his or her personal tax advisor in this regard.

IRELAND

There are no country-specific provisions.

ITALY

TERMS AND CONDITIONS

Plan Document Acknowledgment. By accepting the grant of the Award, the Participant acknowledges that he or she has received a copy of the Plan and the Agreement, including this Appendix and has reviewed the Plan and the Agreement (including this Appendix) in their entirety and fully understands and accept all provisions of the Plan and the Agreement (including this Appendix).

The Participant further acknowledges that he or she has read and specifically and expressly approves the following sections of the Agreement: Vesting Schedule; Settlement; Status of Award; Voting Rights / Rights to Dividends; Vesting Restrictions; Termination of Continuous Status as an Employee or Consultant; Certain Conditions of the Award; Tax Obligations; Language; Governing Law and Venue; Appendix; Imposition of Other Requirements; and Data Privacy Notice and

Omnibus Equity Incentive Plan - ISA Agreement - 15 Rev. Jun. 2022

Consent for participants residing and/or working in the European Union or European Economic Area.

NOTIFICATIONS

Foreign Asset/Account Reporting Information.Italian residents who, at any time during the fiscal year, hold foreign financial assets (including cash and Shares) which may generate income taxable in Italy are required to report these assets on their annual tax returns (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax return is due. These reporting obligations will also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions.

JAPAN

NOTIFICATIONS

Foreign Asset/Account Reporting Information.  Japanese residents are required to report details of any assets held outside of Japan as of December 31, including Shares acquired under the Plan, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th each year. The Participant is responsible for complying with this reporting obligation if applicable to the Participant and should consult his or her personal tax advisor in this regard.

NETHERLANDS

There are no country-specific provisions.

POLAND

NOTIFICATIONS

Exchange Control Information. Information regarding bank or brokerage accounts holding cash and securities (including Shares) outside of Poland must be reported on a quarterly basis to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds a certain threshold. Any transfer of funds in excess of a certain threshold into or out of Poland must be effected through a bank account in Poland. All documents connected with any foreign exchange transactions should be retained for a period of five (5) years as measured from the end of the year in which such transaction occurred.

RUSSIA

TERMS AND CONDITIONS

U.S. Transaction and Sale Restrictions. The Participant understands that acceptance of the Award results in a contract between the Participant and the Company completed in the United States and that the Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. Upon vesting of the Incentive Stock Awards, any Shares to be issued to the Participant will be delivered to the Participant through a brokerage account in the United States and in no event will such Shares be delivered to the Participant in Russia. The Participant also acknowledges that he or she is not permitted to sell or otherwise transfer Shares directly to other individuals in Russia, nor is the Participant permitted to bring any certificates representing the Shares into Russia (if such certificates are actually issued).

Depending on the development of local regulatory requirements, the Company reserves the right to force the immediate sale of any Shares to be issued upon vesting and settlement of the Incentive

Omnibus Equity Incentive Plan - ISA Agreement - 16 Rev. Jun. 2022

Stock Awards. If applicable, the Participant agrees that the Company is authorized to instruct Designated Broker to assist with the mandatory sale of such Shares (on the Participant’s behalf pursuant to this authorization) and the Participant expressly authorizes the Designated Broker to complete the sale of such Shares. The Participant acknowledges that the Designated Broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay the Participant the cash proceeds from the sale of the Shares, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.

NOTIFICATIONS

Securities Law Notice. This Appendix, the Agreement, the Plan and all other materials that the Participant may receive in connection with the Award do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia.

Exchange Control Information. The Participant may be subject to exchange control restrictions and repatriation requirements in Russia as soon as the Participant intends to use those cash amounts for any purpose, including reinvestment. If the repatriation requirement applies, such funds must initially be credited to the Participant through a foreign currency account at an authorized bank in Russia. After the funds are initially received in Russia, they may be further remitted to foreign banks in accordance with Russian exchange control laws. Under the Directive N 5371-U of the Russian Central Bank (the “CBR”), the repatriation requirement may not apply in certain cases with respect to cash amounts received in an account that is considered by the CBR to be a foreign brokerage account. The Participant should contact his or her personal advisor to confirm the application of the exchange control restrictions prior to vesting in the Incentive Stock Award, prior to selling Shares and prior to remitting any sale proceeds to Russia, as significant penalties may apply in the case of non-compliance with the exchange control restrictions and such exchange control restrictions are subject to change at any time, often without notice.

Labor Law Information. If the Participant continues to hold Shares acquired under the Plan after an involuntary termination of the Participant’s employment, the Participant may not be eligible to receive unemployment benefits in Russia.

Anti-Corruption Law. Certain individuals who hold public office in Russia, as well as their spouses and dependent children are prohibited from opening or maintaining foreign brokerage or bank accounts and holding any securities in a foreign company (including Shares acquired under the Plan). The Participant should consult with his or her personal legal advisor to determine whether this law applies to the Participant.

Foreign Asset/Account Reporting Information. Russian residents are required to file the following reports or notifications with the Russian tax authorities, if applicable: (i) annual cash flow reporting for an offshore brokerage account (due by June 1 each year for the previous year); (ii) financial asset (including Shares) reporting for an offshore brokerage account (due by June 1 each year for the previous year); and (ii) a one-time notification within one month of opening, closing, or changing details of an offshore brokerage account. The Participant understands that he or she should consult his or her personal tax advisor to ensure compliance with applicable requirements.

SINGAPORE

NOTIFICATIONS

Securities Law Information. The Award under the Plan is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the

Omnibus Equity Incentive Plan - ISA Agreement - 17 Rev. Jun. 2022

Monetary Authority of Singapore. Hence, statutory liability under the SFA in relation to the content of the prospectuses will not apply. The Award granted under the Plan is subject to section 257 of the SFA and the Participant understands that he or she should not sell or offer to sell, any Shares directly to any person or entity in Singapore unless such sale or offer is made (i) six months or more after the Offering Date, (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA, or (iii) pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.

Director Notification Information. Any director, associate director or shadow director of a Singapore Affiliate or Related Entity is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Affiliate or Related Entity in Singapore in writing when receiving or disposing of an interest (e.g., Rights or Shares) in the Company or in any Affiliate or Related Entity. Such notifications must be made within two days of acquiring or disposing of an interest in the Company or any Affiliate or Related Company, or within two days of becoming a director if such an interest is held at that time.

SOUTH KOREA

NOTIFICATIONS

Foreign Asset/Account Reporting Information. Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds the applicable threshold on any month-end date during a calendar year. The Participant should consult his or her personal tax advisor to determine his or her personal reporting obligations.

SWEDEN

TERMS AND CONDITIONS

Tax Obligations. This provision supplements the “Tax Obligations” section of this Agreement:

Without limiting the Company’s and the Employer’s authority to satisfy their withholding obligations for Tax-Related Items as set forth in the “Tax Obligations” section of this Agreement, in accepting the Award, the Participant authorizes the Company and/or the Employer by deducting from the Shares otherwise deliverable to the Participant in settlement of the Award or withholding from proceeds of the sale of Shares acquired upon vesting/settlement of the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization) to satisfy Tax-Related Items, regardless of whether the Company and/or the Employer have an obligation to withhold such Tax-Related Items.

SWITZERLAND

NOTIFICATIONS

Securities Law Information. Neither this document nor any other materials relating to the offer of participation in the Plan (i) constitutes a prospectus according to articles 35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”); (ii) may be publicly distributed or otherwise made publicly available in Switzerland to any person other than an employee of the Company or (iii) has been or will be filed with, approved or supervised by any Swiss reviewing body according to article 51 FinSA or any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority.

Omnibus Equity Incentive Plan - ISA Agreement - 18 Rev. Jun. 2022

TAIWAN

NOTIFICATIONS

Securities Law Information. The offer of participation in the Plan is available only for eligible Employees and Consultants. The offer of participation in Plan is not a public offer of securities by a Taiwanese company.

Exchange Control Information. Taiwanese residents may acquire and remit foreign currency (including funds to purchase or proceeds from the sale of Shares) up to US$5 million per year without justification. However, if the transaction amount exceeds certain thresholds in a single transaction, Taiwanese residents may be required to submit a foreign exchange transaction form and provide supporting documentation to the satisfaction of the remitting bank.

UNITED KINGDOM

TERMS AND CONDITIONS

Tax Obligations. This provision supplements the “Tax Obligations” section of this Agreement:

Without limitation to the “Tax Obligations” section of the Agreement, the Participant agrees that he or she is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items as and when requested by the Company or the Employer or by HM Revenue and Customs (“HMRC”) (or any other tax authority or any other relevant authority). The Participant also agrees to indemnify and keep indemnified the Company and the Employer against any taxes that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on the Participant’s behalf.

Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provisions will not apply. The Participant understands that, in the event he or she is an executive officer or director and the income tax is not collected by the Participant within 90 days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and National Insurance contributions (“NICs”) may be payable. The Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying the Company or the Employer, as applicable for the value of any NICs due on this additional benefit.

UNITED STATES OF AMERICA

There are no country-specific provisions.

Omnibus Equity Incentive Plan - ISA Agreement - 19 Rev. Jun. 2022

EX-10.04

CADENCE DESIGN SYSTEMS, INC.

Restricted Stock Unit Agreement

Omnibus Equity Incentive Plan

(the “Plan”)

Cadence Design Systems, Inc. (the “Company”) grants the participant named below (the “Participant”) Restricted Stock Units pursuant to the Plan as set forth below (the “Award”). Each Restricted Stock Unit represents the right to receive one Share (as adjusted from time to time pursuant to the Plan), subject to vesting and other conditions set forth in this Agreement (as defined below).

This Award is subject to the terms and conditions set forth in this Restricted Stock Unit Agreement, including the country-specific terms and conditions contained in the appendix attached hereto (the “Appendix”) (collectively, this “Agreement”), and in the Plan located at the Company’s Employee Stock Services’ intranet webpage; provided, however, if there is a conflict between the terms of this Agreement and the terms of the Plan, the terms of this Agreement will govern. Capitalized terms that are not defined herein will have the meanings set forth in the Plan.

Participant: [l]

ID Number: [l]

Restricted Stock Unit Number: [l]

Date of Award: [l]

Number of Shares Subject to the Restricted Stock Units (the “Shares”): [l]

Vesting Commencement Date: [l]

Vesting Schedule:[l]

Settlement. Each vested Restricted Stock Unit will be settled by the delivery of one Share (subject to adjustment under the Plan) to the Participant or, in the event of the Participant’s death, to the Participant’s estate or heirs, on or as soon as practicable following the applicable vesting date (but in no event more than 30 days thereafter), provided that the Participant has remained in Continuous Status as an Employee or Consultant through such vesting date, has satisfied all obligations with regard to the Tax-Related Items (as defined below) in connection with the Award, and that the Participant has completed, signed and returned any documents and taken any additional action that the Company deems appropriate to enable it to accomplish the delivery of the Shares. No fractional shares will be issued under this Agreement.

Status of Award. Until the Restricted Stock Units vest and the Shares underlying the Restricted Stock Units are issued to the Participant pursuant to the terms of this Agreement, the Participant will have no rights as a stockholder of the Company with respect to the Shares subject to the Award (including, without limitation, any voting or dividend rights with respect to such Shares). Following the issuance of such Shares to the Participant hereunder, the Participant will be recorded as a stockholder of the Company with respect to such Shares and will have all voting rights and rights to dividends and other distributions with respect to such Shares.

Termination of Continuous Status as an Employee or Consultant. For purposes of the Participant’s participation in the Plan, in the event of termination of the Participant’s Continuous Status as an Employee or Consultant (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any) for any reason, other than his or her death, the Participant’s Restricted Stock Units will

Omnibus Equity Incentive Plan - RSU Agreement - 1          Rev. Jun. 2022

immediately cease to vest and any rights to the underlying Shares will be forfeited without consideration to the Participant on the effective date of termination of his or her Continuous Status as an Employee or Consultant. The Participant’s Continuous Status as an Employee or Consultant will terminate effective as of the date the Participant is no longer providing services as an Employee or Consultant, with such date being as of the end of any notice period mandated under the employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement (if applicable). The Board (as defined below) will have the exclusive discretion to determine when the Participant’s Continuous Status as an Employee or Consultant has terminated for purposes of the Award.

Death of Participant. In the event of the Participant’s death before all the Restricted Stock Units subject to this Award have vested, if the Participant will have been in Continuous Status since the Date of Award, the number of Restricted Stock Units scheduled to vest one year after the Participant’s date of death will be deemed to have vested immediately prior to the Participant’s death. All other Restricted Stock Units will cease vesting and any rights to the underlying Shares will be forfeited without compensation to the Participant.

Board Authority. Any question concerning the interpretation of this Agreement or the Plan, any adjustments required to be made under the Plan, and any controversy that may arise under the Plan or this Agreement will be determined by the Company’s Board of Directors or a committee of directors designated by the Board pursuant to Section 4(a) of the Plan (including any subcommittee or other person(s) to whom the committee has delegated its authority) in its sole and absolute discretion (collectively, the “Board”). Such decision will be final and binding.

Transfer Restrictions. Any sale, transfer, assignment, encumbrance, pledge, hypothecation, conveyance in trust, gift, transfer by bequest, devise or descent, or other transfer or disposition of any kind, whether voluntary or by operation of law, directly or indirectly, of Restricted Stock Units or Shares subject thereto prior to the date such Shares are issued to the Participant pursuant to this Agreement will be strictly prohibited and void.

Securities Law Compliance. The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales or other subsequent transfers of any Shares issued as a result of or under this Award, including without limitation (i) restrictions under the Company’s Securities Trading Policy, (ii) restrictions that may be necessary in the absence of an effective registration statement under the Securities Act or any other similar applicable law (whether U.S. or foreign law) covering the Award and/or the Shares underlying the Award, and (iii) restrictions as to the use of a specified brokerage firm or other agent for such resales or other transfers. Any sale of the Shares must also comply with other applicable laws and regulations governing the sale of such Shares.

Insider Trading / Market Abuse Laws. By participating in the Plan, the Participant agrees to comply with the Company’s Securities Trading Policy. Further, the Participant acknowledges that, depending on the Participant’s country, the Participant may be subject to insider trading restrictions and/or market-abuse laws, which may affect his or her ability to sell the Shares during such times as he or she is considered to have “inside information” regarding the Company (as defined by the laws in the applicable jurisdictions or the Participant’s country). Any restrictions under these laws or regulations are in addition to any restrictions that may be imposed under the Company’s Securities Trading Policy. The Participant understands and agrees that he or she should consult his or her personal legal advisor for details regarding any insider trading restrictions and/or market-abuse laws in his or her country and that the Participant is solely responsible for complying with such laws or regulations.

Certain Conditions of the Award. By accepting the Award, the Participant acknowledges and agrees that:

Omnibus Equity Incentive Plan - RSU Agreement - 2          Rev. Jun. 2022

(a)The Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b)The grant of the Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of awards, or benefits in lieu of awards, even if awards have been granted in the past;

(c)All decisions with respect to future award grants, if any, will be at the sole discretion of the Company;

(d)The Participant’s participation in the Plan will not create a right to further Continuous Status as an Employee or Consultant and will not interfere with any applicable ability of the Company (or any Affiliate) to terminate the Participant’s Continuous Status as an Employee or Consultant at any time;

(e)The Award and the Participant’s participation in the Plan will not be interpreted to form or amend an employment contract or service contract or relationship with the Company or any Affiliate;

(f)The Participant is voluntarily participating in the Plan;

(g)The Award and the Shares subject to the Award, and the income and value of the same, are not intended to replace any pension rights or compensation;

(h)The Award and the Shares subject to the Award, and the income and value of the same, are not part of normal or expected compensation for any purpose, including but not limited to calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, leave-related payments, holiday pay, pension or retirement benefits or payments or welfare benefits or similar mandatory payments;

(i)The future value of the underlying Shares is unknown and cannot be predicted with certainty;

(j)Unless otherwise provided in the Plan or by the Company in its discretion, the Award and the benefits evidenced by this Agreement do not create any entitlement to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares;

(k)The Award and the Shares subject to the Award, and the income and value of the same, are not part of normal or expected compensation for any purpose;

(l)None of the Company, any Affiliate nor the Company or the Affiliate employing or engaging the Participant (the “Employer”) will be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States dollar that may affect the value of the Award or of any amounts due to the Participant pursuant to the settlement of the Award or the subsequent sale of any Shares acquired upon settlement;

(m)No claim or entitlement to compensation or damages will arise from forfeiture of the Award resulting from termination of the Participant’s Continuous Status as an Employee or Consultant (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any); and

Omnibus Equity Incentive Plan - RSU Agreement - 3          Rev. Jun. 2022

(n)Unless otherwise agreed with the Company, the Award and the Shares subject to the Award, and the income and value of the same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of an Affiliate of the Company.

Data Privacy Notice and Consent. This section applies if the Participant resides outside of the United States:

(a)The Participant understands information about the Company’s data processing practices in connection with the Participant’s participation in the Plan is available in the Company’s Employee and Staff Privacy Policy provided here.

(b)The Participant understands that the Company will collect the Participant’s personal data for purposes of allocating the Shares and implementing, administering and managing the Plan. The Company will also transfer the Participant’s personal data to E*TRADE Corporate Financial Services, Inc. and its affiliated companies, Charles Schwab & Co. and its affiliated companies, or such other equity plan service provider as may be selected by the Company presently or in the future (the “Designated Broker”) so that the Designated Broker can assist the Company with the implementation, administration and management of the Plan. Without limiting any other rights the Company may have, the Participant declares his or her consent to the use of his or her personal data in connection with the Plan.

(c)The Participant’s participation in the Plan and grant of consent is purely voluntary. The Participant may deny or withdraw his or her consent at any time. If the Participant does not consent, or the Participant withdraws his or her consent, the Participant cannot participate in the Plan. This would not affect the Participant’s salary as an Employee of the Employer or payment as a Consultant of the Employer, or the Participant’s service with the Employer. Instead, the Company would not be able to grant the Participant the Restricted Stock Units or other awards, or administer or maintain such awards. The Participant understands that refusing or withdrawing his or consent may affect his or her ability to participate in the Plan.

Tax Obligations

(a)Responsibility for Taxes. The Participant acknowledges that, regardless of any action the Employer takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable to the Participant (the “Tax-Related Items”), the ultimate liability for all Tax-Related Items is and remains the responsibility of the Participant and may exceed the amount actually withheld by the Company or the Employer, if any.

    The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items; and (b) do not commit to and are under no obligation to structure the terms of the grant of rights or any aspect of the Participant’s participation in the Plan to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result.

    Further, if the Participant has become subject to Tax-Related Items in more than one jurisdiction, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

    The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items.

Omnibus Equity Incentive Plan - RSU Agreement - 4          Rev. Jun. 2022

(b)    Withholding in Shares. Subject to applicable local law and to the extent that the Company or the Employer is required to withhold Tax-Related Items with respect to the Award, the Company will require the Participant to satisfy his or her obligation for Tax-Related Items by deducting from the Shares otherwise deliverable to the Participant in settlement of the Award a number of whole Shares having a Fair Market Value on the applicable vesting date (or other applicable date on which the Tax-Related Items arise) not in excess of the amount of such Tax-Related Items, subject to subsection (d) below and provided that if the applicable date falls on a non-trading day, the Fair Market Value will be determined based on the closing price of the Common Stock on the next available trading day. For tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the vested Award, notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the Company's (or the Employer's) withholding obligation with respect to the Tax-Related Items.

(c)    Alternative Withholding Methods. If the Company determines in its discretion that withholding in Shares is not permissible or advisable under applicable local law, the Company may satisfy its obligations for Tax-Related Items by one or a combination of the following:

(i)withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer; or

(ii)withholding from proceeds of the sale of Shares acquired upon vesting/settlement of the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); or

(iii)requiring the Participant to pay an amount equal to the Tax-Related Items to the Company or the Employer.

(d)Withholding Rate. The Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding rates or other applicable withholding rates, including up to the maximum statutory tax rate for the applicable tax jurisdiction(s), to the extent consistent with the Plan and applicable laws. If the Company determines the withholding amount using maximum applicable rates, the Participant may be entitled to a refund of any over-withheld amount in cash (with no entitlement to the equivalent in Shares), or if not refunded by the Company or the Employer, the Participant may seek a refund from the local tax authorities to the extent the Participant wishes to recover the over-withheld amount in the form of a refund. In the event of under-withholding, the Participant may be required to pay any additional Tax-Related Items directly to the applicable tax authority or to the Company and/or the Employer.

Delivery of Documents and Notices. Any document relating to participation in the Plan or any notice required or permitted hereunder will be given in writing and will be deemed effectively given (except to the extent that this Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery at the e-mail address, if any, provided for the Participant by the Company or an Affiliate, or upon deposit in the U.S. Post Office or non-U.S. postal service, by registered or certified mail, or with a nationally recognized overnight courier service, with postage and fees prepaid, addressed to the other party at the address shown below that party’s signature to this Agreement or at such other address as such party may designate in writing from time to time to the other party.

(a)Description of Electronic Delivery. The Plan documents, which may include but do not necessarily include: the Plan, this Agreement, including the Appendix, the Plan Prospectus, and any reports of the Company provided generally to the Company’s stockholders, may be delivered to the Participant electronically. Such means of

Omnibus Equity Incentive Plan - RSU Agreement - 5          Rev. Jun. 2022

electronic delivery may include but do not necessarily include the delivery of a link to a Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail or such other means of electronic delivery specified by the Company.

(b)Consent to Electronic Delivery. The Participant acknowledges that the Participant has read the “Delivery of Documents and Notices” section of this Agreement and consents to the electronic delivery of the Plan documents and Agreement, as described in this section.

The Participant acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Participant by contacting the Company by telephone or in writing. The Participant further acknowledges that the Participant will be provided with a paper copy of any documents if the attempted electronic delivery of such documents fails. Similarly, the Participant understands that the Participant must provide the Company or any designated third party administrator with a paper copy of any documents if the attempted electronic delivery of such documents fails.

The Participant may revoke his or her consent to the electronic delivery of documents described in this section or may change the electronic mail address to which such documents are to be delivered (if the Participant has provided an electronic mail address) at any time by notifying the Company of such revoked consent or revised e-mail address by telephone, postal service or electronic mail. The Participant understands that he or she is not required to consent to electronic delivery of documents as described in this section.

Language. By accepting the Award, the Participant acknowledges that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English to allow the Participant to understand the terms and conditions of this Agreement and Plan. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

Severability.The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions will nevertheless be binding and enforceable.

Governing Law; Venue. This Agreement will be construed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to its conflict of laws rules. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or this Agreement, the parties submit to and consent to the exclusive jurisdiction of the State of Californiaand agree that such litigation will be conducted only in the courts of Santa Clara County, California, or the federal courts for the United States for the Northern District of California, and no other courts, where this grant is made and/or to be performed.

Appendix. Notwithstanding any provisions in this Agreement, the grant of this Award will be subject to any special terms and conditions set forth in any Appendix to this Agreement for the Participant’s country. Moreover, if the Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Participant to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.

Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Award and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative

Omnibus Equity Incentive Plan - RSU Agreement - 6          Rev. Jun. 2022

reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

Foreign Asset / Account Reporting Requirements; Exchange Controls. The Participant acknowledges that his or her country may have certain foreign asset and/or foreign account reporting requirements and exchange controls which may affect Participant’s ability to acquire or hold Shares acquired under the Plan or cash received from participating in the Plan (including from any sale proceeds or dividends paid on Shares acquired under the Plan). The Participant may be required to report such accounts, assets or transactions to the tax or other authorities in his or her country. The Participant also may be required to repatriate sale proceeds or other funds received as a result of participation in the Plan to his or her country through a designated bank or broker and/or within a certain time after receipt. The Participant acknowledges that it is his or her responsibility to be compliant with such regulations and the Participant should consult his or her personal legal advisor for any details.

Waiver. The Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement will not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant.

[Remainder of Page Left Intentionally Blank]

Omnibus Equity Incentive Plan - RSU Agreement - 7          Rev. Jun. 2022

Acceptance. Failure by the Participant to accept and acknowledge this Agreement prior to the first vesting shall result in a delay of the issuance of the Shares until the Agreement has been accepted or forfeiture of the Award if the Agreement is not accepted prior to such date that allows the Company to issue the Shares by March 15th of the year following the year the Award vests).

CADENCE DESIGN SYSTEMS, INC.
By:	_________________________________
Name:	John Wall
Title:	Sr. Vice President Chief Financial Officer
Date:	[l], 2022

ACKNOWLEDGED AND AGREED:
By:	_________________________________
Name:
Date:	_________________________________

Omnibus Equity Incentive Plan - RSU Agreement - 8          Rev. Jun. 2022

APPENDIX

TERMS AND CONDITIONS

This Appendix includes additional terms and conditions that govern the Award granted to the Participant under the Plan if the Participant works and/or resides in one of the countries listed below.  If the Participant is a citizen or resident of a country other than the one in which the Participant is currently working and/or residing (or is considered as such for local law purposes), or if the Participant transfers employment and/or residency to a different country after the Award is granted, the Company will, in its discretion, determine the extent to which the terms and conditions contained herein will be applicable to the Participant.

Certain capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Agreement.

NOTIFICATIONS

This Appendix also includes notifications regarding exchange controls, securities laws and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. These notifications are based on the securities, exchange control and other laws in effect in the respective countries as of June 2022. Such laws are often complex and change frequently. As a result, the Participant understand that he or she should not rely on the notifications contained in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out-of-date at the time the Participant vests in the Restricted Stock Units or sells any Shares obtained upon such vesting.

In addition, the notifications contained in this Appendix are general in nature, may not apply to the Participant’s particular situation and relate to the Participant’s personal obligations with respect to participation in the Plan and, as a result, the Company is not in a position to assure the Participant of any particular result. Accordingly, the Participant should seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s individual situation.

If the Participant is a citizen or resident of a country other than the one in which the Participant is currently working and/or residing (or is considered as such for local law purposes), or if the Participant relocates to a different country after the Award is granted, the notifications contained in this Appendix may not be applicable to the Participant in the same manner.

The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or his or her acquisition or sale of the underlying Shares. The Participant understands and agrees that he or she should consult with his or her personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan.

Omnibus Equity Incentive Plan - RSU Agreement - 9         Rev. Jun. 2022

BELGIUM

NOTIFICATIONS

Foreign Asset/Account Reporting Information. Belgian residents are required to report any securities (e.g., Shares) or bank accounts (including brokerage accounts) held outside Belgium on their annual tax return. The first time a Belgian resident reports the foreign security and/or bank accounts, he or she will have to provide the National Bank of Belgium Central Contact Point with the account number, the name of the bank and the country in which the account was opened in a separate form. The form, as well as additional information on how to complete it, can be found on the website of the National Bank of Belgium, www.nbb.be, under the caption Kredietcentrales / Centrales des crédits.

Stock Exchange Tax. A stock exchange tax applies to transactions executed by a Belgian resident through a non-Belgian financial intermediary, such as a U.S. broker. The stock exchange tax likely will apply when Shares acquired under the Plan are sold. The Participant should consult his or her personal tax or financial advisor for additional details.

Annual Securities Accounts Tax Information. An “annual securities accounts tax” imposes a 0.15% annual tax on the value of the qualifying securities held in a Belgian or foreign securities account. The tax will not apply unless the total value of securities held in such account exceeds EUR 1 million on average on four reference dates within the relevant reporting period (i.e., December 31, March 31, June 30 and September 30). Different payment obligations apply depending on whether the securities account is held with a Belgian or foreign financial institution. The Participant understands the Participant should consult his or her personal tax advisor for more information regarding the Participant’s annual securities accounts tax payment obligations.

BRAZIL

TERMS AND CONDITIONS

Compliance with Law. By accepting the Award, the Participant agrees to comply with any applicable Brazilian laws and is responsible for paying and reporting any and all applicable Tax-Related Items associated with the Participant’s participation in the Plan.

Certain Conditions of the Award. This provision supplements the “Certain Conditions of the Award” section of this Agreement:

In accepting the Award, the Participant acknowledges and agrees that (i) the Participant is making an investment decision, (ii) the Shares will be issued to the Participant only if the vesting conditions are met and any necessary services are rendered by the Participant during the vesting period set forth in the Vesting Schedule, and (iii) the value of the underlying Shares is not fixed and may increase or decrease over the vesting period without compensation to the Participant.

NOTIFICATIONS

Exchange Control Information.A Brazilian resident is required to submit a declaration of assets and rights (including Shares acquired under the Plan) held outside of Brazil if the aggregate value of such assets exceeds a threshold amount that is established annually by the Central Bank. The Participant should consult with his or her personal legal advisor to determine whether he or she will be subject to this reporting requirement.

Omnibus Equity Incentive Plan - RSU Agreement - 10         Rev. Jun. 2022

CANADA

TERMS AND CONDITIONS

Form of Settlement. Notwithstanding any discretion contained in the Plan, the Award will be settled in Shares only.

Termination of Employment. This provision replaces the “Termination of Continuous Status as an Employee or Consultant” section of the Agreement:

For purposes of the Participant’s participation in the Plan, in the event of termination of the Participant’s Continuous Status as an Employee or Consultant (regardless of the reason for such termination and whether or not later found to be invalid, unlawful or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any) for any reason, other than his or her death, the Participant’s Restricted Stock Units will immediately cease to vest and any rights to the underlying Shares will be forfeited without consideration to the Participant upon the earliest of: (i) the Employee receiving notice of termination of employment or the Consultant receiving notice of termination of the applicable service contract, (ii) the Employee providing notice of resignation from his or her employment or the Consultant providing notice of termination of the applicable service contract, and (iii) the Employee or Consultant ceasing to provide active services, regardless of any period during which notice, pay in lieu of notice or related payments or damages are provided or required to be provided under statute, common law, civil law, contract or otherwise. The Participant will not earn or be entitled to any pro-rated vesting for that portion of time before the date on which the Participant's right to vest ceases, nor will the Participant be entitled to any compensation for lost vesting. In the event that the date when the Participant’s Continuous Status as an Employee or Consultant has terminated cannot be reasonably determined under the terms of the Agreement and/or the Plan, the Board will have the exclusive discretion to determine when the Participant’s Continuous Status as an Employee or Consultant has terminated for purposes of the Award (including whether the Participant may still be considered to be providing services while on a leave of absence).

Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to vesting during a statutory notice period, the Participant's right to vest in the Restricted Stock Units, if any, will terminate effective as of the last day of the Participant's minimum statutory notice period, but the Participant will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of the Participant's statutory notice period, nor will the Participant be entitled to any compensation for lost vesting. Similarly, if the Participant is a Consultant and the applicable service contract explicitly requires continued entitlement to vesting during the contractual notice period, the Participant's right to vest in the Restricted Stock Units, if any, will terminate effective as of the last day of the minimum contractual notice period, but the Participant will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of the Participant's contractual notice period, nor will the Participant be entitled to any compensation for lost vesting.

The following provisions will apply if the Participant is a resident of Quebec:

Data Privacy Notice and Consent. This provision supplements the applicable “Data Privacy Notice and Consent” section of this Agreement:

The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company, the Employer, its Affiliates and the plan administrator to disclose and discuss the Plan with their respective advisors, including the Designated Broker. The Participant further authorizes the Employer, the Company and its Affiliates to record such information and to keep such information in the Participant’s employee file. The Participant acknowledges and agrees that the Participant’s

Omnibus Equity Incentive Plan - RSU Agreement - 11         Rev. Jun. 2022

personal information, including any sensitive personal information, may be transferred or disclosed outside the province of Quebec, including to the U.S. If applicable, the Participant also acknowledges and authorizes the Company, the Employer, its Affiliates and the Designated Broker to use technology for profiling purposes and to make automated decisions that may have an impact on the Participant or the administration of the Plan.

NOTIFICATIONS

Securities Law Information. Shares acquired through the Plan may be sold through the Designated Broker, provided that the resale of such Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., the Nasdaq Global Select Market).

Foreign Asset/Account Reporting Information. Specified foreign property, including Shares acquired under the Plan and other rights to receive Shares (e.g., Restricted Stock Units) of a non-Canadian company held by a Canadian resident must generally be reported annually on a Form T1135 (Foreign Income Verification Statement) if the total cost of the foreign property exceeds C$100,000 at any time during the year. Thus, such rights must be reported – generally at a nil cost – if the C$100,000 cost threshold is exceeded because other specified foreign property the Participant holds. When Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the shares. The ACB would ordinarily equal the fair market value of the Shares at the time of acquisition, but if the Participant owns other shares of the same company, this ACB may have to be averaged with the ACB of the other shares.

CHINA

TERMS AND CONDITIONS

Mandatory Sale Restriction. Due to exchange control considerations in the People’s Republic of China (“PRC”), the Company reserves the right to require the sale of any Shares issued to the Participant upon vesting of the Restricted Stock Units, either (i) immediately upon vesting of the Restricted Stock Units, (ii) within ninety (90) days following the termination of the Participant’s Continuous Status as an Employee or Consultant, or (iii) within any other such time frame as may be required by the PRC State Administration of Foreign Exchange.

By accepting the Award, the Participant acknowledges that he or she understands and agrees that the Company is authorized to, and may in its sole discretion, instruct the Designated Broker to assist with the mandatory sale of Shares (on the Participant’s behalf pursuant to this authorization) and the Participant expressly authorizes the Designated Broker to complete the sale of such Shares. The Participant acknowledges that the Designated Broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the proceeds, less any Tax-Related Items and brokerage fees or commissions, will be remitted to the Participant in accordance with any applicable exchange control laws and regulations.

Exchange Control Restrictions. By accepting the Award, the Participant understands and agrees that, due to exchange control laws in China, the Participant is not permitted to transfer any Shares acquired under the Plan out of the Participant’s account established with the Designated Broker, and that the Participant will be required to immediately repatriate all proceeds due to the Participants as a result of his or her participation in the Plan, including any proceeds from the sale of Shares acquired under the Plan to China.

The Participant further understands that such repatriation of the proceeds will need to be effected through a special exchange control account established by the Company, the Employer, or an Affiliate in China, and the Participant hereby consents and agrees that the proceeds may be transferred to such special account prior to being delivered to the Participant in China. The proceeds may be paid in U.S. dollars or local currency at the Company’s discretion. If the proceeds are paid in U.S. dollars, the Participant understands that he or she may be required to set up a

Omnibus Equity Incentive Plan - RSU Agreement - 12         Rev. Jun. 2022

U.S. dollar bank account in China so that the proceeds may be deposited into this account. If the proceeds are converted to local currency, the Participant acknowledges that the Company is under no obligation to secure any particular currency conversion rate, and that it may face delays in converting the proceeds to local currency due to exchange control restrictions in China. The Participant acknowledges and agrees that he or she bears the risk of any currency conversion rate fluctuation between the date that the Shares are sold and the date of conversion of the proceeds to local currency. The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.

FINLAND

There are no country-specific provisions.

FRANCE

TERMS AND CONDITIONS

Consent to Receive Information in English.By accepting the Award, the Participant confirms having read and understood the Plan and this Agreement, including all terms and conditions included therein, which were provided in the English language. The Participant accepts the terms of those documents accordingly.

En acceptant l’attribution, le Participant confirme avoir lu et compris le Plan et le Contrat y relatifs, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Le Participant accepte les dispositions de ces documents en connaissance de cause.

NOTIFICATIONS

Foreign Asset/Account Reporting. French residents must report all foreign bank and brokerage accounts on an annual basis (including accounts opened or closed during the tax year) on a specific form together with the income tax return.

GERMANY

NOTIFICATIONS

Exchange Control Information. Cross-border payments in excess of EUR 12,500 must be reported monthly to the German Federal Bank (Bundesbank). In case of payments in connection with securities (including proceeds realized upon the sale of Shares), the report must be filed electronically by the 5th day of the month following the month in which the payment was received. The form of report (“Allgemeine Meldeportal Statistik”) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English. The Participant understands that if he or she makes or receives a payment in excess of this amount, the Participant is responsible for obtaining the appropriate form and complying with applicable reporting requirements. In addition, the Participant may be required to report the acquisition of Shares to the Bundesbank via email or telephone if the value of the Shares acquired exceeds EUR 12,500.

Foreign Asset/Account Reporting Information. The Participant understands that if his or her acquisition of Shares under the Plan leads to a so-called qualified participation at any point during the calendar year, the Participant may need to report the acquisition when he or she files his or her tax return for the relevant year. A qualified participation is attained if (i) the value of the Shares acquired exceeds EUR 150,000 and the Participant holds Shares reaching or exceeding 1% of the Company’s total Common Stock or (ii) in the unlikely event the Participant holds Shares exceeding 10% of the Company's total Common Stock.

Omnibus Equity Incentive Plan - RSU Agreement - 13         Rev. Jun. 2022

HUNGARY

There are no country-specific provisions.

INDIA

TERMS AND CONDITIONS

Form of Settlement. Notwithstanding any discretion contained in the Plan, the Award will be settled in Shares only.

NOTIFICATIONS

Exchange Control Information. Any proceeds from the sale of Shares acquired under the Plan
and any cash dividends must be repatriated to India within such time as prescribed under
applicable Indian exchange control laws as may be amended from time to time. Any foreign
inward remittance certificate received from the bank where the foreign currency is deposited should be retained in the event that the Reserve Bank of India or the Employer requests proof of repatriation

Foreign Asset/Account Reporting Information. The Participant is required to declare any foreign bank accounts and any foreign financial assets (including Shares held outside India) in the Participant’s annual income tax return. The Participant is responsible for complying with this reporting obligation and is advised to confer with his or her personal tax advisor in this regard.

IRELAND

There are no country-specific provisions.

ISRAEL

TERMS AND CONDITIONS

Nature of Award.By accepting the Award, the Participant understands and agrees that the Restricted Stock Units are offered subject to and in accordance with the Sub-Plan for Israeli Participants to the Plan (the “Israeli Subplan”) and theAward is intended to be a Capital Gain Award pursuant to Section 102 of the Ordinance (as defined in the Israeli Subplan). Notwithstanding the foregoing, the Company does not undertake to maintain the qualified status of the Restricted Stock Units and the Participant acknowledges that he or she will not be entitled to damages of any nature whatsoever if the Award becomes disqualified and no longer qualifies as a Capital Gain Award. In the event of any inconsistencies between the Israeli Subplan, the Agreement and/or the Plan, the terms of the Israeli Subplan will govern.

Further, to the extent requested by the Company or the Employer, the Participant agrees to execute any letter or other agreement in connection with the grant of the Restricted Stock Units or any future Restricted Stock Units granted under the Israeli Subplan. If the Participant fails to comply with such request, the Award may not qualify as a Capital Gain Award.

Trust Arrangement. The Participant acknowledges and agrees that the Award and any Shares issued upon vesting of the Restricted Stock Units will be held on the Participant’s behalf, in trust, or controlled by the Company’s designated trustee in Israel, Tamir Fishman or any such other trustee in Israel which may be designated by the Company in the future (the “Trustee”) in accordance with the terms of the trust agreement between the Company and the Trustee. The Participant further agrees that such Shares will be subject to the Holding Period (as defined in the Israeli Subplan). The Company may, in its sole discretion, replace the trustee from time to time and instruct the

Omnibus Equity Incentive Plan - RSU Agreement - 14         Rev. Jun. 2022

transfer of all Restricted Stock Units and Shares held and/or administered by such trustee at such time to its successor and the provisions of the Agreement will apply to the new trustee.

Restriction on Sale. The Participant acknowledges that, in order to maintain the Award’s status as a Capital Gain Award, any Shares issued upon vesting of the Restricted Stock Units may not be disposed of prior to the expiration of the Holding Period. Accordingly, the Participant will not dispose of (or request the Trustee to dispose of) any such Shares prior to the expiration of the Holding Period, other than as permitted by applicable law. For purposes of this Appendix for Israel, “dispose” will mean any sale, transfer or other disposal of the Shares by the Participant or the Trustee, including a release of such Shares from the Trustee to the Participant.

Tax Obligations. This provision supplements the “Tax Obligations” section of the Agreement:

Upon disposal of the Shares, the fair market value of the Restricted Stock Units on the Date of Award (as computed in accordance with the provisions of the Ordinance relating to Capital Gain Awards) will be subject to taxation in Israel in accordance with ordinary income tax principles. Moreover, in the event that the Participant disposes of any Shares underlying the Restricted Stock Units prior to the expiration of the Holding Period, the Participant acknowledges and agrees that any additional gains from the sale of such Shares will not qualify for capital gains tax treatment applicable to Capital Gain Awards and will be subject to taxation in Israel in accordance with ordinary income tax principles. Further, the Participant acknowledges and agrees that he or she will be liable for the Employer’s component of payments to the Israeli National Insurance Institute (to the extent such payments by the Employer are required).

The Participant further agrees that the Trustee may act on behalf of the Company or the Employer, as applicable, to satisfy any obligation to withhold Tax-Related Items applicable to the Participant in connection with the Restricted Stock Units granted under the Israeli Subplan.

Additional Conditions of the Award. In accepting the Award, the Participant (i) declares that she/he is familiar with Section 102 and the regulations and rules promulgated thereunder, including without limitations the provisions of the tax route applicable to the Awards, and agrees to comply with such provisions, as amended from time to time, provided that if such terms are not met, Section 102 may not apply, and (ii) agrees to the terms and conditions of the trust deed signed between the Trustee and the Company and/or the Employer, which is available for the Participant’s review, during normal working hours, at Company’s offices, (iii) acknowledges that releasing the Awards and Shares from the holding or control of the Trustee prior to the termination of the Holding Period constitutes a violation of the terms of Section 102 and agrees to bear the relevant sanctions, (iv) authorizes the Company and/or the Employer to provide the Trustee with any information required for the purpose of administering the Plan including executing its obligations under the Ordinance, the trust deed and the trust agreement, including without limitation information about his/her Awards, Shares, income tax rates, salary bank account, contact details and identification number.

NOTIFICATIONS

Securities Law Notice. An exemption from filing a prospectus in relation to the Plan has been granted to the Company by the Israeli Securities Authority. Copies of the Plan and the Form S-8 registration statement for the Plan filed with the SEC are available at my local human resources department.

ITALY

TERMS AND CONDITIONS

Plan Document Acknowledgment. By accepting the grant of the Award, the Participant acknowledges that he or she has received a copy of the Plan and the Agreement, including this

Omnibus Equity Incentive Plan - RSU Agreement - 15         Rev. Jun. 2022

Appendix and has reviewed the Plan and the Agreement (including this Appendix) in their entirety and fully understands and accept all provisions of the Plan and the Agreement (including this Appendix).

The Participant further acknowledges that he or she has read and specifically and expressly approves the following sections of the Agreement: Vesting Schedule; Settlement; Status of Award; Termination of Continuous Status as an Employee or Consultant; Certain Conditions of the Award; Data Privacy Notice and Consent; Tax Obligations; Language; Governing Law and Venue; Appendix; and Imposition of Other Requirements.

NOTIFICATIONS

Foreign Asset/Account Reporting Information.Italian residents who, at any time during the fiscal year, hold foreign financial assets (including cash, rights and Shares) which may generate income taxable in Italy are required to report these assets on their annual tax returns (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax return is due. These reporting obligations will also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions.

JAPAN

NOTIFICATIONS

Foreign Asset/Account Reporting Information.  Japanese residents are required to report details of any assets held outside of Japan as of December 31, including Shares acquired under the Plan, to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th each year. The Participant is responsible for complying with this reporting obligation if applicable to the Participant and should consult his or her personal tax advisor in this regard.

NETHERLANDS

There are no country-specific provisions.

POLAND

NOTIFICATIONS

Exchange Control Information. Information regarding bank or brokerage accounts holding cash and securities (including Shares) outside of Poland must be reported on a quarterly basis to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds a certain threshold. Any transfer of funds in excess of a certain threshold into or out of Poland must be effected through a bank account in Poland. All documents connected with any foreign exchange transactions should be retained for a period of five (5) years as measured from the end of the year in which such transaction occurred.

RUSSIA

TERMS AND CONDITIONS

U.S. Transaction and Sale Restrictions. The Participant understands that acceptance of the Award results in a contract between the Participant and the Company completed in the United States and that the Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. Upon vesting of the Restricted Stock Units, any Shares to be issued to the Participant will be delivered to the Participant through a brokerage account in the United States and in no event will such Shares be delivered to the Participant in

Omnibus Equity Incentive Plan - RSU Agreement - 16         Rev. Jun. 2022

Russia. The Participant also acknowledges that he or she is not permitted to sell or otherwise transfer Shares directly to other individuals in Russia, nor is the Participant permitted to bring any certificates representing the Shares into Russia (if such certificates are actually issued).

Depending on the development of local regulatory requirements, the Company reserves the right to force the immediate sale of any Shares to be issued upon vesting and settlement of the Restricted Stock Units. If applicable, the Participant agrees that the Company is authorized to instruct Designated Broker to assist with the mandatory sale of such Shares (on the Participant’s behalf pursuant to this authorization) and the Participant expressly authorizes the Designated Broker to complete the sale of such Shares. The Participant acknowledges that the Designated Broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay the Participant the cash proceeds from the sale of the Shares, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.

NOTIFICATIONS

Securities Law Notice. This Appendix, the Agreement, the Plan and all other materials that the Participant may receive in connection with the Award do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia.

Exchange Control Information. The Participant may be subject to exchange control restrictions and repatriation requirements in Russia as soon as the Participant intends to use those cash amounts for any purpose, including reinvestment. If the repatriation requirement applies, such funds must initially be credited to the Participant through a foreign currency account at an authorized bank in Russia. After the funds are initially received in Russia, they may be further remitted to foreign banks in accordance with Russian exchange control laws. Under the Directive N 5371-U of the Russian Central Bank (the “CBR”), the repatriation requirement may not apply in certain cases with respect to cash amounts received in an account that is considered by the CBR to be a foreign brokerage account. The Participant should contact his or her personal advisor to confirm the application of the exchange control restrictions prior to vesting in the Restricted Stock Units, prior to selling Shares and prior to remitting any sale proceeds to Russia, as significant penalties may apply in the case of non-compliance with the exchange control restrictions and such exchange control restrictions are subject to change at any time, often without notice.

Labor Law Information. If the Participant continues to hold Shares acquired under the Plan after an involuntary termination of the Participant’s employment, the Participant may not be eligible to receive unemployment benefits in Russia.

Anti-Corruption Law. Certain individuals who hold public office in Russia, as well as their spouses and dependent children are prohibited from opening or maintaining foreign brokerage or bank accounts and holding any securities in a foreign company (including Shares acquired under the Plan). The Participant should consult with his or her personal legal advisor to determine whether this law applies to the Participant.

Foreign Asset/Account Reporting Information. Russian residents are required to file the following reports or notifications with the Russian tax authorities, if applicable: (i) annual cash flow reporting for an offshore brokerage account (due by June 1 each year for the previous year); (ii) financial asset (including Shares) reporting for an offshore brokerage account (due by June 1 each year for the previous year); and (ii) a one-time notification within one month of opening, closing, or changing details of an offshore brokerage account. The Participant understands that he or she should consult his or her personal tax advisor to ensure compliance with applicable requirements.

Omnibus Equity Incentive Plan - RSU Agreement - 17         Rev. Jun. 2022

SINGAPORE

NOTIFICATIONS

Securities Law Information. The Award under the Plan is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore. Hence, statutory liability under the SFA in relation to the content of prospectuses will not apply. The Award granted under the Plan is subject to section 257 of the SFA and the Participant understands that he or she should not sell or offer to sell, any Shares directly to any person or entity in Singapore unless such sale or offer is made (i) six months or more after the Offering Date, (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA, or (iii) pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.

Director Notification Information. Any director, associate director or shadow director of a Singapore Affiliate or Related Entity is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Affiliate or Related Entity in Singapore in writing when receiving or disposing of an interest (e.g., rights or Shares) in the Company or in any Affiliate or Related Entity. Such notifications must be made within two days of acquiring or disposing of an interest in the Company or any Affiliate or Related Company, or within two days of becoming a director if such an interest is held at that time.

SOUTH KOREA

NOTIFICATIONS

Foreign Asset/Account Reporting Information. Korean residents must declare all foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authority and file a report with respect to such accounts if the value of such accounts exceeds the applicable threshold on any month-end date during a calendar year. The Participant should consult his or her personal tax advisor to determine his or her personal reporting obligations.

SWEDEN

TERMS AND CONDITIONS

Tax Obligations. This provision supplements the “Tax Obligations” section of this Agreement:

Without limiting the Company’s and the Employer’s authority to satisfy their withholding obligations for Tax-Related Items as set forth in the “Tax Obligations” section of this Agreement, in accepting the Award, the Participant authorizes the Company and/or the Employer by deducting from the Shares otherwise deliverable to the Participant in settlement of the Award or withholding from proceeds of the sale of Shares acquired upon vesting/settlement of the Award either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization) to satisfy Tax-Related Items, regardless of whether the Company and/or the Employer have an obligation to withhold such Tax-Related Items.

SWITZERLAND

NOTIFICATIONS

Securities Law Information. Neither this document nor any other materials relating to the offer of participation in the Plan (i) constitutes a prospectus according to articles 35 et seq. of the Swiss Federal Act on Financial Services (“FinSA”); (ii) may be publicly distributed or otherwise made

Omnibus Equity Incentive Plan - RSU Agreement - 18         Rev. Jun. 2022

publicly available in Switzerland to any person other than an employee of the Company or (iii) has been or will be filed with, approved or supervised by any Swiss reviewing body according to article 51 FinSA or any Swiss regulatory authority, including the Swiss Financial Market Supervisory Authority.

TAIWAN

NOTIFICATIONS

Securities Law Information. The offer of participation in the Plan is available only for eligible Employees and Consultants. The offer of participation in Plan is not a public offer of securities by a Taiwanese company.

Exchange Control Information. Taiwanese residents may acquire and remit foreign currency (including funds to purchase or proceeds from the sale of Shares) up to US$5 million per year without justification. However, if the transaction amount exceeds certain thresholds in a single transaction, Taiwanese residents may be required to submit a foreign exchange transaction form and provide supporting documentation to the satisfaction of the remitting bank.

UNITED KINGDOM

TERMS AND CONDITIONS

Tax Withholding. This provision supplements the “Tax Obligations” section of this Agreement:

Without limitation to the “Tax Obligations” section of the Agreement, the Participant agrees that he or she is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items as and when requested by the Company or the Employer or by HM Revenue and Customs (“HMRC”) (or any other tax authority or any other relevant authority). The Participant also agrees to indemnify and keep indemnified the Company and the Employer against any taxes that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on the Participant’s behalf.

Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provisions will not apply. The Participant understands that, in the event he or she is an executive officer or director and the income tax is not collected by the Participant within 90 days of the end of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to the Participant on which additional income tax and National Insurance contributions (“NICs”) may be payable. The Participant will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for paying the Company or the Employer, as applicable for the value of any NICs due on this additional benefit.

UNITED STATES OF AMERICA

There are no country-specific provisions.

Omnibus Equity Incentive Plan - RSU Agreement - 19         Rev. Jun. 2022

EX-31.01

Exhibit 31.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Anirudh Devgan, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Cadence Design Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Anirudh Devgan
	Anirudh Devgan
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: October 24, 2022

EX-31.02

Exhibit 31.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, John M. Wall, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Cadence Design Systems, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ John M. Wall
	John M. Wall
	Senior Vice President and Chief Financial Officer
	(Principal Accounting and Financial Officer)

Date: October 24, 2022

EX-32.01

Exhibit 32.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2022 of Cadence Design Systems, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anirudh Devgan, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Anirudh Devgan
Anirudh Devgan
President and Chief Executive Officer
(Principal Executive Officer)
Date:	October 24, 2022

A signed original of this written statement required by Section 906 has been provided to Cadence Design Systems, Inc. and will be retained by Cadence and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

Exhibit 32.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2022 of Cadence Design Systems, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John M. Wall, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John M. Wall
John M. Wall
Senior Vice President and Chief Financial Officer
(Principal Accounting and Financial Officer)
Date:	October 24, 2022

A signed original of this written statement required by Section 906 has been provided to Cadence Design Systems, Inc. and will be retained by Cadence and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover Page	9 Months Ended
	Oct. 01, 2022 shares
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Oct. 01, 2022
Document Transition Report	false
Entity File Number	000-15867
Entity Registrant Name	CADENCE DESIGN SYSTEMS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	00-0000000
Entity Address, Address Line One	2655 Seely Avenue, Building 5,
Entity Address, City or Town	San Jose,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95134
City Area Code	(408)
Local Phone Number	943-1234
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	CDNS
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding	274,316,000
Entity Central Index Key	0000813672
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Current assets:
Cash and cash equivalents	$ 1,026,051	$ 1,088,940
Receivables, net	391,181	337,596
Inventories	114,283	115,721
Prepaid expenses and other	138,968	173,512
Total current assets	1,670,483	1,715,769
Property, plant and equipment, net	348,238	305,911
Goodwill	1,348,494	928,358
Acquired intangibles, net	353,912	233,265
Deferred taxes	783,315	763,770
Other assets	463,645	439,226
Total assets	4,968,087	4,386,299
Current liabilities:
Revolving credit facility	150,000	0
Accounts payable and accrued liabilities	454,688	417,283
Current portion of deferred revenue	652,306	553,942
Total current liabilities	1,256,994	971,225
Long-term liabilities:
Long-term portion of deferred revenue	102,167	101,148
Long-term debt	647,799	347,588
Other long-term liabilities	252,999	225,663
Total long-term liabilities	1,002,965	674,399
Commitments and contingencies
Stockholders’ equity:
Common stock and capital in excess of par value	2,697,632	2,467,701
Treasury stock, at cost	(3,522,219)	(2,740,003)
Retained earnings	3,654,848	3,046,288
Accumulated other comprehensive loss	(122,133)	(33,311)
Total stockholders’ equity	2,708,128	2,740,675
Total liabilities and stockholders’ equity	$ 4,968,087	$ 4,386,299

XML

Condensed Consolidated Income Statements - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Revenues [Abstract]
Revenues	$ 902,554	$ 750,895	$ 2,661,841	$ 2,215,208
Costs and Expenses:
Marketing and sales	152,925	143,401	432,407	412,194
Research and development	323,629	289,105	901,121	845,324
General and administrative	73,688	42,990	174,051	123,275
Amortization of acquired intangibles	3,946	5,000	13,543	14,661
Restructuring	14	(222)	42	(968)
Total costs and expenses	641,802	556,861	1,799,272	1,631,799
Income from operations	260,752	194,034	862,569	583,409
Interest expense	(5,463)	(4,196)	(13,852)	(12,729)
Other income (expenses), net	(3,017)	(1,143)	(13,879)	3,701
Income before provision for income taxes	252,272	188,695	834,838	574,381
Provision for income taxes	65,967	12,388	226,278	55,005
Net income	$ 186,305	$ 176,307	$ 608,560	$ 519,376
Net income per share - basic (usd per share)	$ 0.69	$ 0.65	$ 2.24	$ 1.90
Net Income per share - diluted (usd per share)	$ 0.68	$ 0.63	$ 2.21	$ 1.86
Weighted average common shares outstanding - basic (in shares)	271,131	273,194	271,694	273,636
Weighted average common shares outstanding - diluted (in shares)	274,957	278,311	275,683	279,046
Product and maintenance [Member]
Revenues [Abstract]
Revenues	$ 845,788	$ 706,160	$ 2,494,317	$ 2,093,098
Costs and Expenses:
Cost of sales	62,351	54,185	203,863	174,933
Service [Member]
Revenues [Abstract]
Revenues	56,766	44,735	167,524	122,110
Costs and Expenses:
Cost of sales	$ 25,249	$ 22,402	$ 74,245	$ 62,380

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 186,305	$ 176,307	$ 608,560	$ 519,376
Other comprehensive income (loss), net of tax effects:
Foreign currency translation adjustments	(40,768)	(5,483)	(90,764)	(9,618)
Changes in defined benefit plan liabilities	15	(288)	1,942	(520)
Total other comprehensive loss, net of tax effects	(40,753)	(5,771)	(88,822)	(10,138)
Comprehensive income	$ 145,552	$ 170,536	$ 519,738	$ 509,238

XML

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total		Common Stock [Member]	Common Stock, Par Value and Capital in Excess of Par	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning balance at Jan. 02, 2021	$ 2,493,018			$ 2,217,939	$ (2,057,829)	$ 2,350,333	$ (17,425)
Beginning balance, shares at Jan. 02, 2021			278,941
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	519,376					519,376
Other comprehensive loss, net of taxes	$ (10,138)						(10,138)
Purchase of treasury stock, shares	(3,766)		(3,766)
Purchase of treasury stock	$ (502,301)				(502,301)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures, shares			2,640
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	83,632			52,236	31,396
Stock received for payment of employee taxes on vesting of restricted stock, shares			(674)
Stock received for payment of employee taxes on vesting of restricted stock	(108,185)			(14,244)	(93,941)
Stock-based compensation expense	155,860			155,860
Ending balance at Oct. 02, 2021	2,631,262			2,411,791	(2,622,675)	2,869,709	(27,563)
Ending balance, shares at Oct. 02, 2021			277,141
Beginning balance at Jul. 03, 2021	2,516,743			2,354,801	(2,509,668)	2,693,402	(21,792)
Beginning balance, shares at Jul. 03, 2021			276,780
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	176,307					176,307
Other comprehensive loss, net of taxes	$ (5,771)						(5,771)
Purchase of treasury stock, shares	(723)		(723)
Purchase of treasury stock	$ (110,011)				(110,011)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures, shares			1,249
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	31,380			9,319	22,061
Stock received for payment of employee taxes on vesting of restricted stock, shares			(165)
Stock received for payment of employee taxes on vesting of restricted stock	(30,132)			(5,075)	(25,057)
Stock-based compensation expense	52,746			52,746
Ending balance at Oct. 02, 2021	2,631,262			2,411,791	(2,622,675)	2,869,709	(27,563)
Ending balance, shares at Oct. 02, 2021			277,141
Beginning balance at Jan. 01, 2022	2,740,675			2,467,701	(2,740,003)	3,046,288	(33,311)
Beginning balance, shares at Jan. 01, 2022			276,796
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	608,560					608,560
Other comprehensive loss, net of taxes	$ (88,822)						(88,822)
Purchase of treasury stock, shares	(4,664)		(4,664)
Purchase of treasury stock	$ (720,062)				(720,062)
Equity forward contract	(30,000)			(12,035)	(17,965)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures, shares			2,738
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	103,680			60,327	43,353
Stock received for payment of employee taxes on vesting of restricted stock, shares			(554)
Stock received for payment of employee taxes on vesting of restricted stock	(103,093)			(15,551)	(87,542)
Stock-based compensation expense	197,190			197,190
Ending balance at Oct. 01, 2022	2,708,128			2,697,632	(3,522,219)	3,654,848	(122,133)
Ending balance, shares at Oct. 01, 2022			274,316
Beginning balance at Jul. 02, 2022	2,625,229			2,590,893	(3,352,827)	3,468,543	(81,380)
Beginning balance, shares at Jul. 02, 2022			273,870
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	186,305					186,305
Other comprehensive loss, net of taxes	$ (40,753)						(40,753)
Purchase of treasury stock, shares	(959)	[1]	(959)
Purchase of treasury stock	$ (150,013)				(150,013)
Equity forward contract	0			17,965	(17,965)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures, shares			1,574
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	53,458			23,095	30,363
Stock received for payment of employee taxes on vesting of restricted stock, shares			(169)
Stock received for payment of employee taxes on vesting of restricted stock	(39,549)			(7,772)	(31,777)
Stock-based compensation expense	73,451			73,451
Ending balance at Oct. 01, 2022	$ 2,708,128			$ 2,697,632	$ (3,522,219)	$ 3,654,848	$ (122,133)
Ending balance, shares at Oct. 01, 2022			274,316

[1] Includes 109,365 shares and $30.0 million equity forward contract from the June 2022 ASR settled in September 2022.

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021
Statement of Cash Flows [Abstract]
Cash and cash equivalents at beginning of period	$ 1,088,940	$ 928,432
Cash flows from operating activities:
Net income	608,560	519,376
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	98,178	106,962
Amortization of debt discount and fees	810	952
Stock-based compensation	197,190	155,860
(Gain) loss on investments, net	4,777	(330)
Deferred income taxes	(49,834)	(34,566)
Provisions for losses on receivables	471	234
ROU asset amortization and change in operating lease liabilities	(883)	(2,917)
Other non-cash items	158	146
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	(57,309)	15,132
Inventories	(8,020)	(25,608)
Prepaid expenses and other	30,596	36,632
Other assets	17,644	8,127
Accounts payable and accrued liabilities	24,514	10,501
Deferred revenue	113,712	84,183
Other long-term liabilities	(2,305)	10,417
Net cash provided by operating activities	978,259	885,101
Cash flows from investing activities:
Purchases of non-marketable investments	(1,000)	0
Proceeds from the sale of non-marketable investments	0	128
Purchases of property, plant and equipment	(86,295)	(49,977)
Purchases of intangible assets	1,000	0
Cash paid in business combinations, net of cash acquired	(586,163)	(220,026)
Net cash used for investing activities	(674,458)	(269,875)
Cash flows from financing activities:
Proceeds from term loan	300,000	0
Proceeds from revolving credit facility	450,000	0
Payment on revolving credit facility	(300,000)	0
Payment of debt issuance costs	425	1,285
Proceeds from issuance of common stock	103,682	83,632
Stock received for payment of employee taxes on vesting of restricted stock	(103,093)	(108,185)
Payments for repurchases of common stock	(750,062)	(502,301)
Net cash used for financing activities	(299,898)	(528,139)
Effect of exchange rate changes on cash and cash equivalents	(66,792)	(1,700)
Increase (decrease) in cash and cash equivalents	(62,889)	85,387
Cash and cash equivalents at end of period	1,026,051	1,013,819
Supplemental cash flow information:
Cash paid for interest	8,508	8,117
Cash paid for taxes, net	$ 148,151	$ 47,687

XML

Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Oct. 01, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Cadence Design Systems, Inc. (“Cadence”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, Cadence believes that the disclosures contained in this Quarterly Report on Form 10-Q comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These condensed consolidated financial statements are meant to be, and should be, read in conjunction with the consolidated financial statements and the Notes thereto included in Cadence’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022.

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q reflect all adjustments (which include only normal, recurring adjustments and those items discussed in these Notes) that are, in the opinion of management, necessary to state fairly the results of operations, cash flows and financial position for the periods and dates presented. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year. Certain prior period balances have been reclassified to conform to the current period presentation. Management has evaluated subsequent events through the issuance date of the unaudited condensed consolidated financial statements.

Fiscal Year End

On September 7, 2022, Cadence’s Board of Directors approved a change in its fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year. Cadence’s fiscal quarters will end on March 31, June 30, and September 30. The fiscal year change is effective beginning with Cadence’s 2023 fiscal year, which will begin on January 1, 2023.

Cadence’s fiscal year end date for fiscal 2022 will remain December 31, 2022 as previously disclosed. Consistent with SEC guidance, no transition report is required in connection with the change in Cadence’s fiscal year end. Accordingly, Cadence intends to file an Annual Report on Form 10-K for the year ended December 31, 2022, and the new fiscal year will take effect from January 1, 2023 to December 31, 2023.

Use of Estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Despite continued uncertainty and disruption in the global economy and financial markets, Cadence is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of October 24, 2022, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events or developments occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Recently Adopted Accounting Standards

Lessors - Certain Leases with Variable Lease Payments

In July 2021, the Financial Accounting Standards Board (“FASB”), issued ASU 2021-05, “Lessors - Certain Leases with Variable Lease Payments,” which allows lessors to classify and account for a lease with variable payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: (1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria as defined in ASC Topic 842 and (2) the lessor would have otherwise recognized a day-one loss on the lease arrangement. This standard better aligns the accounting with the underlying economics of these arrangements as lessors are not permitted to include most variable payments which do not depend on a reference index or a rate in the lease receivable while assets are derecognized at lease commencement. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Cadence adopted this standard on January 2, 2022, the first day of fiscal 2022, on a prospective basis. The adoption of this standard did not have a material impact on Cadence’s condensed consolidated financial statements and related disclosures.

Business Combinations

In October 2021, the FASB issued ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with “Revenue from Contracts with Customers (Topic 606)” as if the acquiring entity had originated the contracts. This approach differs from the previous requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. Cadence adopted this standard on January 2, 2022, the first day of fiscal 2022. The adoption of this standard did not impact acquired contract assets or liabilities from business combinations that occurred prior to the date of adoption, and the impact in current and future periods will depend on the contract assets and contract liabilities acquired. For business combinations completed during the third quarter of fiscal 2022, Cadence recognized deferred revenue of $11.8 million from the acquired businesses as if Cadence had originated the contracts in accordance with Topic 606 rather than at fair value. For additional information relating to Cadence’s acquisitions, see Note 5 in the notes to condensed consolidated financial statements.

XML

Revenue

9 Months Ended

Oct. 01, 2022

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Cadence groups its products and services into five categories related to major design activities. The following table shows the percentage of revenue contributed by each of Cadence’s five product categories for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Custom Integrated Circuit (“IC”) Design and Simulation	22	%	23	%	22	%	23	%
Digital IC Design and Signoff	29	%	29	%	28	%	28	%
Functional Verification, including Emulation and Prototyping Hardware*	25	%	23	%	26	%	25	%
Intellectual Property (“IP”)	12	%	14	%	13	%	13	%
System Design and Analysis	12	%	11	%	11	%	11	%
Total	100	%	100	%	100	%	100	%

_____________

* Includes immaterial amount of revenue accounted for under leasing arrangements.

Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them. No single customer accounted for 10% or more of total revenue during the three and nine months ended October 1, 2022 or the three and nine months ended October 2, 2021.

Generally, between 85% and 90% of Cadence’s annual revenue is characterized as recurring revenue. Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products or services. These arrangements do not meet the definition of a revenue contract until the customer executes a separate selection form to identify the products and services that they are purchasing. Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations.

The remainder of Cadence’s revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by sales of emulation and prototyping hardware and individual IP licenses. The percentage of Cadence’s recurring and up-front revenue may be impacted by delivery of hardware and IP products to its customers in any single fiscal period. 

The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenue recognized over time	81	%	86	%	82	%	84	%
Revenue from arrangements with non-cancelable commitments	3	%	3	%	2	%	3	%
Recurring revenue	84	%	89	%	84	%	87	%
Up-front revenue	16	%	11	%	16	%	13	%
Total	100	%	100	%	100	%	100	%

Significant Judgments

Cadence’s contracts with customers often include promises to transfer to a customer multiple software and/or IP licenses and services, including professional services, technical support services, and rights to unspecified updates. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some arrangements, such as most of Cadence’s IP license arrangements, Cadence has concluded that the licenses and associated services are distinct from each other. In others, like Cadence’s time-based software arrangements, the licenses and certain services are not distinct from each other. Cadence’s time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and Cadence has concluded that these promised goods and services are a single, combined performance obligation.

The accounting for contracts with multiple performance obligations requires the contract’s transaction price to be allocated to each distinct performance obligation based on relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation because Cadence rarely licenses or sells products on a standalone basis. In instances where the SSP is not directly observable because Cadence does not sell the license, product or service separately, Cadence determines the SSP using information that maximizes the use of observable inputs and may include market conditions. Cadence typically has more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, Cadence may use information such as the size of the customer and geographic region of the customer in determining the SSP.

Revenue is recognized over time for Cadence’s combined performance obligations that include software licenses, updates, technical support and maintenance that are separate performance obligations with the same term. For Cadence’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. For Cadence’s other performance obligations recognized over time, revenue is generally recognized using a time-based measure of progress reflecting generally consistent efforts to satisfy those performance obligations throughout the arrangement term.

If a group of agreements are so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be one arrangement for revenue recognition purposes. Cadence exercises significant judgment to evaluate the relevant facts and circumstances in determining whether the separate agreements should be accounted for separately or as, in substance, a single arrangement. Cadence’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.

Cadence is required to estimate the total consideration expected to be received from contracts with customers. In limited circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on Cadence’s expectations of the term of the contract. Generally, Cadence has not experienced significant returns or refunds to customers. These estimates require significant judgment and a change in these estimates could have an effect on its results of operations during the periods involved.

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on Cadence’s condensed consolidated balance sheets. For certain software, hardware and IP agreements with payment plans, Cadence records an unbilled receivable related to revenue recognized upon transfer of control because it has an unconditional right to invoice and receive payment in the future related to those transferred products or services. Cadence records a contract asset when revenue is recognized prior to invoicing and Cadence does not have the unconditional right to invoice or retains performance risk with respect to that performance obligation. Cadence records deferred revenue when revenue is recognized subsequent to invoicing. For Cadence’s time-based software agreements, customers are generally invoiced in equal, quarterly amounts, although some customers prefer to be invoiced in single or annual amounts.

The contract assets indicated below are included in prepaid expenses and other in the condensed consolidated balance sheets and primarily relate to Cadence’s rights to consideration for work completed but not billed as of the balance sheet date on services and customized IP contracts. The contract assets are transferred to receivables when the rights become unconditional, usually upon completion of a milestone.

Cadence’s contract balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Contract assets	$	38,442	$	6,811
Deferred revenue	754,473		655,090

Cadence recognized revenue of $63.9 million and $488.9 million during the three and nine months ended October 1, 2022, and $59.8 million and $389.8 million during the three and nine months ended October 2, 2021, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue, with the exception of deferred revenue assumed from acquisitions, is due to the timing of invoices in relation to the timing of revenue as described above.

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, Cadence has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing Cadence’s products and services, and not to facilitate financing arrangements.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $5.5 billion as of October 1, 2022, which included $433.5 million of non-cancelable commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. As of October 1, 2022, Cadence expected to recognize 54% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months and the remainder thereafter.

Cadence recognized revenue of $12.1 million and $35.2 million during the three and nine months ended October 1, 2022, and $13.3 million and $35.0 million during the three and nine months ended October 2, 2021, from performance obligations satisfied in previous periods. These amounts represent royalties earned during the period and exclude contracts with nonrefundable prepaid royalties. Nonrefundable prepaid royalties are recognized upon delivery of the IP because Cadence’s right to the consideration is not contingent upon customers’ future shipments.

XML

Receivables, net

9 Months Ended

Oct. 01, 2022

Receivables [Abstract]

RECEIVABLES, NET

RECEIVABLES, NET

Cadence’s current and long-term receivables balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Accounts receivable	$	240,369	$	185,599
Unbilled accounts receivable	153,376		155,689
Long-term receivables	9,473		5,098
Total receivables	403,218		346,386
Less allowance for doubtful accounts	(2,564)		(3,692)
Total receivables, net	$	400,654	$	342,694

Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of October 1, 2022 and January 1, 2022, no single customer accounted for 10% or more of Cadence’s total receivables.

XML

Debt

9 Months Ended

Oct. 01, 2022

Debt Disclosure [Abstract]

DEBT

DEBT

Cadence’s outstanding debt as of October 1, 2022 and January 1, 2022 was as follows:

	October 1, 2022						January 1, 2022
	(In thousands)
	Principal		Unamortized Discount		Carrying Value		Principal		Unamortized Discount		Carrying Value
Revolving Credit Facility	$	150,000	$	—	$	150,000	$	—	$	—	$	—
2024 Notes	350,000		(1,794)		348,206		350,000		(2,412)		347,588
2025 Term Loan	300,000		(407)		299,593		—		—		—
Total outstanding debt	$	800,000	$	(2,201)	$	797,799	$	350,000	$	(2,412)	$	347,588

Revolving Credit Facility

In June 2021, Cadence entered into a five-year senior unsecured revolving credit facility with a group of lenders led by Bank of America, N.A., as administrative agent (the “2021 Credit Facility”). In September 2022, Cadence amended the 2021 Credit Facility to, among other things, allow Cadence to change its fiscal year to match the calendar year commencing in 2023 and change the interest rate benchmark for loans under the 2021 Credit Facility from LIBOR to Term SOFR. The material terms of the 2021 Credit Facility otherwise remain unchanged.

The 2021 Credit Facility provides for borrowings up to $700 million, with the right to request increased capacity up to an additional $350 million upon the receipt of lender commitments, for total maximum borrowings of $1.05 billion. The 2021 Credit Facility expires on June 30, 2026. Any outstanding loans drawn under the 2021 Credit Facility are due at maturity on June 30, 2026, subject to an option to extend the maturity date. Outstanding borrowings may be repaid at any time prior to maturity. Debt issuance costs of $1.3 million were recorded to other assets in Cadence’s condensed consolidated balance sheet at the inception of the agreement and are being amortized to interest expense over the term of the 2021 Credit Facility.

Interest accrues on borrowings under the 2021 Credit Facility at a rate equal to, at Cadence’s option, either (1) SOFR plus a margin between 0.750% and 1.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10% or (2) the base rate plus a margin between 0.000% and 0.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of October 1, 2022, the interest rate on the 2021 Credit Facility was 3.82%. Interest is payable quarterly. A commitment fee ranging from 0.070% to 0.175% is assessed on the daily average undrawn portion of revolving commitments.

The 2021 Credit Facility contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness and grant liens. In addition, the 2021 Credit Facility contains financial covenants that require Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250.0 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of October 1, 2022, Cadence was in compliance with all financial covenants associated with the 2021 Credit Facility.

2024 Notes

In October 2014, Cadence issued $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024 (the “2024 Notes”). Cadence received net proceeds of $342.4 million from the issuance of the 2024 Notes, net of a discount of $1.4 million and issuance costs of $6.2 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2024 Notes using the effective interest method. Interest is payable in cash semi-annually in April and October. The 2024 Notes are unsecured and rank equal in right of payment to all of Cadence’s existing and future senior indebtedness. The carrying value of the 2024 Notes was $348.2 million and $347.6 million as of October 1, 2022 and January 1, 2022, respectively. The fair value of the 2024 Notes was approximately $345.8 million as of October 1, 2022.

Cadence may redeem the 2024 Notes, in whole or in part, at a redemption price equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, and (b) the sum of the present values of the remaining scheduled payments of principal and interest, plus any accrued and unpaid interest, as more particularly described in the indenture governing the 2024 Notes.

The indenture governing the 2024 Notes includes customary representations, warranties and restrictive covenants, including, but not limited to, restrictions on Cadence’s ability to grant liens on assets, enter into sale and lease-back transactions, or merge, consolidate or sell assets, and also includes customary events of default.

2025 Term Loan

In September 2022, Cadence entered into a $300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025 with a group of lenders led by Bank of America, N.A., as administrative agent (the “2025 Term Loan”). The 2025 Term Loan is unsecured and ranks equal in right of payment to all of Cadence’s unsecured indebtedness. Proceeds from the loan were used to fund Cadence’s acquisition of OpenEye Scientific Software, Inc. (“OpenEye”).

Amounts outstanding under the 2025 Term Loan accrue interest at a rate equal to, at Cadence’s option, either (1) Term SOFR plus a margin between 0.625% per annum and 1.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10% or (2) base rate plus a margin between 0.000% per annum and 0.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of October 1, 2022, the interest rate on the 2025 Term Loan was 4.08%. Interest is payable quarterly. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2025 Term Loan approximates fair value.

The 2025 Term Loan contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness, grant liens and make certain asset dispositions. In addition, the 2025 Term Loan contains a financial covenant that requires Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step-up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250.0 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of October 1, 2022, Cadence was in compliance with all financial covenants associated with the 2025 Term Loan.

XML

Acquisitions

9 Months Ended

Oct. 01, 2022

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

ACQUISITIONS

Acquisition of OpenEye Scientific Software, Inc.

On August 31, 2022, Cadence acquired all of the outstanding equity of OpenEye, a leading provider of computational molecular modeling and simulation software used by pharmaceutical and biotechnology companies for drug discovery. The addition of OpenEye’s technologies and experienced team with its deep scientific expertise is expected to accelerate Cadence’s Intelligent System Design™ strategy and broadens Cadence’s System Design and Analysis technology portfolio. The acquisition expands Cadence’s total addressable market, bringing Cadence’s computational software expertise to apply proven algorithmic, simulation and solver advances to life sciences. The aggregate cash consideration for Cadence’s acquisition of OpenEye, net of cash acquired of $13.2 million, was $461.1 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former OpenEye shareholders, now employed by Cadence, through the first quarter of fiscal 2026.

The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	24,890
Goodwill	368,148
Acquired intangibles	117,400
Other long-term assets	6,542
Total assets acquired	516,980
Current liabilities	15,489
Long-term liabilities	27,225
Total liabilities assumed	42,714
Total purchase consideration	$	474,266

The allocation of purchase consideration to certain assets and liabilities has not been finalized. Cadence will continue to evaluate certain estimates and assumptions, primarily related to taxes and assumed liabilities, during the measurement period (up to one year from the acquisition date). The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and will not be deductible for tax purposes.

Acquired Intangibles

	Fair Value		Weighted-Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	53,900	7.0 years
Agreements and relationships	61,400		12.3 years
Tradenames, trademarks and patents	2,100		7.0 years
Total acquired intangibles with definite lives	$	117,400	9.8 years

Acquisition of FFG Holdings Limited

On July 14, 2022, Cadence acquired all of the outstanding equity of FFG Holdings Limited (“Future Facilities”), a provider of electronics cooling analysis and energy performance optimization solutions for data center design and operations using physics-based 3D digital twins. The addition of Future Facilities’ technologies and expertise supports Cadence’s Intelligent System Design strategy and broadens its System Design and Analysis technology portfolio with the addition of solutions that enable companies to make informed business decisions about data center design, operations and lifecycle management that reduce their carbon footprint. The aggregate cash consideration for Cadence’s acquisition of Future Facilities, net of cash acquired of $2.8 million, was $100.1 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former Future Facilities shareholders, now employed by Cadence, subject to service and other conditions, through the third quarter of fiscal 2025.

The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	7,992
Goodwill	67,868
Acquired intangibles	38,100
Other long-term assets	3,102
Total assets acquired	117,062
Current liabilities	4,952
Long-term liabilities	9,210
Total liabilities assumed	14,162
Total purchase consideration	$	102,900

The allocation of purchase consideration to certain assets and liabilities has not been finalized. Cadence will continue to evaluate certain estimates and assumptions, primarily related to taxes and assumed liabilities, during the measurement period (up to one year from the acquisition date). The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies from combining operations of Future Facilities with Cadence. The goodwill will not be deductible for tax purposes.

Acquired Intangibles

	Fair Value		Weighted-Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	20,900	6.0 years
Agreements and relationships	15,600		9.0 years
Tradenames, trademarks and patents	1,600		8.0 years
Total acquired intangibles with definite lives	$	38,100	7.3 years

Other Acquisitions

During the second quarter of fiscal 2022, Cadence completed one business combination for aggregate cash consideration of $25.0 million. The total purchase consideration was allocated to assets acquired based on their respective estimated fair values on the acquisition date. Cadence recorded $15.0 million of acquired intangible assets, which consisted of $8.2 million of existing technology and $6.8 million of in-process technology. Cadence also recognized $10.0 million of goodwill, which is primarily attributed to an assembled workforce. The goodwill recognized is expected to be deductible for tax purposes.

Pro Forma Financial Information

Cadence has not presented pro forma financial information for acquisitions completed during the first three quarters of fiscal 2022 because the results of operations from the acquired businesses are not material to Cadence’s condensed consolidated financial statements.

Transaction Costs

Transaction costs associated with acquisitions are included in general and administrative expense in Cadence’s condensed consolidated income statement. During the three and nine months ended October 1, 2022, transaction costs associated with acquisitions were $3.6 million and $10.1 million, respectively. During the three and nine months ended October 2, 2021, transaction costs associated with acquisitions were $0.1 million and $2.0 million, respectively.

XML

Goodwill and Acquired Intangibles

9 Months Ended

Oct. 01, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND ACQUIRED INTANGIBLES

GOODWILL AND ACQUIRED INTANGIBLES

Goodwill

The changes in the carrying amount of goodwill during the nine months ended October 1, 2022 were as follows:

	Gross Carrying Amount
	(In thousands)
Balance as of January 1, 2022	$	928,358
Goodwill resulting from acquisitions	446,000
Effect of foreign currency translation	(25,864)
Balance as of October 1, 2022	$	1,348,494

Acquired Intangibles, Net

Acquired intangibles as of October 1, 2022 were as follows, excluding intangibles that were fully amortized as of January 1, 2022:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	468,489	$	(267,918)	$	200,571
Agreements and relationships	269,597		(133,089)		136,508
Tradenames, trademarks and patents	12,545		(2,512)		10,033
Total acquired intangibles with definite lives	750,631		(403,519)		347,112
In-process technology	6,800		—		6,800
Total acquired intangibles	$	757,431	$	(403,519)	$	353,912

In-process technology as of October 1, 2022 consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of October 1, 2022, these projects were expected to be completed during the fourth quarter of fiscal 2023. During the three and nine months ended October 1, 2022, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of January 1, 2022 were as follows, excluding intangibles that were fully amortized as of January 2, 2021:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	405,481	$	(254,599)	$	150,882
Agreements and relationships	205,057		(130,187)		74,870
Tradenames, trademarks and patents	10,666		(3,153)		7,513
Total acquired intangibles	$	621,204	$	(387,939)	$	233,265

Amortization expense from existing technology and maintenance agreements is included in cost of product and maintenance. Amortization expense for the three and nine months ended October 1, 2022 and October 2, 2021 by condensed consolidated income statement caption was as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Cost of product and maintenance	$	8,867	$	11,774	$	30,906	$	35,774
Amortization of acquired intangibles	3,946		5,000		13,543		14,661
Total amortization of acquired intangibles	$	12,813	$	16,774	$	44,449	$	50,435

As of October 1, 2022, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

	(In thousands)
2022 - remaining period	$	14,870
2023	56,040
2024	54,280
2025	42,213
2026	36,298
2027	34,056
Thereafter	109,355
Total estimated amortization expense	$	347,112

XML

Stock Based Compensation

9 Months Ended

Oct. 01, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock-based compensation expense is reflected in Cadence’s condensed consolidated income statements for the three and nine months ended October 1, 2022 and October 2, 2021 as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Cost of product and maintenance	$	1,046	$	885	$	2,751	$	2,601
Cost of services	1,331		1,158		3,494		3,177
Marketing and sales	14,991		10,784		39,650		32,284
Research and development	43,327		32,957		115,516		97,101
General and administrative	12,756		6,962		35,779		20,697
Total stock-based compensation expense	$	73,451	$	52,746	$	197,190	$	155,860

Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $534.9 million as of October 1, 2022, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.4 years.

XML

Stock Repurchase Program

9 Months Ended

Oct. 01, 2022

Class of Stock Disclosures [Abstract]

STOCK REPURCHASE PROGRAM

STOCK REPURCHASE PROGRAM

In August 2022, Cadence’s Board of Directors increased the prior authorization to repurchase shares of Cadence common stock by authorizing an additional $1 billion. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

During the three and nine months ended October 1, 2022, Cadence repurchased approximately 0.9 million shares and 4.1 million shares, respectively, on the open market, for an aggregate purchase price of $150.0 million and $650.0 million, respectively.

In June 2022, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with Royal Bank of Canada to repurchase an aggregate of $100.0 million of Cadence common stock. The ASR agreement was accounted for as two separate transactions (1) a repurchase of common stock and (2) an equity-linked contract on Cadence’s own stock. In June 2022, Cadence received an initial share delivery of approximately 0.5 million shares, which represented the number of shares at a market price equal to $70.0 million. An equity-linked contract for $30.0 million, representing the remaining shares to be delivered by Royal Bank of Canada under the ASR agreement, was recorded to stockholders’ equity as of July 2, 2022. In September 2022, the ASR agreement settled and resulted in a delivery to Cadence of approximately 0.1 million additional shares. In total, approximately 0.6 million shares were repurchased under the ASR agreement at an average price per share of $167.07. The shares received were treated as a repurchase of common stock for purposes of calculating earnings per share.

As of October 1, 2022, approximately $1.4 billion of Cadence’s share repurchase authorizations remained available to repurchase shares of Cadence common stock.

The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during the three and nine months ended October 1, 2022 and October 2, 2021 were as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022*		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Shares repurchased	959		723		4,664		3,766
Total cost of repurchased shares	$	180,013	$	110,011	$	750,062	$	502,301

_____________

* Includes 109,365 shares and $30.0 million equity forward contract from the June 2022 ASR settled in September 2022.

XML

Net Income Per Share

9 Months Ended

Oct. 01, 2022

Earnings Per Share [Abstract]

NET INCOME PER SHARE

NET INCOME PER SHARE

Basic net income per share is computed by dividing net income during the period by the weighted average number of shares of common stock outstanding during that period, less unvested restricted stock awards. Diluted net income per share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting.

The calculations for basic and diluted net income per share for the three and nine months ended October 1, 2022 and October 2, 2021 are as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands, except per share amounts)
Net income	$	186,305	$	176,307	$	608,560	$	519,376
Weighted average common shares used to calculate basic net income per share	271,131		273,194		271,694		273,636
Stock-based awards	3,826		5,117		3,989		5,410
Weighted average common shares used to calculate diluted net income per share	274,957		278,311		275,683		279,046
Net income per share - basic	$	0.69	$	0.65	$	2.24	$	1.90
Net income per share - diluted	$	0.68	$	0.63	$	2.21	$	1.86

The following table presents shares of Cadence’s common stock outstanding for the three and nine months ended October 1, 2022 and October 2, 2021 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:

	Three Months Ended		Nine Months Ended
	October 1, 2022	October 2, 2021	October 1, 2022	October 2, 2021
	(In thousands)
Long-term market-based awards	1,761	—	1,485	—
Options to purchase shares of common stock	514	331	678	267
Non-vested shares of restricted stock	26	5	63	46
Total potential common shares excluded	2,301	336	2,226	313

XML

Fair Value

9 Months Ended

Oct. 01, 2022

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

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 nine months ended October 1, 2022.

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 October 1, 2022 and January 1, 2022:

	Fair Value Measurements as of October 1, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	587,205	$	587,205	$	—	$	—
Marketable equity securities	3,963		3,963		—		—
Securities held in Non-Qualified Deferred Compensation (“NQDC”) trust	50,509		50,509		—		—
Total Assets	$	641,677	$	641,677	$	—	$	—
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	16,748	$	—	$	16,748	$	—
Total Liabilities	$	16,748	$	—	$	16,748	$	—
	Fair Value Measurements as of January 1, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	658,474	$	658,474	$	—	$	—
Marketable equity securities	5,956		5,956		—		—
Securities held in NQDC trust	56,165		56,165		—		—
Total Assets	$	720,595	$	720,595	$	—	$	—
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	306	$	—	$	306	$	—
Total Liabilities	$	306	$	—	$	306	$	—

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, the 2024 Notes and the 2025 Term Loan are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Level 3 Measurements

During the second quarter of fiscal 2022, Cadence acquired intangible assets of $15.0 million. The fair value of the intangible assets acquired was determined using the multi-period excess earnings method, a variation of the income approach that utilizes unobservable inputs classified as Level 3 measurements. This method estimates the revenues and cash flows derived from the acquired assets, net of investment in supporting assets. The resulting cash flow, which is attributable solely to the assets acquired, is then discounted at a rate of return commensurate with the associated risk of the asset to calculate the present value. Cadence assumed discount rates between 23% and 25%.

During the third quarter of fiscal 2022, Cadence acquired combined intangible assets of $155.5 million through its acquisitions of OpenEye and Future Facilities. For existing technology acquired during the third quarter of fiscal 2022, 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 the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate. For both OpenEye and Future Facilities, Cadence assumed technological obsolescence at a rate of 10% annually, before applying an assumed royalty rate of 25%.

The fair value for agreements and relationships acquired during the third quarter of fiscal 2022 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 was determined using customer retention rates between 95% and 100% for OpenEye and 95% for Future Facilities. The present value of operating cash flows from existing customers was determined using discount rates ranging from 10% to 11%.

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

XML

Inventory

9 Months Ended

Oct. 01, 2022

Inventory Disclosure [Abstract]

INVENTORY

INVENTORY

Cadence’s inventory balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Inventories:
Raw materials	$	106,299	$	88,629
Finished goods	7,984		27,092
Total inventories	$	114,283	$	115,721

XML

Commitments and Contingencies

9 Months Ended

Oct. 01, 2022

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, Cadence is involved in various disputes and legal proceedings that arise in the ordinary course of business. These include disputes and legal proceedings related to intellectual property, indemnification obligations, mergers and acquisitions, licensing, contracts, customers, products, distribution and other commercial arrangements and employee relations matters. At least quarterly, Cadence reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on Cadence’s judgments using the best information available at the time. As additional information becomes available, Cadence reassesses the potential liability related to pending claims and legal proceedings and may revise estimates.

Other Contingencies

Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. Cadence did not incur any significant costs related to warranty obligations during the three and nine months ended October 1, 2022 and October 2, 2021.

Cadence’s product license and services agreements typically include a limited indemnification provision for claims from third parties relating to Cadence’s intellectual property. If the potential loss from any indemnification claim is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. The indemnification is generally limited to the amount paid by the customer. Cadence did not incur any significant losses from indemnification claims during the three and nine months ended October 1, 2022 and October 2, 2021.

XML

Accumulated Other Comprehensive Loss

9 Months Ended

Oct. 01, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

ACCUMULATED OTHER COMPREHENSIVE LOSS

ACCUMULATED OTHER COMPREHENSIVE LOSS

Cadence’s accumulated other comprehensive loss is comprised of the aggregate impact of foreign currency translation gains and losses and changes in defined benefit plan liabilities and is presented in Cadence’s condensed consolidated statements of comprehensive income.

Accumulated other comprehensive loss was comprised of the following as of October 1, 2022 and January 1, 2022:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Foreign currency translation loss	$	(117,317)	$	(26,553)
Changes in defined benefit plan liabilities	(4,816)		(6,758)
Total accumulated other comprehensive loss	$	(122,133)	$	(33,311)

For the three and nine months ended October 1, 2022 and October 2, 2021 there were no significant amounts related to foreign currency translation loss or changes in defined benefit plan liabilities reclassified from accumulated other comprehensive loss to net income.

XML

Segment Reporting

9 Months Ended

Oct. 01, 2022

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

Segment reporting is based on the “management approach,” following the method that management organizes the company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the chief operating decision maker in allocating resources and in assessing performance. Cadence’s chief operating decision maker is its CEO, who reviews Cadence’s consolidated results as one operating segment. In making operating decisions, the CEO primarily considers consolidated financial information, accompanied by disaggregated information about revenues by geographic region.

Outside the United States, Cadence markets and supports its products and services primarily through its subsidiaries. Revenue is attributed to geography based upon the country in which the product is used, or services are delivered. Long-lived assets are attributed to geography based on the country where the assets are located.

The following table presents a summary of revenue by geography for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Americas:
United States	$	392,222	$	331,463	$	1,174,734	$	970,925
Other Americas	15,165		11,487		39,010		31,353
Total Americas	407,387		342,950		1,213,744		1,002,278
Asia:
China	148,325		98,325		401,460		287,357
Other Asia	156,250		136,272		466,891		404,509
Total Asia	304,575		234,597		868,351		691,866
Europe, Middle East and Africa	142,983		129,606		431,660		384,341
Japan	47,609		43,742		148,086		136,723
Total	$	902,554	$	750,895	$	2,661,841	$	2,215,208

The following table presents a summary of long-lived assets by geography as of October 1, 2022 and January 1, 2022:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Americas:
United States	$	328,455	$	267,202
Other Americas	7,376		975
Total Americas	335,831		268,177
Asia:
China	52,158		56,403
Other Asia	69,859		54,677
Total Asia	122,017		111,080
Europe, Middle East and Africa	55,560		53,748
Japan	4,504		3,030
Total	$	517,912	$	436,035

XML

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Oct. 01, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Cadence Design Systems, Inc. (“Cadence”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.

Use of estimates

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Fair value of financial instruments

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.

Contingencies

From time to time, Cadence is involved in various disputes and legal proceedings that arise in the ordinary course of business. These include disputes and legal proceedings related to intellectual property, indemnification obligations, mergers and acquisitions, licensing, contracts, customers, products, distribution and other commercial arrangements and employee relations matters. At least quarterly, Cadence reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on Cadence’s judgments using the best information available at the time. As additional information becomes available, Cadence reassesses the potential liability related to pending claims and legal proceedings and may revise estimates.

XML

Revenue (Tables)

9 Months Ended

Oct. 01, 2022

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue

The following table shows the percentage of revenue contributed by each of Cadence’s five product categories for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Custom Integrated Circuit (“IC”) Design and Simulation	22	%	23	%	22	%	23	%
Digital IC Design and Signoff	29	%	29	%	28	%	28	%
Functional Verification, including Emulation and Prototyping Hardware*	25	%	23	%	26	%	25	%
Intellectual Property (“IP”)	12	%	14	%	13	%	13	%
System Design and Analysis	12	%	11	%	11	%	11	%
Total	100	%	100	%	100	%	100	%

_____________

* Includes immaterial amount of revenue accounted for under leasing arrangements.

The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Revenue recognized over time	81	%	86	%	82	%	84	%
Revenue from arrangements with non-cancelable commitments	3	%	3	%	2	%	3	%
Recurring revenue	84	%	89	%	84	%	87	%
Up-front revenue	16	%	11	%	16	%	13	%
Total	100	%	100	%	100	%	100	%

Contract balances

Cadence’s contract balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Contract assets	$	38,442	$	6,811
Deferred revenue	754,473		655,090

XML

Receivables, net (Tables)

9 Months Ended

Oct. 01, 2022

Receivables [Abstract]

Current and long-term accounts receivable balances

Cadence’s current and long-term receivables balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Accounts receivable	$	240,369	$	185,599
Unbilled accounts receivable	153,376		155,689
Long-term receivables	9,473		5,098
Total receivables	403,218		346,386
Less allowance for doubtful accounts	(2,564)		(3,692)
Total receivables, net	$	400,654	$	342,694

XML

Debt (Tables)

9 Months Ended

Oct. 01, 2022

Debt Disclosure [Abstract]

Summary of debt outstanding

Cadence’s outstanding debt as of October 1, 2022 and January 1, 2022 was as follows:

	October 1, 2022						January 1, 2022
	(In thousands)
	Principal		Unamortized Discount		Carrying Value		Principal		Unamortized Discount		Carrying Value
Revolving Credit Facility	$	150,000	$	—	$	150,000	$	—	$	—	$	—
2024 Notes	350,000		(1,794)		348,206		350,000		(2,412)		347,588
2025 Term Loan	300,000		(407)		299,593		—		—		—
Total outstanding debt	$	800,000	$	(2,201)	$	797,799	$	350,000	$	(2,412)	$	347,588

XML

Acquisitions (Tables)

9 Months Ended

Oct. 01, 2022

Business Combination and Asset Acquisition [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	24,890
Goodwill	368,148
Acquired intangibles	117,400
Other long-term assets	6,542
Total assets acquired	516,980
Current liabilities	15,489
Long-term liabilities	27,225
Total liabilities assumed	42,714
Total purchase consideration	$	474,266

The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	7,992
Goodwill	67,868
Acquired intangibles	38,100
Other long-term assets	3,102
Total assets acquired	117,062
Current liabilities	4,952
Long-term liabilities	9,210
Total liabilities assumed	14,162
Total purchase consideration	$	102,900

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination

Acquired Intangibles

	Fair Value		Weighted-Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	53,900	7.0 years
Agreements and relationships	61,400		12.3 years
Tradenames, trademarks and patents	2,100		7.0 years
Total acquired intangibles with definite lives	$	117,400	9.8 years

Acquired Intangibles

	Fair Value		Weighted-Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	20,900	6.0 years
Agreements and relationships	15,600		9.0 years
Tradenames, trademarks and patents	1,600		8.0 years
Total acquired intangibles with definite lives	$	38,100	7.3 years

XML

Goodwill and Acquired Intangibles (Tables)

9 Months Ended

Oct. 01, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in the carrying amount of goodwill

The changes in the carrying amount of goodwill during the nine months ended October 1, 2022 were as follows:

	Gross Carrying Amount
	(In thousands)
Balance as of January 1, 2022	$	928,358
Goodwill resulting from acquisitions	446,000
Effect of foreign currency translation	(25,864)
Balance as of October 1, 2022	$	1,348,494

Schedule of acquired intangibles with finite and indefinite lives (excluding goodwill)

Acquired intangibles as of October 1, 2022 were as follows, excluding intangibles that were fully amortized as of January 1, 2022:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	468,489	$	(267,918)	$	200,571
Agreements and relationships	269,597		(133,089)		136,508
Tradenames, trademarks and patents	12,545		(2,512)		10,033
Total acquired intangibles with definite lives	750,631		(403,519)		347,112
In-process technology	6,800		—		6,800
Total acquired intangibles	$	757,431	$	(403,519)	$	353,912

In-process technology as of October 1, 2022 consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of October 1, 2022, these projects were expected to be completed during the fourth quarter of fiscal 2023. During the three and nine months ended October 1, 2022, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of January 1, 2022 were as follows, excluding intangibles that were fully amortized as of January 2, 2021:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	405,481	$	(254,599)	$	150,882
Agreements and relationships	205,057		(130,187)		74,870
Tradenames, trademarks and patents	10,666		(3,153)		7,513
Total acquired intangibles	$	621,204	$	(387,939)	$	233,265

Amortization of acquired intangibles

Amortization expense for the three and nine months ended October 1, 2022 and October 2, 2021 by condensed consolidated income statement caption was as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Cost of product and maintenance	$	8,867	$	11,774	$	30,906	$	35,774
Amortization of acquired intangibles	3,946		5,000		13,543		14,661
Total amortization of acquired intangibles	$	12,813	$	16,774	$	44,449	$	50,435

Estimated amortization expense

As of October 1, 2022, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

	(In thousands)
2022 - remaining period	$	14,870
2023	56,040
2024	54,280
2025	42,213
2026	36,298
2027	34,056
Thereafter	109,355
Total estimated amortization expense	$	347,112

XML

Stock-Based Compensation (Tables)

9 Months Ended

Oct. 01, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based compensation expense and allocation by cost

Stock-based compensation expense is reflected in Cadence’s condensed consolidated income statements for the three and nine months ended October 1, 2022 and October 2, 2021 as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Cost of product and maintenance	$	1,046	$	885	$	2,751	$	2,601
Cost of services	1,331		1,158		3,494		3,177
Marketing and sales	14,991		10,784		39,650		32,284
Research and development	43,327		32,957		115,516		97,101
General and administrative	12,756		6,962		35,779		20,697
Total stock-based compensation expense	$	73,451	$	52,746	$	197,190	$	155,860

XML

Stock Repurchase Program (Tables)

9 Months Ended

Oct. 01, 2022

Class of Stock Disclosures [Abstract]

Shares repurchased and the total cost of shares repurchased

The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during the three and nine months ended October 1, 2022 and October 2, 2021 were as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022*		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Shares repurchased	959		723		4,664		3,766
Total cost of repurchased shares	$	180,013	$	110,011	$	750,062	$	502,301

_____________

* Includes 109,365 shares and $30.0 million equity forward contract from the June 2022 ASR settled in September 2022.

XML

Net Income Per Share (Tables)

9 Months Ended

Oct. 01, 2022

Earnings Per Share [Abstract]

Basic and diluted net income per share

The calculations for basic and diluted net income per share for the three and nine months ended October 1, 2022 and October 2, 2021 are as follows:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands, except per share amounts)
Net income	$	186,305	$	176,307	$	608,560	$	519,376
Weighted average common shares used to calculate basic net income per share	271,131		273,194		271,694		273,636
Stock-based awards	3,826		5,117		3,989		5,410
Weighted average common shares used to calculate diluted net income per share	274,957		278,311		275,683		279,046
Net income per share - basic	$	0.69	$	0.65	$	2.24	$	1.90
Net income per share - diluted	$	0.68	$	0.63	$	2.21	$	1.86

Potential shares of Cadence's common stock excluded

The following table presents shares of Cadence’s common stock outstanding for the three and nine months ended October 1, 2022 and October 2, 2021 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:

	Three Months Ended		Nine Months Ended
	October 1, 2022	October 2, 2021	October 1, 2022	October 2, 2021
	(In thousands)
Long-term market-based awards	1,761	—	1,485	—
Options to purchase shares of common stock	514	331	678	267
Non-vested shares of restricted stock	26	5	63	46
Total potential common shares excluded	2,301	336	2,226	313

XML

Fair Value (Tables)

9 Months Ended

Oct. 01, 2022

Fair Value Disclosures [Abstract]

Fair value of financial assets and liabilities

The fair value of financial assets and liabilities was determined using the following levels of inputs as of October 1, 2022 and January 1, 2022:

	Fair Value Measurements as of October 1, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	587,205	$	587,205	$	—	$	—
Marketable equity securities	3,963		3,963		—		—
Securities held in Non-Qualified Deferred Compensation (“NQDC”) trust	50,509		50,509		—		—
Total Assets	$	641,677	$	641,677	$	—	$	—
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	16,748	$	—	$	16,748	$	—
Total Liabilities	$	16,748	$	—	$	16,748	$	—
	Fair Value Measurements as of January 1, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	658,474	$	658,474	$	—	$	—
Marketable equity securities	5,956		5,956		—		—
Securities held in NQDC trust	56,165		56,165		—		—
Total Assets	$	720,595	$	720,595	$	—	$	—
	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	306	$	—	$	306	$	—
Total Liabilities	$	306	$	—	$	306	$	—

XML

Inventory (Tables)

9 Months Ended

Oct. 01, 2022

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Cadence’s inventory balances as of October 1, 2022 and January 1, 2022 were as follows:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Inventories:
Raw materials	$	106,299	$	88,629
Finished goods	7,984		27,092
Total inventories	$	114,283	$	115,721

XML

Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Oct. 01, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated other comprehensive loss, net of tax

Accumulated other comprehensive loss was comprised of the following as of October 1, 2022 and January 1, 2022:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Foreign currency translation loss	$	(117,317)	$	(26,553)
Changes in defined benefit plan liabilities	(4,816)		(6,758)
Total accumulated other comprehensive loss	$	(122,133)	$	(33,311)

XML

Segment Reporting (Tables)

9 Months Ended

Oct. 01, 2022

Segment Reporting [Abstract]

Summary of revenue by geography

The following table presents a summary of revenue by geography for the three and nine months ended October 1, 2022 and October 2, 2021:

	Three Months Ended				Nine Months Ended
	October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
	(In thousands)
Americas:
United States	$	392,222	$	331,463	$	1,174,734	$	970,925
Other Americas	15,165		11,487		39,010		31,353
Total Americas	407,387		342,950		1,213,744		1,002,278
Asia:
China	148,325		98,325		401,460		287,357
Other Asia	156,250		136,272		466,891		404,509
Total Asia	304,575		234,597		868,351		691,866
Europe, Middle East and Africa	142,983		129,606		431,660		384,341
Japan	47,609		43,742		148,086		136,723
Total	$	902,554	$	750,895	$	2,661,841	$	2,215,208

Summary of long-lived assets by geography

The following table presents a summary of long-lived assets by geography as of October 1, 2022 and January 1, 2022:

	As of
	October 1, 2022		January 1, 2022
	(In thousands)
Americas:
United States	$	328,455	$	267,202
Other Americas	7,376		975
Total Americas	335,831		268,177
Asia:
China	52,158		56,403
Other Asia	69,859		54,677
Total Asia	122,017		111,080
Europe, Middle East and Africa	55,560		53,748
Japan	4,504		3,030
Total	$	517,912	$	436,035

XML

Basis of Presentation and Summary of Significant Accounting Policies (Details) $ in Millions	Oct. 01, 2022 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Deferred revenue assumed in acquisitions during period	$ 11.8

XML

Revenue (Details)	3 Months Ended			9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021		Oct. 01, 2022		Oct. 02, 2021
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	100.00%	100.00%		100.00%		100.00%
Custom Integrated Circuit (“IC”) Design and Simulation
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	22.00%	23.00%		22.00%		23.00%
Digital IC Design and Signoff
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	29.00%	29.00%		28.00%		28.00%
Functional Verification, including Emulation and Prototyping Hardware*
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	25.00%	23.00%	[1]	26.00%	[1]	25.00%	[1]
Intellectual Property (“IP”)
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	12.00%	14.00%		13.00%		13.00%
System Design and Analysis
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	12.00%	11.00%		11.00%		11.00%

[1] Includes immaterial amount of revenue accounted for under leasing arrangements.

XML

Revenue (Details 1)	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	100.00%	100.00%	100.00%	100.00%
Transferred over Time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	84.00%	89.00%	84.00%	87.00%
Transferred over Time | Single performance obligation
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	81.00%	86.00%	82.00%	84.00%
Transferred over Time | Multiple performance obligations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	3.00%	3.00%	2.00%	3.00%
Transferred at Point in Time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	16.00%	11.00%	16.00%	13.00%

XML

Revenue (Details 2) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Revenue from Contract with Customer [Abstract]
Contract assets	$ 38,442	$ 6,811
Deferred revenue	$ 754,473	$ 655,090

XML

Revenue (Details Textual) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Revenue from Contract with Customer [Abstract]
Revenue recognized from deferred revenue during the period	$ 63.9	$ 59.8	$ 488.9	$ 389.8
Remaining performance obligations	5,500.0		5,500.0
Non-cancellable commitments from customers included in remaining performance obligations	$ 433.5		$ 433.5
Percent of remaining performance obligations, current	54.00%		54.00%
Revenue recognized from satisfaction of performance obligations	$ 12.1	$ 13.3	$ 35.2	$ 35.0

XML

Receivables, net (Details) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Current and long-term receivables balances
Accounts receivable	$ 240,369	$ 185,599
Unbilled accounts receivable	153,376	155,689
Long-term receivables	9,473	5,098
Total receivables	403,218	346,386
Less allowance for doubtful accounts	(2,564)	(3,692)
Total receivables, net	$ 400,654	$ 342,694

XML

Debt (Details) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022	Oct. 09, 2014
Debt Disclosure [Abstract]
Revolving credit facility	$ 150,000	$ 0
Unamortized discount	2,201	2,412
Long-term debt	647,799	347,588
Remaining Principal Amount Of Debt Outstanding	800,000	350,000
Carrying Value Of Debt Outstanding	797,799	347,588
Debt Instrument [Line Items]
Revolving credit facility	150,000	0
Unamortized discount	2,201	2,412
Long-term debt	647,799	347,588
Remaining Principal Amount Of Debt Outstanding	800,000	350,000
Carrying Value Of Debt Outstanding	797,799	347,588
Senior Notes Due 2024 [Member] | Senior Notes [Member]
Debt Disclosure [Abstract]
Principal	350,000	350,000	$ 350,000
Unamortized discount	1,794	2,412	1,400
Long-term debt	348,206	347,588
Debt Instrument [Line Items]
Principal	350,000	350,000	350,000
Unamortized discount	1,794	2,412	$ 1,400
Long-term debt	348,206	347,588
Term Loan Due Twenty-Twenty Five
Debt Disclosure [Abstract]
Principal	300,000
Debt Instrument [Line Items]
Principal	300,000
Term Loan Due Twenty-Twenty Five | Notes Payable to Banks
Debt Disclosure [Abstract]
Principal	300,000	0
Unamortized discount	407	0
Long-term debt	299,593	0
Debt Instrument [Line Items]
Principal	300,000	0
Unamortized discount	407	0
Long-term debt	$ 299,593	$ 0

XML

Debt Credit Facility (Details Textual) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Oct. 01, 2022	Oct. 01, 2022	Oct. 02, 2021
Line of Credit Facility [Line Items]
Payment of debt issuance costs		$ 425	$ 1,285
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, current borrowing capacity	$ 700,000	700,000
Credit facility additional borrowing capacity available	350,000	350,000
Credit facility, maximum borrowing capacity	1,050,000	$ 1,050,000
Credit facility, maturity date		Jun. 30, 2026
Payment of debt issuance costs	$ 1,300
Credit facility, interest rate at period end	3.82%	3.82%
Minimum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, commitment fee percentage		0.07%
Credit facility, covenant, pro forma leverage ratio		3.00
Maximum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, commitment fee percentage		0.175%
Credit facility, covenant, pro forma leverage ratio		3.50
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate, additional interest		10.00%
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | Minimum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, interest rate spread		0.75%
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | Maximum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, interest rate spread		1.25%
Base Rate [Member] | Minimum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, interest rate spread		0.00%
Base Rate [Member] | Maximum [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, interest rate spread		0.25%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, covenant, debt to EBITDA ratio		3.25
Credit facility, covenant, debt to EBITDA ratio after step up triggered by acquisition		3.75
Credit facility, covenant, required business acquisition consideration, minimum	$ 250,000	$ 250,000

XML

Debt (Details Textual) - USD ($) $ in Thousands		9 Months Ended
	Oct. 09, 2014	Oct. 01, 2022	Jan. 01, 2022
Debt Instrument [Line Items]
Unamortized discount		$ 2,201	$ 2,412
Carrying value of the 2024 Notes		647,799	347,588
Term Loan Due Twenty-Twenty Five
Debt Instrument [Line Items]
Aggregate principal amount, issued		$ 300,000
Debt instrument, interest rate at period end		4.08%
Debt instrument, covenant, required business acquisition consideration, minimum		$ 250,000
Term Loan Due Twenty-Twenty Five | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate, additional interest		0.10%
Term Loan Due Twenty-Twenty Five | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument, covenant, debt to EBITDA ratio after step up triggered by acquisition		3.75
Term Loan Due Twenty-Twenty Five | Maximum [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Credit facility, interest rate spread		1.125%
Debt instrument, covenant, pro forma leverage ratio		3.50
Term Loan Due Twenty-Twenty Five | Maximum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Credit facility, interest rate spread		0.125%
Term Loan Due Twenty-Twenty Five | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, covenant, debt to EBITDA ratio		3.25
Term Loan Due Twenty-Twenty Five | Minimum [Member] | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Credit facility, interest rate spread		0.625%
Debt instrument, covenant, pro forma leverage ratio		3.00
Term Loan Due Twenty-Twenty Five | Minimum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Credit facility, interest rate spread		0.00%
Senior Notes [Member] | Senior Notes Due 2024 [Member]
Debt Instrument [Line Items]
Aggregate principal amount, issued	$ 350,000	$ 350,000	350,000
Stated interest rate of Senior Notes	4.375%
Proceeds from Senior Notes, net	$ 342,400
Unamortized discount	1,400	1,794	2,412
Debt issuance costs	$ 6,200
Carrying value of the 2024 Notes		348,206	$ 347,588
Fair value of the 2024 Notes		$ 345,800

XML

Acquisitions (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021	Aug. 31, 2022	Jul. 14, 2022	Jan. 01, 2022
Business Acquisition [Line Items]
Cash paid in business combinations, net of cash acquired			$ 586,163	$ 220,026
Goodwill	$ 1,348,494		1,348,494				$ 928,358
Transaction costs associated with acquisitions	3,600	$ 100	10,100	$ 2,000
2022 Other business combination
Business Acquisition [Line Items]
Cash paid in business combinations, net of cash acquired			25,000
Goodwill	10,000		10,000
Acquired intangibles	15,000		15,000
Acquired finite-lived intangibles	8,200		8,200
Acquired intangibles with indefinite lives, in-process research and development	$ 6,800		6,800
OpenEye Scientific Software, Inc.
Business Acquisition [Line Items]
Cash acquired					$ 13,200
Cash paid in business combinations, net of cash acquired			461,100
Goodwill					368,148
Acquired intangibles					$ 117,400
FFG Holdings Limited ("Future Facilities")
Business Acquisition [Line Items]
Cash acquired						$ 2,800
Cash paid in business combinations, net of cash acquired			$ 100,100
Goodwill						67,868
Acquired intangibles						$ 38,100

XML

Acquisitions (Details 1) - USD ($) $ in Thousands	Oct. 01, 2022	Aug. 31, 2022	Jan. 01, 2022
Business Acquisition [Line Items]
Goodwill	$ 1,348,494		$ 928,358
OpenEye Scientific Software, Inc.
Business Acquisition [Line Items]
Current assets		$ 24,890
Goodwill		368,148
Acquired intangibles		117,400
Other long-term assets		6,542
Total assets acquired		516,980
Current liabilities		15,489
Long-term liabilities		27,225
Total liabilities assumed		42,714
Total purchase consideration		$ 474,266

XML

Acquisitions (Details 2) - OpenEye Scientific Software, Inc. $ in Thousands	9 Months Ended
	Oct. 01, 2022 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 117,400
Weighted-average useful life of definite-lived intangible assets acquired	9 years 9 months 18 days
Existing Technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 53,900
Weighted-average useful life of definite-lived intangible assets acquired	7 years
Agreements and Relationship [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 61,400
Weighted-average useful life of definite-lived intangible assets acquired	12 years 3 months 18 days
Tradename Trademark and Patents [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 2,100
Weighted-average useful life of definite-lived intangible assets acquired	7 years

XML

Acquisitions (Details 3) - USD ($) $ in Thousands	Oct. 01, 2022	Jul. 14, 2022	Jan. 01, 2022
Business Acquisition [Line Items]
Goodwill	$ 1,348,494		$ 928,358
FFG Holdings Limited ("Future Facilities")
Business Acquisition [Line Items]
Current assets		$ 7,992
Goodwill		67,868
Acquired intangibles		38,100
Other long-term assets		3,102
Total assets acquired		117,062
Current liabilities		4,952
Long-term liabilities		9,210
Total liabilities assumed		14,162
Total purchase consideration		$ 102,900

XML

Acquisitions (Details 4) - FFG Holdings Limited ("Future Facilities") $ in Thousands	9 Months Ended
	Oct. 01, 2022 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 38,100
Weighted-average useful life of definite-lived intangible assets acquired	7 years 3 months 18 days
Existing Technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 20,900
Weighted-average useful life of definite-lived intangible assets acquired	6 years
Agreements and Relationship [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 15,600
Weighted-average useful life of definite-lived intangible assets acquired	9 years
Tradename Trademark and Patents [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 1,600
Weighted-average useful life of definite-lived intangible assets acquired	8 years

XML

Goodwill and Acquired Intangibles (Details) $ in Thousands	9 Months Ended
	Oct. 01, 2022 USD ($)
Changes in the carrying amount of goodwill
Balance at beginning of period	$ 928,358
Goodwill resulting from acquisitions	446,000
Effect of foreign currency translation	(25,864)
Balance at end of period	$ 1,348,494

XML

Goodwill and Acquired Intangibles (Details 1) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	$ 750,631	$ 621,204
Accumulated amortization	(403,519)	(387,939)
Total estimated amortization expense	347,112	233,265
In-process technology	6,800
Intangible assets, gross carrying amount (excluding goodwill)	757,431
Acquired intangibles, net	353,912	233,265
Existing Technology [Member]
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	468,489	405,481
Accumulated amortization	(267,918)	(254,599)
Total estimated amortization expense	200,571	150,882
Agreements and Relationships [Member]
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	269,597	205,057
Accumulated amortization	(133,089)	(130,187)
Total estimated amortization expense	136,508	74,870
Tradenames Trademarks And Patents [Member]
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	12,545	10,666
Accumulated amortization	(2,512)	(3,153)
Total estimated amortization expense	$ 10,033	$ 7,513

XML

Goodwill and Acquired Intangibles (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Amortization of acquired intangibles
Cost of product and maintenance	$ 8,867	$ 11,774	$ 30,906	$ 35,774
Amortization of acquired intangibles	3,946	5,000	13,543	14,661
Total amortization of acquired intangibles	$ 12,813	$ 16,774	$ 44,449	$ 50,435

XML

Goodwill and Acquired Intangibles (Details 3) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Estimated amortization expense
2022 - remaining period	$ 14,870
2023	56,040
2024	54,280
2025	42,213
2026	36,298
2027	34,056
Thereafter	109,355
Total estimated amortization expense	$ 347,112	$ 233,265

XML

Stock-Based Compensation (Details Textual) - Stock option and restricted stock grants [Member] $ in Millions	9 Months Ended
	Oct. 01, 2022 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expense	$ 534.9
Weighted-average vesting period over which unrecognized compensation expense will be recognized	2 years 4 months 24 days

XML

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	$ 73,451	$ 52,746	$ 197,190	$ 155,860
Cost of product and maintenance
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	1,046	885	2,751	2,601
Cost of services
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	1,331	1,158	3,494	3,177
Marketing and sales
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	14,991	10,784	39,650	32,284
Research and development
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	43,327	32,957	115,516	97,101
General and administrative
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	$ 12,756	$ 6,962	$ 35,779	$ 20,697

XML

Stock Repurchase Program (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended			9 Months Ended
	Oct. 01, 2022	[1]	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Class of Stock Disclosures [Abstract]
Shares repurchased	959		723	4,664	3,766
Total cost of repurchased shares	$ 180,013		$ 110,011	$ 750,062	$ 502,301

[1] Includes 109,365 shares and $30.0 million equity forward contract from the June 2022 ASR settled in September 2022.

XML

Stock Repurchase Program (Details Textuals) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				9 Months Ended
	Oct. 01, 2022		Jul. 02, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021	Aug. 04, 2021
Stock repurchase program
Additional authorized repurchase amount							$ 1,000,000
Shares repurchased	959,000	[1]		723,000	4,664,000	3,766,000
Treasury stock acquired	$ 150,013			$ 110,011	$ 720,062	$ 502,301
Stock repurchase program, remaining authorized repurchase amount	$ 1,400,000				$ 1,400,000
Accelerated share repurchase program
Stock repurchase program
Shares repurchased	100,000		500,000		600,000
Treasury stock acquired			$ 70,000
Accelerated share repurchase, prepayment during period	$ 100,000
Stock repurchase program, prepayment during period, derivative settlement	$ 30,000		$ 30,000
Accelerated share repurchases settlement of equity forward	109,365
Treasury stock acquired, average cost per share					$ 167.07
Share repurchase on open market
Stock repurchase program
Shares repurchased	900,000				4,100,000
Treasury stock acquired	$ 150,000				$ 650,000

[1] Includes 109,365 shares and $30.0 million equity forward contract from the June 2022 ASR settled in September 2022.

XML

Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Earnings Per Share, Basic and Diluted [Abstract]
Net income	$ 186,305	$ 176,307	$ 608,560	$ 519,376
Weighted average common shares used to calculate basic net income per share	271,131	273,194	271,694	273,636
Stock-based awards	3,826	5,117	3,989	5,410
Weighted average common shares used to calculate diluted net income per share (in shares)	274,957	278,311	275,683	279,046
Net income per share - basic (usd per share)	$ 0.69	$ 0.65	$ 2.24	$ 1.90
Net income per share - diluted (usd per share)	$ 0.68	$ 0.63	$ 2.21	$ 1.86

XML

Net Income Per Share (Details 1) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,301	336	2,226	313
Long-term market-based awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,761	0	1,485	0
Options to purchase shares of common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	514	331	678	267
Non-vested shares of restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	26	5	63	46

XML

Fair Value (Details) - USD ($) $ in Thousands	Oct. 01, 2022	Jul. 02, 2022	Jan. 01, 2022
Assets
Marketable equity securities	$ 3,963		$ 5,956
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	50,509		56,165
Total Assets	641,677		720,595
Liabilities
Foreign currency exchange contracts	16,748		306
Total Liabilities	16,748		306
Money Market Funds
Assets
Money market funds	587,205		658,474
Fair Value Measurements, Level 1 [Member]
Assets
Marketable equity securities	3,963		5,956
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	50,509		56,165
Total Assets	641,677		720,595
Liabilities
Foreign currency exchange contracts	0		0
Total Liabilities	0		0
Fair Value Measurements, Level 1 [Member] | Money Market Funds
Assets
Money market funds	587,205		658,474
Fair Value Measurements, Level 2 [Member]
Assets
Marketable equity securities	0		0
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	0		0
Total Assets	0		0
Liabilities
Foreign currency exchange contracts	16,748		306
Total Liabilities	16,748		306
Fair Value Measurements, Level 2 [Member] | Money Market Funds
Assets
Money market funds	0		0
Fair Value Measurements, Level 3 [Member]
Assets
Marketable equity securities	0		0
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	0		0
Total Assets	0		0
Liabilities
Foreign currency exchange contracts	0		0
Total Liabilities	0		0
Acquired intangibles	155,500	$ 15,000
Fair Value Measurements, Level 3 [Member] | Money Market Funds
Assets
Money market funds	$ 0		$ 0

XML

Fair Value (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Jul. 02, 2022	Oct. 02, 2021	Oct. 01, 2022	Aug. 31, 2022	Jul. 14, 2022
2022 Other business combination
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Acquired intangibles			$ 15,000
OpenEye Scientific Software, Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Acquired intangibles				$ 117,400
FFG Holdings Limited ("Future Facilities")
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Acquired intangibles					$ 38,100
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Acquired intangibles	$ 15,000		$ 155,500
Fair Value, Inputs, Level 3 [Member] | Minimum [Member] | 2022 Other business combination | Valuation Technique, Discounted Cash Flow
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Significant Input, Discount Rate	23.00%
Fair Value, Inputs, Level 3 [Member] | Maximum [Member] | 2022 Other business combination | Valuation Technique, Discounted Cash Flow
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Significant Input, Discount Rate	25.00%
Fair Value, Inputs, Level 3 [Member] | Customer Relationships | Measurement Input, Discount Rate [Member] | FFG Holdings Limited ("Future Facilities")
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Customer Retention Rate		95.00%
Fair Value, Inputs, Level 3 [Member] | Customer Relationships | Minimum [Member] | Measurement Input, Discount Rate [Member] | OpenEye Scientific Software, Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Significant Input, Discount Rate		10.00%
Estimated Customer Retention Rate		95.00%
Fair Value, Inputs, Level 3 [Member] | Customer Relationships | Minimum [Member] | Measurement Input, Discount Rate [Member] | FFG Holdings Limited ("Future Facilities")
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Significant Input, Discount Rate		10.00%
Fair Value, Inputs, Level 3 [Member] | Customer Relationships | Maximum [Member] | Measurement Input, Discount Rate [Member] | OpenEye Scientific Software, Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Significant Input, Discount Rate		11.00%
Estimated Customer Retention Rate		100.00%
Fair Value, Inputs, Level 3 [Member] | Customer Relationships | Maximum [Member] | Measurement Input, Discount Rate [Member] | FFG Holdings Limited ("Future Facilities")
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Significant Input, Discount Rate		11.00%
Fair Value, Inputs, Level 3 [Member] | Technology-Based Intangible Assets | Measurement Input, Discount Rate [Member] | OpenEye Scientific Software, Inc.
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Technological Obsolescence Rate		10.00%
Estimated Royalty Rate		25.00%
Fair Value, Inputs, Level 3 [Member] | Technology-Based Intangible Assets | Measurement Input, Discount Rate [Member] | FFG Holdings Limited ("Future Facilities")
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Technological Obsolescence Rate		10.00%
Estimated Royalty Rate		25.00%

XML

Inventory (Details) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 106,299	$ 88,629
Finished goods	7,984	27,092
Total inventories	$ 114,283	$ 115,721

XML

Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Accumulated Other Comprehensive Loss, Net of Tax	$ (122,133)	$ (33,311)
Accumulated Other Comprehensive Loss [Line Items]
Accumulated Other Comprehensive Loss, Net of Tax	(122,133)	(33,311)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Accumulated Other Comprehensive Loss, Net of Tax	(117,317)	(26,553)
Accumulated Other Comprehensive Loss [Line Items]
Accumulated Other Comprehensive Loss, Net of Tax	(117,317)	(26,553)
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Accumulated Other Comprehensive Loss, Net of Tax	(4,816)	(6,758)
Accumulated Other Comprehensive Loss [Line Items]
Accumulated Other Comprehensive Loss, Net of Tax	$ (4,816)	$ (6,758)

XML

Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2022	Oct. 02, 2021	Oct. 01, 2022	Oct. 02, 2021
Segment reporting [Line Items]
Total revenue	$ 902,554	$ 750,895	$ 2,661,841	$ 2,215,208
United States [Member]
Segment reporting [Line Items]
Total revenue	392,222	331,463	1,174,734	970,925
Other Americas [Member]
Segment reporting [Line Items]
Total revenue	15,165	11,487	39,010	31,353
Americas [Member]
Segment reporting [Line Items]
Total revenue	407,387	342,950	1,213,744	1,002,278
China [Member]
Segment reporting [Line Items]
Total revenue	148,325	98,325	401,460	287,357
Other Asia [Member]
Segment reporting [Line Items]
Total revenue	156,250	136,272	466,891	404,509
Asia [Member]
Segment reporting [Line Items]
Total revenue	304,575	234,597	868,351	691,866
EMEA [Member]
Segment reporting [Line Items]
Total revenue	142,983	129,606	431,660	384,341
Japan [Member]
Segment reporting [Line Items]
Total revenue	$ 47,609	$ 43,742	$ 148,086	$ 136,723

XML

Segment Reporting (Details 1) - USD ($) $ in Thousands	Oct. 01, 2022	Jan. 01, 2022
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	$ 517,912	$ 436,035
United States [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	328,455	267,202
Other Americas [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	7,376	975
Americas [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	335,831	268,177
China [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	52,158	56,403
Other Asia [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	69,859	54,677
Asia [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	122,017	111,080
EMEA [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	55,560	53,748
Japan [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	$ 4,504	$ 3,030