Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2023.

Based on their evaluation as of June 30, 2023, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

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

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

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

On November 18, 2022, Cadence and another EDA vendor jointly filed an action in the U.S. District Court for the District of Delaware for declaratory judgment of invalidity and non-infringement as to each of the six patents asserted by Bell Semi in the aforementioned actions. Bell Semi’s motion to dismiss the declaratory judgment actions was denied on April 27, 2023. On November 28, 2022, Cadence and another EDA vendor also filed a motion for preliminary injunction in the U.S. District Court for the District of Delaware seeking to enjoin Bell Semi from proceeding with its litigation campaign. Motions for preliminary injunction were denied without prejudice on April 27, 2023. Bell Semi responded to the declaratory judgment complaint on May 11, 2023. The actions for declaratory judgment are set for trial on January 16, 2024 through January 19, 2024.