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 September 30, 2023

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 September 30, 2023, approximately 272,062,000 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 September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Income Statements for the three and nine months ended September 30, 2023 and October 1, 2022	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and October 1, 2022	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and October 1, 2022	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and October 1, 2022	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	33
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	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	38
	Signatures	39

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

	As of
	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	961,982	$	882,325
Receivables, net	426,505		486,710
Inventories	163,693		128,005
Prepaid expenses and other	272,283		209,727
Total current assets	1,824,463		1,706,767
Property, plant and equipment, net	379,776		371,451
Goodwill	1,500,442		1,374,268
Acquired intangibles, net	347,617		354,617
Deferred taxes	874,805		853,691
Other assets	504,272		476,277
Total assets	$	5,431,375	$	5,137,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving credit facility	$	—	$	100,000
Accounts payable and accrued liabilities	598,261		557,158
Current portion of deferred revenue	665,906		690,538
Total current liabilities	1,264,167		1,347,696
Long-term liabilities:
Long-term portion of deferred revenue	100,609		91,524
Long-term debt	648,801		648,078
Other long-term liabilities	303,904		304,660
Total long-term liabilities	1,053,314		1,044,262
Commitments and contingencies (Note 15)
Stockholders’ equity:
Common stock and capital in excess of par value	3,077,954		2,765,673
Treasury stock, at cost	(4,463,484)		(3,824,163)
Retained earnings	4,612,485		3,895,240
Accumulated other comprehensive loss	(113,061)		(91,637)
Total stockholders’ equity	3,113,894		2,745,113
Total liabilities and stockholders’ equity	$	5,431,375	$	5,137,071

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
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenue:
Product and maintenance	$	965,840	$	845,788	$	2,852,372	$	2,494,317
Services	57,254		56,766		168,991		167,524
Total revenue	1,023,094		902,554		3,021,363		2,661,841
Costs and expenses:
Cost of product and maintenance	85,813		62,351		260,269		203,863
Cost of services	23,768		25,249		70,642		74,245
Marketing and sales	176,215		152,925		509,951		432,407
Research and development	369,642		323,629		1,074,353		901,121
General and administrative	58,556		73,688		166,688		174,051
Amortization of acquired intangibles	4,612		3,946		13,181		13,543
Restructuring	11,582		14		11,582		42
Total costs and expenses	730,188		641,802		2,106,666		1,799,272
Income from operations	292,906		260,752		914,697		862,569
Interest expense	(9,059)		(5,463)		(27,196)		(13,852)
Other income (expense), net	16,106		(3,017)		32,363		(13,879)
Income before provision for income taxes	299,953		252,272		919,864		834,838
Provision for income taxes	45,632		65,967		202,619		226,278
Net income	$	254,321	$	186,305	$	717,245	$	608,560
Net income per share – basic	$	0.94	$	0.69	$	2.66	$	2.24
Net income per share – diluted	$	0.93	$	0.68	$	2.63	$	2.21
Weighted average common shares outstanding – basic	269,229		271,131		269,480		271,694
Weighted average common shares outstanding – diluted	272,427		274,957		272,859		275,683

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
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Net income	$	254,321	$	186,305	$	717,245	$	608,560
Other comprehensive loss, net of tax effects:
Foreign currency translation adjustments	(21,692)		(40,768)		(20,546)		(90,764)
Changes in defined benefit plan liabilities	132		15		537		1,942
Unrealized losses on investments	(991)		—		(1,415)		—
Total other comprehensive loss, net of tax effects	(22,551)		(40,753)		(21,424)		(88,822)
Comprehensive income	$	231,770	$	145,552	$	695,821	$	519,738

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three Months Ended September 30, 2023
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, June 30, 2023	271,790	$	2,897,885	$	(4,257,084)	$	4,358,164	$	(90,510)	$	2,908,455
Net income	—	—		—		254,321		—		$	254,321
Other comprehensive loss, net of taxes	—	—		—		—		(22,551)		$	(22,551)
Purchase of treasury stock	(811)	—		(125,008)		—		—		$	(125,008)
Equity forward contract		61,688		(61,688)						$	—
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	1,230	39,810		14,029		—		—		$	53,839
Stock received for payment of employee taxes on vesting of restricted stock	(147)	(9,461)		(33,733)		—		—		$	(43,194)
Stock-based compensation expense	—	88,032		—		—		—		$	88,032
Balance, September 30, 2023	272,062	$	3,077,954	$	(4,463,484)	$	4,612,485	$	(113,061)	$	3,113,894
	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

	Nine Months Ended September 30, 2023
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, December 31, 2022	272,675	$	2,765,673	$	(3,824,163)	$	3,895,240	$	(91,637)	$	2,745,113
Net income	—	—		—		717,245		—		$	717,245
Other comprehensive loss, net of taxes	—	—		—		—		(21,424)		$	(21,424)
Purchase of treasury stock	(2,657)	—		(515,127)		—		—		$	(515,127)
Equity forward contract		1,688		(61,688)		—		—		$	(60,000)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	2,527	91,894		39,447		—		—		$	131,341
Stock received for payment of employee taxes on vesting of restricted stock	(483)	(20,229)		(101,953)		—		—		$	(122,182)
Stock-based compensation expense	—	238,928		—		—		—		$	238,928
Balance, September 30, 2023	272,062	$	3,077,954	$	(4,463,484)	$	4,612,485	$	(113,061)	$	3,113,894
	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

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30, 2023		October 1, 2022
Cash and cash equivalents at beginning of period	$	882,325	$	1,088,940
Cash flows from operating activities:
Net income	717,245		608,560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	106,783		98,178
Amortization of debt discount and fees	942		810
Stock-based compensation	238,928		197,190
(Gain) loss on investments, net	(12,732)		4,777
Deferred income taxes	(23,506)		(49,834)
Provisions for losses on receivables	1,692		471
ROU asset amortization and change in operating lease liabilities	(2,684)		(883)
Other non-cash items	1,962		158
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	50,024		(57,309)
Inventories	(47,293)		(8,020)
Prepaid expenses and other	33,307		30,596
Other assets	(26,580)		17,644
Accounts payable and accrued liabilities	43,111		24,514
Deferred revenue	(14,628)		113,712
Other long-term liabilities	10,514		(2,305)
Net cash provided by operating activities	1,077,085		978,259
Cash flows from investing activities:
Purchases of investments	(145,150)		(1,000)
Proceeds from the sale and maturity of investments	64,174		—
Purchases of property, plant and equipment	(68,634)		(86,295)
Purchases of intangible assets	—		(1,000)
Cash paid in business combinations, net of cash acquired	(163,963)		(586,163)
Net cash used for investing activities	(313,573)		(674,458)
Cash flows from financing activities:
Proceeds from term loan	—		300,000
Proceeds from revolving credit facility	50,000		450,000
Payments on revolving credit facility	(150,000)		(300,000)
Payment of debt issuance costs	—		(425)
Proceeds from issuance of common stock	131,341		103,682
Stock received for payment of employee taxes on vesting of restricted stock	(122,182)		(103,093)
Payments for repurchases of common stock	(575,127)		(750,062)
Net cash used for financing activities	(665,968)		(299,898)
Effect of exchange rate changes on cash and cash equivalents	(17,887)		(66,792)
Increase (decrease) in cash and cash equivalents	79,657		(62,889)
Cash and cash equivalents at end of period	$	961,982	$	1,026,051
Supplemental cash flow information:
Cash paid for interest	$	22,226	$	8,508
Cash paid for income taxes, net	104,721		148,151

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 December 31, 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

In fiscal 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. The fiscal year change became effective with Cadence’s 2023 fiscal year, which began on January 1, 2023. Cadence’s fiscal quarters now end on March 31, June 30, and September 30. No transition report is required in connection with this change.

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 macroeconomic and geopolitical environment, 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 23, 2023, 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

There have been no recent accounting standard updates that are material or potentially material to Cadence.

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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Custom Integrated Circuit (“IC”) Design and Simulation	22	%	22	%	21	%	22	%
Digital IC Design and Signoff	28	%	29	%	27	%	28	%
Functional Verification, including Emulation and Prototyping Hardware*	26	%	25	%	29	%	26	%
Intellectual Property (“IP”)	11	%	12	%	11	%	13	%
System Design and Analysis	13	%	12	%	12	%	11	%
Total	100	%	100	%	100	%	100	%

_____________

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

6

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 September 30, 2023 or October 1, 2022.

Approximately 85% of Cadence’s annual revenue is characterized as recurring revenue. Recurring revenue includes revenue recognized over time from Cadence’s 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 is 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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenue recognized over time	83	%	81	%	80	%	82	%
Revenue from arrangements with non-cancelable commitments	2	%	3	%	3	%	2	%
Recurring revenue	85	%	84	%	83	%	84	%
Up-front revenue	15	%	16	%	17	%	16	%
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 stand-alone 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.

7

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 September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Contract assets	$	14,353	$	22,766
Deferred revenue	766,515		782,062

Cadence recognized revenue of $106.6 million and $632.4 million during the three and nine months ended September 30, 2023, and $63.9 million and $488.9 million during the three and nine months ended October 1, 2022, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue 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 $5.4 billion as of September 30, 2023, which included $0.4 billion 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 September 30, 2023, Cadence expected to recognize 54% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months.

Cadence recognized revenue of $13.5 million and $40.3 million during the three and nine months ended September 30, 2023, and $12.1 million and $35.2 million during the three and nine months ended October 1, 2022, 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.

8

NOTE 3. RECEIVABLES, NET

Cadence’s current and long-term receivables balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Accounts receivable	$	264,580	$	314,666
Unbilled accounts receivable	164,827		174,334
Long-term receivables	9,009		2,735
Total receivables	438,416		491,735
Less allowance for doubtful accounts	(2,902)		(2,290)
Total receivables, net	$	435,514	$	489,445

Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of September 30, 2023 and December 31, 2022, no single customer accounted for 10% or more of Cadence’s total receivables.

NOTE 4. DEBT

Cadence’s outstanding debt as of September 30, 2023 and December 31, 2022 was as follows:

	September 30, 2023						December 31, 2022
	(In thousands)
	Principal		Unamortized Discount		Carrying Value		Principal		Unamortized Discount		Carrying Value
Revolving Credit Facility	$	—	$	—	$	—	$	100,000	$	—	$	100,000
2024 Notes	350,000		(936)		349,064		350,000		(1,581)		348,419
2025 Term Loan	300,000		(263)		299,737		300,000		(341)		299,659
Total outstanding debt	$	650,000	$	(1,199)	$	648,801	$	750,000	$	(1,922)	$	748,078

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 the London Inter-Bank Offered Rate (“LIBOR”) to Term Secured Overnight Financing Rate (“SOFR”). The material terms of the 2021 Credit Facility otherwise remain unchanged.

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 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. A commitment fee ranging from 0.070% to 0.175% is assessed on the daily average undrawn portion of revolving commitments. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2021 Credit Facility approximates fair value.

The 2021 Credit Facility 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 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 September 30, 2023, Cadence was in compliance with all financial covenants associated with the 2021 Credit Facility.

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2024 Notes

In October 2014, Cadence issued a $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 fair value of the 2024 Notes was approximately $345.7 million as of September 30, 2023.

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. Debt issuance costs associated with the 2025 Term Loan were not material.

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% 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% and 0.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of September 30, 2023, the interest rate on the 2025 Term Loan was 6.18%. 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 September 30, 2023, Cadence was in compliance with all financial covenants associated with the 2025 Term Loan.

NOTE 5. ACQUISITIONS

On September 6, 2023, Cadence acquired the serializer/deserializer (“SerDes”) and memory interface physical layer (“Memory”) IP business from Rambus Inc. (“Rambus”) for an aggregate cash consideration of $108.6 million. Memory and SerDes IP design and integration continues to be integral to the design of artificial intelligence, data center and hyperscale applications, CPU architectures and networking devices. The addition of the Rambus IP and seasoned team accelerates Cadence’s Intelligent System Design strategy and strengthens Cadence's IP technology portfolio.

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

	Fair Value
	(In thousands)
Current assets	$	1,460
Goodwill	80,999
Acquired intangibles	26,000
Other long-term assets	2,798
Total assets acquired	111,257
Current liabilities	2,531
Long-term liabilities	142
Total liabilities assumed	2,673
Total purchase consideration	$	108,584

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 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 be deductible for tax purposes.

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Definite-lived intangible assets acquired with Cadence’s acquisition of the SerDes and Memory business from Rambus were as follows:

	Fair Value		Weighted Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	16,700	5.0 years
Agreements and relationships	9,300		7.0 years
Total acquired intangibles with definite lives	$	26,000	5.7 years

On May 4, 2023, Cadence acquired all of the outstanding equity of Pulsic, Ltd. (“Pulsic”), a longtime provider of production-proven technology for floor-planning, placement, and routing of custom ICs. The addition of Pulsic’s technologies and experienced team supports Cadence’s Intelligent System Design strategy and strengthens Cadence’s Custom IC Design and Simulation technology portfolio. The aggregate cash consideration for Cadence’s acquisition of Pulsic, net of cash acquired of $3.8 million, was $56.1 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former Pulsic shareholders, now employed by Cadence, through the second quarter of fiscal 2025.

The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of Pulsic based on their respective fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	4,369
Goodwill	47,448
Acquired intangibles	12,400
Other long-term assets	89
Total assets acquired	64,306
Current liabilities	1,553
Long-term liabilities	2,885
Total liabilities assumed	4,438
Total purchase consideration	$	59,868

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.

Definite-lived intangible assets acquired with Cadence’s acquisition of Pulsic were as follows:

	Fair Value		Weighted Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	8,000	6.2 years
Agreements and relationships	4,100		8.0 years
Tradenames, trademarks and patents	300		6.0 years
Total acquired intangibles with definite lives	$	12,400	6.8 years

Pro Forma Financial Information

Cadence has not presented pro forma financial information for the businesses acquired during fiscal 2023 because the results of operations for these businesses are not material to Cadence’s condensed consolidated financial statements.

Acquisition-Related Transaction Costs

Transaction costs associated with acquisitions, which consist of professional fees and administrative costs, are expensed as incurred and are included in general and administrative expense in Cadence’s condensed consolidated income statement. During the three and nine months ended September 30, 2023, transaction costs associated with acquisitions were $4.3 million and $10.3 million, respectively. During the three and nine months ended October 1, 2022, transaction costs associated with acquisitions were $3.6 million and $10.1 million, respectively.

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NOTE 6. GOODWILL AND ACQUIRED INTANGIBLES

Goodwill

The changes in the carrying amount of goodwill during the nine months ended September 30, 2023 were as follows:

	Gross Carrying Amount
	(In thousands)
Balance as of December 31, 2022	$	1,374,268
Goodwill resulting from acquisitions	128,447
Effect of foreign currency translation	(2,273)
Balance as of September 30, 2023	$	1,500,442

Acquired Intangibles, Net

Acquired intangibles as of September 30, 2023 were as follows, excluding intangibles that were fully amortized as of December 31, 2022:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	323,359	$	(129,807)	$	193,552
Agreements and relationships	194,625		(56,671)		137,954
Tradenames, trademarks and patents	13,242		(3,931)		9,311
Total acquired intangibles with definite lives	531,226		(190,409)		340,817
In-process technology	6,800		—		6,800
Total acquired intangibles	$	538,026	$	(190,409)	$	347,617

In-process technology as of September 30, 2023 consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of September 30, 2023, these projects were expected to be completed during the first quarter of fiscal 2024. During the three and nine months ended September 30, 2023, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of December 31, 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	$	479,796	$	(278,851)	$	200,945
Agreements and relationships	274,624		(137,847)		136,777
Tradenames, trademarks and patents	12,979		(2,884)		10,095
Total acquired intangibles with definite lives	$	767,399	$	(419,582)	$	347,817
In-process technology	6,800		—		6,800
Total acquired intangibles	$	774,199	$	(419,582)	$	354,617

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 September 30, 2023 and October 1, 2022 by condensed consolidated income statement caption was as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Cost of product and maintenance	$	10,991	$	8,867	$	31,869	$	30,906
Amortization of acquired intangibles	4,612		3,946		13,181		13,543
Total amortization of acquired intangibles	$	15,603	$	12,813	$	45,050	$	44,449

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As of September 30, 2023, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

	(In thousands)
2023 - remaining period	$	16,309
2024	63,382
2025	50,658
2026	44,879
2027	42,438
2028	38,371
Thereafter	84,780
Total estimated amortization expense	$	340,817

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 September 30, 2023 and October 1, 2022 as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Cost of product and maintenance	$	1,191	$	1,046	$	3,292	$	2,751
Cost of services	1,516		1,331		4,190		3,494
Marketing and sales	18,042		14,991		48,819		39,650
Research and development	53,013		43,327		142,142		115,516
General and administrative	14,270		12,756		40,485		35,779
Total stock-based compensation expense	$	88,032	$	73,451	$	238,928	$	197,190

Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $621.5 million as of September 30, 2023, which will be recognized over a weighted average vesting period of 2.0 years.

NOTE 8. STOCK REPURCHASE PROGRAM

In August 2023, Cadence’s Board of Directors increased the prior authorization to repurchase shares of Cadence common stock by authorizing an additional $1.0 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 September 30, 2023, Cadence repurchased approximately 0.5 million and 1.8 million shares on the open market, for an aggregate purchase price of $125 million and $375 million, respectively.

In June 2023, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with HSBC Bank USA, National Association (“HSBC”) to repurchase an aggregate of $200.0 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 2023, Cadence received an initial share delivery of approximately 0.6 million shares, which represented the number of shares at a market price equal to $140.0 million. An equity-linked contract for $60 million, representing the remaining shares to be delivered by HSBC under the ASR agreement, was recorded to stockholders' equity as of June 30, 2023. In August 2023, the ASR agreement settled and resulted in a delivery of approximately 0.3 million additional shares to Cadence. In total, Cadence received approximately 0.9 million shares under the ASR agreement at an average price per share of $228.26. The shares received were treated as repurchased common stock for purposes of calculating earnings per share.

As of September 30, 2023, approximately $1.5 billion of Cadence’s share repurchase authorization remained available to repurchase shares of Cadence common stock.

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The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023*		October 1, 2022**		September 30, 2023		October 1, 2022
	(In thousands)
Shares repurchased	811		959		2,657		4,664
Total cost of repurchased shares	$	185,008	$	180,013	$	575,127	$	750,062

_____________

*Includes 276 thousand shares and $60 million equity forward contract from the June 2023 ASR settled in August 2023.

**Includes 109 thousand shares and $30 million equity forward contract from the June 2022 ASR settled in September 2022.

NOTE 9. RESTRUCTURING

In August 2023, Cadence initiated a restructuring plan (the “2023 Restructuring Plan”) designed to better align its resources with its business strategy. The charges incurred with the 2023 Restructuring Plan during the three and nine months ended September 30, 2023, are comprised of severance payments and termination benefits related to headcount reductions and are included in restructuring on Cadence’s condensed consolidated income statements.

In addition to headcount reductions, Cadence is evaluating certain facilities for closure as part of the 2023 Restructuring Plan. During the three and nine months ended September 30, 2023, no facility-related restructuring charges were incurred, and charges in future periods for the facilities under consideration are not expected to exceed $5 million.

The following table presents activity for the 2023 Restructuring Plan during the nine months ended September 30, 2023:

	Severance and Benefits
	(In thousands)
Balance as of December 31, 2022	$	—
Restructuring charges	11,582
Cash payments	(2,620)
Effect of foreign currency translation	(117)
Balance as of September 30, 2023	$	8,845

All liabilities for severance and related benefits under the 2023 Restructuring Plan are included in accounts payable and accrued liabilities on Cadence’s condensed consolidated balance sheets as of September 30, 2023. Cadence expects to make cash payments to settle these liabilities through the first half of fiscal 2024.

NOTE 10. OTHER INCOME (EXPENSE), NET

Cadence’s other income (expense), net, for the three and nine months ended September 30, 2023 and October 1, 2022 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Interest income	$	8,453	$	3,051	$	22,253	$	4,941
Gains (losses) on marketable equity investments	14,339		(408)		14,960		(1,993)
Losses on non-marketable equity investments	(1,050)		(1,246)		(2,225)		(2,786)
Gains (losses) on securities in Non-Qualified Deferred Compensation (“NQDC”) trust	(1,749)		(2,885)		4,556		(11,977)
Losses on foreign exchange	(3,568)		(1,299)		(4,649)		(1,418)
Other expense, net	(319)		(230)		(2,532)		(646)
Total other income (expense), net	$	16,106	$	(3,017)	$	32,363	$	(13,879)

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NOTE 11. 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 September 30, 2023 and October 1, 2022 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands, except per share amounts)
Net income	$	254,321	$	186,305	$	717,245	$	608,560
Weighted average common shares used to calculate basic net income per share	269,229		271,131		269,480		271,694
Stock-based awards	3,198		3,826		3,379		3,989
Weighted average common shares used to calculate diluted net income per share	272,427		274,957		272,859		275,683
Net income per share - basic	$	0.94	$	0.69	$	2.66	$	2.24
Net income per share - diluted	$	0.93	$	0.68	$	2.63	$	2.21

The following table presents shares of Cadence’s common stock outstanding for the three and nine months ended September 30, 2023 and October 1, 2022 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
	September 30, 2023	October 1, 2022	September 30, 2023	October 1, 2022
	(In thousands)
Long-term market-based awards	1,866	1,761	1,841	1,485
Options to purchase shares of common stock	262	514	373	678
Non-vested shares of restricted stock	807	26	288	63
Total potential common shares excluded	2,935	2,301	2,502	2,226

NOTE 12. INVESTMENTS

Marketable Equity Investments

Cadence’s investments in marketable equity securities consist of purchased shares of publicly held companies and are included in prepaid expenses and other in Cadence’s condensed consolidated balance sheets. Changes in the fair value of these investments are recorded to other income (expense), net in Cadence’s condensed consolidated income statements. The carrying value of marketable equity investments was $58.4 million and $4.5 million as of September 30, 2023 and December 31, 2022, respectively.

Marketable Debt Securities

The following is a summary of Cadence’s available-for-sale debt securities recorded within prepaid expenses and other on the condensed consolidated balance sheet as of September 30, 2023:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
Available-for-sale securities
Mortgage-backed and asset-backed securities	$	44,042	$	6	$	(1,421)	$	42,627
Total available-for-sale securities	$	44,042	$	6	$	(1,421)	$	42,627

Gross unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on Cadence's condensed consolidated balance sheets.

15

As of September 30, 2023, the fair values of available-for-sale debt securities, by remaining contractual maturity, were as follows:

	(In thousands)
Due within 1 year	$	—
Due after 1 year through 5 years	8,366
Due after 5 years through 10 years	14,174
Due after 10 years	20,087
Total	$	42,627

As of September 30, 2023, Cadence does not intend to sell any of its available-for-sale securities in an unrealized loss position, and it is more likely than not that Cadence will hold the securities until maturity or a recovery of the cost basis.

Non-Marketable Equity Investments

Cadence’s investments in non-marketable equity securities generally consist of stock or other instruments of privately held entities and are included in other assets on Cadence’s condensed consolidated balance sheets. Cadence holds a 16% interest in a privately held company that is accounted for using the equity method of accounting. The carrying value of this investment was $112.6 million and $117.7 million as of September 30, 2023 and December 31, 2022, respectively.

Cadence records its proportionate share of net income from the investee, offset by amortization of basis differences, to other income (expense), net in Cadence’s condensed consolidated income statements. For the three and nine months ended September 30, 2023, Cadence recognized losses of $1.0 million and $2.2 million, respectively. For the three and nine months ended October 1, 2022, Cadence recognized losses of $1.2 million and $2.5 million, respectively.

Cadence also holds other non-marketable investments in privately held companies where Cadence does not have the ability to exercise significant influence and the fair value of the investments is not readily determinable. The carrying value of these investments was $2.2 million and $2.3 million as of September 30, 2023 and December 31, 2022, respectively. Gains and losses on these investments were not material to Cadence’s condensed consolidated financial statements for the periods presented.

NOTE 13. 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 September 30, 2023.

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 September 30, 2023 and December 31, 2022:

	Fair Value Measurements as of September 30, 2023
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	444,303	$	444,303	$	—	$	—
Marketable securities:
Marketable equity securities	58,411		58,411		—		—
Mortgage-backed and asset-backed securities	42,627		—		42,627		—
Securities held in NQDC trust	67,324		67,324		—		—
Total Assets	$	612,665	$	570,038	$	42,627	$	—

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	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	10,102	$	—	$	10,102	$	—
Total Liabilities	$	10,102	$	—	$	10,102	$	—
	Fair Value Measurements as of December 31, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	548,373	$	548,373	$	—	$	—
Marketable equity securities	4,490		4,490		—		—
Securities held in NQDC trust	55,605		55,605		—		—
Foreign currency exchange contracts	5,306		—		5,306		—
Total Assets	$	613,774	$	608,468	$	5,306	$	—
As of December 31, 2022, Cadence did not have any financial liabilities requiring a recurring fair value measurement.

Level 1 Measurements

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

Level 2 Measurements

The valuation techniques used to determine the fair value of Cadence’s investments in marketable debt securities, foreign currency forward exchange contracts and 2024 Notes are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Level 3 Measurements

During the nine months ended September 30, 2023, Cadence acquired intangible assets of $38.4 million. The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements.

For existing technology, the fair value was determined by applying the relief-from-royalty method. This method is based on the application of a royalty rate to forecasted revenue to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. To estimate royalty savings over time, Cadence projected revenue from 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. Cadence assumed technological obsolescence at rates between 10% and 13% annually, before applying an assumed royalty rate between 25% and 30%.

For agreements and relationships, the fair value 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 80% and 90%. The present value of operating cash flows from existing customers was determined using discount rates between 13.5% and 15%.

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NOTE 14. INVENTORY

Cadence’s inventory balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Inventories:
Raw materials	$	154,097	$	113,982
Finished goods	9,596		14,023
Total inventories	$	163,693	$	128,005

NOTE 15. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, Cadence is involved in various disputes and litigation 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 litigation matters and may revise estimates.

Tax Proceedings

In December 2022, Cadence received a tax audit assessment of approximately $49 million from the Korea taxing authorities for years 2017-2019. The tax audit assessment is primarily related to value-added taxes. Cadence is required to pay these assessed taxes, prior to being allowed to contest or litigate the assessment in administrative and judicial proceedings. The assessment was paid by Cadence in January 2023 and recorded as a component of other assets in the condensed consolidated balance sheets. Payment of this amount is not an admission that Cadence is subject to such taxes, and Cadence continues to defend its position vigorously. Cadence did not record a reserve for this contingency as of September 30, 2023 or December 31, 2022 as Cadence does not believe a loss is probable because it believes it will ultimately prevail in full. The entire dispute resolution process may take from one to eight years.

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 September 30, 2023 and October 1, 2022.

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.

In connection with a litigation campaign launched in April 2022 by Bell Semiconductor LLC (“Bell Semi”), a patent monetization entity, some customers sought defense and indemnification against claims of patent infringement asserted by Bell Semi in various district court litigation and at the U.S. International Trade Commission. Bell Semi alleged that the customers’ use of one or more features of certain Cadence products infringed one or more of six patents held by Bell Semi. Cadence offered to defend some of its customers consistent with the terms of the applicable license agreements. On July 25, 2023, Cadence and Bell Semi reached a settlement agreement involving the six patents-in-suit. The settlement amount was not material to Cadence.

Cadence did not incur any material losses from indemnification claims during the three and nine months ended September 30, 2023 and October 1, 2022.

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NOTE 16. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

Accumulated other comprehensive loss was comprised of the following as of September 30, 2023 and December 31, 2022:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Foreign currency translation loss	$	(106,409)	$	(85,863)
Changes in defined benefit plan liabilities	(5,237)		(5,774)
Unrealized losses on investments	(1,415)		—
Total accumulated other comprehensive loss	$	(113,061)	$	(91,637)

For the three and nine months ended September 30, 2023 and October 1, 2022, there were no significant amounts related to foreign currency translation loss, changes in defined benefit plan liabilities or unrealized gains and losses on investments reclassified from accumulated other comprehensive loss to net income.

NOTE 17. 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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Americas:
United States	$	421,547	$	392,222	$	1,241,488	$	1,174,734
Other Americas	15,800		15,165		47,884		39,010
Total Americas	437,347		407,387		1,289,372		1,213,744
Asia:
China	172,022		148,325		523,694		401,460
Other Asia	197,831		156,250		558,687		466,891
Total Asia	369,853		304,575		1,082,381		868,351
Europe, Middle East and Africa	158,194		142,983		479,268		431,660
Japan	57,700		47,609		170,342		148,086
Total	$	1,023,094	$	902,554	$	3,021,363	$	2,661,841

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The following table presents a summary of long-lived assets by geography as of September 30, 2023 and December 31, 2022:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Americas:
United States	$	364,932	$	347,822
Other Americas	10,169		7,548
Total Americas	375,101		355,370
Asia:
China	41,386		51,667
Other Asia	70,743		73,329
Total Asia	112,129		124,996
Europe, Middle East and Africa	51,291		56,959
Japan	2,820		4,505
Total	$	541,341	$	541,830

NOTE 18. SUBSEQUENT EVENT

On October 2, 2023, Cadence acquired all of the outstanding equity of Intrinsix Corporation (“Intrinsix”) from CEVA, Inc. The acquisition enhances Cadence’s system and IC design services resources with the addition of a team with expertise in advanced nodes, radio frequency, mixed-signal and security algorithms. The acquisition also expands Cadence’s reach in key high-growth verticals, including aerospace and defense. The aggregate cash consideration of approximately $35 million will be allocated to the assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Cadence expects to complete the initial accounting for its acquisition of Intrinsix during the fourth quarter of fiscal 2023.

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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 December 31, 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, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, the expanded trade control laws and regulations, the conflicts in and around Ukraine, the Middle East and other areas of the world, volatility in foreign currency exchange rates, inflation and the rise in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings; restructuring actions and associated charges and benefits; the accounting for acquisitions and integration of acquired businesses; 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 and our subsequent Quarterly Reports on Form 10-Q, 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 disclaim any obligation to update these forward-looking statements, except as required by law.

Business Overview

Cadence is a leader in electronic system design, building upon more than 30 years of computational software expertise. We apply our underlying Intelligent System Design strategy to deliver computational software, hardware and intellectual property (“IP”) that turn design concepts into reality. 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.

Our strategy is to provide the technology necessary for our customers to develop products across a variety of vertical markets including consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, industrial, healthcare and life sciences. 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.

For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Products and Product Categories,” in our Annual Report.

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.”

Fiscal Year End

In fiscal 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. The fiscal year change became effective beginning with our 2023 fiscal year, which began on January 1, 2023. Our fiscal quarters now end on March 31, June 30, and September 30.

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Macroeconomic and Geopolitical Environment

Because we operate globally, our business is subject to the effects of expanded trade control laws and regulations, geopolitical conflict in and around Ukraine, Israel and other areas of the world, volatility in foreign currency exchange rates relative to the United States (“U.S.”) dollar and the rise in interest rates.

We have been impacted by the continued expansion of trade control laws and regulations, that include certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the Bureau of Industry and Security (“BIS”) “Entity List” and regulations governing the sale of certain technologies. Based on our current assessments, we expect the impact of these expanded trade control laws and regulations on our business to be limited.

We also continuously monitor geopolitical conflicts around the world and their effects on our business. 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.

More recently, the conflict in the Middle East has had an impact on our employees and our customers in that region of the world. It is too early to determine the full extent of the impact this conflict could have on our business and our operations, and our assessment of the potential impacts is ongoing.

While our business model provides some resilience against these factors, we will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and financial results. For additional information on the potential impact of other macroeconomic and geopolitical conditions on our business, see the “Risk Factors” sections in our Annual Report and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Q1 Report”). For additional information on the potential impact of foreign currency exchange rates and interest rates on our business, see the “Quantitative and Qualitative Disclosures About Market Risk” section of this Quarterly 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 condensed 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 additional 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.

Results of Operations

Financial results for the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, reflect the following:

•Growth in revenue from our software and emulation and prototyping hardware offerings;

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

•Restructuring activities designed to better align our resources with our business strategy.

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.

Approximately 85% 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. 

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The following table shows the percentage of our revenue that is classified as recurring or up-front for the three and nine months ended September 30, 2023 and October 1, 2022: 

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenue recognized over time	83	%	81	%	80	%	82	%
Revenue from arrangements with non-cancelable commitments	2	%	3	%	3	%	2	%
Recurring revenue	85	%	84	%	83	%	84	%
Up-front revenue	15	%	16	%	17	%	16	%
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
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		October 1, 2022
Recurring revenue	84	%	84	%	84	%	85	%	86	%
Up-front revenue	16	%	16	%	16	%	15	%	14	%
Total	100	%	100	%	100	%	100	%	100	%

Revenue by Period

The following table shows our revenue for the three months ended September 30, 2023 and October 1, 2022 and the change in revenue between periods:

	Three Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Product and maintenance	$	965.8	$	845.8	$	120.0	14	%
Services	57.3		56.8		0.5		1	%
Total revenue	$	1,023.1	$	902.6	$	120.5	13	%

The following table shows our revenue for the nine months ended September 30, 2023 and October 1, 2022 and the change in revenue between periods:

	Nine Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Product and maintenance	$	2,852.4	$	2,494.3	$	358.1	14	%
Services	169.0		167.5		1.5		1	%
Total revenue	$	3,021.4	$	2,661.8	$	359.6	14	%

Product and maintenance revenue growth during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, was primarily due to our customers continuing to invest 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 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 September 30, 2023 or October 1, 2022.

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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
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		October 1, 2022
Custom IC Design and Simulation	22	%	22	%	20	%	22	%	22	%
Digital IC Design and Signoff	28	%	27	%	25	%	28	%	29	%
Functional Verification, including Emulation and Prototyping Hardware	26	%	27	%	32	%	25	%	25	%
IP	11	%	11	%	11	%	12	%	12	%
System Design and Analysis	13	%	13	%	12	%	13	%	12	%
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. For example, during the first quarter of fiscal 2023, we experienced growth in our Functional Verification product category due to increased production capacity and our ability to fulfill ongoing customer demand for our emulation and prototyping hardware. 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.

Revenue by Geography

	Three Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
United States	$	421.6	$	392.2	$	29.4	7	%
Other Americas	15.8		15.2		0.6		4	%
China	172.0		148.3		23.7		16	%
Other Asia	197.8		156.3		41.5		27	%
Europe, Middle East and Africa (“EMEA”)	158.2		143.0		15.2		11	%
Japan	57.7		47.6		10.1		21	%
Total revenue	$	1,023.1	$	902.6	$	120.5	13	%

	Nine Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
United States	$	1,241.5	$	1,174.7	$	66.8	6	%
Other Americas	47.9		39.0		8.9		23	%
China	523.7		401.5		122.2		30	%
Other Asia	558.7		466.9		91.8		20	%
EMEA	479.3		431.6		47.7		11	%
Japan	170.3		148.1		22.2		15	%
Total revenue	$	3,021.4	$	2,661.8	$	359.6	14	%

During the three months ended September 30, 2023, as compared to the three months ended October 1, 2022, revenue growth in each of our six geographies was primarily driven by increased revenue from our software offerings, resulting from our customers’ continued investment in new, complex designs for their products. Also, during the three months ended September 30, 2023, as compared to the three months ended October 1, 2022, revenue growth from our emulation and prototyping hardware offerings contributed to the growth experienced in the United States, China, Other Asia and Japan.

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During the nine months ended September 30, 2023, as compared to the nine months ended October 1, 2022, revenue growth in the United States, Other Americas, Other Asia, EMEA and Japan was primarily driven by increased revenue from our software offerings. Revenue growth in China during the nine months ended September 30, 2023, as compared to the nine months ended October 1, 2022, was primarily due to increased revenue from our emulation and prototyping hardware offerings. This growth was driven by increased production capacity to address continued demand from our customers in China for our emulation and prototyping hardware offerings.

Revenue by Geography as a Percent of Total Revenue

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
United States	41	%	43	%	41	%	44	%
Other Americas	2	%	2	%	2	%	1	%
China	17	%	17	%	17	%	15	%
Other Asia	19	%	17	%	18	%	18	%
EMEA	15	%	16	%	16	%	16	%
Japan	6	%	5	%	6	%	6	%
Total	100	%	100	%	100	%	100	%

Most of our revenue is transacted in the U.S. 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.”

Cost of Revenue

The following tables show our cost of revenue for the three and nine months ended September 30, 2023 and October 1, 2022 and the change in cost of revenue between periods:

	Three Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Cost of product and maintenance	$	85.8	$	62.4	$	23.4	38	%
Cost of services	23.8		25.2		(1.4)		(6)	%

	Nine Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Cost of product and maintenance	$	260.3	$	203.9	$	56.4	28	%
Cost of services	70.6		74.2		(3.6)		(5)	%

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.

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

	Three Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Product and maintenance-related costs	$	74.8	$	53.5	$	21.3	40	%
Amortization of acquired intangibles	11.0		8.9		2.1		24	%
Total cost of product and maintenance	$	85.8	$	62.4	$	23.4	38	%

	Nine Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Product and maintenance-related costs	$	228.4	$	173.0	$	55.4	32	%
Amortization of acquired intangibles	31.9		30.9		1.0		3	%
Total cost of product and maintenance	$	260.3	$	203.9	$	56.4	28	%

The changes in product and maintenance-related costs for the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, were due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Emulation and prototyping hardware costs	$	20.1	$	47.8
Salary, benefits and other employee-related costs	1.0		5.5
Other items	0.2		2.1
Total change in product and maintenance-related costs	$	21.3	$	55.4

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 September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to increased revenue from emulation and prototyping hardware products.

Amortization of acquired intangibles included in cost of product and maintenance may fluctuate from period to period depending on the timing of newly acquired assets relative to assets becoming fully amortized in any given period.

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, foreign exchange rate movements, acquisition-related costs, volatility in variable compensation programs that are driven by operating results, and charitable donations.

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.”

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Our operating expenses for the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:

	Three Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Marketing and sales	$	176.2	$	152.9	$	23.3	15	%
Research and development	369.6		323.6		46.0		14	%
General and administrative	58.6		73.7		(15.1)		(20)	%
Total operating expenses	$	604.4	$	550.2	$	54.2	10	%

	Nine Months Ended				Change
	September 30, 2023		October 1, 2022		Amount		Percentage
	(In millions, except percentages)
Marketing and sales	$	510.0	$	432.4	$	77.6	18	%
Research and development	1,074.4		901.1		173.3		19	%
General and administrative	166.7		174.1		(7.4)		(4)	%
Total operating expenses	$	1,751.1	$	1,507.6	$	243.5	16	%

Our operating expenses, as a percentage of total revenue, for the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Marketing and sales	17	%	17	%	17	%	16	%
Research and development	36	%	36	%	35	%	34	%
General and administrative	6	%	8	%	6	%	7	%
Total operating expenses	59	%	61	%	58	%	57	%

Marketing and Sales

The increase in marketing and sales expense for the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, was due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Salary, benefits and other employee-related costs	$	15.2	$	45.5
Marketing programs and events	0.4		9.6
Stock-based compensation	3.1		9.2
Facilities and other infrastructure costs	2.3		6.9
Travel and sales meetings	1.2		5.7
Other items	1.1		0.7
Total change in marketing and sales expense	$	23.3	$	77.6

Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from the acquisitions completed in both fiscal 2022 and fiscal 2023. Costs related to marketing programs and events, travel and sales meetings increased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to an increased number of in-person meetings and events. We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions.

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Research and Development

The increase in research and development expense for the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, was due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Salary, benefits and other employee-related costs	$	26.6	$	119.4
Stock-based compensation	9.7		26.6
Facilities and other infrastructure costs	4.6		14.3
Professional services	2.2		5.1
Materials and other pre-production costs	2.1		4.5
Travel	0.6		4.0
Other items	0.2		(0.6)
Total change in research and development expense	$	46.0	$	173.3

Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from the acquisitions completed in both fiscal 2022 and fiscal 2023. Facilities and other infrastructure costs included in research and development expense increased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.

General and Administrative

The decrease in general and administrative expense for the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, was due to the following:

	Change
	Three Months Ended		Nine Months Ended
	(In millions)
Salary, benefits and other employee-related costs	$	3.2	$	15.9
Stock-based compensation	1.5		4.7
Foreign service tax	4.0		4.1
Professional services	1.8		(4.6)
Contributions to non-profit organizations	(25.0)		(29.0)
Other items	(0.6)		1.5
Total change in general and administrative expense	$	(15.1)	$	(7.4)

Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to additional headcount. Also during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, we experienced an increase in foreign service tax, primarily because we did not benefit from any foreign service tax refunds like we did during the same period in fiscal 2022.

During the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, contributions to non-profit organizations decreased, primarily due to the timing of our periodic contributions to support charitable initiatives, including the Cadence Giving Foundation.

Restructuring

In August 2023, we initiated a restructuring plan (the “2023 Restructuring Plan”) designed to better align our resources with our business strategy. During the three and nine months ended September 30, 2023, we incurred $11.6 million of costs comprised of severance and other termination benefits related to headcount reductions. These costs are included in restructuring in our condensed consolidated income statements.

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Inclusive of the 2023 Restructuring Plan, we are evaluating certain facilities for closure. Restructuring charges for the facilities under consideration are not expected to exceed $5 million. Restructuring costs related to facility closures will be primarily comprised of accelerated Right-of-Use (“ROU”) asset amortization, interest accretion on lease liabilities after the facility is vacated, lease buyout costs and certain contractual costs to maintain facilities during the period after abandonment. We record accelerated ROU asset amortization over the period beginning from when the decision is made to abandon the facility until the facility is fully vacated and we have no intention to further utilize the leased space. Other facilities-related restructuring charges are generally recorded in the period in which the affected facilities are vacated.

Because the restructuring charges and related benefits are derived from management’s estimates made during the formulation of the restructuring plans, based on then-currently available information, our restructuring plans may not achieve the benefits anticipated on the timetable or at the level contemplated. Additional actions, including further restructuring of our operations, may be required in the future.

Operating Margin

Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three and nine months ended September 30, 2023, and the three and nine months ended October 1, 2022 was as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Operating margin	29	%	29	%	30	%	32	%

Operating margin decreased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to the mix of products and services sold during each respective period. In addition, our fiscal 2022 acquisitions resulted in incremental expenses, including acquisition of acquired intangibles, that exceeded incremental revenue during the three and nine months ended September 30, 2023.

Interest Expense

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In millions)
Contractual cash interest expense:
2024 Notes	3.8		3.8		$	11.4	$	11.4
2025 Term Loan	4.6		0.9		13.0		0.9
Revolving credit facility	0.2		0.7		1.9		1.1
Amortization of debt discount:
2024 Notes	0.3		0.2		0.7		0.6
2025 Term Loan	0.1		—		0.2		—
Other	0.1		(0.1)		—		(0.1)
Total interest expense	$	9.1	$	5.5	$	27.2	$	13.9

Interest expense increased during the three and nine months ended September 30, 2023, as compared to the three and nine months ended October 1, 2022, primarily due to borrowings under our 2025 Term Loan, which are subject to variable interest rates. For additional information relating to our debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Income Taxes

The following table presents the provision for income taxes and the effective tax rate for the three and nine months ended September 30, 2023 and October 1, 2022:

	Three Months Ended						Nine Months Ended
	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
							(In millions, except percentages)
Provision for income taxes	$	45.6		$	66.0		$	202.6		$	226.3
Effective tax rate	15.2		%	26.1		%	22.0		%	27.1		%

Our provision for income taxes for the three and nine months ended September 30, 2023 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2023 income. We also recognized tax benefits of $21.0 million and $46.8 million related to stock-based compensation that vested or was exercised during each period.

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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 then anticipated fiscal 2022 income. We also recognized a tax benefit of $18.0 million and $36.9 million related to stock-based compensation that vested or was exercised during each period.

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 2023 effective tax rate will be approximately 23%. We expect that our quarterly effective tax rates will vary from our fiscal 2023 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
	September 30, 2023		December 31, 2022		Change
	(In millions)
Cash and cash equivalents	$	962.0	$	882.3	$	79.7
Net working capital	560.3		359.1		201.2

Cash and Cash Equivalents

As of September 30, 2023, our principal sources of liquidity consisted of approximately $962.0 million of cash and cash equivalents as compared to $882.3 million as of December 31, 2022.

Our primary sources of cash and cash equivalents during the nine months ended September 30, 2023 were cash generated from operations, proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period, proceeds from the sale of investments, and proceeds from our revolving credit facility.

Our primary uses of cash and cash equivalents during the nine months ended September 30, 2023 were payments related to employee salaries and benefits, operating expenses, repurchases of our common stock, cash paid for acquired businesses, payments on our revolving credit facility, purchases of investments, payment of employee taxes on vesting of restricted stock, and purchases of property, plant and equipment.

Approximately 66% of our cash and cash equivalents were held by our foreign subsidiaries as of September 30, 2023. 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, investments 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 increase in our net working capital as of September 30, 2023, as compared to December 31, 2022, is primarily due to the timing of cash receipts from customers and disbursements made for operating and financing activities.

Cash Flows from Operating Activities

	Nine Months Ended
	September 30, 2023		October 1, 2022		Change
	(In millions)
Cash provided by operating activities	$	1,077.1	$	978.3	$	98.8

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 September 30, 2023, as compared to the nine months ended October 1, 2022, was primarily due to improved results from operations and the timing of cash receipts from customers and the timing of cash disbursements, including cash used for interest and taxes.

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Cash Flows Used for Investing Activities

	Nine Months Ended
	September 30, 2023		October 1, 2022		Change
	(In millions)
Cash used for investing activities	$	(313.6)	$	(674.5)	$	360.9

Cash used for investing activities decreased during the nine months ended September 30, 2023, as compared to the nine months ended October 1, 2022, primarily due to decreases in cash used for business combinations, partially offset by increases in cash used for purchases of equity and debt securities. We expect to continue our investing activities, including purchasing property, plant and equipment, purchasing intangible assets, acquiring other companies and businesses, and making investments.

Cash Flows Used for Financing Activities

	Nine Months Ended
	September 30, 2023		October 1, 2022		Change
	(In millions)
Cash used for financing activities	$	(666.0)	$	(299.9)	$	(366.1)

Cash used for financing activities increased during the nine months ended September 30, 2023, as compared to the nine months ended October 1, 2022, primarily due to a decrease in proceeds from debt, partially offset by a decrease in payments for repurchases of our common stock.

Other Factors Affecting Liquidity and Capital Resources

Stock Repurchase Program

In August 2023, our Board of Directors increased the prior authorization to repurchase shares of our common stock by authorizing an additional $1.0 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 September 30, 2023, approximately $1.5 billion of the share repurchase authorization 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. Interest rates associated with the 2021 Credit Facility are variable, so interest expense is impacted by changes in the interest rates, particularly for periods when there are outstanding borrowings under the revolving credit facility. Interest is payable quarterly. As of September 30, 2023, there were no 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 a $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 September 30, 2023, we were in compliance with all covenants associated with the 2024 Notes.

2025 Term Loan

In September 2022, we 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 our unsecured indebtedness. Interest rates associated with the 2025 Term Loan are variable, so interest expense is impacted by changes in interest rates. Interest is payable quarterly. As of September 30, 2023, 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.

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Other Liquidity Requirements

During the nine months ended September 30, 2023, 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.

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 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 revenue benefits from a weaker dollar and is 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 revenue from existing contracts.

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 (expense), 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 September 30, 2023. 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 2023.

	Notional Principal		Weighted Average Contract Rate
	(In millions)
Forward Contracts:
European Union euro	$	173.9	0.91
Japanese yen	87.5		143.68
British pound	67.3		0.79
Israeli shekel	59.6		3.73
South Korean won	41.0		1308
Canadian dollar	31.7		1.34
Indian rupee	29.0		83.09
Swedish krona	22.9		10.78
Chinese renminbi	17.8		7.25
Taiwan dollar	11.8		31.85
Other	4.3		N/A
Total	$	546.8
Estimated fair value	$	10.1

As of December 31, 2022, our foreign currency exchange contracts had an aggregate principal amount of $489.0 million, and an estimated fair value of $5.3 million.

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We have performed sensitivity analyses as of September 30, 2023 and December 31, 2022, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% change in the value of the U.S. dollar relative to applicable foreign currency exchange rates, with all other variables held constant. The foreign currency exchange rates we used in performing the sensitivity analysis were based on market rates in effect at each respective date. The sensitivity analyses indicated that a hypothetical 10% decrease in the value of the U.S. dollar would result in a decrease to the fair value of our foreign currency forward exchange contracts of $3.9 million and $4.2 million as of September 30, 2023 and December 31, 2022, respectively, while a hypothetical 10% increase in the value of the U.S. dollar would result in an increase to the fair value of our foreign currency forward exchange contracts of $6.3 million and $7.2 million as of September 30, 2023 and December 31, 2022, respectively.

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, cash equivalents, investments in debt securities 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 September 30, 2023.

Our investments in debt securities had a fair value of approximately $42.6 million as of September 30, 2023, that may decline in value if market interest rates rise. Such variability in market interest rates may result in a negative impact on the results of our investment activities. As of September 30, 2023, an increase in the market rates of interest of 1% would result in a decrease in the fair values of our marketable debt securities by approximately $2.3 million. As of December 31, 2022, we did not hold investments in debt securities.

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 September 30, 2023, there were no borrowings outstanding under our 2021 Credit Facility and $300.0 million of borrowings outstanding under our 2025 Term Loan.

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 strategically important 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 September 30, 2023.

Based on their evaluation as of September 30, 2023, 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 September 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are 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, we review the status of each significant matter and assess 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, we accrue 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 our judgments using the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and legal proceedings and may revise estimates. For additional information regarding pending legal proceedings and associated risks, see the “Risk Factors” sections in our Annual Report and our Q1 Report.

On April 27, 2022, Bell Semiconductor LLC (“Bell Semi“), a patent monetization entity, began filing a series of patent infringement lawsuits against certain technology companies alleging that certain semiconductor devices designed using certain design tools offered by EDA vendors, including Cadence, infringe upon one or more patents held by Bell Semi and Bell Semi seeking monetary damages, attorneys’ fees and costs, and a permanent injunction prohibiting the defendants from using allegedly infringing EDA design tools.

On April 29, 2022, Bell Semi also began filing a series of complaints with the U.S. International Trade Commission (“ITC“) alleging violations of Section 337 of the Tariff Act of 1930 and seeking limited exclusion orders preventing the respondents from importing into the United States semiconductor devices designed using certain design tools offered by EDA vendors, including Cadence, and cease-and-desist orders prohibiting respondents from importing, selling, offering for sale, marketing, advertising, distributing, or transferring products (except for exportation) made using certain design tools offered by EDA vendors, including Cadence. The ITC instituted three investigations but Bell Semi subsequently terminated one of the investigations. On May 8, 2023, Bell Semi filed motions to voluntarily withdraw the pending ITC investigations.

Cadence was not named as a respondent or defendant in any of the aforementioned actions; however, certain respondents and defendants are Cadence customers and sought defense and indemnity from Cadence regarding Bell Semi’s allegations. Cadence offered to defend some of its customers consistent with the terms of the applicable license agreements.

On November 18, 2022, Cadence and another EDA vendor jointly filed an action in the U.S. District Court for the District of Delaware for declaratory judgment of invalidity and non-infringement as to each of the six patents asserted by Bell Semi in the aforementioned actions. Bell Semi’s motion to dismiss the declaratory judgment actions was denied on April 27, 2023. On November 28, 2022, Cadence and another EDA vendor also filed a motion for preliminary injunction in the U.S. District Court for the District of Delaware seeking to enjoin Bell Semi from proceeding with its litigation campaign. Motions for preliminary injunction were denied without prejudice on April 27, 2023. Bell Semi responded to the declaratory judgment complaint on May 11, 2023.

On July 25, 2023, Cadence and Bell Semi reached a settlement agreement involving the six patents-in-suit, and on August 1, 2023, Cadence dismissed its action against Bell Semi.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in the “Risk Factors” sections in our Annual Report and our Q1 Report, 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. The “Risk Factors” section in our Annual Report, as updated in our Q1 Report, remains current in all material respects. The risk factors described in our Annual Report and subsequent SEC filings 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

We are authorized to repurchase shares of our common stock under a publicly announced program that was most recently increased by our Board of Directors on August 2, 2023. Pursuant to this authorization, we may repurchase shares from time to time through open market repurchases, in privately negotiated transactions or by other means, including accelerated share repurchase transactions or other structured repurchase transactions, block trades or pursuant to trading plans intended to comply with Rule 10b5-1 of the Exchange Act. 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 September 30, 2023, we repurchased approximately 0.5 million shares on the open market, for an aggregate purchase price of $125 million.

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In June 2023, we also entered into an accelerated share repurchase (“ASR”) agreement with HSBC Bank USA, National Association (“HSBC”) to repurchase an aggregate of $200 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 stock. Under the ASR agreement, we received an initial share delivery of approximately 0.6 million shares, which represented the number of shares at a market price equal to $140 million. An equity-linked contract for $60 million, representing the remaining shares to be delivered by HSBC under the ASR agreement, was recorded to stockholders’ equity as of September 30, 2023. In August 2023, the ASR agreement settled and resulted in a delivery to us of approximately 0.3 million additional shares. In total, we repurchased approximately 0.9 million shares under the ASR agreement at an average price per share of $228.26.

As of September 30, 2023, approximately $1.5 billion of the share repurchase authorization 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 September 30, 2023:

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 (3)	Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plan or Program (1) (In millions)
July 1, 2023 - July 31, 2023	163,423	$	237.44	155,640	$	590
August 1, 2023 - August 31, 2023	603,921	$	223.80	482,370	$	1,543
September 1, 2023 - September 30, 2023	191,029	$	237.21	172,622	$	1,502
Total	958,373	$	228.80	810,632

 ______________________________

(1)Shares purchased that were not part of our publicly announced repurchase programs represent shares of restricted stock surrendered by employees 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.

(3)Our publicly announced share repurchase program was originally announced on February 1, 2017 and most recently increased by an additional $1.0 billion on August 2, 2023.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Insider Trading Arrangements

During the fiscal quarter ended September 30, 2023, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated the contracts, instructions or written plans for the purchase or sale of our securities set forth in the table below.

			Type of Trading Arrangement
Name and Position	Action	Adoption/ Termination Date	Rule 10b5-1*	Total Shares of Common Stock to be Sold	Expiration Date
Karna Nisewaner, CVP, General Counsel and Corporate Secretary	Adoption	8/9/2023	X	Up to 7,072	9/30/2024
Anirudh Devgan, President and Chief Executive Officer	Termination(1)	9/13/2023	X	Up to 109,381(2)	5/30/2024
Anirudh Devgan, President and Chief Executive Officer	Adoption(1)	9/13/2023	X	Up to 203,474(3)	12/31/2024
Alberto Sangiovanni-Vincentelli, Director	Adoption	9/13/2023	X	Up to 37,000	12/19/2024
* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

36

(1)    Represents the modification, as described in Rule 10b5-1(c)(1)(iv) under the Exchange Act, of a Rule 10b5-1 trading plan adopted on June 14, 2023. As a result of this modification, the subject plan is deemed terminated and a new plan is deemed adopted as of the modification date.

(2)    Includes up to 109,381 shares subject to Performance Stock Awards previously granted to Dr. Devgan subject to vesting and release to Dr. Devgan during the period from August 25, 2023 to March 15, 2024 upon the satisfaction of the applicable total shareholder return hurdles and relative total shareholder return threshold. The actual number of shares that will vest in connection with these awards is not yet determinable. In addition, the actual number of shares that will be released to Dr. Devgan in connection with these awards and could have been sold under the Rule 10b5-1 trading arrangement would have been net of the number of shares withheld to satisfy tax withholding obligations arising from the vesting of such shares.

(3)    Includes up to 100,766 shares subject to Performance Stock Awards previously granted to Dr. Devgan subject to vesting and release to Dr. Devgan during the period from September 15, 2023 to March 15, 2024 upon the satisfaction of the applicable total shareholder return hurdles and relative total shareholder return threshold. The actual number of shares that will vest in connection with these awards is not yet determinable. In addition, the actual number of shares that will be released to Dr. Devgan in connection with these awards and sold under the Rule 10b5-1 trading arrangement will be net of the number of shares withheld to satisfy tax withholding obligations arising from the vesting of such shares and is not yet determinable.

37

Item 6. Exhibits

			Incorporated by Reference
Exhibit Number		Exhibit Title	Form	File No.	Exhibit No.	Filing Date	Provided Herewith
10.01	*	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
10.02	*	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
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 23, 2023	By:	/s/ Anirudh Devgan
			Anirudh Devgan
			President and Chief Executive Officer
DATE:	October 23, 2023	By:	/s/ John M. Wall
			John M. Wall
			Senior Vice President and Chief Financial Officer

39

EX-10.01

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 additional 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

Omnibus Equity Incentive Plan - ISA Agreement - 1 Rev. Jun. 2023

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.

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 non-U.S. 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.

Omnibus Equity Incentive Plan - ISA Agreement - 2 Rev. Jun. 2023

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 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 from 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 from 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;

Omnibus Equity Incentive Plan - ISA Agreement - 3 Rev. Jun. 2023

(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;

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.

Omnibus Equity Incentive Plan - ISA Agreement - 4 Rev. Jun. 2023

(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 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.

Omnibus Equity Incentive Plan - ISA Agreement - 5 Rev. Jun. 2023

(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 or deemed 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, 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.

Omnibus Equity Incentive Plan - ISA Agreement - 6 Rev. Jun. 2023

(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 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.

Omnibus Equity Incentive Plan - ISA Agreement - 7 Rev. Jun. 2023

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, unless otherwise requirede by applicable law.

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.

Omnibus Equity Incentive Plan - ISA Agreement - 8 Rev. Jun. 2023

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 additional 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 additional 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 - 9 Rev. Jun. 2023

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 M. Wall
Title:	Sr. Vice President and Chief Financial Officer
Date:	[l], 2023

Acknowledged and Agreed

By:

Name:

Title:

Date:

Omnibus Equity Incentive Plan - ISA Agreement - 10 Rev. Jun. 2023

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 2023. 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 - 11 Rev. Jun. 2023

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:

By 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 - 12 Rev. Jun. 2023

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.

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

French Language Documents. A French translation of this Agreement and the Plan will be made available to the Participant concurrently with this Agreement. The Participant understands that, from time to time, additional information related to the Restricted Stock Units may be provided in English and such information may not be immediately available in French. Notwithstanding anything to the contrary in the Agreement, and unless the Participant indicates otherwise, the French translation of the Plan and this Agreement will govern the Participant's participation in the Plan.

Omnibus Equity Incentive Plan - ISA Agreement - 13 Rev. Jun. 2023

Data Privacy Notice and Consent. 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 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 that the Company, the Employer, its Affiliates and the Designated Broker may 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., 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.

Omnibus Equity Incentive Plan - ISA Agreement - 14 Rev. Jun. 2023

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 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 Information. French residents must report all foreign bank and brokerage accounts on an annual basis (including accounts opened, held, used and/or closed during the tax year) on a special form together with the income tax return. Failure to report triggers a significant penalty.

Omnibus Equity Incentive Plan - ISA Agreement - 15 Rev. Jun. 2023

GERMANY

NOTIFICATIONS

Exchange Control Information.  Cross-border payments in excess of EUR 12,500 must be reported to the German Federal Bank (Bundesbank). If Participant acquire Shares with a value in excess of this amount, the Employer will report the acquisition of the Shares to Bundesbank. If the Participant otherwise makes or receives a payment in excess of this amount (e.g., if Shares are withheld to cover applicable Tax-Related Items or if the Participant sell Shares via a foreign broker, bank or service provider and receive proceeds in excess of this amount), the Participant must report the payment to Bundesbank, either electronically using the “General Statistics Reporting Portal” (“Allgemeine Meldeportal Statistik”) available on the Bundesbank website (www.bundesbank.de) or via such other method (e.g., by email or telephone) as is permitted or required by Bundesbank. The report must be submitted monthly or within other such timing as is permitted or required by Bundesbank.

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. The Participant must repatriate any funds received from participation in the Plan (e.g., proceeds from the sale of Shares) within such time as prescribed under applicable Indian exchange control laws, which may be amended from time to time. The Participant should obtain a foreign inward remittance certificate (“FIRC”) from the bank where the Participant deposits the foreign currency and maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Company or the Employer requests proof of repatriation. The Participant may be required to provide information regarding funds received from participation in the Plan to the Company and/or the Employer to enable them to comply with their filing requirements under exchange control laws in India.

Foreign Asset/Account Reporting Information. The Participant must declare the following items in his or her annual tax return: (i) any foreign assets held (including Shares acquired under the Plan), and (ii) any foreign bank accounts for which the Participant has signing authority. The Participant is responsible for complying with this reporting obligation and should confer with his or her personal tax advisor in this regard.

Omnibus Equity Incentive Plan - ISA Agreement - 16 Rev. Jun. 2023

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 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

Exchange Control Information. If the Participant acquires Shares valued at more than ¥100 million in a single transaction, the Participant must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days after the acquisition of the Shares. The Participant should consult with his or her personal tax advisor to determine the applicable reporting obligations.

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.

Omnibus Equity Incentive Plan - ISA Agreement - 17 Rev. Jun. 2023

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.

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 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 date of grant, (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.

Omnibus Equity Incentive Plan - ISA Agreement - 18 Rev. Jun. 2023

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, by 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 (FINMA).

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.

Omnibus Equity Incentive Plan - ISA Agreement - 19 Rev. Jun. 2023

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 - 20 Rev. Jun. 2023

EX-10.02

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 additional 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.

Omnibus Equity Incentive Plan - RSU Agreement - 1 Rev. Jun. 2023

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 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 non-U.S. 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.

Omnibus Equity Incentive Plan - RSU Agreement - 2 Rev. Jun. 2023

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:

(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 from 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 from 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;

Omnibus Equity Incentive Plan - RSU Agreement - 3 Rev. Jun. 2023

(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

(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.

Omnibus Equity Incentive Plan - RSU Agreement - 4 Rev. Jun. 2023

(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 or deemed 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.

(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:

Omnibus Equity Incentive Plan - RSU Agreement - 5 Rev. Jun. 2023

(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 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.

Omnibus Equity Incentive Plan - RSU Agreement - 6 Rev. Jun. 2023

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, unless otherwise required by applicable law.

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 additional 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 additional 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.

Omnibus Equity Incentive Plan - RSU Agreement - 7 Rev. Jun. 2023

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 - 8 Rev. Jun. 2023

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 M. Wall
Title:	Sr. Vice President and Chief Financial Officer
Date:	[l], 2023

Acknowledged and Agreed

By:

Name:

Title:

Date:

Omnibus Equity Incentive Plan - RSU Agreement - 9 Rev. Jun. 2023

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 2023. 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 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 - 10         Rev. Jun. 2023

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:

By 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 - 11         Rev. Jun. 2023

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 provision will apply if the Participant is a resident of Quebec:

French Language Documents. A French translation of this Agreement and the Plan will be made available to the Participant concurrently with this Agreement. The Participant understands that, from time to time, additional information related to the Restricted Stock Units may be provided in English and such information may not be immediately available in French. Notwithstanding anything to the contrary in the Agreement, and unless the Participant indicates otherwise, the French translation of the Plan and this Agreement will govern the Participant's participation in the Plan.

Omnibus Equity Incentive Plan - RSU Agreement - 12         Rev. Jun. 2023

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 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 that the Company, the Employer, its Affiliates and the Designated Broker may 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.

Omnibus Equity Incentive Plan - RSU Agreement - 13         Rev. Jun. 2023

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 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 Information. French residents must report all foreign bank and brokerage accounts on an annual basis (including accounts opened, held, used and/or closed during the tax year) on a special form together with the income tax return. Failure to report triggers a significant penalty.

Omnibus Equity Incentive Plan - RSU Agreement - 14         Rev. Jun. 2023

GERMANY

NOTIFICATIONS

Exchange Control Information.  Cross-border payments in excess of EUR 12,500 must be reported to the German Federal Bank (Bundesbank). If Participant acquire Shares with a value in excess of this amount, the Employer will report the acquisition of the Shares to Bundesbank. If the Participant otherwise makes or receives a payment in excess of this amount (e.g., if Shares are withheld to cover applicable Tax-Related Items or if the Participant sell Shares via a foreign broker, bank or service provider and receive proceeds in excess of this amount), the Participant must report the payment to Bundesbank, either electronically using the “General Statistics Reporting Portal” (“Allgemeine Meldeportal Statistik”) available on the Bundesbank website (www.bundesbank.de) or via such other method (e.g., by email or telephone) as is permitted or required by Bundesbank. The report must be submitted monthly or within other such timing as is permitted or required by Bundesbank.

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. The Participant must repatriate any funds received from participation in the Plan (e.g., proceeds from the sale of Shares) within such time as prescribed under applicable Indian exchange control laws, which may be amended from time to time. The Participant should obtain a foreign inward remittance certificate (“FIRC”) from the bank where the Participant deposits the foreign currency and maintain the FIRC as evidence of the repatriation of funds in the event the Reserve Bank of India or the Company or the Employer requests proof of repatriation. The Participant may be required to provide information regarding funds received from participation in the Plan to the Company and/or the Employer to enable them to comply with their filing requirements under exchange control laws in India.

Foreign Asset/Account Reporting Information. The Participant must declare the following items in his or her annual tax return: (i) any foreign assets held (including Shares acquired under the Plan), and (ii) any foreign bank accounts for which the Participant has signing authority. The Participant is responsible for complying with this reporting obligation and should confer with his or her personal tax advisor in this regard.

Omnibus Equity Incentive Plan - RSU Agreement - 15         Rev. Jun. 2023

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 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).

Omnibus Equity Incentive Plan - RSU Agreement - 16         Rev. Jun. 2023

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. By 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 Information. 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 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.

Omnibus Equity Incentive Plan - RSU Agreement - 17         Rev. Jun. 2023

JAPAN

NOTIFICATIONS

Exchange Control Information. If the Participant acquires Shares valued at more than ¥100 million in a single transaction, the Participant must file a Securities Acquisition Report with the Ministry of Finance through the Bank of Japan within 20 days after the acquisition of the Shares. The Participant should consult with his or her personal tax advisor to determine the applicable reporting obligations.

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.

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 date of grant, (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.

Omnibus Equity Incentive Plan - RSU Agreement - 18         Rev. Jun. 2023

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, by 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 (FINMA).

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.

Omnibus Equity Incentive Plan - RSU Agreement - 19         Rev. Jun. 2023

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 - 20         Rev. Jun. 2023

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 23, 2023

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 23, 2023

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 September 30, 2023 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 23, 2023

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 September 30, 2023 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 23, 2023

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
	Sep. 30, 2023 shares
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
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	272,062,000
Entity Central Index Key	0000813672
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 961,982	$ 882,325
Receivables, net	426,505	486,710
Inventories	163,693	128,005
Prepaid expenses and other	272,283	209,727
Total current assets	1,824,463	1,706,767
Property, plant and equipment, net	379,776	371,451
Goodwill	1,500,442	1,374,268
Acquired intangibles, net	347,617	354,617
Deferred taxes	874,805	853,691
Other assets	504,272	476,277
Total assets	5,431,375	5,137,071
Current liabilities:
Revolving credit facility	0	100,000
Accounts payable and accrued liabilities	598,261	557,158
Current portion of deferred revenue	665,906	690,538
Total current liabilities	1,264,167	1,347,696
Long-term liabilities:
Long-term portion of deferred revenue	100,609	91,524
Long-term debt	648,801	648,078
Other long-term liabilities	303,904	304,660
Total long-term liabilities	1,053,314	1,044,262
Commitments and contingencies
Stockholders’ equity:
Common stock and capital in excess of par value	3,077,954	2,765,673
Treasury stock, at cost	(4,463,484)	(3,824,163)
Retained earnings	4,612,485	3,895,240
Accumulated other comprehensive loss	(113,061)	(91,637)
Total stockholders’ equity	3,113,894	2,745,113
Total liabilities and stockholders’ equity	$ 5,431,375	$ 5,137,071

XML

Condensed Consolidated Income Statements - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Revenues [Abstract]
Revenue	$ 1,023,094	$ 902,554	$ 3,021,363	$ 2,661,841
Costs and Expenses:
Marketing and sales	176,215	152,925	509,951	432,407
Research and development	369,642	323,629	1,074,353	901,121
General and administrative	58,556	73,688	166,688	174,051
Amortization of acquired intangibles	4,612	3,946	13,181	13,543
Restructuring	11,582	14	11,582	42
Total costs and expenses	730,188	641,802	2,106,666	1,799,272
Income from operations	292,906	260,752	914,697	862,569
Interest expense	(9,059)	(5,463)	(27,196)	(13,852)
Other income (expense), net	16,106	(3,017)	32,363	(13,879)
Income before provision for income taxes	299,953	252,272	919,864	834,838
Provision for income taxes	45,632	65,967	202,619	226,278
Net income	$ 254,321	$ 186,305	$ 717,245	$ 608,560
Net income per share - basic (usd per share)	$ 0.94	$ 0.69	$ 2.66	$ 2.24
Net Income per share - diluted (usd per share)	$ 0.93	$ 0.68	$ 2.63	$ 2.21
Weighted average common shares outstanding - basic (in shares)	269,229	271,131	269,480	271,694
Weighted average common shares outstanding - diluted (in shares)	272,427	274,957	272,859	275,683
Product and maintenance [Member]
Revenues [Abstract]
Revenue	$ 965,840	$ 845,788	$ 2,852,372	$ 2,494,317
Costs and Expenses:
Cost of sales	85,813	62,351	260,269	203,863
Service [Member]
Revenues [Abstract]
Revenue	57,254	56,766	168,991	167,524
Costs and Expenses:
Cost of sales	$ 23,768	$ 25,249	$ 70,642	$ 74,245

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Statement of Comprehensive Income [Abstract]
Net income	$ 254,321	$ 186,305	$ 717,245	$ 608,560
Other comprehensive loss, net of tax effects:
Foreign currency translation adjustments	(21,692)	(40,768)	(20,546)	(90,764)
Changes in defined benefit plan liabilities	132	15	537	1,942
Unrealized losses on investments	(991)	0	(1,415)	0
Total other comprehensive loss, net of tax effects	(22,551)	(40,753)	(21,424)	(88,822)
Comprehensive income	$ 231,770	$ 145,552	$ 695,821	$ 519,738

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, shares at Jan. 01, 2022			276,796
Beginning balance at Jan. 01, 2022	$ 2,740,675			$ 2,467,701	$ (2,740,003)	$ 3,046,288	$ (33,311)
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, shares at Oct. 01, 2022			274,316
Ending balance at Oct. 01, 2022	2,708,128			2,697,632	(3,522,219)	3,654,848	(122,133)
Beginning balance, shares at Jul. 02, 2022			273,870
Beginning balance at Jul. 02, 2022	2,625,229			2,590,893	(3,352,827)	3,468,543	(81,380)
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, shares at Oct. 01, 2022			274,316
Ending balance at Oct. 01, 2022	2,708,128			2,697,632	(3,522,219)	3,654,848	(122,133)
Beginning balance, shares at Dec. 31, 2022			272,675
Beginning balance at Dec. 31, 2022	2,745,113			2,765,673	(3,824,163)	3,895,240	(91,637)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	717,245					717,245
Other comprehensive loss, net of taxes	$ (21,424)						(21,424)
Purchase of treasury stock, shares	(2,657)		(2,657)
Purchase of treasury stock	$ (515,127)				(515,127)
Equity forward contract	(60,000)			1,688	(61,688)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures, shares			2,527
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	131,341			91,894	39,447
Stock received for payment of employee taxes on vesting of restricted stock, shares			(483)
Stock received for payment of employee taxes on vesting of restricted stock	(122,182)			(20,229)	(101,953)
Stock-based compensation expense	238,928			238,928
Ending balance, shares at Sep. 30, 2023			272,062
Ending balance at Sep. 30, 2023	3,113,894			3,077,954	(4,463,484)	4,612,485	(113,061)
Beginning balance, shares at Jun. 30, 2023			271,790
Beginning balance at Jun. 30, 2023	2,908,455			2,897,885	(4,257,084)	4,358,164	(90,510)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	254,321					254,321
Other comprehensive loss, net of taxes	$ (22,551)						(22,551)
Purchase of treasury stock, shares	(811)	[2]	(811)
Purchase of treasury stock	$ (125,008)				(125,008)
Equity forward contract	0			61,688	(61,688)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures, shares			1,230
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	53,839			39,810	14,029
Stock received for payment of employee taxes on vesting of restricted stock, shares			(147)
Stock received for payment of employee taxes on vesting of restricted stock	(43,194)			(9,461)	(33,733)
Stock-based compensation expense	88,032			88,032
Ending balance, shares at Sep. 30, 2023			272,062
Ending balance at Sep. 30, 2023	$ 3,113,894			$ 3,077,954	$ (4,463,484)	$ 4,612,485	$ (113,061)

[1] Includes 109 thousand shares and $30 million equity forward contract from the June 2022 ASR settled in September 2022.

[2] Includes 276 thousand shares and $60 million equity forward contract from the June 2023 ASR settled in August 2023.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022
Statement of Cash Flows [Abstract]
Cash and cash equivalents at beginning of period	$ 882,325	$ 1,088,940
Cash flows from operating activities:
Net income	717,245	608,560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	106,783	98,178
Amortization of debt discount and fees	942	810
Stock-based compensation	238,928	197,190
(Gain) loss on investments, net	(12,732)	4,777
Deferred income taxes	(23,506)	(49,834)
Provisions for losses on receivables	1,692	471
ROU asset amortization and change in operating lease liabilities	(2,684)	(883)
Other non-cash items	1,962	158
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	50,024	(57,309)
Inventories	(47,293)	(8,020)
Prepaid expenses and other	33,307	30,596
Other assets	(26,580)	17,644
Accounts payable and accrued liabilities	43,111	24,514
Deferred revenue	(14,628)	113,712
Other long-term liabilities	10,514	(2,305)
Net cash provided by operating activities	1,077,085	978,259
Cash flows from investing activities:
Purchases of investments	(145,150)	(1,000)
Proceeds from the sale and maturity of investments	64,174	0
Purchases of property, plant and equipment	(68,634)	(86,295)
Purchases of intangible assets	0	(1,000)
Cash paid in business combinations, net of cash acquired	(163,963)	(586,163)
Net cash used for investing activities	(313,573)	(674,458)
Cash flows from financing activities:
Proceeds from term loan	0	300,000
Proceeds from revolving credit facility	50,000	450,000
Payments on revolving credit facility	(150,000)	(300,000)
Payment of debt issuance costs	0	(425)
Proceeds from issuance of common stock	131,341	103,682
Stock received for payment of employee taxes on vesting of restricted stock	(122,182)	(103,093)
Payments for repurchases of common stock	(575,127)	(750,062)
Net cash used for financing activities	(665,968)	(299,898)
Effect of exchange rate changes on cash and cash equivalents	(17,887)	(66,792)
Increase (decrease) in cash and cash equivalents	79,657	(62,889)
Cash and cash equivalents at end of period	961,982	1,026,051
Supplemental cash flow information:
Cash paid for interest	22,226	8,508
Cash paid for income taxes, net	$ 104,721	$ 148,151

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Basis of Presentation and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

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 December 31, 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

In fiscal 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. The fiscal year change became effective with Cadence’s 2023 fiscal year, which began on January 1, 2023. Cadence’s fiscal quarters now end on March 31, June 30, and September 30. No transition report is required in connection with this change.

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 macroeconomic and geopolitical environment, 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 23, 2023, 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

There have been no recent accounting standard updates that are material or potentially material to Cadence.

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Revenue

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Custom Integrated Circuit (“IC”) Design and Simulation	22	%	22	%	21	%	22	%
Digital IC Design and Signoff	28	%	29	%	27	%	28	%
Functional Verification, including Emulation and Prototyping Hardware*	26	%	25	%	29	%	26	%
Intellectual Property (“IP”)	11	%	12	%	11	%	13	%
System Design and Analysis	13	%	12	%	12	%	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 September 30, 2023 or October 1, 2022.

Approximately 85% of Cadence’s annual revenue is characterized as recurring revenue. Recurring revenue includes revenue recognized over time from Cadence’s 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 is 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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenue recognized over time	83	%	81	%	80	%	82	%
Revenue from arrangements with non-cancelable commitments	2	%	3	%	3	%	2	%
Recurring revenue	85	%	84	%	83	%	84	%
Up-front revenue	15	%	16	%	17	%	16	%
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 stand-alone 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 September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Contract assets	$	14,353	$	22,766
Deferred revenue	766,515		782,062

Cadence recognized revenue of $106.6 million and $632.4 million during the three and nine months ended September 30, 2023, and $63.9 million and $488.9 million during the three and nine months ended October 1, 2022, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue 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 $5.4 billion as of September 30, 2023, which included $0.4 billion 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 September 30, 2023, Cadence expected to recognize 54% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months.

Cadence recognized revenue of $13.5 million and $40.3 million during the three and nine months ended September 30, 2023, and $12.1 million and $35.2 million during the three and nine months ended October 1, 2022, 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.

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Receivables, net

9 Months Ended

Sep. 30, 2023

Receivables [Abstract]

RECEIVABLES, NET

RECEIVABLES, NET

Cadence’s current and long-term receivables balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Accounts receivable	$	264,580	$	314,666
Unbilled accounts receivable	164,827		174,334
Long-term receivables	9,009		2,735
Total receivables	438,416		491,735
Less allowance for doubtful accounts	(2,902)		(2,290)
Total receivables, net	$	435,514	$	489,445

Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of September 30, 2023 and December 31, 2022, no single customer accounted for 10% or more of Cadence’s total receivables.

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Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

Cadence’s outstanding debt as of September 30, 2023 and December 31, 2022 was as follows:

	September 30, 2023						December 31, 2022
	(In thousands)
	Principal		Unamortized Discount		Carrying Value		Principal		Unamortized Discount		Carrying Value
Revolving Credit Facility	$	—	$	—	$	—	$	100,000	$	—	$	100,000
2024 Notes	350,000		(936)		349,064		350,000		(1,581)		348,419
2025 Term Loan	300,000		(263)		299,737		300,000		(341)		299,659
Total outstanding debt	$	650,000	$	(1,199)	$	648,801	$	750,000	$	(1,922)	$	748,078

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 the London Inter-Bank Offered Rate (“LIBOR”) to Term Secured Overnight Financing Rate (“SOFR”). The material terms of the 2021 Credit Facility otherwise remain unchanged.

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 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. A commitment fee ranging from 0.070% to 0.175% is assessed on the daily average undrawn portion of revolving commitments. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2021 Credit Facility approximates fair value.

The 2021 Credit Facility 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 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 September 30, 2023, Cadence was in compliance with all financial covenants associated with the 2021 Credit Facility.

2024 Notes

In October 2014, Cadence issued a $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 fair value of the 2024 Notes was approximately $345.7 million as of September 30, 2023.

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. Debt issuance costs associated with the 2025 Term Loan were not material.

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% 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% and 0.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of September 30, 2023, the interest rate on the 2025 Term Loan was 6.18%. 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 September 30, 2023, Cadence was in compliance with all financial covenants associated with the 2025 Term Loan.

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Acquisitions

9 Months Ended

Sep. 30, 2023

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

ACQUISITIONS

On September 6, 2023, Cadence acquired the serializer/deserializer (“SerDes”) and memory interface physical layer (“Memory”) IP business from Rambus Inc. (“Rambus”) for an aggregate cash consideration of $108.6 million. Memory and SerDes IP design and integration continues to be integral to the design of artificial intelligence, data center and hyperscale applications, CPU architectures and networking devices. The addition of the Rambus IP and seasoned team accelerates Cadence’s Intelligent System Design strategy and strengthens Cadence's IP technology portfolio.

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

	Fair Value
	(In thousands)
Current assets	$	1,460
Goodwill	80,999
Acquired intangibles	26,000
Other long-term assets	2,798
Total assets acquired	111,257
Current liabilities	2,531
Long-term liabilities	142
Total liabilities assumed	2,673
Total purchase consideration	$	108,584

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 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 be deductible for tax purposes.

Definite-lived intangible assets acquired with Cadence’s acquisition of the SerDes and Memory business from Rambus were as follows:

	Fair Value		Weighted Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	16,700	5.0 years
Agreements and relationships	9,300		7.0 years
Total acquired intangibles with definite lives	$	26,000	5.7 years

On May 4, 2023, Cadence acquired all of the outstanding equity of Pulsic, Ltd. (“Pulsic”), a longtime provider of production-proven technology for floor-planning, placement, and routing of custom ICs. The addition of Pulsic’s technologies and experienced team supports Cadence’s Intelligent System Design strategy and strengthens Cadence’s Custom IC Design and Simulation technology portfolio. The aggregate cash consideration for Cadence’s acquisition of Pulsic, net of cash acquired of $3.8 million, was $56.1 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former Pulsic shareholders, now employed by Cadence, through the second quarter of fiscal 2025.

The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of Pulsic based on their respective fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	4,369
Goodwill	47,448
Acquired intangibles	12,400
Other long-term assets	89
Total assets acquired	64,306
Current liabilities	1,553
Long-term liabilities	2,885
Total liabilities assumed	4,438
Total purchase consideration	$	59,868

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.

Definite-lived intangible assets acquired with Cadence’s acquisition of Pulsic were as follows:

	Fair Value		Weighted Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	8,000	6.2 years
Agreements and relationships	4,100		8.0 years
Tradenames, trademarks and patents	300		6.0 years
Total acquired intangibles with definite lives	$	12,400	6.8 years

Pro Forma Financial Information

Cadence has not presented pro forma financial information for the businesses acquired during fiscal 2023 because the results of operations for these businesses are not material to Cadence’s condensed consolidated financial statements.

Acquisition-Related Transaction Costs

Transaction costs associated with acquisitions, which consist of professional fees and administrative costs, are expensed as incurred and are included in general and administrative expense in Cadence’s condensed consolidated income statement. During the three and nine months ended September 30, 2023, transaction costs associated with acquisitions were $4.3 million and $10.3 million, respectively. During the three and nine months ended October 1, 2022, transaction costs associated with acquisitions were $3.6 million and $10.1 million, respectively.

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Goodwill and Acquired Intangibles

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 were as follows:

	Gross Carrying Amount
	(In thousands)
Balance as of December 31, 2022	$	1,374,268
Goodwill resulting from acquisitions	128,447
Effect of foreign currency translation	(2,273)
Balance as of September 30, 2023	$	1,500,442

Acquired Intangibles, Net

Acquired intangibles as of September 30, 2023 were as follows, excluding intangibles that were fully amortized as of December 31, 2022:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	323,359	$	(129,807)	$	193,552
Agreements and relationships	194,625		(56,671)		137,954
Tradenames, trademarks and patents	13,242		(3,931)		9,311
Total acquired intangibles with definite lives	531,226		(190,409)		340,817
In-process technology	6,800		—		6,800
Total acquired intangibles	$	538,026	$	(190,409)	$	347,617

In-process technology as of September 30, 2023 consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of September 30, 2023, these projects were expected to be completed during the first quarter of fiscal 2024. During the three and nine months ended September 30, 2023, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of December 31, 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	$	479,796	$	(278,851)	$	200,945
Agreements and relationships	274,624		(137,847)		136,777
Tradenames, trademarks and patents	12,979		(2,884)		10,095
Total acquired intangibles with definite lives	$	767,399	$	(419,582)	$	347,817
In-process technology	6,800		—		6,800
Total acquired intangibles	$	774,199	$	(419,582)	$	354,617

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 September 30, 2023 and October 1, 2022 by condensed consolidated income statement caption was as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Cost of product and maintenance	$	10,991	$	8,867	$	31,869	$	30,906
Amortization of acquired intangibles	4,612		3,946		13,181		13,543
Total amortization of acquired intangibles	$	15,603	$	12,813	$	45,050	$	44,449

As of September 30, 2023, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

	(In thousands)
2023 - remaining period	$	16,309
2024	63,382
2025	50,658
2026	44,879
2027	42,438
2028	38,371
Thereafter	84,780
Total estimated amortization expense	$	340,817

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Stock Based Compensation

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022 as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Cost of product and maintenance	$	1,191	$	1,046	$	3,292	$	2,751
Cost of services	1,516		1,331		4,190		3,494
Marketing and sales	18,042		14,991		48,819		39,650
Research and development	53,013		43,327		142,142		115,516
General and administrative	14,270		12,756		40,485		35,779
Total stock-based compensation expense	$	88,032	$	73,451	$	238,928	$	197,190

Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $621.5 million as of September 30, 2023, which will be recognized over a weighted average vesting period of 2.0 years.

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Stock Repurchase Program

9 Months Ended

Sep. 30, 2023

Class of Stock Disclosures [Abstract]

STOCK REPURCHASE PROGRAM

STOCK REPURCHASE PROGRAM

In August 2023, Cadence’s Board of Directors increased the prior authorization to repurchase shares of Cadence common stock by authorizing an additional $1.0 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 September 30, 2023, Cadence repurchased approximately 0.5 million and 1.8 million shares on the open market, for an aggregate purchase price of $125 million and $375 million, respectively.

In June 2023, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with HSBC Bank USA, National Association (“HSBC”) to repurchase an aggregate of $200.0 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 2023, Cadence received an initial share delivery of approximately 0.6 million shares, which represented the number of shares at a market price equal to $140.0 million. An equity-linked contract for $60 million, representing the remaining shares to be delivered by HSBC under the ASR agreement, was recorded to stockholders' equity as of June 30, 2023. In August 2023, the ASR agreement settled and resulted in a delivery of approximately 0.3 million additional shares to Cadence. In total, Cadence received approximately 0.9 million shares under the ASR agreement at an average price per share of $228.26. The shares received were treated as repurchased common stock for purposes of calculating earnings per share.

As of September 30, 2023, approximately $1.5 billion of Cadence’s share repurchase authorization 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 September 30, 2023 and October 1, 2022 were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023*		October 1, 2022**		September 30, 2023		October 1, 2022
	(In thousands)
Shares repurchased	811		959		2,657		4,664
Total cost of repurchased shares	$	185,008	$	180,013	$	575,127	$	750,062

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Restructuring and Other Termination Benefits

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

RESTRUCTURING AND OTHER CHARGES

RESTRUCTURING

In August 2023, Cadence initiated a restructuring plan (the “2023 Restructuring Plan”) designed to better align its resources with its business strategy. The charges incurred with the 2023 Restructuring Plan during the three and nine months ended September 30, 2023, are comprised of severance payments and termination benefits related to headcount reductions and are included in restructuring on Cadence’s condensed consolidated income statements.

In addition to headcount reductions, Cadence is evaluating certain facilities for closure as part of the 2023 Restructuring Plan. During the three and nine months ended September 30, 2023, no facility-related restructuring charges were incurred, and charges in future periods for the facilities under consideration are not expected to exceed $5 million.

The following table presents activity for the 2023 Restructuring Plan during the nine months ended September 30, 2023:

	Severance and Benefits
	(In thousands)
Balance as of December 31, 2022	$	—
Restructuring charges	11,582
Cash payments	(2,620)
Effect of foreign currency translation	(117)
Balance as of September 30, 2023	$	8,845

All liabilities for severance and related benefits under the 2023 Restructuring Plan are included in accounts payable and accrued liabilities on Cadence’s condensed consolidated balance sheets as of September 30, 2023. Cadence expects to make cash payments to settle these liabilities through the first half of fiscal 2024.

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Other Income and Expenses

9 Months Ended

Sep. 30, 2023

Other Income and Expenses [Abstract]

OTHER INCOME (EXPENSE), NET

OTHER INCOME (EXPENSE), NET

Cadence’s other income (expense), net, for the three and nine months ended September 30, 2023 and October 1, 2022 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Interest income	$	8,453	$	3,051	$	22,253	$	4,941
Gains (losses) on marketable equity investments	14,339		(408)		14,960		(1,993)
Losses on non-marketable equity investments	(1,050)		(1,246)		(2,225)		(2,786)
Gains (losses) on securities in Non-Qualified Deferred Compensation (“NQDC”) trust	(1,749)		(2,885)		4,556		(11,977)
Losses on foreign exchange	(3,568)		(1,299)		(4,649)		(1,418)
Other expense, net	(319)		(230)		(2,532)		(646)
Total other income (expense), net	$	16,106	$	(3,017)	$	32,363	$	(13,879)

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Net Income Per Share

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands, except per share amounts)
Net income	$	254,321	$	186,305	$	717,245	$	608,560
Weighted average common shares used to calculate basic net income per share	269,229		271,131		269,480		271,694
Stock-based awards	3,198		3,826		3,379		3,989
Weighted average common shares used to calculate diluted net income per share	272,427		274,957		272,859		275,683
Net income per share - basic	$	0.94	$	0.69	$	2.66	$	2.24
Net income per share - diluted	$	0.93	$	0.68	$	2.63	$	2.21

The following table presents shares of Cadence’s common stock outstanding for the three and nine months ended September 30, 2023 and October 1, 2022 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
	September 30, 2023	October 1, 2022	September 30, 2023	October 1, 2022
	(In thousands)
Long-term market-based awards	1,866	1,761	1,841	1,485
Options to purchase shares of common stock	262	514	373	678
Non-vested shares of restricted stock	807	26	288	63
Total potential common shares excluded	2,935	2,301	2,502	2,226

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Investments

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

INVESTMENTS

INVESTMENTS

Marketable Equity Investments

Cadence’s investments in marketable equity securities consist of purchased shares of publicly held companies and are included in prepaid expenses and other in Cadence’s condensed consolidated balance sheets. Changes in the fair value of these investments are recorded to other income (expense), net in Cadence’s condensed consolidated income statements. The carrying value of marketable equity investments was $58.4 million and $4.5 million as of September 30, 2023 and December 31, 2022, respectively.

Marketable Debt Securities

The following is a summary of Cadence’s available-for-sale debt securities recorded within prepaid expenses and other on the condensed consolidated balance sheet as of September 30, 2023:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
Available-for-sale securities
Mortgage-backed and asset-backed securities	$	44,042	$	6	$	(1,421)	$	42,627
Total available-for-sale securities	$	44,042	$	6	$	(1,421)	$	42,627

Gross unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on Cadence's condensed consolidated balance sheets.

As of September 30, 2023, the fair values of available-for-sale debt securities, by remaining contractual maturity, were as follows:

	(In thousands)
Due within 1 year	$	—
Due after 1 year through 5 years	8,366
Due after 5 years through 10 years	14,174
Due after 10 years	20,087
Total	$	42,627

As of September 30, 2023, Cadence does not intend to sell any of its available-for-sale securities in an unrealized loss position, and it is more likely than not that Cadence will hold the securities until maturity or a recovery of the cost basis.

Non-Marketable Equity Investments

Cadence’s investments in non-marketable equity securities generally consist of stock or other instruments of privately held entities and are included in other assets on Cadence’s condensed consolidated balance sheets. Cadence holds a 16% interest in a privately held company that is accounted for using the equity method of accounting. The carrying value of this investment was $112.6 million and $117.7 million as of September 30, 2023 and December 31, 2022, respectively.

Cadence records its proportionate share of net income from the investee, offset by amortization of basis differences, to other income (expense), net in Cadence’s condensed consolidated income statements. For the three and nine months ended September 30, 2023, Cadence recognized losses of $1.0 million and $2.2 million, respectively. For the three and nine months ended October 1, 2022, Cadence recognized losses of $1.2 million and $2.5 million, respectively.

Cadence also holds other non-marketable investments in privately held companies where Cadence does not have the ability to exercise significant influence and the fair value of the investments is not readily determinable. The carrying value of these investments was $2.2 million and $2.3 million as of September 30, 2023 and December 31, 2022, respectively. Gains and losses on these investments were not material to Cadence’s condensed consolidated financial statements for the periods presented.

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Fair Value

9 Months Ended

Sep. 30, 2023

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 September 30, 2023.

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 September 30, 2023 and December 31, 2022:

	Fair Value Measurements as of September 30, 2023
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	444,303	$	444,303	$	—	$	—
Marketable securities:
Marketable equity securities	58,411		58,411		—		—
Mortgage-backed and asset-backed securities	42,627		—		42,627		—
Securities held in NQDC trust	67,324		67,324		—		—
Total Assets	$	612,665	$	570,038	$	42,627	$	—

	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	10,102	$	—	$	10,102	$	—
Total Liabilities	$	10,102	$	—	$	10,102	$	—
	Fair Value Measurements as of December 31, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	548,373	$	548,373	$	—	$	—
Marketable equity securities	4,490		4,490		—		—
Securities held in NQDC trust	55,605		55,605		—		—
Foreign currency exchange contracts	5,306		—		5,306		—
Total Assets	$	613,774	$	608,468	$	5,306	$	—
As of December 31, 2022, Cadence did not have any financial liabilities requiring a recurring fair value measurement.

Level 1 Measurements

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

Level 2 Measurements

The valuation techniques used to determine the fair value of Cadence’s investments in marketable debt securities, foreign currency forward exchange contracts and 2024 Notes are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Level 3 Measurements

During the nine months ended September 30, 2023, Cadence acquired intangible assets of $38.4 million. The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements.

For existing technology, the fair value was determined by applying the relief-from-royalty method. This method is based on the application of a royalty rate to forecasted revenue to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. To estimate royalty savings over time, Cadence projected revenue from 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. Cadence assumed technological obsolescence at rates between 10% and 13% annually, before applying an assumed royalty rate between 25% and 30%.

For agreements and relationships, the fair value 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 80% and 90%. The present value of operating cash flows from existing customers was determined using discount rates between 13.5% and 15%.

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Inventory

9 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

INVENTORY

INVENTORY

Cadence’s inventory balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Inventories:
Raw materials	$	154,097	$	113,982
Finished goods	9,596		14,023
Total inventories	$	163,693	$	128,005

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, Cadence is involved in various disputes and litigation 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 litigation matters and may revise estimates.

Tax Proceedings

In December 2022, Cadence received a tax audit assessment of approximately $49 million from the Korea taxing authorities for years 2017-2019. The tax audit assessment is primarily related to value-added taxes. Cadence is required to pay these assessed taxes, prior to being allowed to contest or litigate the assessment in administrative and judicial proceedings. The assessment was paid by Cadence in January 2023 and recorded as a component of other assets in the condensed consolidated balance sheets. Payment of this amount is not an admission that Cadence is subject to such taxes, and Cadence continues to defend its position vigorously. Cadence did not record a reserve for this contingency as of September 30, 2023 or December 31, 2022 as Cadence does not believe a loss is probable because it believes it will ultimately prevail in full. The entire dispute resolution process may take from one to eight years.

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 September 30, 2023 and October 1, 2022.

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.

In connection with a litigation campaign launched in April 2022 by Bell Semiconductor LLC (“Bell Semi”), a patent monetization entity, some customers sought defense and indemnification against claims of patent infringement asserted by Bell Semi in various district court litigation and at the U.S. International Trade Commission. Bell Semi alleged that the customers’ use of one or more features of certain Cadence products infringed one or more of six patents held by Bell Semi. Cadence offered to defend some of its customers consistent with the terms of the applicable license agreements. On July 25, 2023, Cadence and Bell Semi reached a settlement agreement involving the six patents-in-suit. The settlement amount was not material to Cadence.

Cadence did not incur any material losses from indemnification claims during the three and nine months ended September 30, 2023 and October 1, 2022.

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2023

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, changes in defined benefit plan liabilities and unrealized gains and losses on investments, and is presented in Cadence’s condensed consolidated statements of comprehensive income.

Accumulated other comprehensive loss was comprised of the following as of September 30, 2023 and December 31, 2022:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Foreign currency translation loss	$	(106,409)	$	(85,863)
Changes in defined benefit plan liabilities	(5,237)		(5,774)
Unrealized losses on investments	(1,415)		—
Total accumulated other comprehensive loss	$	(113,061)	$	(91,637)

For the three and nine months ended September 30, 2023 and October 1, 2022, there were no significant amounts related to foreign currency translation loss, changes in defined benefit plan liabilities or unrealized gains and losses on investments reclassified from accumulated other comprehensive loss to net income.

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Segment Reporting

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Americas:
United States	$	421,547	$	392,222	$	1,241,488	$	1,174,734
Other Americas	15,800		15,165		47,884		39,010
Total Americas	437,347		407,387		1,289,372		1,213,744
Asia:
China	172,022		148,325		523,694		401,460
Other Asia	197,831		156,250		558,687		466,891
Total Asia	369,853		304,575		1,082,381		868,351
Europe, Middle East and Africa	158,194		142,983		479,268		431,660
Japan	57,700		47,609		170,342		148,086
Total	$	1,023,094	$	902,554	$	3,021,363	$	2,661,841

The following table presents a summary of long-lived assets by geography as of September 30, 2023 and December 31, 2022:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Americas:
United States	$	364,932	$	347,822
Other Americas	10,169		7,548
Total Americas	375,101		355,370
Asia:
China	41,386		51,667
Other Asia	70,743		73,329
Total Asia	112,129		124,996
Europe, Middle East and Africa	51,291		56,959
Japan	2,820		4,505
Total	$	541,341	$	541,830

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Subsequent Event	9 Months Ended
	Sep. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENT	SUBSEQUENT EVENTOn October 2, 2023, Cadence acquired all of the outstanding equity of Intrinsix Corporation (“Intrinsix”) from CEVA, Inc. The acquisition enhances Cadence’s system and IC design services resources with the addition of a team with expertise in advanced nodes, radio frequency, mixed-signal and security algorithms. The acquisition also expands Cadence’s reach in key high-growth verticals, including aerospace and defense. The aggregate cash consideration of approximately $35 million will be allocated to the assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Cadence expects to complete the initial accounting for its acquisition of Intrinsix during the fourth quarter of fiscal 2023.

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Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Pay vs Performance Disclosure
Net income	$ 254,321	$ 186,305	$ 717,245	$ 608,560

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Insider Trading Arrangements

3 Months Ended

9 Months Ended

Sep. 30, 2023

shares

Sep. 30, 2023

shares

Trading Arrangements, by Individual

Material Terms of Trading Arrangement

During the fiscal quarter ended September 30, 2023, our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated the contracts, instructions or written plans for the purchase or sale of our securities set forth in the table below.

			Type of Trading Arrangement
Name and Position	Action	Adoption/ Termination Date	Rule 10b5-1*	Total Shares of Common Stock to be Sold	Expiration Date
Karna Nisewaner, CVP, General Counsel and Corporate Secretary	Adoption	8/9/2023	X	Up to 7,072	9/30/2024
Anirudh Devgan, President and Chief Executive Officer	Termination(1)	9/13/2023	X	Up to 109,381(2)	5/30/2024
Anirudh Devgan, President and Chief Executive Officer	Adoption(1)	9/13/2023	X	Up to 203,474(3)	12/31/2024
Alberto Sangiovanni-Vincentelli, Director	Adoption	9/13/2023	X	Up to 37,000	12/19/2024
* Contract, instruction or written plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

(1)    Represents the modification, as described in Rule 10b5-1(c)(1)(iv) under the Exchange Act, of a Rule 10b5-1 trading plan adopted on June 14, 2023. As a result of this modification, the subject plan is deemed terminated and a new plan is deemed adopted as of the modification date.

(2)    Includes up to 109,381 shares subject to Performance Stock Awards previously granted to Dr. Devgan subject to vesting and release to Dr. Devgan during the period from August 25, 2023 to March 15, 2024 upon the satisfaction of the applicable total shareholder return hurdles and relative total shareholder return threshold. The actual number of shares that will vest in connection with these awards is not yet determinable. In addition, the actual number of shares that will be released to Dr. Devgan in connection with these awards and could have been sold under the Rule 10b5-1 trading arrangement would have been net of the number of shares withheld to satisfy tax withholding obligations arising from the vesting of such shares.

(3)    Includes up to 100,766 shares subject to Performance Stock Awards previously granted to Dr. Devgan subject to vesting and release to Dr. Devgan during the period from September 15, 2023 to March 15, 2024 upon the satisfaction of the applicable total shareholder return hurdles and relative total shareholder return threshold. The actual number of shares that will vest in connection with these awards is not yet determinable. In addition, the actual number of shares that will be released to Dr. Devgan in connection with these awards and sold under the Rule 10b5-1 trading arrangement will be net of the number of shares withheld to satisfy tax withholding obligations arising from the vesting of such shares and is not yet determinable.

Rule 10b5-1 Arrangement Adopted

true

Non-Rule 10b5-1 Arrangement Adopted

false

Rule 10b5-1 Arrangement Terminated

false

Non-Rule 10b5-1 Arrangement Terminated

false

Karna Nisewaner [Member]

Trading Arrangements, by Individual

Name

Karna Nisewaner

Title

CVP, General Counsel and Corporate Secretary

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

8/9/2023

Arrangement Duration

364 days

Aggregate Available

7,072

7,072

Anirudh Devgan [Member]

Trading Arrangements, by Individual

Name

Anirudh Devgan

Title

President and Chief Executive Officer

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

9/13/2023

Arrangement Duration

351 days

Aggregate Available

203,474

203,474

Alberto Sangiovanni-Vincentelli [Member]

Trading Arrangements, by Individual

Name

Alberto Sangiovanni-Vincentelli

Title

Director

Rule 10b5-1 Arrangement Adopted

true

Adoption Date

9/13/2023

Arrangement Duration

463 days

Aggregate Available

37,000

37,000

Anirudh Devgan Trading Arrangement, 2023 Plan Termination [Member] | Anirudh Devgan [Member]

Trading Arrangements, by Individual

Name

Anirudh Devgan

Title

President and Chief Executive Officer

Rule 10b5-1 Arrangement Terminated

true

Termination Date

9/13/2023

Aggregate Available

109,381

109,381

Anirudh Devgan Trading Arrangement, Performance Stock Awards [Member] | Anirudh Devgan [Member]

Trading Arrangements, by Individual

Aggregate Available

100,766

100,766

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

9 Months Ended

Sep. 30, 2023

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 litigation 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 litigation matters and may revise estimates.

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Revenue (Tables)

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue from external customers by product category

The following table shows the percentage of revenue contributed by each of Cadence’s five product categories for the three and nine months ended September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Custom Integrated Circuit (“IC”) Design and Simulation	22	%	22	%	21	%	22	%
Digital IC Design and Signoff	28	%	29	%	27	%	28	%
Functional Verification, including Emulation and Prototyping Hardware*	26	%	25	%	29	%	26	%
Intellectual Property (“IP”)	11	%	12	%	11	%	13	%
System Design and Analysis	13	%	12	%	12	%	11	%
Total	100	%	100	%	100	%	100	%

_____________

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

Disaggregation of revenue

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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenue recognized over time	83	%	81	%	80	%	82	%
Revenue from arrangements with non-cancelable commitments	2	%	3	%	3	%	2	%
Recurring revenue	85	%	84	%	83	%	84	%
Up-front revenue	15	%	16	%	17	%	16	%
Total	100	%	100	%	100	%	100	%

Contract balances

Cadence’s contract balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Contract assets	$	14,353	$	22,766
Deferred revenue	766,515		782,062

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Receivables, net (Tables)

9 Months Ended

Sep. 30, 2023

Receivables [Abstract]

Current and long-term accounts receivable balances

Cadence’s current and long-term receivables balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Accounts receivable	$	264,580	$	314,666
Unbilled accounts receivable	164,827		174,334
Long-term receivables	9,009		2,735
Total receivables	438,416		491,735
Less allowance for doubtful accounts	(2,902)		(2,290)
Total receivables, net	$	435,514	$	489,445

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Debt (Tables)

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Summary of debt outstanding

Cadence’s outstanding debt as of September 30, 2023 and December 31, 2022 was as follows:

	September 30, 2023						December 31, 2022
	(In thousands)
	Principal		Unamortized Discount		Carrying Value		Principal		Unamortized Discount		Carrying Value
Revolving Credit Facility	$	—	$	—	$	—	$	100,000	$	—	$	100,000
2024 Notes	350,000		(936)		349,064		350,000		(1,581)		348,419
2025 Term Loan	300,000		(263)		299,737		300,000		(341)		299,659
Total outstanding debt	$	650,000	$	(1,199)	$	648,801	$	750,000	$	(1,922)	$	748,078

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2023

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 fair values on the acquisition date as follows:

	Fair Value
	(In thousands)
Current assets	$	1,460
Goodwill	80,999
Acquired intangibles	26,000
Other long-term assets	2,798
Total assets acquired	111,257
Current liabilities	2,531
Long-term liabilities	142
Total liabilities assumed	2,673
Total purchase consideration	$	108,584

	Fair Value
	(In thousands)
Current assets	$	4,369
Goodwill	47,448
Acquired intangibles	12,400
Other long-term assets	89
Total assets acquired	64,306
Current liabilities	1,553
Long-term liabilities	2,885
Total liabilities assumed	4,438
Total purchase consideration	$	59,868

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

Definite-lived intangible assets acquired with Cadence’s acquisition of the SerDes and Memory business from Rambus were as follows:

	Fair Value		Weighted Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	16,700	5.0 years
Agreements and relationships	9,300		7.0 years
Total acquired intangibles with definite lives	$	26,000	5.7 years

Definite-lived intangible assets acquired with Cadence’s acquisition of Pulsic were as follows:

	Fair Value		Weighted Average Amortization Period
	(In thousands)		(in years)
Existing technology	$	8,000	6.2 years
Agreements and relationships	4,100		8.0 years
Tradenames, trademarks and patents	300		6.0 years
Total acquired intangibles with definite lives	$	12,400	6.8 years

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Goodwill and Acquired Intangibles (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 were as follows:

	Gross Carrying Amount
	(In thousands)
Balance as of December 31, 2022	$	1,374,268
Goodwill resulting from acquisitions	128,447
Effect of foreign currency translation	(2,273)
Balance as of September 30, 2023	$	1,500,442

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

Acquired intangibles as of September 30, 2023 were as follows, excluding intangibles that were fully amortized as of December 31, 2022:

	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	323,359	$	(129,807)	$	193,552
Agreements and relationships	194,625		(56,671)		137,954
Tradenames, trademarks and patents	13,242		(3,931)		9,311
Total acquired intangibles with definite lives	531,226		(190,409)		340,817
In-process technology	6,800		—		6,800
Total acquired intangibles	$	538,026	$	(190,409)	$	347,617

In-process technology as of September 30, 2023 consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of September 30, 2023, these projects were expected to be completed during the first quarter of fiscal 2024. During the three and nine months ended September 30, 2023, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of December 31, 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	$	479,796	$	(278,851)	$	200,945
Agreements and relationships	274,624		(137,847)		136,777
Tradenames, trademarks and patents	12,979		(2,884)		10,095
Total acquired intangibles with definite lives	$	767,399	$	(419,582)	$	347,817
In-process technology	6,800		—		6,800
Total acquired intangibles	$	774,199	$	(419,582)	$	354,617

Amortization of acquired intangibles

Amortization expense for the three and nine months ended September 30, 2023 and October 1, 2022 by condensed consolidated income statement caption was as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Cost of product and maintenance	$	10,991	$	8,867	$	31,869	$	30,906
Amortization of acquired intangibles	4,612		3,946		13,181		13,543
Total amortization of acquired intangibles	$	15,603	$	12,813	$	45,050	$	44,449

Estimated amortization expense

As of September 30, 2023, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

	(In thousands)
2023 - remaining period	$	16,309
2024	63,382
2025	50,658
2026	44,879
2027	42,438
2028	38,371
Thereafter	84,780
Total estimated amortization expense	$	340,817

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022 as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Cost of product and maintenance	$	1,191	$	1,046	$	3,292	$	2,751
Cost of services	1,516		1,331		4,190		3,494
Marketing and sales	18,042		14,991		48,819		39,650
Research and development	53,013		43,327		142,142		115,516
General and administrative	14,270		12,756		40,485		35,779
Total stock-based compensation expense	$	88,032	$	73,451	$	238,928	$	197,190

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Stock Repurchase Program (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022 were as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023*		October 1, 2022**		September 30, 2023		October 1, 2022
	(In thousands)
Shares repurchased	811		959		2,657		4,664
Total cost of repurchased shares	$	185,008	$	180,013	$	575,127	$	750,062

_____________

*Includes 276 thousand shares and $60 million equity forward contract from the June 2023 ASR settled in August 2023.

**Includes 109 thousand shares and $30 million equity forward contract from the June 2022 ASR settled in September 2022.

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Restructuring and Other Termination Benefits (Tables)

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring reserve rollforward by major type of cost

The following table presents activity for the 2023 Restructuring Plan during the nine months ended September 30, 2023:

	Severance and Benefits
	(In thousands)
Balance as of December 31, 2022	$	—
Restructuring charges	11,582
Cash payments	(2,620)
Effect of foreign currency translation	(117)
Balance as of September 30, 2023	$	8,845

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Other Income and Expenses (Tables)

9 Months Ended

Sep. 30, 2023

Other Income and Expenses [Abstract]

Schedule of Other Nonoperating Income (Expense)

Cadence’s other income (expense), net, for the three and nine months ended September 30, 2023 and October 1, 2022 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Interest income	$	8,453	$	3,051	$	22,253	$	4,941
Gains (losses) on marketable equity investments	14,339		(408)		14,960		(1,993)
Losses on non-marketable equity investments	(1,050)		(1,246)		(2,225)		(2,786)
Gains (losses) on securities in Non-Qualified Deferred Compensation (“NQDC”) trust	(1,749)		(2,885)		4,556		(11,977)
Losses on foreign exchange	(3,568)		(1,299)		(4,649)		(1,418)
Other expense, net	(319)		(230)		(2,532)		(646)
Total other income (expense), net	$	16,106	$	(3,017)	$	32,363	$	(13,879)

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022 are as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands, except per share amounts)
Net income	$	254,321	$	186,305	$	717,245	$	608,560
Weighted average common shares used to calculate basic net income per share	269,229		271,131		269,480		271,694
Stock-based awards	3,198		3,826		3,379		3,989
Weighted average common shares used to calculate diluted net income per share	272,427		274,957		272,859		275,683
Net income per share - basic	$	0.94	$	0.69	$	2.66	$	2.24
Net income per share - diluted	$	0.93	$	0.68	$	2.63	$	2.21

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 September 30, 2023 and October 1, 2022 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
	September 30, 2023	October 1, 2022	September 30, 2023	October 1, 2022
	(In thousands)
Long-term market-based awards	1,866	1,761	1,841	1,485
Options to purchase shares of common stock	262	514	373	678
Non-vested shares of restricted stock	807	26	288	63
Total potential common shares excluded	2,935	2,301	2,502	2,226

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Investments, Equity Method and Joint Ventures (Tables)

9 Months Ended

Sep. 30, 2023

Equity Method Investments and Joint Ventures [Abstract]

Unrealized Gain (Loss) on Investments

The following is a summary of Cadence’s available-for-sale debt securities recorded within prepaid expenses and other on the condensed consolidated balance sheet as of September 30, 2023:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
Available-for-sale securities
Mortgage-backed and asset-backed securities	$	44,042	$	6	$	(1,421)	$	42,627
Total available-for-sale securities	$	44,042	$	6	$	(1,421)	$	42,627

Investments Classified by Contractual Maturity Date

As of September 30, 2023, the fair values of available-for-sale debt securities, by remaining contractual maturity, were as follows:

	(In thousands)
Due within 1 year	$	—
Due after 1 year through 5 years	8,366
Due after 5 years through 10 years	14,174
Due after 10 years	20,087
Total	$	42,627

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and December 31, 2022:

	Fair Value Measurements as of September 30, 2023
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	444,303	$	444,303	$	—	$	—
Marketable securities:
Marketable equity securities	58,411		58,411		—		—
Mortgage-backed and asset-backed securities	42,627		—		42,627		—
Securities held in NQDC trust	67,324		67,324		—		—
Total Assets	$	612,665	$	570,038	$	42,627	$	—

	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	10,102	$	—	$	10,102	$	—
Total Liabilities	$	10,102	$	—	$	10,102	$	—
	Fair Value Measurements as of December 31, 2022
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	548,373	$	548,373	$	—	$	—
Marketable equity securities	4,490		4,490		—		—
Securities held in NQDC trust	55,605		55,605		—		—
Foreign currency exchange contracts	5,306		—		5,306		—
Total Assets	$	613,774	$	608,468	$	5,306	$	—
As of December 31, 2022, Cadence did not have any financial liabilities requiring a recurring fair value measurement.

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Inventory (Tables)

9 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

Schedule of inventory

Cadence’s inventory balances as of September 30, 2023 and December 31, 2022 were as follows:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Inventories:
Raw materials	$	154,097	$	113,982
Finished goods	9,596		14,023
Total inventories	$	163,693	$	128,005

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and December 31, 2022:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Foreign currency translation loss	$	(106,409)	$	(85,863)
Changes in defined benefit plan liabilities	(5,237)		(5,774)
Unrealized losses on investments	(1,415)		—
Total accumulated other comprehensive loss	$	(113,061)	$	(91,637)

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and October 1, 2022:

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	(In thousands)
Americas:
United States	$	421,547	$	392,222	$	1,241,488	$	1,174,734
Other Americas	15,800		15,165		47,884		39,010
Total Americas	437,347		407,387		1,289,372		1,213,744
Asia:
China	172,022		148,325		523,694		401,460
Other Asia	197,831		156,250		558,687		466,891
Total Asia	369,853		304,575		1,082,381		868,351
Europe, Middle East and Africa	158,194		142,983		479,268		431,660
Japan	57,700		47,609		170,342		148,086
Total	$	1,023,094	$	902,554	$	3,021,363	$	2,661,841

Summary of long-lived assets by geography

The following table presents a summary of long-lived assets by geography as of September 30, 2023 and December 31, 2022:

	As of
	September 30, 2023		December 31, 2022
	(In thousands)
Americas:
United States	$	364,932	$	347,822
Other Americas	10,169		7,548
Total Americas	375,101		355,370
Asia:
China	41,386		51,667
Other Asia	70,743		73,329
Total Asia	112,129		124,996
Europe, Middle East and Africa	51,291		56,959
Japan	2,820		4,505
Total	$	541,341	$	541,830

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Revenue (Details)	3 Months Ended			9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022		Sep. 30, 2023		Oct. 01, 2022
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%	22.00%		21.00%		22.00%
Digital IC Design and Signoff
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	28.00%	29.00%		27.00%		28.00%
Functional Verification, including Emulation and Prototyping Hardware*
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	26.00%	25.00%	[1]	29.00%	[1]	26.00%	[1]
Intellectual Property (“IP”)
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	11.00%	12.00%		11.00%		13.00%
System Design and Analysis
Revenue from External Customer [Line Items]
Percentage of product and maintenance revenue by product group	13.00%	12.00%		12.00%		11.00%

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

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Revenue (Details 1)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
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	85.00%	84.00%	83.00%	84.00%
Transferred over time | Single performance obligation
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	83.00%	81.00%	80.00%	82.00%
Transferred over time | Multiple performance obligations
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	2.00%	3.00%	3.00%	2.00%
Transferred at point in time
Disaggregation of Revenue [Line Items]
Revenue from contract with customer, timing of goods or service	15.00%	16.00%	17.00%	16.00%

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Revenue (Details 2) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Contract assets	$ 14,353	$ 22,766
Deferred revenue	$ 766,515	$ 782,062

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Revenue (Details Textual) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Revenue from Contract with Customer [Abstract]
Revenue recognized from deferred revenue during the period	$ 106.6	$ 63.9	$ 632.4	$ 488.9
Remaining performance obligations	5,400.0		5,400.0
Non-cancellable commitments from customers included in remaining performance obligations	$ 400.0		$ 400.0
Percent of remaining performance obligations, current	54.00%		54.00%
Revenue recognized from satisfaction of performance obligations	$ 13.5	$ 12.1	$ 40.3	$ 35.2

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Receivables, net (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current and long-term receivables balances
Accounts receivable	$ 264,580	$ 314,666
Unbilled accounts receivable	164,827	174,334
Long-term receivables	9,009	2,735
Total receivables	438,416	491,735
Less allowance for doubtful accounts	(2,902)	(2,290)
Total receivables, net	$ 435,514	$ 489,445

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Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022	Sep. 07, 2022	Oct. 09, 2014
Debt Instrument [Line Items]
Remaining Principal Amount Of Debt Outstanding	$ 650,000	$ 750,000
Unamortized discount	1,199	1,922
Carrying Value	0	100,000
Carrying Value	648,801	648,078
Carrying Value Of Debt Outstanding	648,801	748,078
Senior Notes Due 2024 [Member] | Senior Notes [Member]
Debt Instrument [Line Items]
Principal	350,000	350,000		$ 350,000
Unamortized discount	936	1,581		$ 1,400
Carrying Value	349,064	348,419
Term Loan Due Twenty-Twenty Five
Debt Instrument [Line Items]
Principal			$ 300,000
Term Loan Due Twenty-Twenty Five | Notes Payable to Banks
Debt Instrument [Line Items]
Principal	300,000	300,000
Unamortized discount	263	341
Carrying Value	299,737	299,659
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Principal	0	100,000
Carrying Value	$ 0	$ 100,000

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Debt Credit Facility (Details Textual) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Oct. 02, 2021	Sep. 30, 2023	Oct. 01, 2022
Line of Credit Facility [Line Items]
Payment of debt issuance costs		$ 0	$ 425
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Credit facility, current borrowing capacity		700,000
Credit facility additional borrowing capacity available		350,000
Credit facility, maximum borrowing capacity		$ 1,050,000
Credit facility, maturity date		Jun. 30, 2026
Payment of debt issuance costs	$ 1,300
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
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 | 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%
Term Secured Overnight Financing Rate (SOFR) | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Debt instrument, basis spread on variable rate, additional interest		0.10%
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

XML

Debt (Details Textual) - USD ($) $ in Thousands		9 Months Ended
	Oct. 09, 2014	Sep. 30, 2023	Dec. 31, 2022	Sep. 07, 2022
Debt Instrument [Line Items]
Unamortized discount		$ 1,199	$ 1,922
Term Loan Due Twenty-Twenty Five
Debt Instrument [Line Items]
Aggregate principal amount, issued				$ 300,000
Debt instrument, interest rate at period end		6.18%
Debt instrument, covenant, debt to EBITDA ratio		3.25
Debt instrument, covenant, debt to EBITDA ratio after step up triggered by acquisition		3.75
Debt instrument, covenant, required business acquisition consideration, minimum		$ 250,000
Term Loan Due Twenty-Twenty Five | Term Secured Overnight Financing Rate (SOFR)
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, pro forma leverage ratio		3.50
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%
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, pro forma leverage ratio		3.00
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%
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	936	$ 1,581
Debt issuance costs	$ 6,200
Fair value of the 2024 Notes		$ 345,700

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Acquisitions (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022	May 04, 2023
Business Acquisition [Line Items]
Cash paid in business combinations, net of cash acquired			$ 163,963	$ 586,163
Transaction costs associated with acquisitions	$ 4,300	$ 3,600	10,300	$ 10,100
Pulsic. Ltd.
Business Acquisition [Line Items]
Cash acquired					$ 3,800
Cash paid in business combinations, net of cash acquired			56,100
Rambus
Business Acquisition [Line Items]
Cash paid in business combinations, net of cash acquired			$ 108,600

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Acquisitions (Details 1) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 07, 2023	Dec. 31, 2022
Business Acquisition [Line Items]
Goodwill	$ 1,500,442		$ 1,374,268
Rambus
Business Acquisition [Line Items]
Current assets		$ 1,460
Goodwill		80,999
Acquired intangibles		26,000
Other long-term assets		2,798
Total assets acquired		111,257
Current liabilities		2,531
Long-term liabilities		142
Total liabilities assumed		2,673
Total purchase consideration		$ 108,584

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Acquisitions (Details 2) - Rambus $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 26,000
Weighted-average useful life of definite-lived intangible assets acquired	5 years 8 months 12 days
Existing Technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 16,700
Weighted-average useful life of definite-lived intangible assets acquired	5 years
Agreements and Relationship [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 9,300
Weighted-average useful life of definite-lived intangible assets acquired	7 years

XML

Acquisitions (Details 3) - USD ($) $ in Thousands	Sep. 30, 2023	May 04, 2023	Dec. 31, 2022
Business Acquisition [Line Items]
Goodwill	$ 1,500,442		$ 1,374,268
Pulsic. Ltd.
Business Acquisition [Line Items]
Current assets		$ 4,369
Goodwill		47,448
Acquired intangibles		12,400
Other long-term assets		89
Total assets acquired		64,306
Current liabilities		1,553
Long-term liabilities		2,885
Total liabilities assumed		4,438
Total purchase consideration		$ 59,868

XML

Acquisitions (Details 4) - Pulsic. Ltd. $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 12,400
Weighted-average useful life of definite-lived intangible assets acquired	6 years 9 months 18 days
Existing Technology [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 8,000
Weighted-average useful life of definite-lived intangible assets acquired	6 years 2 months 12 days
Agreements and Relationship [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 4,100
Weighted-average useful life of definite-lived intangible assets acquired	8 years
Tradename Trademark and Patents [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived Intangible Assets Acquired	$ 300
Weighted-average useful life of definite-lived intangible assets acquired	6 years

XML

Goodwill and Acquired Intangibles (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Changes in the carrying amount of goodwill
Balance at beginning of period	$ 1,374,268
Goodwill resulting from acquisitions	128,447
Effect of foreign currency translation	(2,273)
Balance at end of period	$ 1,500,442

XML

Goodwill and Acquired Intangibles (Details 1) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	$ 531,226	$ 767,399
Accumulated amortization	(190,409)	(419,582)
Total estimated amortization expense	340,817	347,817
In-process technology	6,800	6,800
Intangible assets, gross carrying amount (excluding goodwill)	538,026	774,199
Acquired intangibles, net	347,617	354,617
Existing Technology [Member]
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	323,359	479,796
Accumulated amortization	(129,807)	(278,851)
Total estimated amortization expense	193,552	200,945
Agreements and Relationships [Member]
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	194,625	274,624
Accumulated amortization	(56,671)	(137,847)
Total estimated amortization expense	137,954	136,777
Tradenames Trademarks And Patents [Member]
Acquired intangibles with finite lives, excluding intangibles fully amortized at end of prior fiscal year
Gross carrying amount	13,242	12,979
Accumulated amortization	(3,931)	(2,884)
Total estimated amortization expense	$ 9,311	$ 10,095

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Goodwill and Acquired Intangibles (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Amortization of acquired intangibles
Cost of product and maintenance	$ 10,991	$ 8,867	$ 31,869	$ 30,906
Amortization of acquired intangibles	4,612	3,946	13,181	13,543
Total amortization of acquired intangibles	$ 15,603	$ 12,813	$ 45,050	$ 44,449

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Goodwill and Acquired Intangibles (Details 3) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Estimated amortization expense
2023 - remaining period	$ 16,309
2024	63,382
2025	50,658
2026	44,879
2027	42,438
2028	38,371
Thereafter	84,780
Total estimated amortization expense	$ 340,817	$ 347,817

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Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	$ 88,032	$ 73,451	$ 238,928	$ 197,190
Cost of product and maintenance
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	1,191	1,046	3,292	2,751
Cost of services
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	1,516	1,331	4,190	3,494
Marketing and sales
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	18,042	14,991	48,819	39,650
Research and development
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	53,013	43,327	142,142	115,516
General and administrative
Share-based compensation expense and allocation by cost [Line Items]
Stock-based compensation expense	$ 14,270	$ 12,756	$ 40,485	$ 35,779

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Stock-Based Compensation (Details Textual) - Stock option and restricted stock grants [Member] $ in Millions	9 Months Ended
	Sep. 30, 2023 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation expense	$ 621.5
Weighted-average vesting period over which unrecognized compensation expense will be recognized	2 years

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Stock Repurchase Program (Details Textuals) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended					6 Months Ended	9 Months Ended
	Sep. 30, 2023		Jun. 30, 2023	Oct. 01, 2022		Sep. 30, 2023	Sep. 30, 2023	Oct. 01, 2022	Aug. 15, 2022
Stock repurchase program
Additional authorized repurchase amount									$ 1,000,000
Shares repurchased	811,000	[1]		959,000	[2]		2,657,000	4,664,000
Treasury stock acquired	$ 125,008			$ 150,013			$ 515,127	$ 720,062
Stock repurchase program, remaining authorized repurchase amount	$ 1,500,000					$ 1,500,000	$ 1,500,000
Share repurchase on open market
Stock repurchase program
Shares repurchased	500,000						1,800,000
Treasury stock acquired	$ 125,000						$ 375,000
Accelerated share repurchase program
Stock repurchase program
Shares repurchased	300,000		600,000			900,000
Treasury stock acquired			$ 140,000
Accelerated share repurchase, prepayment during period			$ 200,000
Stock repurchase program, prepayment during period, derivative settlement	$ 60,000			$ 30,000
Average repurchase price per share						$ 228.26
Shares from equity forward contract settled during the period	276,000			109,000

[1] Includes 276 thousand shares and $60 million equity forward contract from the June 2023 ASR settled in August 2023.

[2] Includes 109 thousand shares and $30 million equity forward contract from the June 2022 ASR settled in September 2022.

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Stock Repurchase Program (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended				9 Months Ended
	Sep. 30, 2023	[1]	Oct. 01, 2022	[2]	Sep. 30, 2023	Oct. 01, 2022
Class of Stock Disclosures [Abstract]
Shares repurchased	811		959		2,657	4,664
Total cost of repurchased shares	$ 185,008		$ 180,013		$ 575,127	$ 750,062

[1] Includes 276 thousand shares and $60 million equity forward contract from the June 2023 ASR settled in August 2023.

[2] Includes 109 thousand shares and $30 million equity forward contract from the June 2022 ASR settled in September 2022.

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Restructuring and Other Termination Benefits (Details Textual) $ in Millions	Sep. 30, 2023 USD ($)
Excess Facilities [Member]
Restructuring Cost and Reserve [Line Items]
Expected restructuring costs expected in future periods	$ 5

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Restructuring and Other Termination Benefits (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Restructuring Reserve [Roll Forward]
Restructuring Charges	$ 11,582	$ 14	$ 11,582	$ 42
Employee Severance and Benefits [Member]
Restructuring Reserve [Roll Forward]
Beginning balance			0
Restructuring Charges			11,582
Payments for Restructuring			(2,620)
Restructuring Reserve, Foreign Currency Translation Gain (Loss)			(117)
Ending balance	$ 8,845		$ 8,845

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Other Income and Expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Other Income and Expenses [Abstract]
Interest income	$ 8,453	$ 3,051	$ 22,253	$ 4,941
Gains (losses) on marketable equity investments	14,339	(408)	14,960	(1,993)
Losses on non-marketable equity investments	(1,050)	(1,246)	(2,225)	(2,786)
Gains (losses) on securities in Non-Qualified Deferred Compensation (“NQDC”) trust	(1,749)	(2,885)	4,556	(11,977)
Losses on foreign exchange	(3,568)	(1,299)	(4,649)	(1,418)
Other expense, net	(319)	(230)	(2,532)	(646)
Other income (expense), net	$ 16,106	$ (3,017)	$ 32,363	$ (13,879)

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Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Earnings Per Share, Basic and Diluted [Abstract]
Net income	$ 254,321	$ 186,305	$ 717,245	$ 608,560
Weighted average common shares used to calculate basic net income per share	269,229	271,131	269,480	271,694
Stock-based awards	3,198	3,826	3,379	3,989
Weighted average common shares used to calculate diluted net income per share (in shares)	272,427	274,957	272,859	275,683
Net income per share - basic (usd per share)	$ 0.94	$ 0.69	$ 2.66	$ 2.24
Net income per share - diluted (usd per share)	$ 0.93	$ 0.68	$ 2.63	$ 2.21

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Net Income Per Share (Details 1) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,935	2,301	2,502	2,226
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	1,866	1,761	1,841	1,485
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	262	514	373	678
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	807	26	288	63

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Investments (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Debt Securities, Available-for-Sale, Unrealized Loss Position [Line Items]
Amortized cost	$ 44,042
Gross accumulated unrealized gains	6
Gross accumulated unrealized losses	(1,421)
Available-for-sale debt securities, fair value	42,627
Mortgage-backed and asset-backed securities
Debt Securities, Available-for-Sale, Unrealized Loss Position [Line Items]
Amortized cost	44,042
Gross accumulated unrealized gains	6
Gross accumulated unrealized losses	(1,421)
Available-for-sale debt securities, fair value	$ 42,627

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Investments (Details 2) $ in Thousands	Sep. 30, 2023 USD ($)
Equity Method Investments and Joint Ventures [Abstract]
Due within 1 year	$ 0
Due after 1 year through 5 years	8,366
Due after 5 years through 10 years	14,174
Due after 10 years	20,087
Total	$ 42,627

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Investments (Details Textuals) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022	Dec. 31, 2022
Schedule of Equity Method Investments [Line Items]
Marketable equity securities	$ 58,411		$ 58,411		$ 4,490
Equity method investments, carrying value	112,600		112,600		117,700
Income (loss) from equity method investments	1,000	$ 1,200	2,200	$ 2,500
Equity securities without readily determinable fair value, book value	$ 2,200		$ 2,200		$ 2,300
Privately held company, equity method
Schedule of Equity Method Investments [Line Items]
Equity method investment, ownership percentage	16.00%		16.00%

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Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Assets
Marketable equity securities	$ 58,411	$ 4,490
Mortgage-backed and asset-backed securities	42,627
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	67,324	55,605
Foreign currency exchange contracts		5,306
Total Assets	612,665	613,774
Liabilities
Foreign currency exchange contracts	10,102
Total Liabilities	10,102
Mortgage-backed and asset-backed securities
Assets
Mortgage-backed and asset-backed securities	42,627
Money Market Funds
Assets
Money market funds	444,303	548,373
Fair Value Measurements, Level 1 [Member]
Assets
Marketable equity securities	58,411	4,490
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	67,324	55,605
Foreign currency exchange contracts		0
Total Assets	570,038	608,468
Liabilities
Foreign currency exchange contracts	0
Total Liabilities	0
Fair Value Measurements, Level 1 [Member] | Mortgage-backed and asset-backed securities
Assets
Mortgage-backed and asset-backed securities	0
Fair Value Measurements, Level 1 [Member] | Money Market Funds
Assets
Money market funds	444,303	548,373
Fair Value Measurements, Level 2 [Member]
Assets
Marketable equity securities	0	0
Securities held in Non-Qualified Deferred Compensation trust, or NQDC	0	0
Foreign currency exchange contracts		5,306
Total Assets	42,627	5,306
Liabilities
Foreign currency exchange contracts	10,102
Total Liabilities	10,102
Fair Value Measurements, Level 2 [Member] | Mortgage-backed and asset-backed securities
Assets
Mortgage-backed and asset-backed securities	42,627
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
Foreign currency exchange contracts		0
Total Assets	0	0
Liabilities
Foreign currency exchange contracts	0
Total Liabilities	0
Fair Value Measurements, Level 3 [Member] | Mortgage-backed and asset-backed securities
Assets
Mortgage-backed and asset-backed securities	0
Fair Value Measurements, Level 3 [Member] | Money Market Funds
Assets
Money market funds	$ 0	$ 0

XML

Fair Value (Details Textuals) - Fair Value, Inputs, Level 3 [Member] $ in Millions	9 Months Ended
	Sep. 30, 2023 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Finite-lived Intangible Assets Acquired	$ 38.4
Technology-Based Intangible Assets | Measurement Input, Discount Rate [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Technological Obsolescence Rate	10.00%
Estimated Royalty Rate	25.00%
Technology-Based Intangible Assets | Measurement Input, Discount Rate [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Technological Obsolescence Rate	13.00%
Estimated Royalty Rate	30.00%
Customer Relationships | Measurement Input, Discount Rate [Member] | Minimum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Customer Retention Rate	80.00%
Valuation Significant Input, Discount Rate	13.50%
Customer Relationships | Measurement Input, Discount Rate [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated Customer Retention Rate	90.00%
Valuation Significant Input, Discount Rate	15.00%

XML

Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Raw materials	$ 154,097	$ 113,982
Finished goods	9,596	14,023
Total inventories	$ 163,693	$ 128,005

XML

Commitments and Contingencies (Details) $ in Thousands	Dec. 31, 2022 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Tax audit assessment	$ 49,000

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accumulated other comprehensive income
Foreign currency translation loss	$ (106,409)	$ (85,863)
Changes in defined benefit plan liabilities	(5,237)	(5,774)
Unrealized losses on investments	(1,415)	0
Total accumulated other comprehensive loss	$ (113,061)	$ (91,637)

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Segment Reporting (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Oct. 01, 2022	Sep. 30, 2023	Oct. 01, 2022
Segment reporting [Line Items]
Total revenue	$ 1,023,094	$ 902,554	$ 3,021,363	$ 2,661,841
United States [Member]
Segment reporting [Line Items]
Total revenue	421,547	392,222	1,241,488	1,174,734
Other Americas [Member]
Segment reporting [Line Items]
Total revenue	15,800	15,165	47,884	39,010
Americas [Member]
Segment reporting [Line Items]
Total revenue	437,347	407,387	1,289,372	1,213,744
China [Member]
Segment reporting [Line Items]
Total revenue	172,022	148,325	523,694	401,460
Other Asia [Member]
Segment reporting [Line Items]
Total revenue	197,831	156,250	558,687	466,891
Asia [Member]
Segment reporting [Line Items]
Total revenue	369,853	304,575	1,082,381	868,351
EMEA [Member]
Segment reporting [Line Items]
Total revenue	158,194	142,983	479,268	431,660
Japan [Member]
Segment reporting [Line Items]
Total revenue	$ 57,700	$ 47,609	$ 170,342	$ 148,086

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Segment Reporting (Details 1) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	$ 541,341	$ 541,830
United States [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	364,932	347,822
Other Americas [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	10,169	7,548
Americas [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	375,101	355,370
China [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	41,386	51,667
Other Asia [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	70,743	73,329
Asia [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	112,129	124,996
EMEA [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	51,291	56,959
Japan [Member]
Summary of long-lived assets by geography
Long-lived assets in individual foreign countries	$ 2,820	$ 4,505

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Subsequent Event (Details) $ in Millions	1 Months Ended
	Oct. 31, 2023 USD ($)
Subsequent Event [Member]
Subsequent Event [Line Items]
Expected merger consideration	$ 35