Cadence Design Systems (CDNS) 10-K risk factor changes: FY2022 vs FY2021

We are unable to accurately predict the full impact that the COVID-19 pandemic will have on our results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic, the impact of COVID-19 [removed: variants,] [added: variants] and the [removed: distribution, acceptance and effectiveness] [added: effects] of [removed: vaccines and] containment measures.

Our [removed: compliance with these measures has impacted our day-to-day operations and could disrupt our] business and operations, as well as that of our [removed: key] customers, [removed: suppliers (including] [added: suppliers,] contract [removed: manufacturers)] [added: manufacturers] and other counterparties, [added: could continue to be disrupted] for an indefinite period of time.

[removed: More generally, the impact of the] [added: The] pandemic [added: has also caused volatility in the financial markets and] may increase the possibility of an extended global economic downturn and extended periods of high inflation, [removed: and has caused volatility in financial markets,] which could [added: continue to] affect demand for our products and [removed: services] [added: services, our ability to collect payments from our customers] and impact our results and financial [removed: condition even after the pandemic is contained and local conditions improve.][added: condition.]

[removed: Also,] [added: A substantial proportion of our software licenses yield revenue recognized over time, which may make it difficult for us to rapidly increase our revenue in future fiscal periods, and means that] a decrease in orders in a given period [removed: could] [added: would] negatively affect our [removed: revenues] [added: revenue] in future [removed: periods, particularly if experienced on a sustained basis, because a substantial proportion of our software licenses yield revenue recognized over time.][added: periods.]

[removed: The] [added: In addition, the] pandemic [added: has had, and] may [removed: also have] [added: have,] the effect of heightening many of the other risks described in this “Risk Factors” [removed: section, including risks associated with our customers and supply chain.][added: section.]

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

We plan our operating expenses based on forecasted revenue, expected business needs and other factors such as [removed: changes in] inflation.

Such methods, estimates and judgments [removed: are, by their nature,] [added: are] subject to substantial risks, uncertainties and assumptions, and factors may arise over time that may lead us to change our methods, estimates and judgments.

Uncertainty [removed: about future] [added: caused by the recent challenging global] political and economic conditions, [added: including the effects of the recent rise in inflation and interest rates, the Russian invasion of Ukraine and the continuing COVID-19 pandemic,] adverse changes to international trade relationships between countries in which we do [removed: business] [added: business, protectionist measures] or future decline in corporate or consumer spending could negatively impact our customers’ businesses, reducing the number of new chip designs and their overall research and development spending, including their spending on our products and services, and as a result decrease demand for our products and services.

Decreased bookings for our products and services, customer bankruptcies, consolidation among our customers, or problems or delays with our hardware suppliers or with the supply or delivery of our hardware products could also adversely affect our ability to grow our business or adversely affect our future [removed: revenues] [added: revenue] and financial results.

For example, [removed: in fiscal 2019,] the [removed: DOC placed certain entities who are our customers on] [added: BIS maintains and frequently updates] the “Entity List,” [removed: limiting] [added: which limits] our ability to deliver products and services to these [removed: entities.][added: entities, some of which are our customers.]

When [removed: certain] customers are on the Entity List or are subject to new or expanded trade restrictions, [removed: such as the expansion in scope by the DOC of the military end-user and military end-use regulations in April 2020 and the foreign-produced direct product rules in August 2020,] it [removed: will have] [added: has] a negative effect on our ability to sell products and provide services to these [removed: customers without first obtaining a license from the BIS.][added: customers.]

In addition, [added: the issuance of] new or expanded trade restrictions, such as the continued expansion of the military end-user and military end-use rule, the foreign-produced direct product rules, or any [removed: future] [added: other] rule that [removed: will prevent] [added: prevents] a class of technology from export to any specific country or countries without a license, [removed: will] [added: could] increase our costs or expenses.

In addition, although customers are not prohibited from paying (and we are not restricted from collecting) for products we previously delivered to them, the credit risks associated with outstanding receivables from customers on the Entity List – including receivables from anti-piracy enforcement efforts and litigation settlements – and other trade restrictions could [removed: increase as a result of these limitations.][added: increase.]

We are unable to predict the duration of the export restrictions imposed with respect to any particular [removed: customer] [added: customer, technology, country] or [added: region or] the long-term effects on our business or our customers’ [removed: business.][added: businesses.]

In addition to export control laws, our global operations are subject to numerous U.S. and foreign laws and regulations, including those related to anti-corruption, [added: anti-bribery,] tax, corporate governance, financial and other disclosures, competition, [added: antitrust,] data [removed: privacy] [added: privacy, data protection] and employment.

- the failure to complete transactions on a timely basis or at all, including as a result of [removed: governmental antitrust] [added: regulatory] approval dynamics;

- the failure to realize, or a delay in realizing, anticipated [removed: benefits such as cost savings and revenue enhancements;][added: benefits;]

- the failure to understand, compete and operate effectively in markets where we have limited [removed: experience;][added: experience or where competitors may have stronger market positions;]

- the failure to integrate, combine or manage acquired products, infrastructure, technologies and businesses [removed: effectively;][added: effectively and customer acceptance of multiple platforms on a temporary or permanent basis;]

- unanticipated costs or assumed liabilities, including those incurred to remediate issues of an acquired company discovered during due diligence or thereafter, such that we cannot realize the anticipated value of the acquisition; [removed: or]

- unwillingness of customers of an acquired business to continue licensing or buying products from [removed: us.][added: us or delays in customer purchases;]

[removed: We may use] [added: -] contingent payments in connection with acquisitions in the [removed: future, and] [added: future where] we may be required to make certain contingent payments without deriving the value we expect to derive from an acquisition in excess of such [removed: payments.][added: payments;]

Volatility of currencies in countries where we conduct business, most notably the U.S. dollar, Chinese renminbi, Japanese yen, European Union euro, British pound and Indian [removed: rupee] [added: rupee,] have had and may in the future have an effect on our revenue or operating results.

Fluctuations in the exchange rate between the U.S. dollar and [removed: the currencies of] other [removed: countries where we conduct business] [added: currencies] could seriously affect our business, operating results or financial condition, including due to inflation, devaluations and currency controls.

For example, if we price our products and services in a [removed: foreign] [added: non-U.S. market in the local] currency, we receive fewer U.S. dollars when [removed: this] [added: the local] currency declines in value relative to the U.S. dollar.

Approximately [removed: 34%] [added: one third] of our total costs and expenses are transacted in foreign currencies.

Our attempts to reduce the effect of foreign currency fluctuations may be unsuccessful, and [removed: significant] exchange rate movements may adversely impact our results of operations as expressed in U.S. dollars.

As a result, from time to time, we may be compelled to respond to or [removed: prosecute] [added: assert] intellectual property infringement claims to protect our rights or defend a customer’s rights.

[removed: Any potential intellectual] [added: Intellectual] property litigation could compel us to do one or more of the following:

We may also be a target of malicious attacks [removed: in an attempt] to gain access to our network, including our Cadence Cloud portfolio, which includes both our managed and customer-managed environments, or data centers or those of our customers or end users; steal proprietary information related to our business, products, services or infrastructure; steal financial data or [removed: assets] [added: assets;] or interrupt our systems and services or those of our customers or others.

In recent years, we have observed, and expect to continue to see, far reaching vulnerabilities, [removed: such as the remote code execution vulnerability in Log4j, an open source component of the Apache Software Foundation, that was widely reported in December 2021 as] [added: including zero-day software vulnerabilities] impacting many systems globally.

Furthermore, we have [added: acquired] and may continue to acquire companies with less sophisticated security measures and that have had or may experience in the future cybersecurity incidents causing business or financial harm.

In the event of an actual or perceived breach of our security, or [removed: the security of one of our vendors,] [added: a vendor's security,] the market perception of the effectiveness of our security measures could be harmed, legal or regulatory actions could be initiated against us and we could suffer damage to our reputation or our business, or lose existing customers and our ability to obtain new customers (including government customers), or suffer harm to our financial condition.

- differing employment practices and labor issues or inability to continue to offer competitive [removed: compensation in certain growing regions;][added: compensation;]

- variations in costs or expenses associated with our international operations, including as a result of changes in foreign tax laws or devaluation of the U.S. dollar relative to other [removed: foreign] currencies; and

[removed: Furthermore, this potential harm is exacerbated because damage] [added: Damage] to or disruptions at our international research and development facilities could have a [removed: more] significant adverse effect on our ability to develop new [added: products] or improve existing [removed: products than other businesses that may only have sales offices or other less critical operations abroad.][added: products.]

Activities that interfere with our international connectivity or operations, such as cyber hacking, [removed: the introduction of a virus into our] computer [removed: systems,] [added: system viruses,] natural disasters, public health emergencies, civil unrest or terrorism, could significantly [removed: interfere with] [added: harm] our business operations.

As of [removed: January 1,] [added: December 31,] 2022, approximately [removed: 55%] [added: 76%] of our cash and cash equivalents balance was held by subsidiaries outside the United States, with the remainder of the balance held by us or our subsidiaries in the United States.

While we believe that the combination of our current U.S. cash and cash equivalents, future U.S. operating cash [removed: flows] [added: flows, cash available under our revolving credit facility] and other cash that may be accessible to us [added: through financing arrangements] on attractive terms are sufficient to meet our ongoing U.S. operating expenses and debt repayment obligations, we cannot accurately predict the full impact that [removed: COVID-19] [added: evolving macroeconomic and geopolitical conditions] may have on our cash flows.

Our business could also be impacted by political, economic and legal actions and conditions in regions in which our suppliers or customers operate, including Taiwan, which serves as a central hub for the technology industry supply chain.

Further, while our ability to do business has not been materially affected, political or economic conflicts between various global actors, and responsive measures that have been or could be taken, have created and can further create significant global economic uncertainty that could prolong or expand such conflicts, which could have a lasting impact on regional and global economies and harm our business and operating results.

Anticipated or actual changes in trade restrictions could also affect customer purchasing behaviors.

We have been cooperating with BIS and responding to the subpoena.

The application and interpretation of these laws and policies can also be uncertain and change over time, and we may need to adjust our policies and procedures accordingly.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

As we acquire and invest in companies or technologies, we may not realize the expected business or financial benefits and these acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the market value of our common stock.

As part of our business strategy, we invest in, and acquire complementary businesses, joint venture, services and technologies and intellectual property rights.

We continue to evaluate such opportunities and expect to continue to make such investments and acquisitions in the future.

Acquisitions and other transactions, arrangements and investments involve numerous risks and could create unforeseen operating difficulties and expenditures, including:

- potential identified or unknown security vulnerabilities in acquired companies, technologies or products that expose us to additional security risks or delay our ability to integrate them into our organization and offerings;

- brand or reputational harm;

- difficulties in integrating and assimilating acquired employees, which may lead to retention risk with respect to both acquired and existing employees;

- diversion of financial resources and management’s attention from day-to-day business;

- difficulties managing any strategic investment or collaboration that we do not control or for which we do not have sole decision-making authority;

- impairment charges or other adverse accounting outcomes related to acquisitions or strategic investments;

- the failure or cessation of operations by entities in which we made strategic investments or collaboration agreements;

- the loss of some or all of the value of our investment;

- additional stock-based compensation issued or assumed in connection with the acquisition, including the impact on stockholder dilution and our results of operations; and

- the tax effects of any such acquisitions including related integration and business operation changes, and assessment of the impact on the realizability of our future tax assets or liabilities

Any of these risks could harm our business or negatively impact our results of operations.

In addition, to facilitate future acquisitions or investments, we may seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock.

For example, if we finance acquisitions or investments by issuing equity or convertible or other debt securities or loans, our existing stockholders may be diluted, or we could face constraints related to the terms of, and repayment obligation related to, the incurrence of indebtedness that could affect the market price of our common stock.

Future acquisitions or investments may also require the expenditure of substantial cash resources.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may be impaired by trade tensions and increased global scrutiny of foreign investments and acquisitions and investments in the technology sector.

For example, the U.S. and several other countries have adopted, or are considering adopting restrictions on transactions involving foreign investments.

Antitrust authorities in a number of countries have also reviewed acquisitions and investments in the technology industry with increased scrutiny.

Governments may continue to adopt or tighten restrictions of this nature, some of which may apply to acquisitions, investments or integrations of businesses by us, and such restrictions or government actions could negatively impact our business and financial results.

If we price our products and services in a non-U.S. market in U.S. dollars, a decrease in value of the local currency relative to the U.S. dollar could result in our prices being uncompetitive in that market.

For example, some customers have requested we defend and indemnify them against claims asserted in various legal proceedings by Bell Semiconductor LLC (“Bell Semi”), a patent monetization entity, based on Bell Semi’s allegation that the customers’ use of one or more features of certain Cadence products infringe one or more of six patents held by Bell Semi.

We have offered to defend some of our customers consistent with the terms of our license agreements.

We have been subject to intellectual property infringement claims and actions alleging that Cadence products and technologies infringe others' intellectual property rights.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

Furthermore, the risk of state-supported and geopolitical-related cybersecurity incidents may increase due to geopolitical incidents, such as the Russian invasion of Ukraine.

The loss, misuse or theft of personal data collected, used, stored or transferred by us, vendors or other third parties in the course of running our business could result in business or financial harm, damage to our reputation and legal or regulatory proceedings.

- political and economic conditions, such as global economic downturns or recessions in the regions in which we do business, as well as macroeconomic and policy impacts of political instability and armed conflicts;

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

As a result of the pandemic, we have experienced, and may continue to experience, inefficiencies, delays and additional costs in our product development, business operations and hardware product deliveries, as well as volatility in the demand for our products and services and the availability of supplies.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees are still working remotely as of February 22, 2022.

However, we have begun a limited pilot program for employees to begin voluntarily returning to work in certain jurisdictions with lower rates of new COVID-19 cases and higher vaccination rates.

The disruptions to our operations caused by COVID-19 may result in inefficiencies, delays and additional costs in our product development, sales, marketing and customer service efforts that we cannot fully mitigate through remote or other alternative work arrangements.

In addition, we have experienced, and may continue to experience, some volatility in our hardware product delivery times due to delays in obtaining access to customer sites.

Volatile surges in demand and in infection rates may also result in the unavailability, delay, or congestion of, and increased costs for, transportation and the raw materials, inputs, and other matters used in our business and by our customers.

Moreover, access by our employees to our laboratory facilities that are necessary for the development of certain IP products has been and may in the future be disrupted due to local conditions.

For example, we may be unable to collect receivables from those customers significantly impacted by COVID-19 and, in fact, have received and may continue to receive, requests from our customers to delay their payments to us, while we continue to provide services to these customers.

We will continue to evaluate the nature and extent of the impact of COVID-19 to our business.

A substantial proportion of our software licenses yield revenue recognized over time, which may make it difficult for us to rapidly increase our revenue in future fiscal periods, and means that a decrease in orders in a given period would negatively affect our revenues in future periods.

Additionally, other companies may be added to the Entity List and/or be subject to new or expanded trade restrictions and restrictions may be imposed against specific countries.

We are cooperating with BIS and are in the process of responding to the subpoena as well as conducting an internal review.

We have acquired and expect to acquire other companies and businesses and may not realize the expected benefits of these acquisitions.

We have acquired and expect to acquire other companies and businesses in order to expand our product offerings and enter into new markets.

Our future revenue growth and expansion of our business is dependent on our successful integration of our acquisitions.

We may incur significant costs in connection with potential transactions, including acquisitions that are not consummated.

Potential and completed acquisitions involve a number of risks.

If any of the following acquisition-related risks occur, our business, operating results or financial condition could be adversely impacted:

- difficulties in integrating or retaining employees;

- the substantial diversion of management’s attention from day-to-day business when evaluating and negotiating these transactions and integrating an acquired company or business;

In a number of our completed acquisitions, we have agreed to make future payments, either in the form of employee retention bonuses or contingent purchase price payments, based on the achievement of specified milestones.

The performance goals pursuant to which these future payments may be made generally relate to the achievement by the acquired company or business, or by the employees who joined us with the acquired company or business, of certain specified bookings, revenue, run rate, product proliferation, product development or employee retention goals during a specified period following completion of the applicable acquisition.

The specific performance goal levels and amounts and timing of employee bonuses or contingent purchase price payments vary with each acquisition.

Future acquisitions may involve issuances of stock as full or partial payment of the purchase price for the acquired company or business, grants of restricted stock, restricted stock units or stock options to employees of the acquired companies or businesses (which may be dilutive to existing stockholders), expenditure of substantial cash resources or the incurrence of a material amount of debt.

We make and expect to make strategic investments and may not realize the expected benefits of these investments.

We have made and expect to make strategic investments in which we have a minority equity interest and do not have operational control.

These strategic investments may also involve collaboration agreements that further and complement our strategy and marketing efforts.

We may not be able to realize the expected benefits of these investments, and the related collaborations may be difficult to manage without sole decision-making authority and the economic or business interests in these collaborations may become inconsistent with our interests.

These challenges could have an adverse effect on our business, operating results or financial condition.

The accounting applied to strategic investments depends on a number of factors, including, but not limited to, our percentage of ownership and the level of our influence over the entity.

Losses experienced by these strategic investment entities or associated impairment charges could adversely impact our operating results and the value of our investment.

In addition, if these entities fail and cease operations, we may lose the value of our investment and shared profits.

If we price our products and services in U.S. dollars, the decrease in value of a local currency results in an increase in the price for our products and services compared to those products of our competitors that are priced in this currency.

This could result in our prices being uncompetitive in markets where business is transacted in the local currency.

The risk of infringement and related indemnification claims associated with design IP products that are incorporated into a customer product broadly used by consumers may be higher than the risk associated with our software products.

In settling these claims, we may be required to enter into royalty or licensing agreements with the third parties claiming infringement.

These royalty or licensing agreements may not be available on terms favorable to us or at all.

Being compelled to enter into a license agreement with unfavorable terms could seriously harm our business, operating results or financial condition.

- political and economic instability;

In October 2021, we expanded our vaccine policy to require that U.S. employees be fully vaccinated against COVID-19, or obtain an accommodation, by December 2021, and the implementation of this policy may result in difficulty attracting or retaining employees.

We may suffer a disruption in the supply of certain hardware components if we are unable to purchase sufficient components on a timely basis or at all for any reason.

Our products and services are designed to give our customers a competitive edge in their development of [added: integrated] ICs, SoCs, and increasingly sophisticated electronic devices and systems.

Our [removed: strategy, which we call Intelligent System Design,] [added: strategy] is to provide the technology necessary for our customers to develop [removed: electronic] products across a variety of vertical markets including consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, [removed: industrial] [added: industrial, healthcare] and [removed: healthcare.][added: life sciences.]

Historically, the industry that provided the tools used by IC engineers was referred to as [removed: EDA.][added: Electronic Design Automation (“EDA”).]

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

[removed: These] [added: During fiscal 2022, these] acquisitions increased expenses, including amortization of acquired intangible [removed: assets,] [added: assets] more than [removed: revenue during fiscal 2021.][added: revenue.]

For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Products and Product [removed: Strategy.”][added: Categories.”]

During [removed: the second quarter of] fiscal 2021, we offered a voluntary retirement program to eligible employees in the United States.

As of [removed: January 1,] [added: December 31,] 2022, liabilities related to the voluntary retirement program were [removed: $17.5] [added: $0.4] million and were included in accounts payable and accrued liabilities [removed: and other long-term liabilities] on our consolidated balance sheet.

[removed: We] [added: While we] are unable to accurately predict the full impact that COVID-19 [added: and its continuing repercussions] will have on our results of operations, financial condition, liquidity and cash [removed: flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures] [added: flows, we have implemented policies] and [removed: the distribution, acceptance] [added: practices that have enabled us to support critical operations] and [removed: effectiveness of vaccines.][added: execute our strategy.]

Despite [removed: the challenges] [added: these challenges,] the [removed: COVID-19] pandemic has [removed: posed to our operations, it did] not [removed: have] [added: had] a material, adverse impact on our results of operations, financial condition, liquidity or cash [removed: flows during fiscal 2021.][added: flows.]

[removed: See Part I, Item 1A, “Risk Factors” for] [added: For] additional information on the [added: potential] impact of [removed: COVID-19] [added: macroeconomic conditions] on our [removed: business.][added: business, see Part I, Item 1A, “Risk Factors.”]

The discussion of our fiscal [removed: 2021] [added: 2022] consolidated results of operations include year-over-year comparisons to fiscal [removed: 2020] [added: 2021] for revenue, cost of revenue, operating expenses, operating margin, other non-operating expenses, income taxes and cash flows.

For a discussion of the fiscal [removed: 2020] [added: 2021] changes compared to fiscal [removed: 2019,] [added: 2020,] see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January [removed: 2, 2021,] [added: 1, 2022,] filed on February 22, [removed: 2021.][added: 2022.]

Results of operations for fiscal [removed: 2021,] [added: 2022,] as compared to fiscal [removed: 2020,] [added: 2021,] reflect the following:

- continued investment in research and development activities [removed: focused on expanding] and [removed: enhancing our product portfolio;] [added: technical sales support;] and

[removed: In any fiscal year, we expect that] [added: Generally,] between 85% and 90% of our annual revenue [removed: will be] [added: is] characterized as recurring revenue.

[removed: Revenue characterized as recurring] [added: Recurring revenue] includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of [removed: hardware and revenue recognized at varying points in time over the term of our IP Access Agreements that include non-cancellable commitments from customers.][added: hardware.]

The following table shows our revenue for fiscal [removed: 2021] [added: 2022] and [removed: 2020] [added: 2021] and the change in revenue between years:

| | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | | | | | | | [removed: 2021] [added: 2022] vs. [removed: 2020] [added: 2021] | | | | | | | | | | | | | | | | | | | | |

| Product and maintenance | | | $ | [removed: 2,812.9] [added: 3,340.2] | | | | | $ | [removed: 2,536.6] [added: 2,812.9] | | | | | | | | | | | $ | [removed: 276.3] [added: 527.3] | | | | | [removed: 11] [added: 19] | | % | | | | | | | | | | | | |

| Total revenue | | | $ | [removed: 2,988.2] [added: 3,561.7] | | | | | $ | [removed: 2,682.9] [added: 2,988.2] | | | | | | | | | | | $ | [removed: 305.3] [added: 573.5] | | | | | [removed: 11] [added: 19] | | % | | | | | | | | | | | | |

Product and maintenance revenue increased during fiscal [removed: 2021,] [added: 2022,] as compared to fiscal [removed: 2020,] [added: 2021,] primarily [removed: because of] [added: due to] increased revenue [removed: from] [added: in] each of our five product categories.

This growth [removed: is] [added: was] driven by our customers investing in new, complex designs for their products [removed: including] [added: that include the design of] electronic systems for consumer, hyperscale computing, [added: mobile,] 5G communications, automotive, aerospace and defense, industrial and healthcare.

No one customer accounted for 10% or more of total revenue during fiscal [removed: 2021] [added: 2022] or [removed: 2020.][added: 2021.]

The following table shows the percentage of product and related maintenance revenue contributed by each of our five product categories and services during fiscal [removed: 2021] [added: 2022] and [removed: 2020:][added: 2021:]

| Custom IC Design and Simulation | | | [removed: 23] [added: 22] | | % | | | | [removed: 25] [added: 23] | | % | | | | | | |

| Digital IC Design and Signoff | | | [removed: 29] [added: 28] | | % | | | | 29 | | % | | | | | | |

| Functional Verification, including Emulation and Prototyping Hardware | | | [removed: 24] [added: 26] | | % | | | | [removed: 22] [added: 24] | | % | | | | | | |

| System Design and Analysis | | | [removed: 11] [added: 12] | | % | | | | [removed: 10] [added: 11] | | % | | | | | | |

| United States | | | $ | [removed: 1,293.0] [added: 1,577.9] | | | | | $ | [removed: 1,096.3] [added: 1,293.0] | | | | | | | | | | | $ | [removed: 196.7] [added: 284.9] | | | | | [removed: 18] [added: 22] | | % | | | | | | | | | | | | |

| Other Americas | | | [removed: 42.1] [added: 53.1] | | | | | | [removed: 43.6] [added: 42.1] | | | | | | | | | | | | [removed: (1.5)] [added: 11.0] | | | | | | [removed: (3)] [added: 26] | | % | | | | | | | | | | | | |

| Other Asia | | | [removed: 566.8] [added: 629.5] | | | | | | [removed: 487.4] [added: 566.8] | | | | | | | | | | | | [removed: 79.4] [added: 62.7] | | | | | | [removed: 16] [added: 11] | | % | | | | | | | | | | | | |

| Europe, Middle East and Africa | | | [removed: 523.4 | | | | | | 469.8 | | | | | | | | | | | | 53.6 | | | | | | 11] [added: 16] | | % | | | | [added: 17] | | [added: %] | | | | | | |

| United States | | | [removed: 43] [added: 44] | | % | | | | [removed: 41] [added: 43] | | % | | | | | | |

| Other Americas | | | 2 | | % | | | | [removed: 1] [added: 2] | | % | | | | | | |

| China | | | [removed: 13] [added: 15] | | % | | | | [removed: 15] [added: 13] | | % | | | | | | |

| Other Asia | | | [removed: 19] [added: 18] | | % | | | | [removed: 18] [added: 19] | | % | | | | | | |

| Europe, Middle East and Africa | | | [removed: 17] [added: 582.4] | | [removed: %] | | | | [removed: 18] [added: 523.4] | | [added: | | | | | | | | | | 59.0 | | | | | | 11 | |] % | | | | | | | [added: | | | | | |]

| Japan | | | [removed: 6] [added: 5] | | % | | | | [removed: 7] [added: 6] | | % | | | | | | |

| Cost of product and maintenance | | | [removed: $ | 222.6 | | | | | $ | 231.0 | | | | | | | | | | | $ | (8.4) | | | | | (4)] [added: 8] | | % | | | | [added: 8] | | [added: %] | | | | | | |

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 IP that turn design concepts into reality.

Consistent with our Intelligent System Design strategy, we completed our acquisitions of OpenEye and Future Facilities during fiscal 2022.

Both of these acquisitions are expected to add important new technologies and capabilities to our System Design and Analysis technology portfolio that we believe will enhance our ability to pursue attractive opportunities in the markets we serve.

Fiscal Year End

On September 7, 2022, our Board of Directors approved a change in our fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year.

Our fiscal quarters will end on March 31, June 30, and September 30.

The fiscal year change is effective beginning with our 2023 fiscal year, which began on January 1, 2023.

Macroeconomic Environment

Our business is subject to the effects of expanded trade restrictions, the ongoing geopolitical conflict in Ukraine and other areas of the world, the COVID-19 pandemic, volatility in foreign currency exchange rates, global inflation and the rise in interest rates.

We have been impacted by expanded trade restrictions, including restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the BIS’s “Unverified List” and regulations governing the sale of certain technologies.

Based on our current assessments, we expect the impact of these expanded trade restrictions 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.

Since its inception, the COVID-19 pandemic has posed a variety of challenges to our day-to-day operations.

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.

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

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

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

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

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 following table shows the percentage of our revenue that is classified as recurring or up-front for fiscal 2022 and 2021:

| | | | 2022 | | | | | | 2021 | | | | | | | | |

| Revenue recognized over time | | | 83 | | % | | | | 85 | | % | | | | | | |

| Revenue from arrangements with non-cancelable commitments | | | 2 | | % | | | | 3 | | % | | | | | | |

| Recurring revenue | | | 85 | | % | | | | 88 | | % | | | | | | |

| Up-front revenue | | | 15 | | % | | | | 12 | | % | | | | | | |

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 | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | December 31, 2022 | | | | | | October 1, 2022 | | | | | | July 2, 2022 | | | | | | April 2, 2022 | | | | | | January 1, 2022 | | |

| Recurring revenue | | | 85 | | % | | | | 86 | | % | | | | 87 | | % | | | | 87 | | % | | | | 88 | | % |

| Up-front revenue | | | 15 | | % | | | | 14 | | % | | | | 13 | | % | | | | 13 | | % | | | | 12 | | % |

| Total | | | 100 | | % | | | | 100 | | % | | | | 100 | | % | | | | 100 | | % | | | | 100 | | % |

| Services | | | 221.5 | | | | | | 175.3 | | | | | | | | | | | | 46.2 | | | | | | 26 | | % | | | | | | | | | | | | |

Services revenue increased during fiscal 2022, as compared to fiscal 2021, primarily due to increased revenue from our custom IP offerings.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

| | | | 2022 | | | | | | 2021 | | | | | | | | |

We offer software, hardware, services and reusable IC design blocks, which are commonly referred to as IP.

During fiscal 2021, we continued to execute our Intelligent System Design strategy with our announcement of the next generation of hardware-software products in our Functional Verification product category, which consists of the integrated Palladium Z2 emulation and Protium X2 prototyping systems, to accelerate hardware debug and software validation.

We also completed our acquisitions of Belgium-based NUMECA, a leader in computational fluid dynamics (“CFD”), and Pointwise Inc, a leading provider of CFD Meshing technology.

The addition of these technologies and talent broadens our System Design and Analysis portfolio and expertise.

We expect to make cash payments to settle these liabilities through fiscal 2023, including $17.0 million that is expected to be paid in the next twelve months.

COVID-19 Impact

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic.

The effects of the ongoing global pandemic have been widespread and have resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders and business limitations and shutdowns.

Our efforts to comply with these containment measures have impacted our day-to-day operations and could disrupt our business and operations, as well as that of our key customers, suppliers (including contract manufacturers) and other counterparties, for an indefinite period of time.

To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees are still working remotely as of January 1, 2022.

However, we have begun a limited pilot program for employees to begin voluntarily returning to work in certain jurisdictions with lower rates of new COVID-19 cases and higher vaccination rates.

Since its inception, the COVID-19 pandemic has caused some volatility in our delivery timing for our hardware and IP products to certain customers.

Many of our customers’ employees are working remotely, and, in some cases, we have experienced delivery lead times that are longer than normal because of delays in getting access to customer sites to complete our deliveries.

In other cases, the amount of our hardware and IP products that we have been able to deliver has been greater than we originally anticipated at the beginning of the respective period.

We will continue to evaluate the nature and extent of the impact of COVID-19 on our business.

Our fiscal years are 52- or 53-week periods ending on the Saturday closest to December 31.

Fiscal 2021 was a 52-week fiscal year, compared to 2020, which was a 53-week fiscal year.

The additional week in fiscal 2020 resulted in additional revenue of approximately $45 million and additional expense, including stock-based compensation and amortization of acquired intangibles, of approximately $35 million.

- increased product and maintenance revenue, primarily from growth in our software and hardware product offerings;

- higher selling costs, including additional investment in technical sales support in response to our customers’ increasing technological requirements.

| Services | | | 175.3 | | | | | | 146.3 | | | | | | | | | | | | 29.0 | | | | | | 20 | | % | | | | | | | | | | | | |

Services revenue increased during fiscal 2021, as compared to fiscal 2020, primarily due to the timing of performance obligations being fulfilled for certain customer contracts during fiscal 2021.

| | | | 2021 | | | | | | 2020 | | | | | | | | |

| IP | | | 13 | | % | | | | 14 | | % | | | | | | |

| China | | | 378.1 | | | | | | 406.6 | | | | | | | | | | | | (28.5) | | | | | | (7) | | % | | | | | | | | | | | | |

| Japan | | | 184.8 | | | | | | 179.2 | | | | | | | | | | | | 5.6 | | | | | | 3 | | % | | | | | | | | | | | | |

The increase in revenue in the United States and Other Asia during fiscal 2021, as compared to fiscal 2020, was attributable to growth in revenue from each of our five product categories.

The decrease in revenue in China during fiscal 2021, as compared to fiscal 2020, was due to higher-than-typical volume in China during fiscal 2020.

During fiscal 2020, we experienced an increase in demand for our emulation and prototyping hardware and IP product offerings from our customers in China that resulted in a larger percentage of total revenue coming from that geography.

The increase in revenue in Europe, Middle East and Africa during fiscal 2021, as compared to fiscal 2020, was attributable to growth in revenue from System Design and Analysis, Digital IC Design and Custom IC Design product offerings.

| Home office-related expenses | | | (2.0) | | | | | | | | |

This increase was partially offset by reduced home office-related expenses associated with the transition to a remote work environment during fiscal 2020 due to the COVID-19 pandemic.

| Home office-related costs | | | (5.3) | | | | | | | | |

The increase in contributions to non-profit organizations is the result of our continued commitment to support charitable initiatives.

During the fourth quarter of fiscal 2021, we launched the Cadence Giving Foundation, a stand-alone, non-profit organization that was established to partner with other charitable initiatives to give back to the communities where we live and work.

The Cadence Giving Foundation will also support critical needs in areas such as diversity, equity and inclusion, environmental sustainability and STEM education.

Amortization of acquired intangibles increased during fiscal 2021, as compared to fiscal 2020, primarily due to intangibles assets acquired from Pointwise and Numeca during fiscal 2021.

Restructuring

We have initiated restructuring plans in recent years, most recently in fiscal 2020, to better align our resources with our business strategy.

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.

In certain countries where we may invoice customers in the local currency, our [removed: revenues benefit] [added: revenue benefits] from a weaker dollar and are adversely affected by a stronger 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 [removed: revenues] [added: revenue] from existing contracts.

These forward contracts are not designated as accounting hedges, so the unrealized gains and losses are recognized in other [removed: income,] [added: 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.

The following table provides information about our foreign currency forward exchange contracts as of [removed: January 1,] [added: December 31,] 2022.

All of these forward contracts matured during [removed: February, 2022.][added: February 2023.]

| European [removed: Union] [added: union] euro | | | $ | [removed: 140.8] [added: 139.5] | | | | | [removed: 0.88] [added: 0.95] | | |

| Estimated fair value | | | $ | [removed: (0.3)] [added: 5.3] | | | | | | | |

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

Our exposure to market risk for changes in interest rates relates primarily to our portfolio of cash and cash equivalents and [added: any] balances outstanding on our [removed: revolving credit facility, if any.][added: 2021 Credit Facility and 2025 Term Loan.]

The carrying value of our interest-bearing instruments approximated fair value as of [removed: January 1,] [added: December 31,] 2022.

Interest rates under our [removed: revolving credit facility] [added: 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.

Interest rates for our [removed: revolving credit facility] [added: 2021 Credit Facility and 2025 Term Loan] can fluctuate based on changes in market interest rates and in [removed: an] interest rate [removed: margin] [added: margins] that [removed: varies] [added: vary] based on [added: the credit ratings of] our [removed: consolidated leverage ratio.][added: unsecured debt.]

Assuming all loans were fully drawn and we were to fully exercise our right to increase borrowing capacity under our [removed: revolving credit facility,] [added: 2021 Credit Facility and made no prepayments on our 2025 Term Loan,] each quarter point change in interest rates would result in a [removed: $2.6] [added: $3.4] million change in annual interest expense on our indebtedness under our [removed: revolving credit facility.][added: 2021 Credit Facility and 2025 Term Loan.]

For an additional description of the [removed: revolving credit facility,] [added: 2021 Credit Facility and 2025 Term Loan,] see Note [removed: 3] [added: 5] in the notes to consolidated financial statements.

See Note [removed: 8] [added: 14] in the notes to consolidated financial statements for an additional description of these investments.

| British pound | | | 105.7 | | | | | | 0.83 | | |

| Japanese yen | | | 68.3 | | | | | | 135.15 | | |

| Israeli shekel | | | 58.5 | | | | | | 3.42 | | |

| Indian rupee | | | 35.9 | | | | | | 81.84 | | |

| Swedish krona | | | 26.4 | | | | | | 10.35 | | |

| Chinese renminbi | | | 18.2 | | | | | | 6.99 | | |

| Canadian dollar | | | 15.5 | | | | | | 1.33 | | |

| South Korean Won | | | 9.9 | | | | | | 1,303.03 | | |

| Taiwan dollar | | | 7.1 | | | | | | 30.47 | | |

| Singapore dollar | | | 4.0 | | | | | | 1.37 | | |

| Total | | | $ | 489.0 | | | | | | | |

As of January 1, 2022, our foreign currency exchange contracts had an aggregate principal amount of $469.4 million, and an estimated fair value of negative $0.3 million.

We have performed sensitivity analyses as of December 31, 2022 and January 1, 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 $4.2 million and $5.7 million as of December 31, 2022 and January 1, 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 $7.2 million and $8.5 million as of December 31, 2022 and January 1, 2022, respectively.

As of December 31, 2022, there were $100.0 million of borrowings outstanding under our 2021 Credit Facility and $300.0 million of borrowings outstanding under our 2025 Term Loan.

| British pound | | | 104.3 | | | | | | 0.74 | | |

| Israeli shekel | | | 84.1 | | | | | | 3.10 | | |

| Japanese yen | | | 57.5 | | | | | | 114.50 | | |

| Indian rupee | | | 29.4 | | | | | | 75.23 | | |

| Swedish krona | | | 22.3 | | | | | | 9.01 | | |

| Canadian dollar | | | 11.7 | | | | | | 1.26 | | |

| Chinese renminbi | | | 7.3 | | | | | | 6.43 | | |

| Taiwan dollar | | | 5.6 | | | | | | 27.62 | | |

| Other | | | 6.4 | | | | | | N/A | | |

| Total | | | $ | 469.4 | | | | | | | |

As of January 1, 2022, there were no borrowings outstanding under our revolving credit facility.

Statements including, but not limited to, statements regarding the extent and timing of future revenues and expenses and customer demand, statements regarding the deployment of our products and services, statements regarding our reliance on third parties, statements regarding the impact on our business of the [added: macroeconomic environment, including but not limited to, the expanded trade restrictions, the ongoing geopolitical conflict in Ukraine and other areas of the world, the] COVID-19 [removed: pandemic] [added: pandemic, volatility in foreign currency exchange rates, global inflation] and [removed: related public health measures or mandates,] [added: the rise in interest rates, statements regarding the impact of government actions] and other [removed: and] 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.

Our [removed: strategy, which we call] Intelligent System [removed: Design,] [added: Design strategy] is to provide the computational software technologies necessary for our electronic system and semiconductor customers to develop products across a variety of vertical markets including consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, [removed: industrial] [added: industrial, healthcare] and [removed: healthcare.][added: life sciences.]

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

[removed: ][added: ]

It includes tools and services used for system design of the packages that encapsulate the ICs and the PCBs, system simulation which includes electromagnetic, electro-thermal and other [removed: multi-physics] [added: multiphysics] analysis necessary as part of optimizing the full system’s performance, radio frequency (“RF”) and microwave systems, and embedded software.

[removed: On December 15, 2021,] [added: |] Anirudh Devgan [removed: assumed the role of] [added: | | | | | | 53 | | | | | |] President and Chief Executive Officer [removed: of Cadence, replacing Lip-Bu Tan.][added: | | |]

Products and Product [removed: Strategy][added: Categories]

Our Verification [removed: Suite™] [added: Suite] includes four primary verification engines, starting with the JasperGold® Formal Verification Platform and Xcelium™ Parallel Logic Simulation Platform, which are used in the early stages of design verification, often at the IP and subsystem level.

Our system design and analysis offerings are used by our customers to develop PCBs and advanced IC packages and to analyze electromagnetic, electro-thermal and other [removed: multi-physics] [added: multiphysics] effects.

Our Clarity™ 3D Solver for electromagnetic and power electronics analysis and simulation, as well as our Celsius™ Thermal Solver, provide the foundation for [removed: multi-physics] [added: multiphysics] analysis technology, with complete electrical-thermal co-simulation for electronic systems from ICs to physical enclosures.

[removed: The addition of our] [added: Our Fidelity™] CFD [added: Software] solution expands our ability to meet the growing design challenges of electronic and systems companies.

Our [added: comprehensive suite of] CFD [removed: solution enables] [added: solutions enable] our customers to extend their [removed: multi-physics] [added: multiphysics] analysis workflows to address simulation and analysis challenges for applications such as aerodynamics, hydrodynamics, propulsion, [added: turbomachinery,] heat transfer, and combustion.

The Cadence Cloud portfolio, consisting of Cadence-managed and customer-managed environments for electronic product developers using the scalability of the cloud, continues to expand, with additional cloud-ready products added or under development in fiscal [removed: 2021.][added: 2022, including cloud-based platforms for e-commerce and for molecular sciences.]

Some customers enter into [removed: a non-cancellable IP Access Agreement (“IPAA”),] [added: 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 [removed: IP] products or services.

| | | | [removed: 2021] [added: 2022] | | | | | | | | | | | | [removed: 2020] [added: 2021] | | | | | | | | | | | | [removed: 2019] [added: 2020] | | | | | | | | |

| Product and maintenance | | | $ | [removed: 2,813] [added: 3,340] | | | | | 94 | | % | | | | $ | [removed: 2,537] [added: 2,813] | | | | | [removed: 95] [added: 94] | | % | | | | $ | [removed: 2,204] [added: 2,537] | | | | | [removed: 94] [added: 95] | | % |

| Services | | | [removed: 175] [added: 222] | | | | | | 6 | | % | | | | [removed: 146] [added: 175] | | | | | | [removed: 5] [added: 6] | | % | | | | [removed: 132] [added: 146] | | | | | | [removed: 6] [added: 5] | | % |

| Total revenue | | | $ | [removed: 2,988] [added: 3,562] | | | | | | | | | | | $ | [removed: 2,683] [added: 2,988] | | | | | | | | | | | $ | [removed: 2,336] [added: 2,683] | | | | | | | |

[removed: In any fiscal year, we expect] [added: Generally,] between 85% and 90% of our annual revenue [removed: to be] [added: is] characterized as recurring revenue.

[removed: Revenue characterized as recurring] [added: Recurring revenue] includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, [added: and] operating leases of [removed: hardware and revenue recognized at varying points in time over the term of our IP Access Agreements that include non-cancellable commitments from customers.][added: hardware.]

Up-front revenue is primarily generated by [removed: our] sales of emulation and prototyping hardware and individual IP licenses.

The percentage of our recurring and up-front revenue [removed: and fluctuations in revenue within our geographies are] [added: may be] impacted by delivery of hardware and IP products to [removed: our] [added: its] customers in any single fiscal period.

For additional information and analysis on our revenue, including revenue by geography, see the discussion under “Results of Operations” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For our fiscal [removed: 2021] [added: 2022] results of operations and our financial position as of [removed: January 1,] [added: December 31,] 2022, see Part IV, Item 15, “Exhibits and Financial Statement Schedules.”

Contracted but unsatisfied performance obligations were approximately [removed: $4.4] [added: $5.8] billion as of [removed: January 1,] [added: December 31,] 2022, which included [removed: $119.5 million] [added: $0.4 billion] of [removed: non-cancellable IPAA] [added: 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 [removed: January 1,] [added: December 31,] 2022, we expected to recognize approximately 55% of the contracted but unsatisfied performance obligations, excluding [removed: non-cancellable IPAA] [added: non-cancelable] commitments, as revenue over the next 12 [removed: months and the remainder thereafter.][added: months.]

These include, but are not limited to, laws and regulations related to [removed: import and export] [added: trade] controls, [removed: anti-corruption, competition,] [added: anti-corruption and anti-bribery, and] data [removed: privacy,] [added: privacy] and [added: data protection, as well as antitrust, competition, and] employment.

[removed: For example, we] [added: - *Trade controls.* We] are subject to [removed: the] [added: laws and] regulations [removed: of] [added: in] the United States and [removed: certain] other jurisdictions [removed: in selling or shipping] [added: concerning the sale and shipment of] our products and technology outside the United States and to foreign nationals, including tariffs, trade protection measures, import or export licensing requirements, sanctions and other trade [removed: regulations, such as the U.S. Export Administration Regulations including “Entity List” restrictions imposed by the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“DOC”).][added: regulations.]

[removed: Import/export] [added: Trade] regulations limiting or banning sales into certain countries or to certain companies have impacted our ability to transact business in certain countries and with certain customers.

Future [removed: export] [added: trade] regulations may also impact our ability to transact business with certain customers and in certain countries and may restrict certain non-U.S. person employees from performing their duties at Cadence without first obtaining appropriate authorization if their duties involve an export, reexport, or transfer of export-controlled technology.

[removed: In addition, as a result of our international operations, we] [added: - *Anti-corruption and anti-bribery.* We] are subject to laws and [removed: regulations, such as] [added: regulations in] the [added: United States and other jurisdictions concerning anti-corruption and anti-bribery, including the] U.S. Foreign Corrupt Practices [removed: Act,] [added: Act and] the U.K. Bribery [removed: Act and other local laws, prohibiting] [added: Act, which prohibit] corrupt payments to governmental [removed: officials, as well as anti-competition regulations.][added: officials and bribes to other persons.]

[added: - *Data privacy and data protection.*] We are [removed: also] subject to laws and regulations [removed: governing data privacy] in the [removed: U.S.] [added: United States] and other [removed: jurisdictions, such as] [added: jurisdictions governing data privacy and data protection, including] the General Data Protection Regulation [removed: (“GDPR”)] in the European [removed: Union.][added: Union, which regulate our collection, handling and use of personal information.]

[removed: These] [added: The] laws and regulations [added: to which we] are [added: subject are] complex and may change or develop over time, sometimes with limited [added: or no advance] notice.

These include U.S. based companies such as Keysight Technologies, [removed: Inc.] [added: Inc., Schrödinger, Inc.,] and CEVA, Inc., and foreign companies such as Altium Limited (Australia), Zuken Ltd. (Japan), and emerging competitors in China like Huada Empyrean, [added: Avatar,] Xpeedic, X-EPIC, Primarius [removed: Technologies] [added: Technologies, Univista,] and Giga-DA.

As of [removed: January 1,] [added: December 31,] 2022, we had approximately [removed: 9,300] [added: 10,200] employees.

These partnerships allow us to [removed: do more targeted] [added: conduct] recruiting, outreach and engagement with [removed: these] [added: diverse] communities.

- Inclusion groups for Black, Latinx, [removed: LGBTQ+, Veterans] [added: Asian American] and [added: Pacific Islanders, Indian and South Asian, LGBTQ+, Veterans,] women employees and allies which host networking events to foster dialogue and promote awareness.

To promote [added: employee] health and well-being [removed: during] [added: throughout] the [removed: challenges brought on by] [added: course of] the COVID-19 pandemic, we [added: have] provided employees with [added: a flexible, hybrid work model,] additional time off to focus on themselves and their [removed: families] [added: families, wellness initiatives (including physical, emotional] and [removed: provided] [added: mental health), and] global employee assistance programs to connect employees and their families with resources, information and counseling to address the challenges caused by the pandemic, such as increased anxiety or stress.

Our [removed: High-Performance] [added: High Performance] Culture portal provides our employees with valuable resources such as a comprehensive online Learning Management program with training and development tools on a broad range of topics and skills.

This stand-alone, non-profit foundation [removed: will partner] [added: partners] with other charitable initiatives to support critical needs in areas such as diversity, equity and inclusion, environmental sustainability and science, technology, engineering, and mathematics (“STEM”) education.

We encourage you to review our [removed: 2020] [added: 2021] Sustainability Report (located at www.cadence.com), and our [removed: 2021] [added: 2022] Sustainability Report when released, for more information on [removed: all of] our Environmental, Social and Governance (“ESG”) initiatives.

Business Strategy

Consistent with our Intelligent System Design strategy, we completed several acquisitions during fiscal 2022 that we believe enhances our talent, our System Design and Analysis technology portfolio and our ability to pursue attractive opportunities in the markets we serve.

This includes our acquisition of OpenEye Scientific Software, Inc. (“OpenEye”), a leading provider of computational molecular modeling and simulation software used by pharmaceutical and biotechnology companies for drug discovery.

The addition of OpenEye’s technologies and experienced team, with its deep scientific expertise, broadens our System Design and Analysis technology portfolio and expands our total addressable market, bringing our computational software expertise to apply proven algorithmic, simulation and solver advances to life sciences.

We also acquired FFG Holdings Limited (“Future Facilities”), a provider of electronics cooling analysis and energy performance optimization solutions for data center design and operations using physics-based 3D digital twins.

The addition of Future Facilities broadens our multiphysics system analysis and computational fluid dynamics (“CFD”) product offerings to serve a wide breadth of hyperscale, enterprise data center, managed service and colocation providers.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

The addition of our computational molecular modeling and simulation solution with our acquisition of OpenEye leverages our computational software expertise and expands our ability to address various challenges of drug discovery faced by pharmaceutical and biotechnology companies.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

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.

Contracted but unsatisfied performance obligations will fluctuate from period to period depending on the timing of contract renewals and duration of the contracts.

The contracted, but unsatisfied performance obligations expected to generate revenue in the next 12 months include hardware orders that were previously undelivered due to production constraints.

Due to increasing hardware production capacity, these performance obligations are expected to be satisfied in fiscal 2023.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

U.S. Export Administration Regulations include “Entity List” and “Unverified List” restrictions imposed by the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce (“DOC”).

BIS frequently adds entities to the Entity List and the Unverified List, some of which have been Cadence customers.

BIS also issues new rules and regulations from time to time.

In 2022, BIS issued new restrictions concerning advanced node IC production in China and extended controls to additional technologies, including electronic computer-aided design software specially designed for the development of ICs with Gate-All-Around Field-Effect Transistor structure.

Developments or other changes in laws or regulations or how they are interpreted or enforced have had, and may continue to have, a negative impact on our business and increase our compliance-related expenditures.

For additional information regarding risks related to laws and regulations, including existing restrictions imposed by BIS, as well as international relations, see Item 1A, “Risk Factors.”

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

- University programs to increase diversity that actively engages Historically Black Colleges and Universities and Hispanic Serving Institutions including grants for diversity based scholarships.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

The contents of our Sustainability Reports and website are not part of or incorporated by reference into this Annual Report on Form 10-K.

On September 7, 2022, our Board of Directors approved a change in our fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year.

The fiscal year change is effective beginning with our 2023 fiscal year, which began on January 1, 2023.

Our fiscal quarters will end on March 31, June 30, and September 30.

No transition report is required in connection with this change.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

| Karna Nisewaner | | | | | | 48 | | | | | | Corporate Vice President, General Counsel and Corporate Secretary | | |

KARNA NISEWANER has served as Corporate Vice President, General Counsel and Corporate Secretary of Cadence since September 2022.

From May 2011 to September 2022, Ms. Nisewaner held several positions at Cadence, most recently as Corporate Vice President and Deputy General Counsel beginning in May 2019.

Prior to joining Cadence, Ms. Nisewaner held in-house counsel roles at Intuit from 2007 to 2011 and IBM from 2003 to 2007.

Ms. Nisewaner was in private practice focused on intellectual property at Finnegan, Henderson, Farbow, Garrett, and Dunner, LLP from 2001 to 2003.

Ms. Nisewaner has a B.S.E. in civil engineering and operations research from Princeton University and her J.D. from UCLA School of Law.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

During fiscal 2021, we continued to execute our Intelligent System Design strategy and expanded our product offerings and solutions into computational fluid dynamics (“CFD”) with our acquisitions of Belgium-based NUMECA International, a leader in CFD technology, and Pointwise, Inc, a leading provider of CFD meshing technology.

The addition of these technologies and talent broadens our System Design and Analysis portfolio and expertise.

Chief Executive Officer Transition

Prior to his role as Chief Executive Officer, Dr. Devgan served as President of Cadence.

Concurrently, Mr. Tan transitioned to the role of Executive Chair.

Our Learning and Support System gives customers easy access to extensive online training and webinar offerings to support the increase in the number of our customers’ employees working from home.

We also have a strategic partnership with Green Hills Software, an industry leader in embedded safety and security software solutions.

We may incur significant expenditures in future periods related to compliance, which could restrict our business operations.

For more information on risks related to these regulations, see the relevant discussions throughout Item 1A, "Risk Factors."

The vast majority of our employees continued to work from home during fiscal 2021.

Through these initiatives, we plan to reduce our scope 1 and scope 2 greenhouse gas emissions 25% by 2025, over our 2019 baseline.

| Anirudh Devgan | | | | | | 52 | | | | | | President and Chief Executive Officer | | |

| Neil Zaman | | | | | | 53 | | | | | | Senior Vice President and Chief Revenue Officer | | |

ALINKA FLAMINIA has served as Senior Vice President, Chief Legal Officer and Corporate Secretary of Cadence since June 2020.

Prior to joining Cadence, Ms. Flaminia served as Senior Vice President, General Counsel and Corporate Secretary of Mellanox Technologies Ltd., a supplier of intelligent interconnect solutions, from September 2016 until its acquisition by NVIDIA Corporation in April 2020.

She also served as General Counsel and Corporate Secretary of PMC-Sierra, Inc., a semiconductor company, from 2007 until its acquisition by Microsemi Corporation in 2016.

Ms. Flaminia has a B.A. from Yale University, and a J.D. from Colorado University, School of Law.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

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.

Bell Semi seeks 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.

Cadence is not named as a respondent or defendant in any of the aforementioned actions; however, certain respondents and defendants are Cadence customers and have sought defense and indemnity from Cadence regarding Bell Semi’s allegations.

Cadence has 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.

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.

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

For the fiscal year ended [removed: January 1,] [added: December 31,] 2022

[removed: ][added: ]

[removed: (408)\-943-1234][added: (408) 943-1234]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter ended July [removed: 3, 2021] [added: 2, 2022] was approximately [removed: $38,179,000,000.][added: $40,982,000,000.]

On [removed: February 5, 2022,] [added: January 31, 2023,] approximately [removed: 277,336,000] [added: 272,940,000] shares of the Registrant’s Common Stock, $0.01 par value, were outstanding.

Portions of the definitive proxy statement for Cadence Design Systems, Inc.’s [removed: 2022] [added: 2023] Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

| Item 1. | | | [removed: [Business](#i090043fcb1da400aaac214abf3d3ee98_13)] [added: [Business](#i97343246becb48fa926dba3a366e932a_13)] | | | [removed: [1](#i090043fcb1da400aaac214abf3d3ee98_13)] [added: [1](#i97343246becb48fa926dba3a366e932a_13)] | | |

| Item 1A. | | | [Risk [removed: Factors](#i090043fcb1da400aaac214abf3d3ee98_22)] [added: Factors](#i97343246becb48fa926dba3a366e932a_22)] | | | [removed: [11](#i090043fcb1da400aaac214abf3d3ee98_22)] [added: [11](#i97343246becb48fa926dba3a366e932a_22)] | | |

| Item 1B. | | | [Unresolved Staff [removed: Comments](#i090043fcb1da400aaac214abf3d3ee98_25)] [added: Comments](#i97343246becb48fa926dba3a366e932a_25)] | | | [removed: [25](#i090043fcb1da400aaac214abf3d3ee98_25)] [added: [25](#i97343246becb48fa926dba3a366e932a_25)] | | |

| Item 2. | | | [removed: [Properties](#i090043fcb1da400aaac214abf3d3ee98_28)] [added: [Properties](#i97343246becb48fa926dba3a366e932a_28)] | | | [removed: [25](#i090043fcb1da400aaac214abf3d3ee98_28)] [added: [25](#i97343246becb48fa926dba3a366e932a_28)] | | |

| Item 3. | | | [Legal [removed: Proceedings](#i090043fcb1da400aaac214abf3d3ee98_31)] [added: Proceedings](#i97343246becb48fa926dba3a366e932a_31)] | | | [removed: [26](#i090043fcb1da400aaac214abf3d3ee98_31)] [added: [25](#i97343246becb48fa926dba3a366e932a_31)] | | |

| Item 4. | | | [Mine Safety [removed: Disclosures](#i090043fcb1da400aaac214abf3d3ee98_34)] [added: Disclosures](#i97343246becb48fa926dba3a366e932a_34)] | | | [removed: [26](#i090043fcb1da400aaac214abf3d3ee98_34)] [added: [26](#i97343246becb48fa926dba3a366e932a_34)] | | |

| Item 5. | | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#i090043fcb1da400aaac214abf3d3ee98_40)] [added: Securities](#i97343246becb48fa926dba3a366e932a_40)] | | | [removed: [27](#i090043fcb1da400aaac214abf3d3ee98_40)] [added: [27](#i97343246becb48fa926dba3a366e932a_40)] | | |

| Item 6. | | | [removed: [\[Reserved\]](#i090043fcb1da400aaac214abf3d3ee98_52)] [added: [\[Reserved\]](#i97343246becb48fa926dba3a366e932a_52)] | | | [removed: [28](#i090043fcb1da400aaac214abf3d3ee98_52)] [added: [28](#i97343246becb48fa926dba3a366e932a_52)] | | |

| Item 7. | | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i090043fcb1da400aaac214abf3d3ee98_55)] [added: Operations](#i97343246becb48fa926dba3a366e932a_55)] | | | [removed: [28](#i090043fcb1da400aaac214abf3d3ee98_55)] [added: [28](#i97343246becb48fa926dba3a366e932a_55)] | | |

| Item 7A. | | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#i090043fcb1da400aaac214abf3d3ee98_85)] [added: Risk](#i97343246becb48fa926dba3a366e932a_82)] | | | [removed: [41](#i090043fcb1da400aaac214abf3d3ee98_85)] [added: [42](#i97343246becb48fa926dba3a366e932a_82)] | | |

| Item 8. | | | [Financial Statements and Supplementary [removed: Data](#i090043fcb1da400aaac214abf3d3ee98_88)] [added: Data](#i97343246becb48fa926dba3a366e932a_85)] | | | [removed: [42](#i090043fcb1da400aaac214abf3d3ee98_88)] [added: [43](#i97343246becb48fa926dba3a366e932a_85)] | | |

| Item 9. | | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#i090043fcb1da400aaac214abf3d3ee98_91)] [added: Disclosure](#i97343246becb48fa926dba3a366e932a_88)] | | | [removed: [42](#i090043fcb1da400aaac214abf3d3ee98_91)] [added: [43](#i97343246becb48fa926dba3a366e932a_88)] | | |

| Item 9A. | | | [Controls and [removed: Procedures](#i090043fcb1da400aaac214abf3d3ee98_94)] [added: Procedures](#i97343246becb48fa926dba3a366e932a_91)] | | | [removed: [42](#i090043fcb1da400aaac214abf3d3ee98_94)] [added: [43](#i97343246becb48fa926dba3a366e932a_91)] | | |

| Item 9B. | | | [Other [removed: Information](#i090043fcb1da400aaac214abf3d3ee98_97)] [added: Information](#i97343246becb48fa926dba3a366e932a_94)] | | | [removed: [43](#i090043fcb1da400aaac214abf3d3ee98_97)] [added: [44](#i97343246becb48fa926dba3a366e932a_94)] | | |

| Item 9C. | | | [Disclosure Regarding Foreign Jurisdictions that Prevent [removed: Inspections](#i090043fcb1da400aaac214abf3d3ee98_1884)] [added: Inspections](#i97343246becb48fa926dba3a366e932a_97)] | | | [removed: [43](#i090043fcb1da400aaac214abf3d3ee98_1884)] [added: [44](#i97343246becb48fa926dba3a366e932a_97)] | | |

| Item 10. | | | [Directors, Executive Officers and Corporate [removed: Governance](#i090043fcb1da400aaac214abf3d3ee98_103)] [added: Governance](#i97343246becb48fa926dba3a366e932a_103)] | | | [removed: [44](#i090043fcb1da400aaac214abf3d3ee98_103)] [added: [45](#i97343246becb48fa926dba3a366e932a_103)] | | |

| Item 11. | | | [Executive [removed: Compensation](#i090043fcb1da400aaac214abf3d3ee98_106)] [added: Compensation](#i97343246becb48fa926dba3a366e932a_106)] | | | [removed: [44](#i090043fcb1da400aaac214abf3d3ee98_106)] [added: [45](#i97343246becb48fa926dba3a366e932a_106)] | | |

| Item 12. | | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#i090043fcb1da400aaac214abf3d3ee98_109)] [added: Matters](#i97343246becb48fa926dba3a366e932a_109)] | | | [removed: [44](#i090043fcb1da400aaac214abf3d3ee98_109)] [added: [45](#i97343246becb48fa926dba3a366e932a_109)] | | |

| Item 13. | | | [Certain Relationships and Related Transactions and Director [removed: Independence](#i090043fcb1da400aaac214abf3d3ee98_112)] [added: Independence](#i97343246becb48fa926dba3a366e932a_112)] | | | [removed: [44](#i090043fcb1da400aaac214abf3d3ee98_112)] [added: [45](#i97343246becb48fa926dba3a366e932a_112)] | | |

| Item 14. | | | [Principal Accountant Fees and [removed: Services](#i090043fcb1da400aaac214abf3d3ee98_115)] [added: Services](#i97343246becb48fa926dba3a366e932a_115)] | | | [removed: [44](#i090043fcb1da400aaac214abf3d3ee98_115)] [added: [45](#i97343246becb48fa926dba3a366e932a_115)] | | |

| Item 15. | | | [Exhibits and Financial Statement [removed: Schedules](#i090043fcb1da400aaac214abf3d3ee98_121)] [added: Schedules](#i97343246becb48fa926dba3a366e932a_121)] | | | [removed: [45](#i090043fcb1da400aaac214abf3d3ee98_121)] [added: [46](#i97343246becb48fa926dba3a366e932a_121)] | | |

| Item 16. | | | [Form 10-K [removed: Summary](#i090043fcb1da400aaac214abf3d3ee98_214)] [added: Summary](#i97343246becb48fa926dba3a366e932a_211)] | | | [removed: [85](#i090043fcb1da400aaac214abf3d3ee98_214)] [added: [88](#i97343246becb48fa926dba3a366e932a_211)] | | |

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022

| | | | [Signatures](#i97343246becb48fa926dba3a366e932a_214) | | | [89](#i97343246becb48fa926dba3a366e932a_214) | | |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

| | | | [Signatures](#i090043fcb1da400aaac214abf3d3ee98_217) | | | [86](#i090043fcb1da400aaac214abf3d3ee98_217) | | |

We own land and buildings at our [added: corporate] headquarters located in San Jose, California.

As of [removed: January 1,] [added: December 31,] 2022, the total square footage of our owned buildings was approximately [removed: 1,010,000.][added: 1,227,000.]

We also own properties in New Mexico and India.

We also own buildings in India.

[Table of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

As of [removed: February 5, 2022,] [added: January 31, 2023,] we had [removed: 384] [added: 357] registered stockholders and approximately [removed: 340,000] [added: 490,000] beneficial owners of our common stock.

The graph assumes that the value of the investment in our common stock and in each index on December [removed: 31, 2016] [added: 30, 2017] (including reinvestment of dividends) was $100 and tracks it each year thereafter on the last day of our fiscal year through [removed: January 1,] [added: December 31,] 2022 and, for each index, on the last day of the calendar year.

[removed: ][added: ]

| | | | | | | [removed: 12/31/2016] [added: 12/30/2017] | | | | | | [removed: 12/30/2017] [added: 12/29/2018] | | | | | | [removed: 12/29/2018] [added: 12/28/2019] | | | | | | [removed: 12/28/2019] [added: 1/2/2021] | | | | | | [removed: 1/2/2021] [added: 1/1/2022] | | | | | | [removed: 1/1/2022] [added: 12/31/2022] | | |

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

As of [removed: the end of fiscal 2020,] [added: December 31, 2022,] approximately [removed: $739 million remained available under] [added: $1.1 billion of] the [removed: previously announced] [added: share repurchase] authorization [added: remained available] to repurchase shares of our common stock.

The following table presents repurchases made under our current authorization and shares surrendered by employees to satisfy income tax withholding obligations during the three months ended [removed: January 1,] [added: December 31,] 2022:

| Period | | | Total Number of Shares Purchased (1) | | | | | | Average Price Paid Per Share (2) | | | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs [added: (3)] | | | | | | Maximum Dollar Value of Shares Authorized for Repurchase Under Publicly Announced Plan or Program (1) (In millions) | | |

*$100 invested on 12/30/17 in stock or index, including reinvestment of dividends.

Indexes calculated on a month-end basis.

Copyright© 2023 Standard & Poor's, a division of S&P Global.

All rights reserved.

| Cadence Design Systems, Inc. | | | | | | $ | 100.00 | | | | | $ | 103.63 | | | | | $ | 168.08 | | | | | $ | 326.23 | | | | | $ | 445.60 | | | | | $ | 384.12 | |

| Nasdaq Composite | | | | | | 100.00 | | | | | | 97.16 | | | | | | 132.81 | | | | | | 192.47 | | | | | | 235.15 | | | | | | 158.65 | | |

| S&P 500 | | | | | | 100.00 | | | | | | 95.62 | | | | | | 125.72 | | | | | | 148.85 | | | | | | 191.58 | | | | | | 156.89 | | |

| S&P 500 Information Technology | | | | | | 100.00 | | | | | | 99.71 | | | | | | 149.86 | | | | | | 215.63 | | | | | | 290.08 | | | | | | 208.30 | | |

We are authorized to repurchase shares of our common stock under a publicly announced program most recently increased by our Board of Directors on August 11, 2022.

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 share repurchase authorization does not obligate us to acquire a minimum amount of shares, does not have an expiration date and may be modified, suspended or terminated without prior notice.

| October 2, 2022 - November 5, 2022 | | | 1,379,968 | | | | | | $ | 151.75 | | | | | 1,361,665 | | | | | | $ | 1,170 | |

| November 6, 2022 - December 3, 2022 | | | 304,525 | | | | | | $ | 160.06 | | | | | 292,586 | | | | | | $ | 1,123 | |

| December 4, 2022 - December 31, 2022 | | | 298,895 | | | | | | $ | 164.25 | | | | | 284,350 | | | | | | $ | 1,077 | |

| Total | | | 1,983,388 | | | | | | $ | 154.91 | | | | | 1,938,601 | | | | | | | | |

(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 11, 2022.

| Cadence Design Systems, Inc. | | | | | | $ | 100.00 | | | | | $ | 165.82 | | | | | $ | 171.85 | | | | | $ | 278.71 | | | | | $ | 540.96 | | | | | $ | 738.90 | |

| Nasdaq Composite | | | | | | 100.00 | | | | | | 129.64 | | | | | | 125.96 | | | | | | 172.17 | | | | | | 249.51 | | | | | | 304.85 | | |

| S&P 500 | | | | | | 100.00 | | | | | | 121.83 | | | | | | 116.49 | | | | | | 153.17 | | | | | | 181.35 | | | | | | 233.41 | | |

| S&P 500 Information Technology | | | | | | 100.00 | | | | | | 138.83 | | | | | | 138.43 | | | | | | 208.05 | | | | | | 299.37 | | | | | | 402.73 | | |

In August 2021, our Board of Directors increased the prior authorization to repurchase shares of our common stock by authorizing an additional $1 billion.

As of January 1, 2022, approximately $1.1 billion of the share repurchase authorization remained available to repurchase shares of our common stock.

| October 3, 2021 - November 6, 2021 | | | 273,361 | | | | | | $ | 160.04 | | | | | 258,000 | | | | | | $ | 1,195 | |

| November 7, 2021 - December 4, 2021 | | | 206,571 | | | | | | $ | 182.03 | | | | | 188,200 | | | | | | $ | 1,161 | |

| December 5, 2021 - January 1, 2022 | | | 202,711 | | | | | | $ | 182.44 | | | | | 188,800 | | | | | | $ | 1,126 | |

| Total | | | 682,643 | | | | | | $ | 173.34 | | | | | 635,000 | | | | | | | | |

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 [removed: January 1,] [added: December 31,] 2022.

Based on their evaluation [removed: as of January 1, 2022,] our CEO and CFO have concluded [removed: that] [added: that, as of December 31, 2022,] our disclosure controls and procedures were effective 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.

There were no changes in our internal control over financial reporting during the fiscal quarter ended [removed: January 1,] [added: December 31,] 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

Our management assessed the effectiveness of our internal control over financial reporting as of [removed: January 1,] [added: December 31,] 2022.

Our management has concluded that, as of [removed: January 1,] [added: December 31,] 2022, our internal control over financial reporting is effective based on these criteria.

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

Not applicable.

None.

The information required by Item 10 as to directors is incorporated herein by reference from the sections entitled “Proposal 1 - Election of Directors” and, as applicable, “Security Ownership of Certain Beneficial Owners and Management - Delinquent Section 16(a) Reports” in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

The information required by Item 10 as to Cadence’s code of ethics is incorporated herein by reference from the section entitled “Corporate Governance - Code of Business Conduct” in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

The information required by Item 10 as to the director nomination process and Cadence’s Audit Committee is incorporated by reference from the section entitled “Board of Directors - Committees of the Board” in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

The information required by Item 11 is incorporated herein by reference from the sections entitled “Board of Directors - Components of Director Compensation,” “Board of Directors - Director Compensation for Fiscal [removed: 2021,”] [added: 2022,”] “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Compensation of Executive Officers,” “Potential Payments Upon Termination or Change In Control,” and “Pay Ratio Disclosure” in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

The information required by Item 12 is incorporated herein by reference from the sections entitled “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

The information required by Item 13 is incorporated herein by reference from the sections entitled “Certain Transactions” and “Board of Directors - Director Independence” in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

The information required by Item 14 is incorporated herein by reference from the section entitled “Fees Billed to Cadence by the Independent Registered Public Accounting Firm During Fiscal [removed: 2021] [added: 2022] and [removed: 2020”] [added: 2021”] in Cadence’s definitive proxy statement for its [removed: 2022] [added: 2023] Annual Meeting of Stockholders.

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

| | | | [removed: [Reports] [added: [Report] of Independent Registered Public Accounting [removed: Firms](#i090043fcb1da400aaac214abf3d3ee98_124)] [added: Firm](#i97343246becb48fa926dba3a366e932a_124)] (Auditor Firm [removed: IDs 238 & 185)] [added: ID 238)] | | | [removed: [46](#i090043fcb1da400aaac214abf3d3ee98_124)] [added: [47](#i97343246becb48fa926dba3a366e932a_124)] | | |

| | | | [Consolidated Balance Sheets as of [removed: January 1,] [added: December 31,] 2022 and January [removed: 2, 2021](#i090043fcb1da400aaac214abf3d3ee98_127)] [added: 1, 2022](#i97343246becb48fa926dba3a366e932a_127)] | | | [removed: [49](#i090043fcb1da400aaac214abf3d3ee98_127)] [added: [49](#i97343246becb48fa926dba3a366e932a_127)] | | |

| | | | [Consolidated Income Statements for the three fiscal years ended [removed: January 1, 2022](#i090043fcb1da400aaac214abf3d3ee98_130)] [added: December 31, 2022](#i97343246becb48fa926dba3a366e932a_130)] | | | [removed: [50](#i090043fcb1da400aaac214abf3d3ee98_130)] [added: [50](#i97343246becb48fa926dba3a366e932a_130)] | | |

| | | | [Consolidated Statements of Comprehensive Income for the three fiscal years ended [removed: January 1, 2022](#i090043fcb1da400aaac214abf3d3ee98_133)] [added: December 31, 2022](#i97343246becb48fa926dba3a366e932a_133)] | | | [removed: [51](#i090043fcb1da400aaac214abf3d3ee98_133)] [added: [51](#i97343246becb48fa926dba3a366e932a_133)] | | |

| | | | [Consolidated Statements of Stockholders’ Equity for the three fiscal years ended [removed: January 1, 2022](#i090043fcb1da400aaac214abf3d3ee98_136)] [added: December 31, 2022](#i97343246becb48fa926dba3a366e932a_136)] | | | [removed: [52](#i090043fcb1da400aaac214abf3d3ee98_136)] [added: [52](#i97343246becb48fa926dba3a366e932a_136)] | | |

| | | | [Consolidated Statements of Cash Flows for the three fiscal years ended [removed: January 1, 2022](#i090043fcb1da400aaac214abf3d3ee98_139)] [added: December 31, 2022](#i97343246becb48fa926dba3a366e932a_139)] | | | [removed: [53](#i090043fcb1da400aaac214abf3d3ee98_139)] [added: [53](#i97343246becb48fa926dba3a366e932a_139)] | | |

| | | | [Notes to Consolidated Financial [removed: Statements](#i090043fcb1da400aaac214abf3d3ee98_142)] [added: Statements](#i97343246becb48fa926dba3a366e932a_142)] | | | [removed: [54](#i090043fcb1da400aaac214abf3d3ee98_142)] [added: [54](#i97343246becb48fa926dba3a366e932a_142)] | | |

© [removed: 2022] [added: 2023] Cadence Design Systems, Inc. All rights reserved worldwide.

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

We have audited the accompanying consolidated balance sheets of Cadence Design Systems, Inc. and its subsidiaries (the “Company”) as of [removed: January 1,] [added: December 31,] 2022 and January [removed: 2, 2021,] [added: 1, 2022,] and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for [added: each of] the [added: three] years [removed: then ended,] [added: in the period ended December 31, 2022,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of [removed: January 1,] [added: December 31,] 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of [removed: January 1,] [added: December 31,] 2022 and January [removed: 2, 2021,] [added: 1, 2022,] and the results of its operations and its cash flows for [added: each of] the [added: three] years [removed: then] [added: in the period] ended [added: December 31, 2022] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of [removed: January 1,] [added: December 31,] 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Our [removed: audits] [added: audit] of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

As described in Note 2 and Note [removed: 5] [added: 3] to the consolidated financial statements, the Company enters into contracts that can include various combinations of licenses, products, and services, some of which are distinct and are accounted for as separate performance obligations.

For the year ended [removed: January 1,] [added: December 31,] 2022, the Company’s total revenue was [removed: $2.988] [added: $3.562] billion.

[removed: January 1,] [added: December 31,] 2022 and January [removed: 2, 2021][added: 1, 2022]

| | | | [added: December 31, 2022 | | | | | |] January 1, 2022 | | | | | | January 2, 2021 | | |

| Cash and cash equivalents [added: at beginning of year] | | | $ | 1,088,940 | | | | | $ | 928,432 | | [added: | | | $ | 705,210 | |]

| Receivables, net | | | [removed: 337,596] [added: 486,710] | | | | | | [removed: 338,487] [added: 337,596] | | |

| Inventories | | | [removed: 115,721] [added: 128,005] | | | | | | [removed: 75,956] [added: 115,721] | | |

| Prepaid expenses and other | | | [removed: 173,512] [added: 209,727] | | | | | | [removed: 135,712] [added: 173,512] | | |

| Total current assets | | | [removed: 1,715,769] [added: 1,706,767] | | | | | | [removed: 1,478,587] [added: 1,715,769] | | |

| Property, plant and equipment, net | | | [removed: 305,911] [added: 371,451] | | | | | | [removed: 311,125] [added: 305,911] | | |

| Goodwill | | | [removed: 928,358] [added: 1,374,268] | | | | | | [removed: 782,087] [added: 928,358] | | |

| Acquired intangibles, net | | | [removed: 233,265] [added: 354,617] | | | | | | [removed: 210,590] [added: 233,265] | | |

| Deferred taxes | | | [removed: 763,770] [added: 853,691] | | | | | | [removed: 732,290] [added: 763,770] | | |

| Other assets | | | [removed: 439,226] [added: 476,277] | | | | | | [removed: 436,106] [added: 439,226] | | |

| Total assets | | | $ | [removed: 4,386,299] [added: 5,137,071] | | | | | $ | [removed: 3,950,785] [added: 4,386,299] | |

| Accounts payable and accrued liabilities | | | [removed: $] [added: 557,158] | [removed: 417,283] | | | | | [removed: $] [added: 417,283] | [removed: 349,951] | |

| Current portion of deferred revenue | | | [removed: 553,942] [added: 690,538] | | | | | | [removed: 446,857] [added: 553,942] | | |

| Total current liabilities | | | [removed: 971,225] [added: 1,347,696] | | | | | | [removed: 796,808] [added: 971,225] | | |

| Long-term portion of deferred revenue | | | [removed: 101,148] [added: 91,524] | | | | | | [removed: 107,064] [added: 101,148] | | |

| Long-term debt | | | [removed: 347,588] [added: 648,078] | | | | | | [removed: 346,793] [added: 347,588] | | |

| Other long-term liabilities | | | [removed: 225,663] [added: 304,660] | | | | | | [removed: 207,102] [added: 225,663] | | |

| Total long-term liabilities | | | [removed: 674,399] [added: 1,044,262] | | | | | | [removed: 660,959] [added: 674,399] | | |

| Common stock – $0.01 par value; authorized 600,000 shares; issued and outstanding shares: [removed: 276,796] [added: 272,675] and [removed: 278,941,] [added: 276,796,] respectively | | | [removed: 2,467,701] [added: 2,765,673] | | | | | | [removed: 2,217,939] [added: 2,467,701] | | |

| Treasury stock, at cost; [removed: 52,363] [added: 56,485] shares and [removed: 50,219] [added: 52,363] shares, respectively | | | [removed: (2,740,003)] [added: (3,824,163)] | | | | | | [removed: (2,057,829)] [added: (2,740,003)] | | |

| Retained earnings | | | [removed: 3,046,288] [added: 3,895,240] | | | | | | [removed: 2,350,333] [added: 3,046,288] | | |

| Accumulated other comprehensive loss | | | [removed: (33,311)] [added: (91,637)] | | | | | | [removed: (17,425)] [added: (33,311)] | | |

| [(a) 3. Exhibits](#i97343246becb48fa926dba3a366e932a_208) | | | | | | [86](#i97343246becb48fa926dba3a366e932a_208) | | |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

February 13, 2023

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

| Cash and cash equivalents | | | $ | 882,325 | | | | | $ | 1,088,940 | |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

For the three fiscal years ended December 31, 2022

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

For the three fiscal years ended December 31, 2022

| Net income | | | — | | | | | | — | | | | | | — | | | | | | 848,952 | | | | | | — | | | | | | $ | 848,952 | |

| Purchase of treasury stock | | | (6,602) | | | | | | — | | | | | | (1,020,091) | | | | | | — | | | | | | — | | | | | | $ | (1,020,091) | |

| Equity forward contract | | | — | | | | | | (12,035) | | | | | | (17,965) | | | | | | — | | | | | | — | | | | | | $ | (30,000) | |

| Balance, December 31, 2022 | | | 272,675 | | | | | | $ | 2,765,673 | | | | | $ | (3,824,163) | | | | | $ | 3,895,240 | | | | | $ | (91,637) | | | | | $ | 2,745,113 | |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

For the three fiscal years ended December 31, 2022

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| Net income | | | 848,952 | | | | | | 695,955 | | | | | | 590,644 | | |

| Proceeds from term loan | | | 300,000 | | | | | | — | | | | | | — | | |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

For the three fiscal years ended December 31, 2022

During fiscal 2022, Cadence’s Board of Directors approved a change in Cadence’s 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 will end on March 31, June 30, and September 30.

The adoption of this standard did not impact acquired contract assets or liabilities from business combinations that occurred prior to the date of adoption, and the impact in current and future periods will depend on the contract assets and contract liabilities acquired.

For business combinations completed during fiscal 2022, Cadence recognized deferred revenue of $11.8 million from the acquired businesses as if Cadence had originated the contracts in accordance with Topic 606 rather than at fair value.

For additional information relating to Cadence’s acquisitions, see Note 6 in the notes to consolidated financial statements.

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

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

The fair value of market-based performance stock awards is calculated using a Monte Carlo simulation model and takes into account the same input assumptions as the Black-Scholes model, as well as the possibility that the market conditions may not be satisfied.

Cadence recognizes stock-based compensation expense on the graded-vesting method for market-based performance stock awards.

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

| | | | 2022 | | | | | | 2021 | | | | | | 2020 | | |

| IP | | | 12 | | % | | | | 13 | | % | | | | 14 | | % |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)

Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations.

| [(a) 3. Exhibits](#i090043fcb1da400aaac214abf3d3ee98_211) | | | | | | [83](#i090043fcb1da400aaac214abf3d3ee98_211) | | |

_____________

Report of Independent Registered Public Accounting Firm

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

February 22, 2022

To the Stockholders and Board of Directors

Cadence Design Systems, Inc.:

*Opinion on the Consolidated Financial Statements*

We have audited the accompanying consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year ended December 28, 2019, and the related notes (collectively, the consolidated financial statements) of Cadence Design Systems, Inc. and subsidiaries (the Company).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 28, 2019, in conformity with U.S. generally accepted accounting principles.

*Basis for Opinion*

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provided a reasonable basis for our opinion.

/s/ KPMG LLP

We served as the Company’s auditor from 2002 to 2020.

Santa Clara, California

February 24, 2020

| Balance, December 29, 2018 | | | 280,015 | | | | | | $ | 1,936,124 | | | | | $ | (1,395,652) | | | | | $ | 772,709 | | | | | $ | (24,780) | | | | | $ | 1,288,401 | |

| Net income | | | — | | | | | | — | | | | | | — | | | | | | 988,979 | | | | | | — | | | | | | $ | 988,979 | |

| Purchase of treasury stock | | | (4,841) | | | | | | — | | | | | | (306,148) | | | | | | — | | | | | | — | | | | | | $ | (306,148) | |

| Cash and cash equivalents at beginning of year | | | $ | 928,432 | | | | | $ | 705,210 | | | | | $ | 533,298 | |

*Accounting for Income Taxes*

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

Cadence adopted the standard on January 3, 2021, the first day of fiscal 2021.

This standard is not expected to have a material impact on Cadence’s consolidated financial statements and related disclosures.

The standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted.

The impact of the standard on Cadence’s consolidated financial statements is dependent on the size and frequency of future acquisitions and does not affect contract assets or contract liabilities related to acquisitions completed prior to the adoption date.

Cadence used the incremental borrowing rate on the effective date of adoption of Topic 842 for all leases that commenced prior to that date.

The 2021 Credit Facility also includes provisions addressing the potential transition from LIBOR to a new replacement benchmark.

| Year ended December 28, 2019 | | | | | | $ | 3,936 | | | | | $ | 632 | | | | | $ | — | | | | | $ | (3,699) | | | | | $ | 869 | |

* Beginning balance for the year ended January 2, 2021 reflects the cumulative-effect adjustment recorded in connection with the adoption of ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” on the first day of fiscal 2020.

| IP | | | 13 | | % | | | | 14 | | % | | | | 13 | | % |

| Balance as of December 28, 2019 | | | $ | 661,856 | |

[Table [removed: of](#i090043fcb1da400aaac214abf3d3ee98_7) [Contents](#i090043fcb1da400aaac214abf3d3ee98_7)][added: of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)]

| Dated: | | | February [removed: 22, 2022] [added: 13, 2023] | | |

| /s/ Anirudh Devgan | | | DATE: | | | February [removed: 22, 2022] [added: 13, 2023] | | |

| /s/ John M. Wall | | | DATE: | | | February [removed: 22, 2022] [added: 13, 2023] | | |

Wall and [removed: Alinka Flaminia,] [added: Karna Nisewaner,] and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

| /s/ | | | Lip-Bu Tan | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Dr. John B. Shoven | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Mark W. Adams | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Ita Brennan | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Lewis Chew | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Mary Louise Krakauer | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Julia Liuson | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Dr. James D. Plummer | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Dr. Alberto Sangiovanni-Vincentelli | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

| /s/ | | | Young K. Sohn | | | | | | February [removed: 22, 2022] [added: 13, 2023] | | | | | |

[Table of](#i97343246becb48fa926dba3a366e932a_7) [Contents](#i97343246becb48fa926dba3a366e932a_7)