Item 15. Exhibits and Financial Statement Schedules

						Page
(a) 1. Financial Statements
			Report of Independent Registered Public Accounting Firm (Auditor Firm ID 238)			49
			Consolidated Balance Sheets as of December 31, 2023, and December 31, 2022			51
			Consolidated Income Statements for the three fiscal years ended December 31, 2023			52
			Consolidated Statements of Comprehensive Income for the three fiscal years ended December 31, 2023			53
			Consolidated Statements of Stockholders’ Equity for the three fiscal years ended December 31, 2023			54
			Consolidated Statements of Cash Flows for the three fiscal years ended December 31, 2023			55
			Notes to Consolidated Financial Statements			56
(a) 2. Financial Statement Schedules
			All financial statement schedules are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto.
(a) 3. Exhibits						91

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report.

The exhibits filed or incorporated by reference as part of this Annual Report contain agreements to which Cadence is a party. These agreements are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about Cadence or the other parties to the agreements. Certain of the agreements contain representations and warranties by each of the parties to the applicable agreement, and any such representations and warranties have been made solely for the benefit of the other parties to the applicable agreement as of specified dates, may apply materiality standards that are different than those applied by investors, and may be subject to important qualifications and limitations that are not necessarily reflected in the agreement. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time and should not be relied upon as statements of factual information.

_____________

© 2024 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo, and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective holders.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Cadence Design Systems, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cadence Design Systems, Inc. and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, 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 December 31, 2023, 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 December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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 December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. 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.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits 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 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. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Identifying and Evaluating Terms and Conditions in Contracts

As described in Note 2 and Note 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 contracts with multiple performance obligations, management allocates the transaction price of the contract to each performance obligation and recognizes revenue upon transfer of control of promised products or services to customers. Management applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. For the year ended December 31, 2023, the Company’s total revenue was $4.090 billion.

The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of terms and conditions in contracts, is a critical audit matter are the significant judgment by management in identifying and evaluating terms and conditions in contracts that impact revenue recognition, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating whether terms and conditions in contracts were appropriately identified and evaluated by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls related to the identification and evaluation of terms and conditions in contracts that impact revenue recognition. These procedures also included, among others (i) testing management’s process of identifying and evaluating the terms and conditions in contracts, including management’s determination of the impact of those terms and conditions on revenue recognition and (ii) testing the completeness and accuracy of management’s identification and evaluation of the terms and conditions in contracts by examining revenue arrangements on a test basis.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 13, 2024

We have served as the Company’s auditor since 2020.

CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2023 and December 31, 2022

(In thousands, except par value)

			As of
			December 31, 2023						December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents			$	1,008,152					$	882,325
Receivables, net			489,224						486,710
Inventories			181,661						128,005
Prepaid expenses and other			297,180						209,727
Total current assets			1,976,217						1,706,767
Property, plant and equipment, net			403,213						371,451
Goodwill			1,535,845						1,374,268
Acquired intangibles, net			336,843						354,617
Deferred taxes			880,001						853,691
Other assets			537,372						476,277
Total assets			$	5,669,491					$	5,137,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Revolving credit facility			$	—					$	100,000
Current portion of long-term debt			349,285						—
Accounts payable and accrued liabilities			576,558						557,158
Current portion of deferred revenue			665,024						690,538
Total current liabilities			1,590,867						1,347,696
Long-term liabilities:
Long-term portion of deferred revenue			98,931						91,524
Long-term debt			299,771						648,078
Other long-term liabilities			275,651						304,660
Total long-term liabilities			674,353						1,044,262
Commitments and contingencies (Notes 8, 17 and 18)
Stockholders’ equity:
Preferred stock – $0.01 par value; authorized 400 shares, none issued or outstanding			—						—
Common stock – $0.01 par value; authorized 600,000 shares; issued and outstanding shares: 271,706 and 272,675, respectively			3,166,964						2,765,673
Treasury stock, at cost; 57,453 shares and 56,485 shares, respectively			(4,604,323)						(3,824,163)
Retained earnings			4,936,384						3,895,240
Accumulated other comprehensive loss			(94,754)						(91,637)
Total stockholders’ equity			3,404,271						2,745,113
Total liabilities and stockholders’ equity			$	5,669,491					$	5,137,071

See notes to consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED INCOME STATEMENTS

For the three fiscal years ended December 31, 2023

(In thousands, except per share amounts)

			2023						2022						2021
Revenue:
Product and maintenance			$	3,834,359					$	3,340,197					$	2,812,947
Services			255,627						221,521						175,297
Total revenue			4,089,986						3,561,718						2,988,244
Costs and expenses:
Cost of product and maintenance			331,760						273,565						222,647
Cost of services			103,281						98,058						84,359
Marketing and sales			690,319						604,224						560,262
Research and development			1,441,796						1,251,544						1,134,277
General and administrative			242,430						242,116						189,018
Amortization of acquired intangibles			18,162						18,470						19,640
Restructuring			11,013						55						(1,048)
Total costs and expenses			2,838,761						2,488,032						2,209,155
Income from operations			1,251,225						1,073,686						779,089
Interest expense			(36,185)						(22,934)						(16,980)
Other income (expense), net			66,886						(5,389)						6,326
Income before provision for income taxes			1,281,926						1,045,363						768,435
Provision for income taxes			240,782						196,411						72,480
Net income			$	1,041,144					$	848,952					$	695,955
Net income per share – basic			$	3.86					$	3.13					$	2.54
Net income per share – diluted			$	3.82					$	3.09					$	2.50
Weighted average common shares outstanding – basic			269,381						271,198						273,504
Weighted average common shares outstanding – diluted			272,748						275,011						278,858

See notes to consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three fiscal years ended December 31, 2023

(In thousands)

			2023						2022						2021
Net income			$	1,041,144					$	848,952					$	695,955
Other comprehensive income (loss), net of tax effects:
Foreign currency translation adjustments			(4,815)						(59,310)						(15,423)
Changes in defined benefit plan liabilities			1,566						984						(463)
Unrealized gains on investments			132						—						—
Total other comprehensive loss, net of tax effects			(3,117)						(58,326)						(15,886)
Comprehensive income			$	1,038,027					$	790,626					$	680,069

See notes to consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three fiscal years ended December 31, 2023

(In thousands)

			Common Stock
									Par Value																		Accumulated
									and Capital																		Other
									in Excess						Treasury						Retained						Comprehensive
			Shares						of Par						Stock						Earnings						Income (Loss)						Total
Balance, January 2, 2021			278,941						$	2,217,939					$	(2,057,829)					$	2,350,333					$	(17,425)					$	2,493,018
Net income			—						—						—						695,955						—						$	695,955
Other comprehensive loss, net of taxes			—						—						—						—						(15,886)						$	(15,886)
Purchase of treasury stock			(4,401)						—						(612,297)						—						—						$	(612,297)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures			2,978						55,505						32,272						—						—						$	87,777
Stock received for payment of employee taxes on vesting of restricted stock			(722)						(15,833)						(102,149)						—						—						$	(117,982)
Stock-based compensation expense			—						210,090						—						—						—						$	210,090
Balance, January 1, 2022			276,796						$	2,467,701					$	(2,740,003)					$	3,046,288					$	(33,311)					$	2,740,675
Net income			—						—						—						848,952						—						$	848,952
Other comprehensive loss, net of taxes			—						—						—						—						(58,326)						$	(58,326)
Purchase of treasury stock			(6,602)						—						(1,020,091)						—						—						$	(1,020,091)
Equity forward contract			—						(12,035)						(17,965)						—						—						$	(30,000)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures			3,079						56,708						48,620						—						—						$	105,328
Stock received for payment of employee taxes on vesting of restricted stock			(598)						(17,140)						(94,724)						—						—						$	(111,864)
Stock-based compensation expense			—						270,439						—						—						—						$	270,439
Balance, December 31, 2022			272,675						$	2,765,673					$	(3,824,163)					$	3,895,240					$	(91,637)					$	2,745,113
Net income			—						—						—						1,041,144						—						$	1,041,144
Other comprehensive loss, net of taxes			—						—						—						—						(3,117)						$	(3,117)
Purchase of treasury stock, including excise tax			(3,145)						—						(641,041)						—						—						$	(641,041)
Equity forward contract			—						1,688						(61,688)						—						—						$	(60,000)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures			2,704						97,050						35,907						—						—						$	132,957
Stock received for payment of employee taxes on vesting of restricted stock			(528)						(23,058)						(113,338)						—						—						$	(136,396)
Stock-based compensation expense			—						325,611						—						—						—						$	325,611
Balance, December 31, 2023			271,706						$	3,166,964					$	(4,604,323)					$	4,936,384					$	(94,754)					$	3,404,271

See notes to consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three fiscal years ended December 31, 2023

(In thousands)

			2023						2022						2021
Cash and cash equivalents at beginning of year			$	882,325					$	1,088,940					$	928,432
Cash flows from operating activities:
Net income			1,041,144						848,952						695,955
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			145,292						132,088						142,308
Amortization of debt discount and fees			1,262						1,134						1,219
Stock-based compensation			325,611						270,439						210,090
(Gain) loss on investments, net			(34,602)						5,425						(580)
Deferred income taxes			(36,512)						(107,606)						(43,178)
Provisions for losses on receivables			3,325						204						525
ROU asset amortization and change in operating lease liabilities			451						3,342						(11,606)
Other non-cash items			1,983						371						427
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables			(11,748)						(138,471)						2,014
Inventories			(65,895)						(23,073)						(39,027)
Prepaid expenses and other			39,015						(38,927)						(34,342)
Other assets			(45,784)						(933)						(7,133)
Accounts payable and accrued liabilities			5,415						113,945						67,356
Deferred revenue			(21,583)						131,462						100,731
Other long-term liabilities			1,802						43,542						16,199
Net cash provided by operating activities			1,349,176						1,241,894						1,100,958
Cash flows from investing activities:
Purchases of investments			(176,170)						(1,000)						—
Proceeds from the sale and maturity of investments			64,775						366						128
Purchases of property, plant and equipment			(102,337)						(123,215)						(65,298)
Purchases of intangible assets			(166)						(1,000)						(1,583)
Cash paid in business combinations, net of cash acquired			(198,351)						(613,785)						(226,201)
Net cash used for investing activities			(412,249)						(738,634)						(292,954)
Cash flows from financing activities:
Proceeds from revolving credit facility			50,000						585,000						—
Payments on revolving credit facility			(150,000)						(485,000)						—
Proceeds from term loan			—						300,000						—
Payment of debt issuance costs			—						(425)						(1,285)
Proceeds from issuance of common stock			132,957						105,331						87,772
Stock received for payment of employee taxes on vesting of restricted stock			(136,396)						(111,864)						(117,982)
Payments for repurchases of common stock			(700,134)						(1,050,091)						(612,297)
Net cash used for financing activities			(803,573)						(657,049)						(643,792)
Effect of exchange rate changes on cash and cash equivalents			(7,527)						(52,826)						(3,704)
Increase (decrease) in cash and cash equivalents			125,827						(206,615)						160,508
Cash and cash equivalents at end of year			$	1,008,152					$	882,325					$	1,088,940
Supplemental cash flow information:
Cash paid for interest			$	34,934					$	21,122					$	15,950
Cash paid for income taxes, net			253,700						233,235						146,424

See notes to consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three fiscal years ended December 31, 2023

NOTE 1. BUSINESS OVERVIEW

Cadence Design Systems, Inc. (“Cadence”) is an innovation leader in electronic system design that delivers essential computational software, hardware, and IP that its customers use to turn their design concepts into reality. Many of Cadence’s customers design semiconductors and electronic systems. Semiconductor companies focus on the design of all types of semiconductor devices including integrated circuits (“ICs”), analog, mixed-signal, memory, 3D-IC, processor chips for computing (“CPUs”), graphics (“GPUs”), and AI. These customers will then use the semiconductor devices in the design of printed circuit boards (“PCBs”). Cadence’s electronic systems customers design and create products for consumer and business needs, such as smartphones, laptop computers, gaming and entertainment systems, automobiles and autonomous driving systems, aerospace and defense systems, communication systems, networking products, compute servers, cloud data center infrastructure, artificial intelligence (“AI”) systems, medical equipment, and a much longer list of consumer products used in everyday life. These systems companies internally develop, or externally purchase, the sub-components for their products, including ICs and PCBs, which connect all the hardware components, and software at various levels that run on the hardware.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Cadence and its subsidiaries after elimination of intercompany accounts and transactions. All consolidated subsidiaries are wholly owned by Cadence.

Historically, Cadence’s fiscal years were 52- or 53-week periods ending on the Saturday closest to December 31. During fiscal 2022, Cadence’s Board of Directors approved a change in its fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year. The fiscal year change became effective beginning with Cadence’s 2023 fiscal year, which began on January 1, 2023. Both fiscal year 2022 and 2021, which are included in this report for comparative purposes, represent 52-week periods.

Cadence’s first three fiscal quarters end on March 31, June 30, and September 30. No transition report was required in connection with this change.

Use of Estimates

Preparation of the consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Adopted Accounting Standards

Cadence has not recently adopted any accounting standard updates that are material or potentially material to its consolidated financial statements.

New Accounting Standards Not Yet Adopted

Segment Reporting

In November 2023. the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” intended to improve reportable segment disclosure requirements, primarily through enhanced annual and interim disclosures about significant segment expenses. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Cadence is currently evaluating the impact of this standard on its financial statement disclosures.

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This standard is effective for fiscal years beginning after December 15, 2024, and may be applied on a retrospective or prospective basis. Cadence is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

Foreign Operations

Cadence transacts business in various foreign currencies. The United States dollar is the functional currency of Cadence’s consolidated entities operating in the United States and certain of its consolidated subsidiaries operating outside the United States. The functional currency for Cadence’s other consolidated entities operating outside of the United States is generally the country’s local currency.

Cadence translates the financial statements of consolidated entities whose functional currency is not the United States dollar into United States dollars. Cadence translates assets and liabilities at the exchange rate in effect as of the financial statement date and translates income statement accounts using an average exchange rate for the period. Cadence includes adjustments from translating assets and liabilities into United States dollars, and the effect of exchange rate changes on intercompany transactions of a long-term investment nature in stockholders’ equity as a component of accumulated other comprehensive income. Cadence reports gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature, as well as gains and losses from foreign currency transactions of a monetary nature in other income (expense), net, in the consolidated income statements.

Concentrations of Credit Risk

Financial instruments, including derivative financial instruments, that may potentially subject Cadence to concentrations of credit risk, consist principally of cash and cash equivalents, accounts receivable, investments and forward contracts. Credit exposure related to Cadence’s foreign currency forward contracts is limited to the realized and unrealized gains on these contracts.

Cash and Cash Equivalents

Cadence considers all highly liquid investments with original maturities of three months or less on the date of purchase to be cash equivalents.

Receivables

Cadence’s receivables, net includes invoiced accounts receivable and the current portion of unbilled receivables. Unbilled receivables represent amounts Cadence has recorded as revenue for which payments from a customer are due over time and Cadence has an unconditional right to the payment. Cadence’s accounts receivable and unbilled receivables were initially recorded at the transaction value. Cadence’s long-term receivables balance includes receivable balances to be invoiced more than one year after each balance sheet date.

Allowances for Doubtful Accounts

Cadence assesses its ability to collect outstanding receivables and provides customer-specific allowances, allowances for credit losses and general allowances for the portion of its receivables that are estimated to be uncollectible. The allowances are based on the current creditworthiness of its customers, historical experience, expected credit losses, changes in customer demand and the overall economic climate in the industries that Cadence serves. Provisions for these allowances are recorded in general and administrative expense in Cadence’s consolidated income statements.

Inventories

Inventories are computed at standard costs which approximate actual costs and are valued at the lower of cost or net realizable value based on the first-in, first-out method. Cadence’s inventories include high technology parts and components for complex emulation and prototyping hardware systems. These parts and components are specialized in nature and may be subject to rapid technological obsolescence. While Cadence has programs to manage the required inventories on hand and considers technological obsolescence when estimating required reserves to reduce recorded amounts to market values, it is reasonably possible that such estimates could change in the near term. Cadence’s policy is to reserve for inventory in excess of 12-month demand or for other known obsolescence or realization issues.

Property, Plant and Equipment

Property, plant and equipment is stated at historical cost. Depreciation and amortization are generally provided over the estimated useful lives, using the straight-line method, as follows:

Equipment and internal-use software			2-7 years
Buildings			25-32 years
Leasehold improvements			Shorter of the lease term or the estimated useful life
Building improvements and land improvements			Up to 32 years
Furniture and fixtures			3-5 years

Cadence capitalizes certain costs of software developed for internal use. Capitalization of software developed for internal use begins at the application development phase of the project. Amortization begins when the computer software is substantially complete and ready for its intended use. Amortization is recorded on a straight-line basis over the estimated useful life. Capitalized costs were not material during fiscal 2023, 2022 or 2021.

Cadence recorded depreciation and amortization expense of $78.4 million, $69.1 million and $71.2 million during fiscal 2023, 2022 and 2021, respectively, for property, plant and equipment.

Software Development Costs

Software development costs are capitalized beginning when a product’s technological feasibility has been established by completion of a working model of the product and amortization begins when a product is available for general release to customers. The period between the achievement of technological feasibility and the general release of Cadence’s products has typically been of short duration. Costs incurred during fiscal 2023, 2022 and 2021 were not material.

Deferred Sales Commissions

Cadence records an asset for the incremental costs of obtaining a contract with a customer, including direct sales commissions that are earned upon execution of the contract. Cadence uses the portfolio method to recognize the amortization expense related to these capitalized costs related to initial contracts and renewals and such expense is recognized over a period associated with the revenue of the related portfolio, which is generally two to three years for Cadence’s software arrangements and upon delivery for its hardware and IP arrangements. Incremental costs related to initial contracts and renewals are amortized over the period of the arrangement in each case because Cadence pays the same commission rate for both new contracts and renewals. Deferred sales commissions are tested for impairment on an ongoing basis when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is recognized to the extent that the amount of deferred sales commission exceeds the remaining expected gross margin (remaining revenue less remaining direct costs) on the goods and services to which the deferred sales commission relates. Total capitalized costs were $47.6 million and $41.7 million as of December 31, 2023, and December 31, 2022, respectively, and are included in other assets in Cadence’s consolidated balance sheet. Amortization of these assets was $41.4 million, $40.5 million and $40.1 million during fiscal 2023, 2022 and 2021, respectively, and is included in sales and marketing expense in Cadence’s consolidated income statement.

Goodwill

Cadence conducts a goodwill impairment analysis annually and as necessary if changes in facts and circumstances indicate that the fair value of Cadence’s single reporting unit may be less than its carrying amount. To assess for impairment, Cadence compares the estimated fair value of its single reporting unit to the carrying value of the reporting unit’s net assets, including goodwill. If the fair value of the reporting unit is greater than the carrying value of its net assets, goodwill is not considered to be impaired, and no further analysis is required. If the fair value of the reporting unit is less than the carrying value of its net assets, Cadence would be required to record an impairment charge.

Long-Lived Assets, Including Acquired Intangibles

Cadence’s long-lived assets consist of property, plant and equipment, and acquired intangibles. Acquired intangibles consist of acquired technology, certain contract rights, customer relationships, trademarks and trade names, capitalized software, and in-process research and development. These acquired intangibles are acquired through business combinations or direct purchases. Acquired intangibles with definite lives are amortized on a straight-line basis over the estimated economic life of the underlying products and technologies, which range from three years to fifteen years. Acquired intangibles with indefinite lives, or in-process technology, consists of projects that had not reached technological feasibility by the date of acquisition. Upon completion of the project, the assets are amortized over their estimated useful lives. If the project is abandoned rather than completed, the asset is written off. In-process technology is tested for impairment annually and as necessary if changes in facts and circumstances indicate that the assets might be impaired.

Cadence reviews its long-lived assets, including acquired intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may not be recoverable. Recoverability of an asset or asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset or asset group is expected to generate. If it is determined that the carrying amount of an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset or asset group exceeds its fair value.

Leases

Lessee Considerations

Cadence has operating leases primarily consisting of facilities with remaining lease terms of approximately one year to fifteen years. Cadence has options to terminate many of its leases early. The lease term represents the period up to the early termination date unless it is reasonably certain that Cadence will not exercise the early termination option. For certain leases, Cadence has options to extend the lease term for additional periods ranging from one year to ten years. Renewal options are not considered in the remaining lease term unless it is reasonably certain that Cadence will exercise such options.

At inception of a contract, Cadence determines an arrangement contains a lease if the arrangement conveys the right to use an identified asset and Cadence obtains substantially all of the economic benefits from the asset and has the ability to direct the use of the asset. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, Cadence combines the lease and non-lease components in determining the lease liabilities and right-of-use (“ROU”) assets. Non-lease components primarily include common-area maintenance and other management fees.

Operating lease expense is generally recognized evenly over the term of the lease. Payments under Cadence's lease agreements are primarily fixed; however, certain agreements contain rental payments that are adjusted periodically based on changes in consumer price and other indices. Changes to payments resulting from changes in indices are expensed as incurred and not included in the measurement of lease liabilities and ROU assets. Cadence’s lease agreements do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The incremental borrowing rate represents a comparable rate to borrow on a collateralized basis over a similar term and in the economic environment where the leased asset is located.

Lessor Considerations

Although most of Cadence’s revenue from its hardware business comes from sales of hardware, Cadence also leases its hardware products to some customers. Cadence determines the existence of a lease when the customer controls the use of the identified hardware for a period of time defined in the lease agreement.

Cadence’s leases range in duration up to three years with payments generally collected in equal quarterly installments. Cadence’s leases do not include termination rights or variable pricing and typically do not include purchase rights at the end of the lease. Short-term leases are usually less than two years and are classified as operating leases with revenue recognized and depreciation expensed on a straight-line basis over the term of the lease. Long-term leases are typically for three years and are classified as sales-type leases with revenue and cost of sales recognized upon installation.

Cadence’s operating leases and sales-type leases contain both lease and non-lease components. Because the pattern of revenue recognition is the same for both the lease and non-lease components in Cadence’s operating leases, Cadence has elected the practical expedient to not separate lease and related non-lease components and accounts for both components under Topic 842. Cadence allocates value to the lease and non-lease components in its sales-type leases using standalone selling prices (“SSPs”) similar to those used under ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” the current accounting standard governing revenue recognition. When Cadence leases its hardware in the same arrangement as software or IP, Cadence allocates value to each performance obligation using SSPs.

Investments in Equity Securities

Cadence’s investments in marketable equity securities are carried at fair value as a component of prepaid expenses and other in the consolidated balance sheets. Cadence records realized and unrealized holding gains or losses as part of other income (expense), net in the consolidated income statements.

Cadence’s non-marketable investments include its investments in privately held companies. These investments are initially recorded at cost and are included in other assets in the consolidated balance sheets. Cadence accounts for these investments using the measurement alternative when the fair value of the investment is not readily determinable, and Cadence does not have the ability to exercise significant influence, or the equity method of accounting when it is determined that Cadence has the ability to exercise significant influence. For investments accounted for using the equity method of accounting, Cadence records its proportionate share of the investee’s income or loss, net of the effects of any basis differences, to other income (expense), net on a one-quarter lag in Cadence’s consolidated income statements.

Cadence reviews its non-marketable investments for impairment on a regular basis by considering investee financial performance and other information received from the investee companies that indicates a decline in value has occurred. For non-marketable equity investments accounted for using the measurement alternative, the carrying amount may also be adjusted based on observable price changes from orderly transactions for identical or similar investments of the same issuer. Adjustments to the carrying amounts of non-marketable investments are recorded in other income (expense), net in the consolidated income statements. There were no material events or circumstances impacting the carrying amount of our non-marketable investments during the periods presented.

Investments in Debt Securities

Cadence’s investments in debt securities are comprised of investments in mortgage-backed and asset backed-securities and are carried at fair value as a component of prepaid expenses and other in the consolidated balance sheets. Cadence classifies its investment in debt securities as available-for-sale, and gross unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on its consolidated balance sheets.

Cadence assesses its portfolio of debt securities for impairment at least quarterly. Cadence records an allowance for credit losses on debt securities when the fair value of a debt security is below its amortized cost, and it is more likely than not that Cadence will either sell the impaired security before recovery of its amortized basis or has the intention to sell the security. Provisions for credit losses on impaired debt securities are recorded as a component of other income (expense), net in the consolidated income statements.

Derivative Financial Instruments

Cadence enters into foreign currency forward exchange contracts with financial institutions to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. The forward contracts are not designated as accounting hedges and, therefore, the unrealized gains and losses are recognized in other income (expense), net, in advance of the actual foreign currency cash flows. The fair value of these forward contracts is recorded in accrued liabilities or in other current assets. These forward contracts generally have maturities of 90 days or less.

Nonqualified Deferred Compensation Trust

Executive officers, senior management and members of Cadence’s Board of Directors may elect to defer compensation payable to them under Cadence’s Nonqualified Deferred Compensation Plan (“NQDC”). Deferred compensation payments are held in investment accounts and the values of the accounts are adjusted each quarter based on the fair value of the investments held in the NQDC.

The selected investments held in the NQDC accounts are carried at fair value, with the unrealized gains and losses recognized in the consolidated income statements as other income (expense), net. These securities are classified in other assets in the consolidated balance sheets because they are not available for Cadence’s use in its operations.

Cadence’s obligation with respect to the NQDC trust is recorded in other long-term liabilities on the consolidated balance sheets. Increases and decreases in the NQDC trust liability are recorded as compensation expense in the consolidated income statements.

Treasury Stock

Cadence generally issues shares related to its stock-based compensation plans from shares held in treasury. When treasury stock is reissued at an amount higher than its cost, the difference is recorded as a component of capital in excess of par in the consolidated statements of stockholders’ equity. When treasury stock is reissued at an amount lower than its cost, the difference is recorded as a component of capital in excess of par to the extent that gains exist to offset the losses. If there are no accumulated treasury stock gains in capital in excess of par, the losses upon reissuance of treasury stock are recorded as a component of retained earnings in the consolidated statements of stockholders’ equity. There were no losses recorded as a component of retained earnings by Cadence on the reissuance of treasury stock during fiscal 2023, 2022 or 2021.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During fiscal 2023, Cadence recorded excise tax of $0.9 million as a component of treasury stock to account for the incremental cost of the shares repurchased. A corresponding liability for the excise tax payable was recorded as a component of accounts payable and accrued liabilities on Cadence's consolidated balance sheet as of December 31, 2023.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which Cadence expects to be entitled in exchange for promised goods or services. Cadence’s performance obligations are satisfied either over time or at a point in time.

Product and maintenance revenue includes Cadence’s licenses of software and IP, sales of emulation hardware and the related maintenance on these licenses and sales.

Services revenue includes revenue received for performing engineering services (which are generally not related to the functionality of other licensed products), customized IP on a fixed fee basis, and sales from cloud-based solutions that provide customers with software, hardware and services over a period of time.

Cadence 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 contracts with multiple performance obligations, Cadence allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its SSP. Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.

Some customers enter into 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. Cadence records a customer deposit liability for amounts received from customers prior to the arrangement meeting the definition of a revenue contract.

Software Revenue Recognition

Cadence’s time-based license arrangements grant customers the right to access and use all of the licensed products at the outset of an arrangement and updates are generally made available throughout the entire term of the arrangement, which is generally two to three years. Cadence’s updates provide continued access to evolving technology as customers’ designs migrate to more advanced nodes and as its customers’ technological requirements evolve. In addition, certain time-based license arrangements include remix rights and unspecified additional products that become commercially available during the term of the agreement. Payments are generally received in equal or near equal installments over the term of the agreement.

Multiple software licenses, related updates, and technical support in these time-based arrangements constitute a single, combined performance obligation and revenue is recognized over the term of the license, commencing upon the later of the effective date of the arrangement or transfer of the software license. Remix rights are not an additional promised good or service in the contract, and where unspecified additional software product rights are part of the contract with the customer, such rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support because such rights are provided for the same period of time and have the same time-based pattern of transfer to the customer.

Hardware Revenue Recognition

Cadence generally has two performance obligations in arrangements involving the sale or lease of hardware products. The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product). The second performance obligation is to provide maintenance on hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The transaction price allocated to the hardware product is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. Cadence has concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. The transaction price allocated to maintenance is recognized as revenue ratably over the maintenance term. Payments for hardware contracts are generally received upon delivery of the hardware product. Shipping and handling costs are considered fulfillment costs and are included in cost of product and maintenance in Cadence’s consolidated income statements.

IP Revenue Recognition

Cadence generally licenses IP under nonexclusive license agreements that provide usage rights for specific designs. In addition, for certain of Cadence’s IP license agreements, royalties are collected as customers ship their own products that incorporate Cadence IP. These arrangements generally have two performance obligations—transferring the licensed IP and associated maintenance, which includes rights to technical support, and software updates that are all provided over the maintenance term and have a time-based pattern of transfer to the customer.

Revenue allocated to the IP license is recognized at a point in time upon the later of the delivery of the IP or the beginning of the license period and revenue allocated to the maintenance is recognized over the maintenance term. Royalties are recognized as revenue in the quarter in which the applicable Cadence customer ships its products that incorporate Cadence IP. Payments for IP contracts are generally received upon delivery of the IP. Cadence customizes certain IP and revenue related to this customization is recognized as services revenue as described below.

Services Revenue Recognition

Revenue from service contracts is recognized over time, generally using costs incurred or hours expended to measure progress. Cadence has a history of accurately estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Payments for services are generally due upon milestones in the contract or upon consumption of the hourly resources.

Stock-Based Compensation

Cadence recognizes the cost of awards of equity instruments granted to employees in exchange for their services as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the value of the award and is recognized as expense over the requisite service period, which is typically the vesting period. Cadence recognizes stock-based compensation expense on the straight-line method for awards that only contain a service condition and on the graded-vesting method for awards that contain both a service and performance condition. Cadence recognizes the impact of forfeitures on stock-based compensation expense as they occur.

The fair value of stock options and purchase rights issued under Cadence’s Employee Stock Purchase Plan (“ESPP”) are calculated using the Black-Scholes option pricing model. The computation of the expected volatility assumption used for new awards is based on a weighting of historical and implied volatilities. When determining the expected term, Cadence reviews historical employee exercise behavior from options having similar vesting periods. The risk-free interest rate for the period within the expected term of the option is based on the yield of United States Treasury notes for the comparable term in effect at the time of grant. The expected dividend yield used in the calculation is zero because Cadence has not historically paid and currently does not expect to pay dividends in the foreseeable future.

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.

Advertising

Cadence expenses the costs of advertising as incurred. Total advertising expense, including marketing programs and events, was $21.7 million, $17.0 million and $7.5 million during fiscal 2023, 2022 and 2021, respectively, and is included in marketing and sales in the consolidated income statements.

Restructuring

Cadence records personnel-related restructuring charges with termination benefits when the costs are both probable and estimable. Cadence records personnel-related restructuring charges with non-customary termination benefits when the plan has been communicated to the affected employees. Cadence generally begins recording facilities-related restructuring charges in the period in which a formal plan to vacate an affected facility is established. In connection with facilities-related restructuring plans, Cadence has made certain assumptions and estimates related to facilities, particularly the timing of exit and the ability to sublease. Facility closure costs in restructuring charges primarily includes accelerated ROU asset amortization, lease buyout costs and certain contractual costs to maintain facilities during the period after abandonment.

Cadence records estimated provisions for termination benefits and outplacement costs along with other personnel-related restructuring costs, asset impairments related to abandoned assets and other costs associated with the restructuring plan. Cadence regularly evaluates the adequacy of its restructuring liabilities and adjusts the balances based on actual costs incurred or changes in estimates and assumptions. Subsequent adjustments to restructuring accruals are classified as restructuring in the consolidated income statements.

Accounting for Income Taxes

Cadence accounts for the effect of income taxes in its consolidated financial statements using the asset and liability method. This process involves estimating actual current tax liabilities together with assessing carryforwards and temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, measured using enacted tax rates expected to apply to taxable income in the years when those temporary differences are expected to be recovered or settled. Cadence accounts for the United States global intangible low-taxed income as a period expense.

Cadence then records a valuation allowance to reduce the deferred tax assets to the amount that Cadence believes is more likely than not to be realized based on its judgment of all available positive and negative evidence. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which the strength of the evidence can be objectively verified. This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following:

• the nature and history of current or cumulative financial reporting income or losses;

• sources of future taxable income;

• the anticipated reversal or expiration dates of the deferred tax assets; and

• tax planning strategies.

Cadence takes a two-step approach to recognizing and measuring the financial statement benefit of uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement of the audit. Cadence classifies interest and penalties on unrecognized tax benefits as income tax expense or benefit.

For additional discussion of income taxes, see Note 8 in the notes to the consolidated financial statements.

NOTE 3. REVENUE

Cadence groups its products and services into five categories related to major design activities. The following table shows the percentage of revenue contributed by each of Cadence’s five product categories for fiscal 2023, 2022 and 2021:

			2023						2022						2021
Custom IC Design and Simulation			22		%				22		%				23		%
Digital IC Design and Signoff			27		%				28		%				29		%
Functional Verification, including Emulation and Prototyping Hardware*			27		%				26		%				24		%
IP			12		%				12		%				13		%
System Design and Analysis			12		%				12		%				11		%
Total			100		%				100		%				100		%

_____________

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

Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them. No single customer accounted for 10% or more of total revenue during fiscal 2023, 2022 or 2021.

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

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

The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for fiscal 2023, 2022 and 2021:

			2023						2022						2021
Revenue recognized over time			81		%				83		%				85		%
Revenue from arrangements with non-cancelable commitments			3		%				2		%				3		%
Recurring revenue			84		%				85		%				88		%
Up-front revenue			16		%				15		%				12		%
Total			100		%				100		%				100		%

Significant Judgments

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

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

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

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

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

Contract Balances

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

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

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

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Contract assets			$	17,554					$	22,766
Deferred revenue			763,955						782,062

Cadence recognized revenue of $689.7 million, $540.7 million and $430.2 million during fiscal 2023, 2022 and 2021, respectively, that was included in the deferred revenue balance at the beginning of each fiscal year. All other activity in deferred revenue, with the exception of deferred revenue assumed from acquisitions, is due to the timing of invoices in relation to the timing of revenue as described above.

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

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $6.0 billion as of December 31, 2023, which included $0.4 billion of non-cancelable commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.

Cadence estimates its remaining performance obligations at a point in time. Actual amounts and timing of revenue recognition may differ from these estimates largely due to changes in actual installation and delivery dates, as well as contract renewals, modifications and terminations. As of December 31, 2023, Cadence expected to recognize 56% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months, 39% over the next 13 to 36 months and the remainder thereafter.

Cadence recognized revenue of $55.0 million, $52.8 million and $47.1 million during fiscal 2023, 2022 and 2021, respectively, from performance obligations satisfied in previous periods. These amounts represent royalties earned during the period and exclude contracts with nonrefundable prepaid royalties. Nonrefundable prepaid royalties are recognized upon delivery of the IP because Cadence’s right to the consideration is not contingent upon customers’ future shipments.

NOTE 4. RECEIVABLES, NET

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

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Accounts receivable			$	299,814					$	314,666
Unbilled accounts receivable			193,963						174,334
Long-term receivables			10,755						2,735
Total receivables			504,532						491,735
Less allowance for doubtful accounts			(4,553)						(2,290)
Total receivables, net			$	499,979					$	489,445

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

Allowance for doubtful accounts

Cadence’s provisions for losses on its accounts receivable during fiscal 2023, 2022 and 2021 were as follows:

						Balance at Beginning of Period						Charged to Costs and Expenses						Charged to Other Accounts						Uncollectible Accounts Written Off, Net						Balance at End of Period
Year ended December 31, 2023						$	2,290					$	3,325					$	—					$	(1,062)					$	4,553
Year ended December 31, 2022						3,692						204						—						(1,606)						2,290
Year ended January 1, 2022						$	2,867					$	525					$	780					$	(480)					$	3,692

NOTE 5. DEBT

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

			December 31, 2023																		December 31, 2022
			(In thousands)
			Principal						Unamortized Discount						Carrying Value						Principal						Unamortized Discount						Carrying Value
Revolving Credit Facility			$	—					$	—					$	—					$	100,000					$	—					$	100,000
2024 Notes			350,000						(715)						349,285						350,000						(1,581)						348,419
2025 Term Loan			300,000						(229)						299,771						300,000						(341)						299,659
Total outstanding debt			$	650,000					$	(944)					$	649,056					$	750,000					$	(1,922)					$	748,078

Revolving Credit Facility

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

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

Interest accrues on borrowings under the 2021 Credit Facility at a rate equal to, at Cadence’s option, either (1) SOFR plus a margin between 0.750% and 1.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10% or (2) the base rate plus a margin between 0.000% and 0.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. Interest is payable quarterly. A commitment fee ranging from 0.070% to 0.175% is assessed on the daily average undrawn portion of revolving commitments. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2021 Credit Facility approximates fair value.

The 2021 Credit Facility contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness, grant liens and make certain asset dispositions. In addition, the 2021 Credit Facility contains financial covenants that require Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of December 31, 2023, Cadence was in compliance with all financial covenants associated with the 2021 Credit Facility.

2024 Notes

In October 2014, Cadence issued a $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024 (the “2024 Notes”). Cadence received net proceeds of $342.4 million from the issuance of the 2024 Notes, net of a discount of $1.4 million and issuance costs of $6.2 million. Both the discount and issuance costs are being amortized to interest expense over the term of the 2024 Notes using the effective interest method. The net balance of the 2024 notes of $349.3 million was classified as a current liability on Cadence’s consolidated balance sheet as of December 31, 2023.

Interest is payable in cash semi-annually in April and October. The 2024 Notes are unsecured and rank equal in right of payment to all of Cadence’s existing and future senior indebtedness. The fair value of the 2024 Notes was approximately $347.2 million as of December 31, 2023.

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

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

2025 Term Loan

In September 2022, Cadence entered into a $300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025, with a group of lenders led by Bank of America, N.A., as administrative agent (the “2025 Term Loan”). The 2025 Term Loan is unsecured and ranks equal in right of payment to all of Cadence’s unsecured indebtedness. Proceeds from the loan were used to fund Cadence’s acquisition of OpenEye Scientific Software, Inc. (“OpenEye”). Debt issuance costs associated with the 2025 Term Loan were not material.

Amounts outstanding under the 2025 Term Loan accrue interest at a rate equal to, at Cadence’s option, either (1) Term SOFR plus a margin between 0.625% and 1.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10% or (2) base rate plus a margin between 0.000% and 0.125% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. As of December 31, 2023, the interest rate on the 2025 Term Loan was 6.21%. Interest is payable quarterly. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2025 Term Loan approximates fair value.

The 2025 Term Loan contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness, grant liens and make certain asset dispositions. In addition, the 2025 Term Loan contains a financial covenant that requires Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step-up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of December 31, 2023, Cadence was in compliance with all financial covenants associated with the 2025 Term Loan.

NOTE 6. ACQUISITIONS

2023 Acquisitions

Acquisition of IP Assets from Rambus Inc.

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

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

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

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

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

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

Acquisition of Pulsic, Ltd.

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

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

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

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and is not deductible for tax purposes.

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

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

Acquisition of Intrinsix Corporation

On October 2, 2023, Cadence acquired all of the outstanding equity of Intrinsix Corporation (“Intrinsix”) from CEVA, Inc. The acquisition enhances Cadence’s system and IC design services resources with the addition of a team with expertise in advanced nodes, radio frequency, mixed-signal and security algorithms. The acquisition also expands Cadence’s reach in key high-growth vertical sectors, including aerospace and defense. The aggregate cash consideration for Cadence’s acquisition of Intrinsix was $34.6 million, net of cash acquired of $0.5 million. With its acquisition of Intrinsix, Cadence recorded $2.6 million of definite-lived intangible assets, $31.6 million of goodwill and $0.9 million net assets. The weighted average amortization period for the definite-lived intangible assets acquired with Cadence’s acquisition of Intrinsix was 5.0 years.The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and is not deductible for tax purposes.

2022 Acquisitions

Acquisition of OpenEye Scientific Software, Inc.

On August 31, 2022, Cadence acquired all of the outstanding equity of OpenEye, a leading provider of computational molecular modeling and simulation software used by pharmaceutical and biotechnology companies for drug discovery. The addition of OpenEye’s technologies and experienced team with its deep scientific expertise is expected to accelerate Cadence’s Intelligent System Design strategy and broadens Cadence’s System Design and Analysis technology portfolio. The acquisition expands Cadence’s total addressable market, bringing Cadence’s computational software expertise to apply proven algorithmic, simulation and solver advances to life sciences. The aggregate cash consideration for Cadence’s acquisition of OpenEye, net of cash acquired of $13.2 million, was $461.3 million. Subject to service and other conditions, Cadence expects to recognize expense for consideration paid to certain former OpenEye shareholders, now employed by Cadence, through the first quarter of fiscal 2026.

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

			Fair Value
			(In thousands)
Current assets			$	24,890
Goodwill			359,580
Acquired intangibles			117,400
Other long-term assets			6,542
Total assets acquired			508,412
Current liabilities			15,489
Long-term liabilities			18,456
Total liabilities assumed			33,945
Total purchase consideration			$	474,467

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and is not deductible for tax purposes.

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

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

Acquisition of FFG Holdings Limited

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

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

			Fair Value
			(In thousands)
Current assets			$	7,992
Goodwill			67,219
Acquired intangibles			38,100
Other long-term assets			2,708
Total assets acquired			116,019
Current liabilities			4,952
Long-term liabilities			8,167
Total liabilities assumed			13,119
Total purchase consideration			$	102,900

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies from combining operations of Future Facilities with Cadence. The goodwill will not be deductible for tax purposes.

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

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

Other 2022 Acquisitions

During fiscal 2022, Cadence completed three other business combinations for aggregate cash consideration of $53.6 million, net of cash acquired. The total purchase consideration was allocated to assets acquired based on their respective estimated fair values on the acquisition dates. Cadence recorded $23.1 million of acquired intangible assets, which consisted of $13.1 million of existing technology, $3.1 million of agreements and relationships, $0.1 million of tradenames, trademarks and patents, and $6.8 million of in-process technology. The weighted average amortization period for the definite-lived intangible assets acquired with these business combinations was 6.9 years. Cadence also recognized $29.5 million of goodwill, which is primarily attributed to the assembled workforce of the acquired businesses. Of the goodwill recognized with these acquisitions, $27.8 million is expected to be deductible for tax purposes.

2021 Acquisitions

On February 23, 2021, Cadence acquired all of the outstanding equity of Belgium-based Numerical Mechanics Applications International SA (“NUMECA”). The addition of NUMECA’s technologies and talent supports Cadence’s Intelligent System Design strategy, servicing the computational fluid dynamics (“CFD”) space as part of System Design and Analysis. The aggregate cash consideration for Cadence’s acquisition of NUMECA, net of cash acquired of $9.6 million, was $188.6 million. Cadence recognized expense for consideration paid to certain former NUMECA shareholders that was subject to service and other conditions, through the first quarter of fiscal 2023.

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

			Acquisition Date Fair Value
			(In thousands)
Current assets			$	16,423
Goodwill			133,077
Acquired intangibles			72,200
Other long-term assets			6,928
Total assets acquired			228,628
Current liabilities			9,951
Long-term liabilities			20,475
Total liabilities assumed			30,426
Total purchase consideration			$	198,202

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies from combining operations of NUMECA with Cadence. Cadence expects all of the goodwill related to the acquisition of NUMECA to be deductible for tax purposes.

On April 14, 2021, Cadence acquired all of the outstanding equity of Pointwise, Inc. (“Pointwise”), a leader in mesh generation for CFD for cash consideration of approximately $31.4 million, net of cash acquired. The addition of Pointwise’s technologies and experienced team supports Cadence’s Intelligent System Design strategy and further broadens its System Design and Analysis portfolio, complementing its acquisition of NUMECA. The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Cadence recorded $16.7 million of definite-lived intangible assets and $16.7 million of goodwill with its acquisition of Pointwise. All of the goodwill related to Cadence’s acquisition of Pointwise is expected to be deductible for tax purposes.

Cadence completed two additional acquisitions during fiscal 2021. These acquisitions are not material to the consolidated financial statements.

Definite-lived intangible assets acquired with Cadence’s fiscal 2021 acquisitions were as follows:

			Acquisition Date Fair Value						Weighted Average Amortization Period
			(In thousands)						(in years)
Existing technology			$	59,100					13.7 years
Agreements and relationships			28,900						13.7 years
Tradenames, trademarks and patents			4,600						14.3 years
Total acquired intangibles with definite lives			$	92,600					13.7 years

Pro Forma Financial Information

Cadence has not presented pro forma financial information for any of the businesses it acquired during fiscal 2023, 2022 and fiscal 2021 because the results of operations for these businesses are not material to Cadence’s consolidated financial statements.

Acquisition-Related Transaction Costs

Transaction costs associated with acquisitions, which consist of professional fees and administrative costs, are expensed as incurred and are included in general and administrative expense in Cadence’s consolidated income statement. During fiscal 2023, 2022 or 2021, transaction costs associated with acquisitions were $12.1 million, $10.1 million and $2.6 million, respectively.

NOTE 7. GOODWILL AND ACQUIRED INTANGIBLES

Goodwill

The changes in the carrying amount of goodwill during fiscal 2023 and 2022 were as follows:

			Gross Carrying Amount
			(In thousands)
Balance as of January 1, 2022			$	928,358
Goodwill resulting from acquisitions			456,323
Effect of foreign currency translation			(10,413)
Balance as of December 31, 2022			1,374,268
Goodwill resulting from acquisitions			160,083
Effect of foreign currency translation			1,494
Balance as of December 31, 2023			$	1,535,845

Cadence completed its annual goodwill impairment test during the third quarter of fiscal 2023 and determined that the fair value of Cadence’s single reporting unit exceeded the carrying amount of its net assets and that no impairment existed.

Acquired Intangibles, Net

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

			Gross Carrying Amount						Accumulated Amortization						Acquired Intangibles, Net
			(In thousands)
Existing technology			$	325,710					$	(141,659)					$	184,051
Agreements and relationships			198,259						(61,395)						136,864
Tradenames, trademarks and patents			13,460						(4,332)						9,128
Total acquired intangibles with definite lives			$	537,429					$	(207,386)					$	330,043
In-process technology			6,800						—						6,800
Total acquired intangibles			$	544,229					$	(207,386)					$	336,843

In-process technology as of December 31, 2023, consisted of acquired projects that, if completed, will contribute to Cadence’s existing product offerings. As of December 31, 2023, these projects were expected to be completed during the first quarter of fiscal 2024. During fiscal 2023, there were no transfers from in-process technology to existing technology.

Acquired intangibles as of December 31, 2022, were as follows, excluding intangibles that were fully amortized as of January 1, 2022:

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

Amortization expense from existing technology and maintenance agreements is included in cost of product and maintenance. Amortization expense for fiscal 2023, 2022 and 2021, by consolidated income statement caption, was as follows:

			2023						2022						2021
			(In thousands)
Cost of product and maintenance			$	43,808					$	41,348					$	47,576
Amortization of acquired intangibles			18,162						18,470						19,640
Total amortization of acquired intangibles			$	61,970					$	59,818					$	67,216

As of December 31, 2023, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

			(In thousands)
2024			$	64,006
2025			51,277
2026			45,698
2027			43,184
2028			39,015
Thereafter			86,863
Total estimated amortization expense			$	330,043

NOTE 8. INCOME TAXES

The United States enacted the Tax Cuts and Jobs Act in December 2017, which required companies to capitalize all of their research and development (“R&D”) costs, including software development costs, incurred in tax years beginning after December 31, 2021. Beginning in fiscal 2022, Cadence began capitalizing and amortizing R&D costs over five years for domestic research and fifteen years for international research rather than expensing these costs as incurred. The mandatory capitalization requirement increased Cadence’s fiscal 2023 and 2022 effective tax rates, deferred tax assets, and cash tax payments.

Cadence’s income before provision for income taxes included income from the United States and from foreign subsidiaries for fiscal 2023, 2022 and 2021, was as follows:

			2023						2022						2021
			(In thousands)
United States			$	533,442					$	402,083					$	376,037
Foreign subsidiaries			748,484						643,280						392,398
Total income before provision for income taxes			$	1,281,926					$	1,045,363					$	768,435

Cadence’s provision for income taxes was comprised of the following items for fiscal 2023, 2022 and 2021:

			2023						2022						2021
			(In thousands)
Current:
Federal			$	156,495					$	212,380					$	19,957
State and local			15,933						7,280						25,246
Foreign			104,866						84,357						70,455
Total current			277,294						304,017						115,658
Deferred:
Federal			(87,851)						(79,170)						(16,415)
State and local			25,440						(50,640)						(30,406)
Foreign			25,899						22,204						3,643
Total deferred			(36,512)						(107,606)						(43,178)
Total provision for income taxes			$	240,782					$	196,411					$	72,480

During fiscal 2023, Cadence recognized a tax benefit of approximately $24.8 million due to the recognition of previously unrecognized tax benefits from the expiration of the applicable statute of limitations and a tax benefit of approximately $14.0 million primarily related to a change in R&D expenses that were capitalized in fiscal 2022.

During fiscal 2022, Cadence recognized a tax benefit of approximately $68.7 million due to a release of the valuation allowance on its California research and development tax credit deferred tax assets. In evaluating its ability to realize its deferred tax assets, Cadence considered all available positive and negative evidence, including its past operating results, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. Cadence expects to utilize these tax credits based on current earnings and future taxable income projections.

During fiscal 2021, Cadence recognized a tax benefit of approximately $10.5 million due to a release of the valuation allowance on its Massachusetts research and development tax credit deferred tax assets. Cadence expects to utilize these tax credits prior to expiration based on current earnings and future taxable income projections.

The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rates of 21% to income before provision for income taxes for fiscal 2023, 2022, and 2021 as follows:

			2023						2022						2021
			(In thousands)
Provision computed at federal statutory income tax rate			$	269,205					$	219,526					$	161,880
State and local income tax, net of federal tax effect			40,304						29,622						24,640
Intercompany transfers of intangible property rights			23,826						—						—
Foreign income tax rate differential			(54,210)						(49,949)						(26,887)
Foreign-derived intangible income deduction			(14,253)						(2,335)						(22,050)
U.S. tax on foreign entities			113,011						132,563						51,112
Stock-based compensation			(26,805)						(17,023)						(55,091)
Change in deferred tax asset valuation allowance			9,077						(38,073)						(8,262)
Tax credits			(130,383)						(105,366)						(90,054)
Non-deductible research and development expense			—						—						4,443
Withholding taxes			15,300						17,459						23,495
Tax settlements, foreign			4,034						—						—
Increase (decrease) in unrecognized tax benefits			(19,660)						2,354						1,511
Other			11,336						7,633						7,743
Provision for income taxes			$	240,782					$	196,411					$	72,480
Effective tax rate			19		%				19		%				9		%

The components of deferred tax assets and liabilities consisted of the following as of December 31, 2023, and December 31, 2022:

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Deferred tax assets:
Tax credit carryforwards			$	129,513					$	142,374
Reserves and accruals			78,993						75,543
Intangible assets			506,398						538,424
Capitalized research and development expense for income tax purposes			242,465						149,625
Operating loss carryforwards			9,598						11,081
Deferred income			77,066						64,897
Capital loss carryforwards			16,483						16,777
Stock-based compensation costs			27,409						22,830
Depreciation and amortization			10,671						9,176
Investments			15,949						9,016
Lease liability			33,639						37,758
Prepaid expenses			3,253						14,699
Total deferred tax assets			1,151,437						1,092,200
Valuation allowance			(79,162)						(70,085)
Net deferred tax assets			1,072,275						1,022,115
Deferred tax liabilities:
Intangible assets			(83,308)						(82,971)
Undistributed foreign earnings			(64,371)						(51,394)
ROU assets			(33,639)						(37,758)
Investments			(6,318)						—
Other			(13,455)						(11,060)
Total deferred tax liabilities			(201,091)						(183,183)
Total net deferred tax assets			$	871,184					$	838,932

During fiscal 2023, 2022 and 2021 Cadence maintained valuation allowances of $79.2 million, $70.1 million, and $108.2 million, respectively, on certain federal, state and foreign deferred tax assets because the realization of these deferred tax assets requires future income of a specific character or amount that Cadence considered uncertain. The valuation allowance primarily relates to the following:

• Tax credits in certain states that are accumulating at a rate greater than Cadence’s capacity to utilize the credits and tax credits in certain states where it is likely the credits will expire unused;

• Federal, state and foreign deferred tax assets related to investments and capital losses that can only be utilized against gains that are capital in nature; and

• Foreign tax credits that can only be fully utilized if Cadence has sufficient income of a specific character in the future.

The valuation allowance increased by $9.1 million during fiscal 2023, and decreased by $38.1 million and $8.3 million during fiscal 2022 and fiscal 2021, respectively. The valuation allowance activity was primarily related to state research and development tax credits and certain foreign tax credits.

As of December 31, 2023, Cadence’s operating loss carryforwards were as follows:

			Amount						Expiration Periods
			(In thousands)
Federal			$	167					from 2027 through 2033
California			28,437						from 2025 through 2041
Other states (tax effected, net of federal benefit)			762						from 2024 through indefinite
Foreign (tax effected)			6,719						indefinite

As of December 31, 2023, Cadence had tax credit carryforwards of:

			Amount						Expiration Periods
			(In thousands)
Federal*			$	42,905					from 2031
California			33,542						indefinite
Other states			11,065						from 2031 through indefinite
Foreign			42,002						from 2042 through indefinite

_____________

*Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.

Examinations by Tax Authorities

Taxing authorities regularly examine Cadence’s income tax returns. As of December 31, 2023, Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:

Jurisdiction						Earliest Tax Year Open to Examination
United States – Federal						2017
United States – California						2019
Ireland						2019
Israel						2017
Korea						2019

Unrecognized Tax Benefits

The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2023, 2022 and 2021 are as follows:

			2023						2022						2021
			(In thousands)
Unrecognized tax benefits at the beginning of the fiscal year			$	126,073					$	130,530					$	113,021
Gross amount of the increase (decrease) in unrecognized tax benefits of tax positions taken during a prior year*			(1,401)						2,152						15,414
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year			2,565						2,660						5,100
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes			(8,000)						—						(270)
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations			(24,768)						(7,430)						(2,778)
Effect of foreign currency translation			(158)						(1,839)						43
Unrecognized tax benefits at the end of the fiscal year			$	94,311					$	126,073					$	130,530
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate			$	93,398					$	121,415					$	79,654

_____________

• Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions

Cadence is currently under examination or contesting proposed adjustments by various domestic and international taxing authorities. It is reasonably possible that the amount of unrecognized tax positions could decrease by approximately $4.9 million during the next 12 months. The potential decrease could be a combination of settlements with tax authorities and expiration of statute of limitations. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements or examinations in advance of statute of limitation expirations.

The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision for income taxes for fiscal 2023, 2022 and 2021 were as follows:

			2023						2022						2021
			(In thousands)
Interest			$	2,282					$	434					$	1,171
Penalties			267						7						(11)

The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 31, 2023, and December 31, 2022, were as follows:

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Interest			$	4,813					$	5,133
Penalties			—						—

NOTE 9. STOCK COMPENSATION PLANS AND STOCK-BASED COMPENSATION

Equity Incentive Plans

Cadence’s Omnibus Plan provides for the issuance of both incentive and non-qualified options, restricted stock awards, restricted stock units, stock bonuses and the rights to acquire restricted stock to both executive and non-executive employees. During fiscal 2023, Cadence’s stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock authorized for issuance by 6.5 million. As of December 31, 2023, the total number of shares available for future issuance under the Omnibus Plan was 15.5 million. Options granted under the Omnibus Plan have an exercise price not less than the fair market value of the stock on the date of grant. Options and restricted stock generally vest over a period of three years to four years. Options granted under the Omnibus Plan expire seven years from the date of grant. Vesting of restricted stock awards granted under the Omnibus Plan may require the attainment of specified performance criteria.

Cadence’s 1995 Directors Stock Incentive Plan (the “Directors Plan”) provides for the issuance of non-qualified options, restricted stock awards and restricted stock units to its non-employee directors. Options granted under the Directors Plan have an exercise price not less than the fair market value of the stock on the date of grant. As of December 31, 2023, the total number of shares available for future issuance under the Directors Plan was 0.4 million. Options granted under the Directors Plan expire after ten years, and options, restricted stock awards and restricted stock units vest one year from the date of grant.

Cadence has assumed certain options granted to employees of acquired companies (“Acquired Options”). The Acquired Options were assumed by Cadence outside of its stock option plans, and each option is administered under the terms of the respective original plans of the acquired companies. All of the Acquired Options have been adjusted for the price conversion under the terms of the acquisition agreement between Cadence and the relevant acquired company. If the Acquired Options are canceled, forfeited or expire, they do not become available for future grant.

Stock-Based Compensation

Stock-based compensation expense and the related income tax benefit recognized in connection with stock options, restricted stock and the ESPP during fiscal 2023, 2022 and 2021 were as follows:

			2023						2022						2021
			(In thousands)
Stock options			$	15,939					$	14,597					$	9,051
Restricted stock			278,567						224,887						181,946
ESPP			31,105						30,955						19,093
Total stock-based compensation expense			$	325,611					$	270,439					$	210,090
Income tax benefit			$	50,994					$	40,612					$	33,958

Stock-based compensation expense is reflected in Cadence’s consolidated income statements during fiscal 2023, 2022 and 2021 as follows:

			2023						2022						2021
			(In thousands)
Cost of product and maintenance			$	4,500					$	3,818					$	3,375
Cost of services			5,728						4,851						4,161
Marketing and sales			66,304						54,771						43,264
Research and development			194,709						158,937						131,247
General and administrative			54,370						48,062						28,043
Total stock-based compensation expense			$	325,611					$	270,439					$	210,090

Stock Options

The exercise price of each stock option granted under Cadence’s employee equity incentive plans is equal to or greater than the closing price of Cadence’s common stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted average grant date fair value of options granted, and the weighted average assumptions used in the model for fiscal 2023, 2022 and 2021 were as follows:

			2023						2022						2021
Dividend yield			None						None						None
Expected volatility			32.6		%				36.0		%				31.7		%
Risk-free interest rate			3.62		%				2.14		%				1.02		%
Expected term (in years)			5.0						4.8						4.8
Weighted average fair value of options granted			$	71.83					$	49.16					$	46.10

A summary of the changes in stock options outstanding under Cadence’s equity incentive plans during fiscal 2023 is presented below:

									Weighted Average						Weighted Average Remaining Contractual Terms						Aggregate Intrinsic
			Shares						Exercise Price						(Years)						Value
			(In thousands)																		(In thousands)
Options outstanding as of December 31, 2022			2,915						$	80.35
Granted			262						205.87
Exercised			(797)						38.82
Forfeited			(13)						131.94
Options outstanding as of December 31, 2023			2,367						$	107.93					3.5						$	389,178
Options vested as of December 31, 2023			1,763						$	85.79					2.8						$	328,927

Cadence had total unrecognized compensation expense related to stock option grants of $32.9 million as of December 31, 2023, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.3 years.

The total intrinsic value of and cash received from options exercised during fiscal 2023, 2022 and 2021 was:

			2023						2022						2021
			(In thousands)
Intrinsic value of options exercised			$	139,125					$	105,242					$	129,403
Cash received from options exercised			30,940						16,014						23,844

Restricted Stock

Generally, restricted stock, which includes restricted stock awards and restricted stock units, vests over three years to four years and is subject to the employee’s continuing service to Cadence. Stock-based compensation expense is recognized ratably over the vesting term. The vesting of certain restricted stock grants is subject to attainment of specified performance criteria. Each fiscal quarter, Cadence estimates the probability of the achievement of these performance goals and recognizes any related stock-based compensation expense using the graded-vesting method. The amount of stock-based compensation expense recognized in any one period can vary based on the attainment or expected attainment of the various performance goals. If such performance goals are not ultimately met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

Certain long-term, market-based stock awards granted to executives vest over three to five years and are subject to certain market conditions and the executive’s continuing service to Cadence. Vesting of the market-based awards is contingent upon achieving market conditions of total shareholder return relative to a peer index. Stock-based compensation expense is recognized using the graded-vesting method over the vesting term. If the market-based conditions are not ultimately met, compensation expense previously recognized is not reversed. As of December 31, 2023, Cadence had 2.4 million shares of unvested long-term, market-based stock awards outstanding.

Cadence granted market-based awards in fiscal 2023 and fiscal 2022. No market-based awards were granted in fiscal 2021. Compensation expense is calculated using the fair value of the market-based stock awards under Monte Carlo simulation model. The weighted average assumptions used in the model for fiscal 2023 and fiscal 2022 were as follows:

			2023						2022
Dividend yield			None						None
Expected volatility			33.6		%				29.1		%
Risk-free interest rate			3.64		%				1.98		%
Expected term (in years)			3.8						5.1
Weighted average fair value of market-based awards granted			$	132.20					$	51.34

Stock-based compensation expense related to performance-based restricted stock grants and market-based restricted stock grants for fiscal 2023, 2022 and 2021 was as follows:

			2023						2022						2021
			(In thousands)
Stock-based compensation expense related to performance-based restricted stock			$	22,922					$	17,753					$	16,225
Stock-based compensation expense related to market-based stock awards			30,095						25,259						6,453

A summary of the changes in restricted stock outstanding under Cadence’s equity incentive plans during fiscal 2023 is presented below:

									Weighted Average Grant Date												Aggregate Intrinsic
			Shares						Fair Value												Value
			(In thousands)																		(In thousands)
Unvested shares as of December 31, 2022			6,371						$	99.03
Granted			1,546						233.78
Vested			(2,052)						115.26
Forfeited			(268)						118.97
Unvested shares as of December 31, 2023			5,597						$	129.35											$	1,138,797

As of December 31, 2023, Cadence had total unrecognized compensation expense related to restricted stock grants of $547.2 million, which will be recognized over a weighted average vesting period of 1.8 years.

The total fair value realized by employees upon vesting of restricted stock during fiscal 2023, 2022 and 2021 was:

			2023						2022						2021
			(In thousands)
Fair value of restricted stock realized upon vesting			$	442,556					$	346,003					$	365,298

Employee Stock Purchase Plan

Cadence provides an ESPP that enables eligible employees to purchase shares of its common stock. Offering periods under the plan last a duration of six months beginning on either February 1 or August 1, with the purchase dates falling on the last day of the six-month offering period. For the offering periods commencing after February 1, 2022, eligible employees may purchase Cadence’s common stock at a price equal to 85% of the lower of the fair market value at the beginning or the end of the applicable offering period, in an amount not to exceed 15% of their annual base earnings plus bonuses and commissions, and subject to a limit in any calendar year of $25,000. The ESPP may be amended from time to time. As of December 31, 2023, the total number of shares available for future issuance under the ESPP was 3.3 million.

Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes option pricing model. The weighted average grant date fair value of purchase rights granted under the ESPP and the weighted average assumptions used in the model for fiscal 2023, 2022 and 2021 were as follows:

			2023						2022						2021
Dividend yield			None						None						None
Expected volatility			29.9		%				37.2		%				31.5		%
Risk-free interest rate			4.50		%				1.71		%				0.07		%
Expected term (in years)			0.5						0.5						0.5
Weighted average fair value of options granted			$	50.95					$	43.41					$	33.77

Shares of common stock issued under the ESPP for fiscal 2023, 2022 and 2021 were as follows:

			2023						2022						2021
			(In thousands, except per share amounts)
Cadence shares purchased under the ESPP			647						703						624
Cash received for the purchase of shares under the ESPP			$	102,017					$	89,314					$	63,932
Weighted average purchase price per share			$	157.70					$	127.12					$	102.41

Reserved for Future Issuance

As of December 31, 2023, Cadence had reserved the following shares of authorized but unissued common stock for future issuance:

			Shares
			(In thousands)
Employee equity incentive plans*			21,028
Employee stock purchase plans			3,280
Directors stock plans*			458
Total			24,766

_____________

*Includes shares reserved for: (i) issuance upon exercise of future option grants, (ii) issuance upon vesting of future restricted stock grants, (iii) outstanding but unexercised options to purchase common stock, or (iv) unvested restricted stock units.

NOTE 10. STOCK REPURCHASE PROGRAMS

In August 2023, Cadence’s Board of Directors increased the prior authorization to repurchase shares of Cadence common stock by authorizing an additional $1.0 billion. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

During fiscal 2023, Cadence repurchased approximately 2.3 million shares on the open market, for an aggregate purchase price of 500.0 million.

In June 2023, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with HSBC Bank USA, National Association (“HSBC”) to repurchase an aggregate of $200.0 million of Cadence common stock. The ASR agreement was accounted for as two separate transactions (1) a repurchase of common stock and (2) an equity-linked contract on Cadence’s own stock. In June 2023, Cadence received an initial share delivery of approximately 0.6 million shares, which represented the number of shares at a market price equal to $140.0 million. An equity-linked contract for $60 million, representing the remaining shares to be delivered by HSBC under the ASR agreement, was recorded to stockholders' equity as of June 30, 2023. In August 2023, the ASR agreement settled and resulted in a delivery of approximately 0.3 million additional shares to Cadence. In total, Cadence received approximately 0.9 million shares under the ASR agreement at an average price per share of $228.26. The shares received were treated as repurchased common stock for purposes of calculating earnings per share.

As of December 31, 2023, approximately $1.4 billion of the share repurchase authorization remained available to repurchase shares of Cadence common stock.

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

The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during fiscal 2023, 2022 and 2021 were as follows:

			2023*						2022**						2021
			(In thousands)
Shares repurchased			3,145						6,602						4,401
Total cost of repurchased shares			$	700,134					$	1,050,091					$	612,297

_____________

*Includes 276 thousand shares and $60 million equity forward contract from the June 2023 ASR settled in August 2023, and excludes $0.9 million of excise tax.

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

NOTE 11. RESTRUCTURING AND OTHER CHARGES

Cadence has initiated various restructuring plans in recent years in an effort to better align its resources with its business strategy. Most recently, in August 2023, Cadence initiated a restructuring plan (the “2023 Restructuring Plan”) and incurred costs comprised of severance payments and termination benefits related to headcount reductions and costs related to impacted facilities. Cadence expects to incur facility-related restructuring charges in future periods until all affected leases are terminated. These facility-related charges are not expected to be material. These costs are included in restructuring on Cadence’s consolidated income statements.

The following table presents activity for Cadence’s restructuring plans during fiscal 2023, 2022 and 2021:

			Severance and Benefits						Excess Facilities						Total
			(In thousands)
Balance, January 2, 2021			$	7,321					$	1,372					$	8,693
Restructuring			(1,480)						432						(1,048)
Cash payments			(5,774)						(1,761)						(7,535)
Effect of foreign currency translation			(67)						—						(67)
Balance, January 1, 2022			$	—					$	43					$	43
Restructuring			—						55						55
Cash payments			—						(98)						(98)
Effect of foreign currency translation			—						—						—
Balance, December 31, 2022			$	—					$	—					$	—
Restructuring			10,935						78						11,013
Non-cash changes			—						(78)						(78)
Cash payments			(8,211)						—						(8,211)
Effect of foreign currency translation			(121)						—						(121)
Balance, December 31, 2023			$	2,603					$	—					$	2,603

All liabilities for severance and related benefits under the 2023 Restructuring Plan are included in accounts payable and accrued liabilities on Cadence’s consolidated balance sheet as of December 31, 2023. Cadence expects to make cash payments to settle these liabilities through fiscal 2024.

Other Termination Benefits

During fiscal 2021, Cadence offered a voluntary retirement program to eligible employees in the United States. This program resulted in a one-time charge of $26.8 million for voluntary termination and post-employment benefits. These charges were included in cost of revenue and each of the operating expense categories included in Cadence’s consolidated income statements. As of December 31, 2023, there were no remaining liabilities related to the voluntary retirement program on Cadence’s consolidated balance sheet.

NOTE 12. OTHER INCOME (EXPENSE), NET

Cadence’s other income (expense), net, for fiscal 2023, 2022 and 2021 was as follows:

			2023						2022						2021
			(In thousands)
Interest income			$	29,637					$	10,099					$	2,634
Gains (losses) on investments			34,602						(5,425)						580
Gains (losses) on securities in NQDC trust			10,851						(8,744)						6,163
Losses on foreign exchange			(5,490)						(459)						(2,789)
Other expense, net			(2,714)						(860)						(262)
Total other income (expense), net			$	66,886					$	(5,389)					$	6,326

NOTE 13. NET INCOME PER SHARE

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

The calculations for basic and diluted net income per share for fiscal 2023, 2022 and 2021 are as follows:

			2023						2022						2021
			(In thousands, except per share amounts)
Net income			$	1,041,144					$	848,952					$	695,955
Weighted average common shares used to calculate basic net income per share			269,381						271,198						273,504
Stock-based awards			3,367						3,813						5,354
Weighted average common shares used to calculate diluted net income per share			272,748						275,011						278,858
Net income per share – basic			$	3.86					$	3.13					$	2.54
Net income per share – diluted			$	3.82					$	3.09					$	2.50

The following table presents shares of Cadence’s common stock outstanding for fiscal 2023, 2022 and 2021 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:

			2023						2022						2021
			(In thousands)
Long-term market-based awards			1,381						1,565						—
Options to purchase shares of common stock			345						716						214
Non-vested shares of restricted stock			232						88						41
Total potential common shares excluded			1,958						2,369						255

NOTE 14. INVESTMENTS

Marketable Equity Investments

Cadence’s investments in marketable equity securities consist of purchased shares of publicly held companies and are included in prepaid expenses and other in Cadence’s consolidated balance sheets. Changes in the fair value of these investments are recorded to other income (expense), net in Cadence’s consolidated income statements. The carrying value of marketable equity investments was $80.6 million and $4.5 million as of December 31, 2023, and December 31, 2022, respectively.

Marketable Debt Securities

The following is a summary of Cadence’s available-for-sale debt securities recorded within prepaid expenses and other on the consolidated balance sheet as of December 31, 2023:

			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
			(In thousands)
Available-for-sale securities
Mortgage-backed and asset-backed securities			$	49,653					$	375					$	(243)					$	49,785
Total available-for-sale securities			$	49,653					$	375					$	(243)					$	49,785

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

As of December 31, 2023, the fair values of available-for-sale debt securities, by remaining contractual maturity, were as follows:

			(In thousands)
Due within 1 year			$	—
Due after 1 year through 5 years			10,027
Due after 5 years through 10 years			16,180
Due after 10 years			23,578
Total			$	49,785

As of December 31, 2023, Cadence does not intend to sell any of its available-for-sale securities in an unrealized loss position, and it is more likely than not that Cadence will hold the securities until maturity or a recovery of the cost basis.

Non-Marketable Equity Investments

Cadence’s investments in non-marketable equity securities generally consist of stock or other instruments of privately held entities and are included in other assets on Cadence’s consolidated balance sheets. Cadence holds a 16% interest in a privately held company that is accounted for using the equity method of accounting. The carrying value of this investment was $111.1 million and $117.7 million as of December 31, 2023, and December 31, 2022, respectively. Cadence records its proportionate share of net income from the investee, offset by amortization of basis differences, to other income (expense), net in Cadence’s consolidated income statements. During fiscal 2023, 2022 and 2021, Cadence recorded losses of $2.7 million, $3.6 million and $1.1 million respectively.

Cadence also holds other non-marketable investments in privately held companies where Cadence does not have the ability to exercise significant influence and the fair value of the investments is not readily determinable. The carrying value of these investments was $27.2 million and $2.3 million as of December 31, 2023, and December 31, 2022, respectively. There were no material upward or downward adjustments to non-marketable investments held or sold by Cadence during the periods presented.

NOTE 15. FAIR VALUE

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

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

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

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

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

On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of December 31, 2023, and December 31, 2022:

			Fair Value Measurements as of December 31, 2023
			Total						Level 1						Level 2						Level 3
			(In thousands)
Assets
Cash equivalents:
Money market funds			$	490,983					$	490,983					$	—					$	—
Marketable equity securities:
Marketable equity securities			80,575						80,575						—						—
Mortgage-backed and asset-backed securities			49,785						—						49,785						—
Securities held in NQDC trust			75,671						75,671						—						—
Foreign currency exchange contracts			9,327						—						9,327						—
Total Assets			$	706,341					$	647,229					$	59,112					$	—
As of December 31, 2023, Cadence did not have any financial liabilities requiring a recurring fair value measurement.

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

Level 1 Measurements

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

Level 2 Measurements

The valuation techniques used to determine the fair value of Cadence’s investments in marketable debt securities, foreign currency forward exchange contracts, the 2024 Notes and the 2025 Term Loan are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 5 in the notes to consolidated financial statements.

Level 3 Measurements

During fiscal 2023, Cadence acquired intangible assets of $41.0 million. The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements.

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

For agreements and relationships, the fair value was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships was determined using customer retention rates between 70% and 90%. The present value of operating cash flows from existing customers was determined using discount rates between 12% and 15%.

During fiscal 2022, Cadence acquired intangible assets of $178.6 million. The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements.

With its acquisitions of OpenEye and Future Facilities, Cadence acquired combined intangible assets of $155.5 million. For existing technology acquired with OpenEye and Future Facilities, the fair value was determined by applying the relief-from-royalty method. This method is based on the application of a royalty rate to forecasted revenue to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. To estimate royalty savings over time, Cadence projected revenue from the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate. For both OpenEye and Future Facilities, Cadence assumed technological obsolescence at a rate of 10% annually, before applying an assumed royalty rate of 25%.

The fair value for agreements and relationships acquired with its acquisitions of OpenEye and Future Facilities was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships was determined using customer retention rates between 95% and 100% for OpenEye and 95% for Future Facilities. The present value of operating cash flows from existing customers was determined using discount rates ranging from 10% to 11%.

Cadence also completed three other business combinations during fiscal 2022, with combined intangible assets of $23.1 million. The fair value of certain intangible assets acquired was determined using the multi-period excess earnings method, a variation of the income approach that utilizes unobservable inputs classified as Level 3 measurements. This method estimates the revenue and cash flows derived from the acquired assets, net of investment in supporting assets. The resulting cash flow, which is attributable solely to the assets acquired, is then discounted at a rate of return commensurate with the associated risk of the asset to calculate the present value. Cadence assumed discount rates ranging from 11.5% to 24.5%. The fair value of the remaining intangible assets acquired was determined using the relief-from-royalty method using a technological obsolescence rate of approximately 12% annually, before applying a royalty rate of 25%.

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

NOTE 16. BALANCE SHEET COMPONENTS

A summary of certain balance sheet components as of December 31, 2023, and December 31, 2022, is as follows:

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Inventories:
Raw materials			$	162,754					$	113,982
Finished goods			18,907						14,023
Inventories			$	181,661					$	128,005
Prepaid expenses and other:
Prepaid income taxes			$	24,905					$	69,498
Short-term investments			130,359						4,490
Other prepaid expenses and other assets			141,916						135,739
Prepaid expenses and other			$	297,180					$	209,727
Property, plant and equipment:
Equipment and internal-use software			$	781,683					$	727,415
Buildings			131,882						131,949
Land			56,641						56,611
Leasehold, building and land improvements			211,854						176,413
Furniture and fixtures			39,998						34,330
In-process capital assets			17,937						21,670
Total cost			1,239,995						1,148,388
Less: Accumulated depreciation and amortization			(836,782)						(776,937)
Property, plant and equipment, net			$	403,213					$	371,451
Other assets:
Non-marketable investments			$	138,321					$	119,997
ROU lease assets			150,797						170,379
Other long-term assets			248,254						185,901
Other assets			$	537,372					$	476,277
Accounts payable and accrued liabilities:
Trade accounts payable			$	91,194					$	47,113
Payroll and payroll-related accruals			294,108						294,620
Customer deposits			18,790						54,568
Other accrued operating liabilities			172,466						160,857
Accounts payable and accrued liabilities			$	576,558					$	557,158
Other long-term liabilities:
Operating lease liabilities			$	115,358					$	139,337
Other accrued liabilities			160,293						165,323
Other long-term liabilities			$	275,651					$	304,660

NOTE 17. LEASES

Operating lease expense, which includes immaterial amounts of short-term leases, variable lease costs and sublease income, was as follows during fiscal 2023, 2022 and 2021:

			2023						2022						2021
			(In thousands)
Operating lease expense			$	56,805					$	49,165					$	43,210

Additional activity related to Cadence’s leases during fiscal 2023, 2022 and 2021 was as follows:

			2023						2022						2021
			(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities			$	46,069					$	34,334					$	50,151
ROU assets obtained in exchange for operating lease obligations			32,597						83,758						31,813

ROU lease assets and lease liabilities for Cadence’s operating leases were recorded in the consolidated balance sheets as follows:

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Other assets			$	150,797					$	170,379
Accounts payable and accrued liabilities			41,619						36,737
Other long-term liabilities			115,358						139,337
Total lease liabilities			$	156,977					$	176,074
Weighted average remaining lease term (in years)			5.7						6.3
Weighted average discount rate			4		%				4		%

Future lease payments included in the measurement of lease liabilities on the consolidated balance sheet as of December 31, 2023, for the following five fiscal years and thereafter were as follows:

			Operating
			Leases
			(In thousands)
2024			$	45,304
2025			36,433
2026			27,054
2027			16,785
2028			13,122
Thereafter			38,693
Total future lease payments			177,391
Less imputed interest			(20,414)
Total lease liability balance			$	156,977

NOTE 18. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

Cadence had purchase obligations of $107.4 million as of December 31, 2023, that were associated with agreements or commitments for purchases of goods or services. Cadence expects to settle $68.7 million of these obligations within the next 12 months.

Legal Proceedings

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

Tax Proceedings

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

Other Contingencies

Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. Cadence did not incur any significant costs related to warranty obligations during fiscal 2023, 2022 or 2021.

Cadence’s product license and services agreements typically include a limited indemnification provision for claims from third parties relating to Cadence’s IP. If the potential loss from any indemnification claim is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss.

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

Cadence did not incur any material losses from indemnification claims during fiscal 2023, 2022 or 2021.

NOTE 19. EMPLOYEE AND DIRECTOR BENEFIT PLANS

Cadence maintains various defined contribution plans for its eligible U.S. and non-U.S. employees. For employees in the United States, Cadence maintains a 401(k) savings plan to provide retirement benefits through tax-deferred salary deductions and may make discretionary contributions, as determined by the Board of Directors, which cannot exceed a specified percentage of the annual aggregate salaries of those employees eligible to participate. Cadence’s total contributions made to these plans during fiscal 2023, 2022 and 2021 were as follows:

			2023						2022						2021
			(In thousands)
Contributions to defined contribution plans			$	39,651					$	35,464					$	33,029

Executive Officers and Directors may also elect to defer compensation payable to them under Cadence’s NQDC. Deferred compensation payments are held in investment accounts and the values of the accounts are adjusted each quarter based on the fair value of the investments held in the NQDC. These investments are classified in other assets in the consolidated balance sheets and gains and losses are recognized as other income (expense), net in the consolidated income statements.

Certain of Cadence’s international subsidiaries sponsor defined benefit retirement plans. The unfunded projected benefit obligation for Cadence’s defined benefit retirement plans is recorded in other long-term liabilities in the consolidated balance sheets.

NOTE 20. ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

			As of
			December 31, 2023						December 31, 2022
			(In thousands)
Foreign currency translation loss			$	(90,678)					$	(85,863)
Changes in defined benefit plan liabilities			(4,208)						(5,774)
Unrealized gains on investments			132						—
Total accumulated other comprehensive loss			$	(94,754)					$	(91,637)

For fiscal 2023, 2022 and 2021, there were no significant amounts related to foreign currency translation loss or changes in defined benefit plan liabilities reclassified to net income from accumulated other comprehensive loss.

NOTE 21. SEGMENT REPORTING

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

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

The following table presents a summary of revenue by geography for fiscal 2023, 2022 and 2021:

			2023						2022						2021
			(In thousands)
Americas:
United States			$	1,694,529					$	1,577,881					$	1,292,980
Other Americas			65,259						53,123						42,141
Total Americas			1,759,788						1,631,004						1,335,121
Asia:
China			679,538						521,509						378,160
Other Asia			766,409						629,533						566,772
Total Asia			1,445,947						1,151,042						944,932
Europe, Middle East and Africa			655,078						582,350						523,390
Japan			229,173						197,322						184,801
Total			$	4,089,986					$	3,561,718					$	2,988,244

The following table presents a summary of long-lived assets by geography as of December 31, 2023, December 31, 2022, and January 1, 2022:

			As of
			December 31, 2023						December 31, 2022						January 1, 2022
			(In thousands)
Americas:
United States			$	383,807					$	347,822					$	267,202
Other Americas			10,219						7,548						975
Total Americas			394,026						355,370						268,177
Asia:
China			29,598						51,667						56,403
Other Asia			71,365						73,329						54,677
Total Asia			100,963						124,996						111,080
Europe, Middle East and Africa			56,449						56,959						53,748
Japan			2,572						4,505						3,030
Total			$	554,010					$	541,830					$	436,035

NOTE 22. SUBSEQUENT EVENT

On January 8, 2024, Cadence acquired all of the outstanding equity of Invecas, Inc. (“Invecas”), a leading provider of design engineering, embedded software and system-level solutions. The acquisition adds a skilled system design engineering team to Cadence, with expertise in providing customers with custom solutions across chip design, product engineering, advanced packaging and embedded software. The aggregate cash consideration of approximately $95 million will be allocated to the assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Cadence expects to complete the initial accounting for its acquisition of Invecas during the first quarter of fiscal 2024.

EXHIBIT INDEX

																		Incorporated by Reference
Exhibit																								Exhibit						Filing						Provided
Number						Exhibit Title						Form						File No.						No.						Date						Herewith
3.01						The Registrant’s Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on May 3, 2019.						10-Q						000-15867						3.01						7/22/2019
3.02						The Registrant’s Amended and Restated Bylaws, effective as of November 2, 2023.						8-K						000-15867						3.01						11/3/2023
4.01						Specimen Certificate of the Registrant’s Common Stock.						S-4						033-43400						4.01						10/17/1991
4.02						Base Indenture, dated October 9, 2014, between the Registrant and Wells Fargo Bank, N.A., as trustee.						8-K						000-15867						4.01						10/9/2014
4.03						First Supplemental Indenture, dated October 9, 2014, between the Registrant and Wells Fargo Bank, N.A., as trustee (including the Form of 4.375% Senior Notes due 2024).						8-K						000-15867						4.02						10/9/2014
4.04						Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.																														X
10.01*						The Registrant’s 1995 Directors Stock Incentive Plan.						10-Q						001-15867						10.01						7/26/2012
10.02*						Form of Stock Option Agreement, as currently in effect under the Registrant’s 1995 Directors Stock Incentive Plan.						10-K						000-15867						10.76						2/21/2013
10.03*						Form of Incentive Stock Award Agreement, as currently in effect under the Registrant’s 1995 Directors Stock Incentive Plan.						10-K						000-15867						10.77						2/21/2013
10.04*						The Registrant’s Omnibus Equity Incentive Plan, as amended and restated.						S-8						333-275140						99.01						10/23/2023
10.05*						Form of Incentive Stock Award Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.						10-Q						000-15867						10.01						10/23/2023
10.06*						Form of Restricted Stock Unit Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.						10-Q						000-15867						10.02						10/23/2023
10.07*						Form of Stock Option Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.						S-8						333-195771						99.04						5/7/2014
10.08*						Form of Incentive Stock Award Agreement for Executives, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.						S-8						333-195771						99.05						5/7/2014
10.09*						Form of Restricted Stock Unit Agreement for Executives, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.						S-8						333-195771						99.06						5/7/2014
10.10*						Form of Stock Option Agreement for Executives, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.						S-8						333-195771						99.07						5/7/2014
10.11*						nusemi inc. 2015 Equity Incentive Plan.						S-8						333-226294						99.01						7/23/2018
10.12*						The Registrant’s Amended and Restated Employee Stock Purchase Plan.						S-8						333-226293						99.01						7/23/2018
10.13*						The Registrant’s 2009 Deferred Compensation Plan, as amended and restated on February 5, 2019.						10-K						000-15867						10.26						2/24/2020
10.14*						The Registrant’s Senior Executive Bonus Plan.						8-K						000-15867						10.01						2/8/2019
10.15*						The Registrant’s Executive Severance Plan.						8-K						001-15867						10.01						5/11/2016
10.16*						The Registrant’s Director Medical and Prescription Benefits Coverage Reimbursement Plan.						10-Q						001-10606						10.02						4/29/2011

10.17*						Form of Indemnity Agreement between the Registrant and its directors and executive officers, as amended and restated.						10-Q						000-15867						10.01						7/25/2016
10.18*						Employment Agreement, effective as of January 8, 2009, between the Registrant and Lip-Bu Tan.						10-K						001-10606						10.93						3/2/2009
10.19*						Employment Agreement, effective as of February 23, 2009, between the Registrant and Nimish H. Modi.						10-K						001-10606						10.96						3/2/2009
10.20*						Form of First Amendment to Employment Agreement between the Registrant and the Registrant’s named executive officers.						10-Q						001-10606						10.02						7/31/2009
10.21*						Form of Second Amendment to Employment Agreement between the Registrant and the Registrant’s named executive officers.						10-K						001-10606						10.94						2/26/2010
10.22*						Second Amendment to Employment Agreement, effective as of March 1, 2010, between the Registrant and Lip-Bu Tan.						10-K						001-10606						10.95						2/26/2010
10.23*						Third Amendment to Employment Agreement, effective as of March 22, 2018, between the Registrant and Lip-Bu Tan.						10-Q						000-15867						10.01						4/25/2018
10.24*						Employment Agreement, effective as of September 20, 2012, between the Registrant and Thomas P. Beckley.						10-K						000-15867						10.44						2/20/2014
10.25*						Letter, dated September 1, 2015, between the Registrant and Neil Zaman.						10-K						000-15867						10.49						2/18/2016
10.26*						Amended and Restated Employment Agreement, effective as of December 15, 2021, between the Registrant and Anirudh Devgan.						8-K/A						000-15867						10.01						12/17/2021
10.27*						Executive Chairman Agreement, effective as of December 15, 2021, between the Registrant and Lip-Bu Tan.						8-K/A						000-15867						10.02						12/17/2021
10.28						Credit Agreement, dated as of June 30, 2021, by and among the Registrant, Bank of America, N.A., and other lenders party thereto.						8-K						000-15867						10.01						7/1/2021
10.29						First Amendment to Credit Agreement, dated September 7, 2022, by and among the Registrant, Bank of America, N.A. and other lenders party thereto.						8-K						000-15867						10.02						9/8/2022
10.30						Loan Agreement, dated September 7, 2022, by and among the Registrant, Bank of America, N.A., and other lenders party thereto.						8-K						000-15867						10.01						9/8/2022
21.01						Subsidiaries of the Registrant.																														X
23.01						Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.																														X
24.01						Power of Attorney (incorporated by reference to the signature page to this Annual Report on Form 10-K).
31.01						Certification of the Registrant’s Chief Executive Officer, Anirudh Devgan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.																														X
31.02						Certification of the Registrant’s Chief Financial Officer, John M. Wall, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.																														X
32.01†						Certification of the Registrant’s Chief Executive Officer, Anirudh Devgan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.																														X
32.02†						Certification of the Registrant’s Chief Financial Officer, John M. Wall, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.																														X

97.01						The Registrant's Policy for Recovery of Erroneously Awarded Compensation																														X
101.INS						Inline XBRL Instance Document.																														X
101.SCH						Inline XBRL Taxonomy Extension Schema Document.																														X
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.																														X
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.																														X
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.																														X
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.																														X
104						Cover Page Interactive Data File - The cover page from this Annual Report on Form 10-K is formatted in iXBRL.

• Indicates management contract or compensatory plan or arrangement covering executive officers or directors of the Registrant.

† In accordance with Item 601(b)(32)(ii) of Regulation S-K, the certifications furnished in Exhibits 32.01 and 32.02 hereto will not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filings under the Securities Act or the Exchange Act (except to the extent that the registrant specifically incorporates it by reference).