Item 1. Financial Statements

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Item 1. Financial Statements

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	As of
	March 31, 2025		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	2,777,674	$	2,644,030
Receivables, net	580,887		680,460
Inventories	225,621		257,711
Prepaid expenses and other	413,905		433,878
Total current assets	3,998,087		4,016,079
Property, plant and equipment, net	466,322		458,200
Goodwill	2,419,717		2,378,671
Acquired intangibles, net	584,228		594,734
Deferred taxes	986,191		982,057
Other assets	558,941		544,741
Total assets	$	9,013,486	$	8,974,482
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:


Accounts payable and accrued liabilities	$	570,197	$	632,692
Current portion of deferred revenue	730,570		737,413
Total current liabilities	1,300,767		1,370,105
Long-term liabilities:
Long-term portion of deferred revenue	110,702		115,168
Long-term debt	2,477,159		2,476,183
Other long-term liabilities	348,601		339,448
Total long-term liabilities	2,936,462		2,930,799
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock and capital in excess of par value	4,327,187		4,181,737
Treasury stock, at cost	(5,693,200)		(5,309,579)
Retained earnings	6,265,447		5,991,868
Accumulated other comprehensive loss	(123,177)		(190,448)
Total stockholders’ equity	4,776,257		4,673,578
Total liabilities and stockholders’ equity	$	9,013,486	$	8,974,482

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended
		March 31, 2025		March 31, 2024
Revenue:
Product and maintenance		$	1,110,850	$	913,385
Services		131,516		95,718
Total revenue		1,242,366		1,009,103
Costs and expenses:
Cost of product and maintenance		116,672		75,395
Cost of services		50,461		49,802
Marketing and sales		202,700		180,589
Research and development		439,102		378,958
General and administrative		63,098		68,716
Amortization of acquired intangibles		8,922		5,407
Restructuring		(109)		280
Total costs and expenses		880,846		759,147
Income from operations		361,520		249,956
Interest expense		(29,118)		(8,692)
Other income, net		23,290		68,779
Income before provision for income taxes		355,692		310,043
Provision for income taxes		82,113		62,400
Net income		$	273,579	$	247,643
Net income per share – basic		$	1.01	$	0.92
Net income per share – diluted		$	1.00	$	0.91
Weighted average common shares outstanding – basic		271,973		269,606
Weighted average common shares outstanding – diluted		273,631		273,544

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended
		March 31, 2025		March 31, 2024
Net income		$	273,579	$	247,643
Other comprehensive income (loss), net of tax effects:
Foreign currency translation adjustments		66,150		(12,630)
Changes in defined benefit plan liabilities		355		(21)
Reclassification of realized losses on derivatives designated as hedging instruments		195		—
Unrealized gains (losses) on available-for-sale debt securities		571		(392)
Total other comprehensive income (loss), net of tax effects		67,271		(13,043)
Comprehensive income		$	340,850	$	234,600

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)





































	Three Months Ended March 31, 2025
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, December 31, 2024	273,851	$	4,181,737	$	(5,309,579)	$	5,991,868	$	(190,448)	$	4,673,578
Net income	—	—		—		273,579		—		$	273,579
Other comprehensive income, net of taxes	—	—		—		—		67,271		$	67,271
Purchase of treasury stock	(1,361)	—		(350,007)		—		—		$	(350,007)

Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	700	67,220		9,569		—		—		$	76,789

Stock received for payment of employee taxes on vesting of restricted stock	(148)	(29,383)		(43,183)		—		—		$	(72,566)
Stock-based compensation expense	—	107,613		—		—		—		$	107,613
Balance, March 31, 2025	273,042	$	4,327,187	$	(5,693,200)	$	6,265,447	$	(123,177)	$	4,776,257

	Three Months Ended March 31, 2024
	Common Stock
		Par Value						Accumulated
		and Capital						Other
		in Excess		Treasury		Retained		Comprehensive
	Shares	of Par		Stock		Earnings		Loss		Total
Balance, December 31, 2023	271,706	$	3,166,964	$	(4,604,323)	$	4,936,384	$	(94,754)	$	3,404,271
Net income	—	—		—		247,643		—		$	247,643
Other comprehensive loss, net of taxes	—	—		—		—		(13,043)		$	(13,043)
Purchase of treasury stock	(425)	—		(125,006)		—		—		$	(125,006)

Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures	1,319	89,159		27,566		—		—		$	116,725
Stock received for payment of employee taxes on vesting of restricted stock	(466)	(12,705)		(138,418)		—		—		$	(151,123)
Stock-based compensation expense	—	88,129		—		—		—		$	88,129
Balance, March 31, 2024	272,134	$	3,331,547	$	(4,840,181)	$	5,184,027	$	(107,797)	$	3,567,596

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended
	March 31, 2025		March 31, 2024
Cash and cash equivalents at beginning of period	$	2,644,030	$	1,008,152
Cash flows from operating activities:
Net income	273,579		247,643
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	52,916		39,556

Stock-based compensation	107,613		88,129
(Gain) loss on divestitures and investments, net	1,791		(55,394)
Deferred income taxes	(1,861)		(1,523)

ROU asset amortization and change in operating lease liabilities	(1,446)		(917)
Other non-cash items	862		556
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables	102,136		102,991
Inventories	15,018		(10,689)
Prepaid expenses and other	10,316		(15,073)
Other assets	12,237		(7,535)
Accounts payable and accrued liabilities	(69,621)		(117,291)
Deferred revenue	(14,377)		(23,941)
Other long-term liabilities	(2,142)		6,720
Net cash provided by operating activities	487,021		253,232
Cash flows from investing activities:
Purchases of investments	(11,469)		(2,095)
Proceeds from the sale and maturity of investments	1,246		43,377
Proceeds from the sale of IP and other assets	11,500		—
Purchases of property, plant and equipment	(23,061)		(49,601)

Cash paid in business combinations, net of cash acquired	—		(71,450)
Net cash used for investing activities	(21,784)		(79,769)
Cash flows from financing activities:






Proceeds from issuance of common stock	76,789		116,725
Stock received for payment of employee taxes on vesting of restricted stock	(72,566)		(151,123)
Payments for repurchases of common stock	(350,007)		(125,006)
Net cash used for financing activities	(345,784)		(159,404)
Effect of exchange rate changes on cash and cash equivalents	14,191		(9,793)
Increase in cash and cash equivalents	133,644		4,266
Cash and cash equivalents at end of period	$	2,777,674	$	1,012,418

Supplemental cash flow information:
Cash paid for interest	$	55,734	$	4,903
Cash paid for income taxes, net	29,956		23,850

See notes to condensed consolidated financial statements.

CADENCE DESIGN SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Basis of Presentation

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Cadence Design Systems, Inc. (“Cadence”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, Cadence believes that the disclosures contained in this Quarterly Report on Form 10-Q comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These condensed consolidated financial statements are meant to be, and should be, read in conjunction with the consolidated financial statements and the notes thereto included in Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the "Annual Report").

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

Fiscal Year End

Cadence’s fiscal year end is December 31, and its fiscal quarters end on March 31, June 30, and September 30.

Use of Estimates

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

Recently Adopted Accounting Standards

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 for significant segment expenses. Cadence adopted this ASU retrospectively during fiscal 2024 for its Annual Report. For interim disclosures required by this ASU, see Note 15 in the notes to condensed consolidated financial statements.

New Accounting Standards Not Yet Adopted

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 plans to adopt this standard in connection with its annual report for fiscal 2025 and is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

Income Statement - Expense Disaggregation Disclosure

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,” which requires additional disclosure of certain costs and expenses in the notes to the financial statements. The updated standard is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted and will be applied prospectively with the option for retrospective application. Cadence is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

NOTE 2. REVENUE

Cadence groups its solutions in three product categories: Core EDA, Semiconductor IP, and System Design and Analysis. The Core EDA category includes software, hardware, and services used to design and verify a wide variety of semiconductors. The Semiconductor IP category includes silicon subsystems, software, and services that are used in semiconductor design. The System Design and Analysis category includes software and services used to design and verify a wide variety of physical electronic systems. These categories are tightly integrated to provide complete design solutions for customers.

The following table shows the percentage of revenue contributed by each of Cadence’s product categories for the three months ended March 31, 2025 and March 31, 2024:


	Three Months Ended
		March 31, 2025		March 31, 2024
Core EDA*		71	%	76	%
Semiconductor IP (“IP”)		14	%	12	%
System Design and Analysis		15	%	12	%
Total		100	%	100	%

_____________

Includes immaterial amount of revenue accounted for under leasing arrangements.

Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them. No single customer accounted for 10% or more of total revenue during the three months ended March 31, 2025 or March 31, 2024.

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. 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 hardware, individual IP licenses and certain software licenses.

The percentage of Cadence’s recurring and up-front revenue in any single fiscal period is primarily impacted by delivery of hardware and IP products to its customers.

The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for the three months ended March 31, 2025 and March 31, 2024:


	Three Months Ended
		March 31, 2025		March 31, 2024
Revenue recognized over time		77	%	87	%
Revenue from arrangements with non-cancelable commitments		3	%	3	%
Recurring revenue		80	%	90	%
Up-front revenue		20	%	10	%
Total		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 and the license of certain software, Cadence has concluded that the licenses and the related updates and technical support are distinct from each other. In others, such as Cadence’s time-based software arrangements, the licenses and certain services are not distinct from each other. These time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and Cadence has concluded that these promised goods and services are a single, combined performance obligation.

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

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

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

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

Contract Balances

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

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

Cadence’s contract balances as of March 31, 2025 and December 31, 2024 were as follows:


	As of
	March 31, 2025		December 31, 2024

	(In thousands)

Contract assets	$	70,775	$	29,339
Deferred revenue	841,272		852,581

Cadence recognized revenue of $390.1 million during the three months ended March 31, 2025, and $324.4 million during the three months ended March 31, 2024, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue, with the exception of deferred revenue assumed from acquisitions, is due to the timing of invoices in relation to the timing of revenue as described above.

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

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $6.4 billion as of March 31, 2025, which included $0.5 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 March 31, 2025, Cadence expected to recognize 55% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months, 42% over the next 13 to 36 months and the remainder thereafter.

Cadence recognized revenue of $14.9 million during the three months ended March 31, 2025, and $15.0 million during the three months ended March 31, 2024, 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 3. RECEIVABLES, NET

Cadence’s current and long-term receivables balances as of March 31, 2025 and December 31, 2024 were as follows:


	As of
	March 31, 2025		December 31, 2024
	(In thousands)
Accounts receivable	$	314,976	$	393,017
Unbilled accounts receivable	270,298		293,251
Long-term receivables	24,186		24,179
Total receivables	609,460		710,447
Less allowance for doubtful accounts	(4,387)		(5,808)
Total receivables, net	$	605,073	$	704,639

Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of March 31, 2025, no single customer accounted for 10% or more of Cadence’s total receivables. As of December 31, 2024, one customer accounted for approximately 11% of Cadence’s total receivables.

NOTE 4. DEBT

Cadence’s outstanding debt was as follows:


	March 31, 2025						December 31, 2024
	(In thousands)
	Principal		Unamortized Discount and Issuance Costs		Carrying Value		Principal		Unamortized Discount and Issuance Costs		Carrying Value

2027 Notes	$	500,000	$	(2,927)	$	497,073	$	500,000	$	(3,206)	$	496,794
2029 Notes	1,000,000		(9,194)		990,806		1,000,000		(9,666)		990,334
2034 Notes	1,000,000		(10,720)		989,280		1,000,000		(10,945)		989,055
Total outstanding debt	$	2,500,000	$	(22,841)	$	2,477,159	$	2,500,000	$	(23,817)	$	2,476,183

Senior Notes

In September 2024, Cadence issued $500.0 million aggregate principal amount of 4.200% Senior Notes due September 10, 2027 (the “2027 Notes”). Cadence received net proceeds of $496.5 million from the issuance of the 2027 Notes, net of a discount of $0.1 million and issuance costs of $3.5 million. As of March 31, 2025, the fair value of the 2027 Notes was $498.7 million.

In September 2024, Cadence issued $1.0 billion aggregate principal amount of 4.300% Senior Notes due September 10, 2029 (the “2029 Notes”). Cadence received net proceeds of $989.8 million from the issuance of the 2029 Notes, net of a discount of $1.4 million and issuance costs of $8.8 million. As of March 31, 2025, the fair value of the 2029 Notes was $991.7 million.

In September 2024, Cadence issued $1.0 billion aggregate principal amount of 4.700% Senior Notes due September 10, 2034 (the “2034 Notes,” and together with the 2027 Notes and the 2029 Notes, the “New Senior Notes”). Cadence received net proceeds of $988.8 million from the issuance of the 2034 Notes, net of a discount of $1.9 million and issuance costs of $9.3 million. As of March 31, 2025, the fair value of the 2034 Notes was $977.7 million.

Cadence may redeem the New Senior Notes, in whole or in part, at any time or from time to time, at redemption prices specified in the governing indenture. In addition, Cadence may be required to repurchase New Senior Notes upon occurrence of a change of control triggering event, as set forth in the governing indenture.

The indenture governing the New Senior Notes includes customary representations, warranties and restrictive covenants, including, but not limited to, restrictions on Cadence’s ability to grant liens on certain assets, enter into certain sale and lease-back transactions, or merge, consolidate or sell assets, and also includes customary events of default. As of March 31, 2025, Cadence was in compliance with all covenants associated with the New Senior Notes.

Both the discount and issuance costs are being amortized to interest expense over the term of the New Senior Notes using the effective interest method. Interest on the New Senior Notes is payable semi-annually in arrears in March and September of each year. The New Senior Notes are unsecured and rank equal in right of payment to all of Cadence’s existing and future senior indebtedness.

Revolving Credit Facility

In August 2024, Cadence terminated its existing revolving credit facility, dated June 30, 2021, and amended in September 2022, and 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 “2024 Credit Facility”). The 2024 Credit Facility provides for borrowings up to $1.25 billion, with the right to request increased capacity up to an additional $500.0 million upon the receipt of lender commitments, for total maximum borrowings of $1.75 billion. The 2024 Credit Facility expires on August 14, 2029. Any outstanding loans drawn under the 2024 Credit Facility are due at maturity on August 14, 2029, subject to an option to extend the maturity date. Outstanding borrowings may be repaid at any time prior to maturity. Cadence paid debt issuance costs of $1.3 million that were recorded to other assets in Cadence’s condensed consolidated balance sheet at the inception of the agreement. The debt issuance costs will be amortized to interest expense over the term of the 2024 Credit Facility. As of March 31, 2025, there were no outstanding borrowings under the 2024 Credit Facility.

Interest accrues on borrowings under the 2024 Credit Facility at a rate equal to, at Cadence’s option, either (1) secured overnight financing rate (“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) the 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. Interest is payable quarterly. A commitment fee ranging from 0.050% to 0.125% 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 2024 Credit Facility approximates fair value.

The 2024 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 2024 Credit Facility contains financial covenants that require Cadence to maintain a funded debt to EBITDA ratio not greater than 3.5 to 1, with a step up to 4 to 1 for one year following an acquisition by Cadence of at least $250.0 million that results in a pro forma leverage ratio between 3.25 to 1 and 3.75 to 1. As of March 31, 2025, Cadence was in compliance with all covenants associated with the 2024 Credit Facility.

NOTE 5. GOODWILL AND ACQUIRED INTANGIBLES

Goodwill

The changes in the carrying amount of goodwill during the three months ended March 31, 2025 were as follows:


	Gross Carrying Amount
	(In thousands)
Balance as of December 31, 2024	$	2,378,671


Effect of foreign currency translation	41,046
Balance as of March 31, 2025	$	2,419,717

Acquired Intangibles, Net

Acquired intangibles as of March 31, 2025 were as follows:


	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	460,255	$	(204,291)	$	255,964
Agreements and relationships	393,700		(85,852)		307,848
Tradenames, trademarks and patents	28,865		(8,449)		20,416


Total acquired intangibles	$	882,820	$	(298,592)	$	584,228

Acquired intangibles as of December 31, 2024 were as follows:


	Gross Carrying Amount		Accumulated Amortization		Acquired Intangibles, Net
	(In thousands)
Existing technology	$	465,453	$	(199,126)	$	266,327
Agreements and relationships	386,365		(78,605)		307,760
Tradenames, trademarks and patents	28,113		(7,466)		20,647


Total acquired intangibles	$	879,931	$	(285,197)	$	594,734

Amortization expense from existing technology is included in cost of product and maintenance. Amortization expense for the three months ended March 31, 2025 and March 31, 2024 by condensed consolidated income statement caption was as follows:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Cost of product and maintenance		$	16,494	$	11,348
Amortization of acquired intangibles		8,922		5,407
Total amortization of acquired intangibles		$	25,416	$	16,755

As of March 31, 2025, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:


	(In thousands)
2025 - remaining period	$	68,314
2026	88,564
2027	85,334
2028	80,668
2029	65,995
2030	40,842
Thereafter	154,511
Total estimated amortization expense	$	584,228

NOTE 6. STOCK-BASED COMPENSATION

Stock-based compensation expense is reflected in Cadence’s condensed consolidated income statements for the three months ended March 31, 2025 and March 31, 2024 as follows:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Cost of product and maintenance		$	2,154	$	1,280
Cost of services		2,466		1,629
Marketing and sales		21,671		17,836
Research and development		67,089		53,637
General and administrative		14,233		13,747
Total stock-based compensation expense		$	107,613	$	88,129

Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $830.0 million as of March 31, 2025, which is expected to be recognized over a weighted average vesting period of 2.1 years.

NOTE 7. STOCK REPURCHASE PROGRAM

Cadence is authorized to repurchase shares of its common stock under a publicly announced program that was most recently increased by its Board of Directors in August 2023. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. As of March 31, 2025, approximately $477.0 million of Cadence’s share repurchase authorization remained available to repurchase shares of Cadence common stock.

The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during the three months ended March 31, 2025 and March 31, 2024 were as follows:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Shares repurchased		1,361		425
Total cost of repurchased shares		$	350,007	$	125,006

NOTE 8. OTHER INCOME, NET

Cadence’s other income, net, for the three months ended March 31, 2025 and March 31, 2024 was as follows:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Interest income		$	26,222	$	9,512
Gain on sale of IP and other assets		11,500		—
Gain (loss) on investments		(13,291)		55,394
Gain (loss) on securities in Non-Qualified Deferred Compensation (“NQDC”) trust		(1,573)		4,588
Gain (loss) on foreign exchange		809		(331)
Other expense, net		(377)		(384)
Total other income, net		$	23,290	$	68,779

For additional information relating to Cadence’s investment activity, see Note 10 in the notes to condensed consolidated financial statements.

NOTE 9. NET INCOME PER SHARE

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

The calculations for basic and diluted net income per share for the three months ended March 31, 2025 and March 31, 2024 are as follows:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands, except per share amounts)
Net income		$	273,579	$	247,643
Weighted average common shares used to calculate basic net income per share		271,973		269,606
Stock-based awards		1,658		3,938
Weighted average common shares used to calculate diluted net income per share		273,631		273,544
Net income per share - basic		$	1.01	$	0.92
Net income per share - diluted		$	1.00	$	0.91

The following table presents shares of Cadence’s common stock outstanding for the three months ended March 31, 2025 and March 31, 2024 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:


	Three Months Ended
		March 31, 2025	March 31, 2024
		(In thousands)
Market-based awards		187	—
Options to purchase shares of common stock		234	59
Non-vested shares of restricted stock		190	8
Total potential common shares excluded		611	67

NOTE 10. INVESTMENTS

Investments in Equity Securities

Marketable Equity Investments

Cadence’s investments in marketable equity securities consist of purchased shares of publicly held companies and are included in prepaid expenses and other in Cadence’s condensed consolidated balance sheets. Changes in the fair value of these investments are recorded to other income, net in Cadence’s condensed consolidated income statements. The carrying value of marketable equity investments was $78.7 million and $90.4 million as of March 31, 2025 and December 31, 2024, respectively.

Non-Marketable Equity Investments

Cadence’s investments in non-marketable equity securities generally consist of stock or other instruments of privately held entities and are included in other assets on Cadence’s condensed consolidated balance sheets. Cadence holds a 16% interest in a privately held company that is accounted for using the equity method of accounting. The carrying value of this investment was $96.0 million and $97.5 million as of March 31, 2025 and December 31, 2024, respectively.

Cadence records its proportionate share of net income from the investee, offset by amortization of basis differences, to other income, net in Cadence’s condensed consolidated income statements. For the three months ended March 31, 2025 and March 31, 2024, Cadence recognized losses of $1.5 million and $0.4 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 $36.5 million and $26.6 million as of March 31, 2025 and December 31, 2024, respectively. Gains and losses on these investments were not material to Cadence’s condensed consolidated financial statements for the periods presented.

The portion of gains and losses included in Cadence’s condensed consolidated income statements related to equity securities still held at the end of the period were as follows:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Net gains (losses) recognized on equity securities		$	(13,259)	$	55,398
Less: Net gains recognized on equity securities sold		—		(20,367)
Net gains (losses) recognized on equity securities still held		$	(13,259)	$	35,031

Investments in Debt Securities

The following is a summary of Cadence’s available-for-sale debt securities recorded within prepaid expenses and other on its condensed consolidated balance sheets:


	As of March 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
Available-for-sale debt securities
Mortgage-backed and asset-backed securities	$	50,782	$	485	$	(266)	$	51,001

Total available-for-sale securities	$	50,782	$	485	$	(266)	$	51,001


	As of December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In thousands)
Available-for-sale debt securities
Mortgage-backed and asset-backed securities	$	50,604	$	230	$	(582)	$	50,252

Total available-for-sale securities	$	50,604	$	230	$	(582)	$	50,252

Gross unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on Cadence's condensed consolidated balance sheets. As of March 31, 2025 and December 31, 2024, the fair value of available-for-sale debt securities in a continuous unrealized loss position for greater than 12 months was $6.3 million and $6.0 million, respectively. The unrealized losses on these securities were not material.

As of March 31, 2025, the fair values of available-for-sale debt securities, by remaining contractual maturity, were as follows:


	(In thousands)
Due within 1 year	$	1,671
Due after 1 year through 5 years	9,696
Due after 5 years through 10 years	19,415
Due after 10 years	20,219
Total	$	51,001

As of March 31, 2025, Cadence did not intend to sell any of its available-for-sale debt securities in an unrealized loss position, and it was more likely than not that Cadence will hold the securities until maturity or a recovery of the cost basis.

NOTE 11. 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 three months ended March 31, 2025.

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 March 31, 2025 and December 31, 2024:


	Fair Value Measurements as of March 31, 2025
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	1,963,812	$	1,963,812	$	—	$	—
Marketable securities:
Marketable equity securities	78,706		78,706		—		—
Mortgage-backed and asset-backed securities	51,001		—		51,001		—

Securities held in NQDC trust	93,023		93,023		—		—
Foreign currency exchange contracts	12,289		—		12,289		—
Total Assets	$	2,198,831	$	2,135,541	$	63,290	$	—







As of March 31, 2025, Cadence did not have any financial liabilities requiring a recurring fair value measurement.


	Fair Value Measurements as of December 31, 2024
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets
Cash equivalents:
Money market funds	$	1,700,084	$	1,700,084	$	—	$	—
Marketable securities:
Marketable equity securities	90,374		90,374		—		—
Mortgage-backed and asset-backed securities	50,252		—		50,252		—
Securities held in NQDC trust	96,450		96,450		—		—

Total Assets	$	1,937,160	$	1,886,908	$	50,252	$	—


	Total		Level 1		Level 2		Level 3
	(In thousands)
Liabilities
Foreign currency exchange contracts	$	7,533	$	—	$	7,533	$	—
Total Liabilities	$	7,533	$	—	$	7,533	$	—

Level 1 Measurements

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

Level 2 Measurements

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

NOTE 12. INVENTORY

Cadence’s inventory balances as of March 31, 2025 and December 31, 2024 were as follows:


	As of
	March 31, 2025		December 31, 2024
	(In thousands)
Inventories:
Raw materials	$	210,713	$	243,244
Work-in-process	—		1,216
Finished goods	14,908		13,251
Total inventories	$	225,621	$	257,711

NOTE 13. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

Cadence has been responding to subpoenas received from BIS in February 2021 and DOJ in November 2023 regarding sales and business activity in China. In December 2024, Cadence began discussions with BIS and DOJ regarding their preliminary findings and a potential resolution. Although Cadence believes it has defenses to the potential claims, Cadence has recorded an estimated probable liability as of March 31, 2025 and December 31, 2024 that is immaterial to Cadence’s condensed consolidated financial statements. Actual losses could differ materially.

Other Contingencies

Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. Cadence did not incur any significant costs related to warranty obligations during the three months ended March 31, 2025 or March 31, 2024.

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

Cadence did not incur any material losses from indemnification claims during the three months ended March 31, 2025 or March 31, 2024.

NOTE 14. 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, unrealized losses on derivatives designated as hedging instruments and unrealized gains and losses on available-for-sale debt securities, and is presented in Cadence’s condensed consolidated statements of comprehensive income.

Accumulated other comprehensive loss was comprised of the following as of March 31, 2025 and December 31, 2024:


	As of
	March 31, 2025		December 31, 2024
	(In thousands)
Foreign currency translation loss	$	(112,461)	$	(178,611)
Changes in defined benefit plan liabilities	(4,092)		(4,447)
Unrealized losses on derivatives designated as hedging instruments	(6,843)		(7,038)
Unrealized gains (losses) on available-for-sale debt securities	219		(352)
Total accumulated other comprehensive loss	$	(123,177)	$	(190,448)

For the three months ended March 31, 2025 and March 31, 2024, there were no significant amounts reclassified from accumulated other comprehensive loss to net income.

NOTE 15. 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 operates as one operating segment. Cadence’s chief operating decision maker (“CODM”) is its CEO. The CODM makes decisions on resource allocation and assesses performance of the business based on Cadence’s consolidated results, including net income.

For additional information on Cadence’s revenue, including the nature and timing of revenue from contracts with customers, see Note 2 in the notes to condensed consolidated financial statements. The following table presents revenue, significant expenses and net income for the three months ended March 31, 2025 and March 31, 2024:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Revenue		$	1,242,366	$	1,009,103
Costs and Expenses:
Salary, benefits and other employee-related costs		542,655		475,886
Stock based compensation		107,613		88,129
Manufacturing costs		81,666		56,661
Facilities and other infrastructure costs		43,836		41,654
Depreciation and amortization		52,916		39,556
Professional services		32,461		38,917
Restructuring		(109)		280
Other segment items(1)		22,740		(41,203)
Interest income		(26,222)		(9,512)
Interest expense		29,118		8,692
Provision for income taxes		82,113		62,400
Net income		$	273,579	$	247,643

_____________

(1) Other segment items include direct costs for advertising, marketing events, travel, entertainment, bad debt and other operating expense categories that are not considered significant individually. It also includes non-operating expenses such as gains and losses on investments, foreign currency and other non-operating expenses that are not considered significant individually.

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

The following table presents a summary of revenue by geography for the three months ended March 31, 2025 and March 31, 2024:


	Three Months Ended
		March 31, 2025		March 31, 2024
		(In thousands)
Americas:
United States		$	568,967	$	435,523
Other Americas		29,612		27,347
Total Americas		598,579		462,870
Asia:
China		139,381		117,229
Other Asia		240,512		208,531
Total Asia		379,893		325,760
Europe, Middle East and Africa (“EMEA”)		195,743		169,056
Japan		68,151		51,417
Total		$	1,242,366	$	1,009,103

The following table presents a summary of long-lived assets by geography as of March 31, 2025 and December 31, 2024:


	As of
	March 31, 2025		December 31, 2024
	(In thousands)
Americas:
United States	$	422,658	$	412,339
Other Americas	10,242		7,437
Total Americas	432,900		419,776
Asia:
China	20,011		22,929
Other Asia	91,734		83,951
Total Asia	111,745		106,880
EMEA	72,784		73,551
Japan	3,905		4,183
Total	$	621,334	$	604,390

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