CADENCE DESIGN SYSTEMS INC

Previous wording

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “Annual Report”). This Quarterly Report contains statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other forward-looking statements. Statements including, but not limited to, statements regarding the extent, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, expanded trade control laws and regulations, the conflicts in and around Ukraine, the Middle East and other areas of the world, volatility in foreign currency exchange rates, inflation and the rise in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings; restructuring actions and associated benefits; pending acquisitions, the accounting for acquisitions and the integration of acquired businesses; and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including, but not limited to, those expressed in these statements. We refer you to the “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Liquidity and Capital Resources” and "Risk Factors" sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report, and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.

Current wording

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “Annual Report”). This Quarterly Report contains statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other forward-looking statements. Statements including, but not limited to, statements regarding the extent, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, expanded trade control laws and regulations, the conflicts in and around Ukraine, the Middle East and other areas of the world, volatility in foreign currency exchange rates, inflation and interest rate fluctuations; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings; restructuring actions and associated benefits; pending acquisitions, the accounting for acquisitions and the integration of acquired businesses; and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including, but not limited to, those expressed in these statements. We refer you to the “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” “Liquidity and Capital Resources” and "Risk Factors" sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report, and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.

Previous wording

Our Intelligent System Design TM strategy allows us to deliver essential computational software, hardware and IP that our customers use to turn their design concepts into reality. Our customers include many of the world's most innovative companies that design and build highly sophisticated semiconductor and electronic systems found in products used in everyday life. Our Intelligent System Design strategy allows us to quickly adapt to our customers' dynamic design requirements. Our products and services enable our customers to develop complex and innovative semiconductor and electronic systems, so demand for our technology and expertise is driven by increasing complexity and our customers’ need to invest in new designs and products that are highly differentiated. Historically, the industry that provided the tools used by IC engineers was referred to as Electronic Design Automation (“EDA”). Today, our offerings include and extend beyond EDA.

Current wording

Our Intelligent System Design TM strategy allows us to deliver essential computational software, hardware and IP that our customers use to turn their design concepts into reality. Our customers include many of the world's most innovative companies that design and build highly sophisticated semiconductor and electronic systems found in products used in everyday life. Our Intelligent System Design strategy allows us to quickly adapt to our customers' dynamic design requirements. Our products and services enable our customers to develop complex and innovative semiconductor and electronic systems, so demand for our technology and expertise is driven by increasing complexity and our customers’ need to invest in new designs and products that are highly differentiated. Historically, the industry that provided the tools used by integrated circuit (“IC”) engineers was referred to as Electronic Design Automation (“EDA”). Today, our offerings include and extend beyond EDA.

Previous wording

Because we operate globally, our business is subject to the effects of economic downturns or recessions in the regions in which we do business, volatility in foreign currency exchange rates relative to the U.S. dollar, the rise in interest rates, expanded trade control laws and regulations, and geopolitical conflicts.

Current wording

Because we operate globally, our business is subject to the effects of economic downturns or recessions in the regions in which we do business, volatility in foreign currency exchange rates relative to the U.S. dollar, changing interest rates, expanded trade control laws and regulations, and geopolitical conflicts.

Previous wording

Financial results for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, reflect the following:

Current wording

Financial results for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, reflect the following:

Previous wording

•Incremental costs for professional services associated with acquisitions; and

Current wording

•Incremental costs for professional services associated with acquisitions;

Previous wording

•Gains from our investments in equity securities.

Current wording

•Gains and losses from our investments in equity securities.

Previous wording

The following table shows the percentage of our revenue that is classified as recurring or up-front for the three and six months ended June 30, 2024 and June 30, 2023:

Current wording

The following table shows the percentage of our revenue that is classified as recurring or up-front for the three and nine months ended September 30, 2024 and September 30, 2023:

Previous wording

The percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters. On an annual basis, or over the course of twelve consecutive months, the overall mix of revenue has historically been relatively consistent, but we expect revenue characterized as up-front to increase as a percentage of total annual revenue due to growth from arrangements where revenue is recognized at a point in time. The following table shows the percentage of recurring revenue for the twelve-month periods ending concurrently with our five most recent fiscal quarters:

Current wording

The percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters. On an annual basis, or over the course of twelve consecutive months, the overall mix of revenue has historically been relatively consistent, but we expect revenue characterized as up-front to continue to increase as a percentage of total annual revenue due to growth from arrangements where revenue is recognized at a point in time. The following table shows the percentage of recurring revenue for the twelve-month periods ending concurrently with our five most recent fiscal quarters:

Previous wording

The following table shows our revenue for the six months ended June 30, 2024 and June 30, 2023 and the change in revenue between periods:

Current wording

The following table shows our revenue for the nine months ended September 30, 2024 and September 30, 2023 and the change in revenue between periods:

Previous wording

During the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, the decrease in up-front revenue from our emulation and prototyping hardware offerings was offset by growth in revenue from our software and IP offerings driven by new and existing customers' continued investment in complex designs for their products.

Current wording

Product and maintenance revenue increased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to growth in revenue from our software and IP offerings as a result of existing customers' continued investment in complex designs for their products.

Previous wording

Our revenue in any given period is significantly affected by the mix of software, hardware and IP products generating revenue and whether the revenue is recognized over time or at a point in time, primarily upon completion of delivery. During the three and six months ended June 30, 2023, hardware installations were relatively high in comparison to historical levels due to increased production capacity and our ability to fulfill customer orders that had been subject to longer than normal lead times. As a result, up-front revenue from our emulation and prototyping offerings classified as product and maintenance revenue decreased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023.

Current wording

This growth was partially offset by a decrease in revenue from our emulation and prototyping hardware offerings during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. During the first half of fiscal 2023, hardware installations were relatively high in comparison to historical levels due to increased production capacity and our ability to fulfill customer orders that had been subject to longer than normal lead times. As a result, up-front revenue from our emulation and prototyping offerings classified as product and maintenance revenue decreased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

Previous wording

Services revenue increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to increased revenue from our design service offerings, which were supplemented by our acquisition of Invecas. Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations.

Current wording

Services revenue increased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to increased revenue from our design service offerings, which were supplemented by our acquisition of Invecas. Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations.

Previous wording

No single customer accounted for 10% or more of total revenue during the three and six months ended June 30, 2024 or June 30, 2023.

Current wording

No single customer accounted for 10% or more of total revenue during the three and nine months ended September 30, 2024 or September 30, 2023.

Previous wording

Revenue by product category fluctuates from period to period based on demand for our products and services, our available resources and our ability to deliver and support them. For example, during the first half of fiscal 2023, we experienced growth in our Functional Verification product category due to increased production capacity and our ability to fulfill ongoing customer demand for our emulation and prototyping hardware. Certain of our licensing arrangements allow customers the ability to remix among software products. Additionally, we have arrangements with customers that include a combination of our products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, we estimate the allocation of the revenue to product categories based upon the expected usage of our products. The actual usage of our products by these customers may differ and, if that proves to be the case, the revenue allocation in the table above would differ.

Current wording

Revenue by product category fluctuates from period to period based on demand for our products and services, our available resources and our ability to deliver and support them. Certain of our licensing arrangements allow customers the ability to remix among software products. Additionally, we have arrangements with customers that include a combination of our products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, we estimate the allocation of the revenue to product categories based upon the expected usage of our products. The actual usage of our products by these customers may differ and, if that proves to be the case, the revenue allocation in the table above would differ.

Previous wording

During the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, revenue in the United States increased as the result of growth in revenue from our hardware, IP and software offerings, while revenue growth in Other Asia was primarily driven by growth in revenue from our software and IP offerings. Revenue in China decreased primarily due to a decrease in revenue from our hardware offerings.

Current wording

During the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, revenue in the United States increased as the result of growth in revenue from our hardware, IP and software offerings, while revenue growth in Other Asia was primarily driven by growth in revenue from our software and IP offerings. Revenue in China decreased primarily due to a decrease in revenue from our hardware and software offerings.

Previous wording

The changes in product and maintenance-related costs for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, were due to the following:

Current wording

The changes in product and maintenance-related costs for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, were due to the following:

Previous wording

Costs associated with our emulation and prototyping hardware products include components, assembly, testing, applicable reserves and overhead. These costs make our cost of emulation and prototyping hardware products higher, as a percentage of revenue, than our cost of software and IP products. Emulation and prototyping hardware costs increased during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily due to increased reserves for inventory. Emulation and prototyping hardware costs decreased during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily due to decreased installations of emulation and prototyping hardware products, partially offset by an increase in reserves for inventory.

Current wording

Costs associated with our emulation and prototyping hardware products include components, assembly, testing, applicable reserves and overhead. These costs make our cost of emulation and prototyping hardware products higher, as a percentage of revenue, than our cost of software and IP products. Emulation and prototyping hardware costs increased during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to increased installations of emulation and prototyping hardware products. Emulation and prototyping hardware costs increased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to increased charges for excess and obsolete inventory, partially offset by decreased installations of emulation and prototyping hardware products during the first half of fiscal 2024, as compared to the same period during fiscal 2023.

Previous wording

Cost of services primarily includes employee salary, benefits and other employee-related costs to perform work on revenue-generating projects, costs to maintain the infrastructure necessary to manage a services organization, and direct costs associated with certain design services. Cost of services may fluctuate from period to period based on our utilization of design services engineers on revenue-generating projects rather than internal development projects and the timing of design service projects being completed.

Current wording

Cost of services primarily includes employee salary, benefits and other employee-related costs to perform work on revenue-generating projects, costs to maintain the infrastructure necessary to manage a services organization, and direct costs associated with certain design services. Cost of services may fluctuate from period to period based on our utilization of design services engineers on revenue-generating projects rather than internal development projects and the timing of design service projects being completed. Cost of services increased during three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to increased costs associated with our design service offerings and costs associated with the service offerings from our acquisition of Invecas.

Previous wording

Our operating expenses include marketing and sales, research and development, and general and administrative expenses. Factors that tend to cause our operating expenses to fluctuate include changes in the number of employees due to hiring and acquisitions, our annual merit compensation cycle, stock-based compensation, foreign exchange rate movements, acquisition-related costs, volatility in variable compensation programs that are driven by operating results, and charitable donations.

Current wording

Our operating expenses include marketing and sales, research and development, and general and administrative expenses. Factors that tend to cause our operating expenses to fluctuate include changes in the number of employees due to hiring and acquisitions, our merit compensation cycle, stock-based compensation, foreign exchange rate movements, acquisition-related costs, and volatility in variable compensation programs that are driven by operating results.

Previous wording

Our operating expenses for the three and six months ended June 30, 2024 and June 30, 2023 were as follows:

Current wording

Our operating expenses for the three and nine months ended September 30, 2024 and September 30, 2023 were as follows:

Previous wording

Our operating expenses, as a percentage of total revenue, for the three and six months ended June 30, 2024 and June 30, 2023 were as follows:

Current wording

Our operating expenses, as a percentage of total revenue, for the three and nine months ended September 30, 2024 and September 30, 2023 were as follows:

Previous wording

The increase in marketing and sales expense for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, was due to the following:

Current wording

The increase in marketing and sales expense for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, was due to the following:

Previous wording

Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from the acquisitions completed in both fiscal 2023 and the first half of fiscal 2024. Facilities and other infrastructure costs included in marketing and sales expense increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions.

Current wording

Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions. Facilities and other infrastructure costs included in marketing and sales expense increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions.

Previous wording

The increase in research and development expense for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, was due to the following:

Current wording

The increase in research and development expense for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, was due to the following:

Previous wording

Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from the acquisitions completed in fiscal 2023 and the first half of fiscal 2024. Facilities and other infrastructure costs included in research and development expense increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.

Current wording

Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from acquisitions. Facilities and other infrastructure costs included in research and development expense increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.

Previous wording

The increase in general and administrative expense for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, was due to the following:

Current wording

The increase in general and administrative expense for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, was due to the following:

Previous wording

Professional services increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to increased legal and consulting services associated with acquisition-related activities. Also during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, we experienced an increase in foreign service tax, primarily because we did not benefit from foreign service tax refunds as we did during the same period in fiscal 2023.

Current wording

Professional services increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to increased legal and consulting services associated with acquisition-related activities. Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to additional headcount from acquisitions. Also, during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, we experienced an increase in foreign service tax, primarily because we did not benefit from foreign service tax refunds as we did during the same period in fiscal 2023.

Previous wording

We have initiated restructuring plans in recent years, most recently in fiscal 2023, to better align our resources with our business strategy. Because the restructuring charges and related benefits are derived from management’s estimates made during the formulation of the restructuring plans, based on then-currently available information, our restructuring plans may not achieve the benefits anticipated on the timetable or at the level contemplated. Additional actions, including further restructuring of our operations, may be required in the future.

Current wording

We have initiated restructuring plans in recent years, most recently in August 2024, to better align our resources with our business strategy. Restructuring charges and related benefits are derived from management's estimates during the formulation of the restructuring plans, based on then-currently available information. As a result, our restructuring plans may not achieve the benefits anticipated on the timetable or at the level contemplated. Additional actions, including further restructuring of our operations, may be required in the future. For additional information about our restructuring plans, see Note 9 in the notes to condensed consolidated financial statements.

Previous wording

Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three and six months ended June 30, 2024, and the three and six months ended June 30, 2023 was as follows:

Current wording

Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three and nine months ended September 30, 2024, and the three and nine months ended September 30, 2023 was as follows:

Previous wording

Operating margin decreased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to the mix of products and services sold during each respective period. In addition, our acquisitions in fiscal 2023 and the first half of fiscal 2024 resulted in incremental expenses, including amortization of acquired intangibles, that exceeded incremental revenue during the three and six months ended June 30, 2024. We expect our operating margin to be impacted by our recent acquisitions because the incremental operating expenses, including amortization of the acquired intangibles, are expected to exceed the incremental revenue for the remainder of fiscal 2024.

Current wording

Operating margin decreased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to the mix of products and services sold during each respective period. In addition, our acquisitions in fiscal 2023 and fiscal 2024 resulted in incremental expenses, including amortization of acquired intangibles, that exceeded incremental revenue during the three and nine months ended September 30, 2024. We expect our operating margin to be impacted by our recent acquisitions because the incremental operating expenses, including amortization of the acquired intangibles, are expected to exceed the incremental revenue for the remainder of fiscal 2024.

Previous wording

Interest expense increased during the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to the interest expense related to the 2026 Term Loan, and an increase in interest expense for the 2025 Term Loan, which is subject to variable interest rates. We expect higher interest expense in fiscal 2024, as compared to fiscal 2023, primarily due to additional interest expense related to our 2026 Term Loan. For additional information relating to our debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Current wording

Interest expense increased during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, primarily due to the interest expense related to increased debt during fiscal 2024. For additional information relating to our debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.

Previous wording

The following table presents the provision for income taxes and the effective tax rate for the three and six months ended June 30, 2024 and June 30, 2023:

Current wording

The following table presents the provision for income taxes and the effective tax rate for the three and nine months ended September 30, 2024 and September 30, 2023:

Previous wording

Our provision for income taxes for the three and six months ended June 30, 2024 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2024 income. We also recognized tax benefits of $5.4 million and $28.2 million related to stock-based compensation that vested or was exercised during the respective periods.

Current wording

Our provision for income taxes for the three and nine months ended September 30, 2024 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2024 income. We also recognized tax benefits of $12.6 million and $40.8 million related to stock-based compensation that vested or was exercised during the respective periods. The higher effective tax rates during the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023 were primarily attributable to a different geographic mix of earnings and lower tax benefits related to stock-based compensation.

Previous wording

In 2021, the Organisation for Economic Co-operation and Development announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a global minimum tax rate of 15%. Many non-U.S. tax jurisdictions, including Ireland and Hungary, have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in fiscal 2024 or announced their plans to enact legislation in future years. The currently enacted Pillar Two Model Rules did not have a material impact to our provision for income taxes for the three and six months ended June 30, 2024.

Current wording

In 2021, the Organisation for Economic Co-operation and Development announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a global minimum tax rate of 15%. Many non-U.S. tax jurisdictions, including Ireland and Hungary, have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in fiscal 2024 or announced their plans to enact legislation in future years. The currently enacted Pillar Two Model Rules did not have a material impact to our provision for income taxes for the three and nine months ended September 30, 2024.

Previous wording

Our provision for income taxes for the three and six months ended June 30, 2023 was primarily attributable to federal, state and foreign income taxes on our then anticipated fiscal 2023 income. We also recognized tax benefits of $8.9 million and $25.8 million related to stock-based compensation that vested or was exercised during the respective periods.

Current wording

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

Previous wording

Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates. We currently expect that our fiscal 2024 effective tax rate will be approximately 25.1%. We expect that our quarterly effective tax rates will vary from our fiscal 2024 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate. For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors,” in our Annual Report.

Current wording

Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates. We currently expect that our fiscal 2024 effective tax rate will be approximately 26.7%. We expect that our quarterly effective tax rates will vary from our fiscal 2024 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate. For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors,” in our Annual Report.

Previous wording

As of June 30, 2024, our principal sources of liquidity consisted of approximately $1,059.0 million of cash and cash equivalents as compared to $1,008.2 million as of December 31, 2023.

Current wording

As of September 30, 2024, our principal sources of liquidity consisted of approximately $2,786.0 million of cash and cash equivalents as compared to $1,008.2 million as of December 31, 2023.

Previous wording

Our primary sources of cash and cash equivalents during the six months ended June 30, 2024 were proceeds from borrowings, cash generated from operations, proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period, and proceeds from the sale of investments.

Current wording

Our primary sources of cash and cash equivalents during the nine months ended September 30, 2024 were proceeds from debt, cash generated from operations, proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period, and proceeds from the sale of investments.

Previous wording

Our primary uses of cash and cash equivalents during the six months ended June 30, 2024 were payments related to employee salaries and benefits, operating expenses, cash paid for acquired businesses, payment of employee taxes on vesting of restricted stock, repurchases of our common stock, purchases of inventory, and purchases of property, plant and equipment.

Current wording

Our primary uses of cash and cash equivalents during the nine months ended September 30, 2024 were payments related to employee salaries and benefits, operating expenses, payments on debt, cash paid for acquired businesses, payment of employee taxes on vesting of restricted stock, repurchases of our common stock, purchases of inventory, payments for income tax and purchases of property, plant and equipment.

Previous wording

Approximately 74% of our cash and cash equivalents were held by our foreign subsidiaries as of June 30, 2024. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections and repatriation of foreign earnings. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our domestic and international operating activities and other capital and liquidity requirements, including acquisitions, investments and share repurchases, for at least the next 12 months and thereafter for the foreseeable future.

Current wording

Approximately 26% of our cash and cash equivalents were held by our foreign subsidiaries as of September 30, 2024. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections and repatriation of foreign earnings. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our domestic and international operating activities and other capital and liquidity requirements, including acquisitions, investments and share repurchases, for at least the next 12 months and thereafter for the foreseeable future.