CADENCE DESIGN SYSTEMS INC
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 21, 2025
CDNS$319.92+2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-14.
0000813672-24-000034
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-21.
0000813672-25-000024
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 148 previous paragraphs and 144 current paragraphs.
76 unchanged; 46 reworded; 21 added; 22 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 24 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Cadence® is a global market leader that develops computational, AI-driven software, accelerated hardware, and IP solutions for engineers and scientists to bring new and innovative products to life. The world’s most innovative technology companies use our solutions and services to deliver transformational products to multiple industries that drive the global economy. The products these companies develop are some of the most complex systems in the world. Since our inception, we have been at the forefront of technology innovation. We work closely with our customers, helping them solve their most complex challenges in the semiconductor and electronic systems industries to unlock limitless opportunities.
Current report
Our strategy allows us to deliver solutions to our customers to solve their most complex product development challenges. Our industry-leading computational software, specialized accelerated hardware, and IP enable us to adapt to our customer’s dynamic design requirements, allowing them to meet their critical business and environmental concerns including time-to-market and sustainability. The creation of even the most seemingly simple electronic systems and products often requires a complex design process and requires highly trained engineers with various areas of specialized knowledge and skill sets. Our ability to deliver innovative products that keep up with increasing complexity allows our customers to be successful in meeting their business goals and objectives.
Current report
•Core EDA
Current report
Recent Acquisitions
Current report
Consistent with our Intelligent System Design strategy, during the first quarter of fiscal 2024, we completed our acquisition of Invecas, a leading provider of design engineering, embedded software and system-level solutions. We believe the addition of a skilled engineering team with vast experience in delivering end-to-end system solutions with deep expertise in advanced nodes, mixed-signal, verification, embedded software, packaging and turnkey custom silicon production will enhance our ability to pursue attractive opportunities in the markets we serve. Revenue and cost of revenue associated with contracts assumed with our acquisition of Invecas is primarily classified as services revenue and cost of services in our consolidated income statements.
Current report
During the second quarter of fiscal 2024, we completed our acquisition of BETA CAE, a system analysis platform provider of multi-domain, engineering simulation solutions. The acquisition of BETA CAE expands our multiphysics system analysis suite with highly complementary products, enabling us to offer a more comprehensive portfolio to customers in the automotive sector and at companies in the aerospace, industrial and healthcare industries. Revenue associated with contracts assumed with our acquisition of BETA CAE is primarily classified as product and maintenance revenue in our System Design and Analysis product category. Cost of revenue associated with these contracts is primarily classified as cost of product and maintenance in our consolidated income statements.
Current report
•Growth in revenue from our software, services, IP and hardware offerings;
Current report
•Incremental costs for professional services; and
Current report
•Increased interest expense from our indebtedness.
Current report
The percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters. We expect our percentage of annual up-front revenue to continue to increase in 2025 as growth in our product offerings for which revenue is recognized up-front is expected to be greater than the growth of our product offerings for which revenue is recognized over time
Current report
Product and maintenance revenue increased during fiscal 2024, as compared to fiscal 2023, primarily due to growth in revenue from our software, hardware and IP offerings as a result of customers’ continued investment in complex designs for their products.
Current report
Outside legal fees included in general and administrative expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased legal services associated with acquisitions and legal proceedings. For additional information about our legal proceedings, including the increase in estimated legal liabilities, see Note 18 in the notes to consolidated financial statements.
Current report
Operating margin decreased during fiscal 2024, as compared to fiscal 2023, primarily due to the mix of products and services sold during each respective period. In addition, our acquisitions during fiscal 2024 resulted in incremental expenses, including amortization of acquired intangibles, that exceeded incremental revenue.
Current report
Interest expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to the interest expense related to new debt issued during fiscal 2024. We expect interest expense to increase during fiscal 2025 due to the increased level of debt on our consolidated balance sheet compared to prior periods. For an additional description of our debt arrangements, see Note 5 in the notes to consolidated financial statements.
Current report
During fiscal 2024, we received best judgment tax audit assessments of approximately $26.0 million from the Israel Tax Authority (“ITA”) for the tax years 2017, 2018 and 2019. The best judgment tax audit assessments were primarily related to transfer pricing and withholding taxes. We disagree with the ITA’s positions and have appealed or are in the process of appealing the tax assessments.
Current report
Cash Flows Provided by (Used for) Financing Activities
Current report
Cash from financing activities increased during fiscal 2024, as compared to fiscal 2023, primarily due to an increase in proceeds from debt, increased 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 a decrease in repurchases of common stock. These factors were partially offset by an increase in payments on debt and payments of employee taxes on vesting of restricted stock.
Current report
Senior Notes
Current report
In September 2024, we issued $2.5 billion aggregate principal amount of senior notes, consisting of $500.0 million aggregate principal amount of 4.200% Senior Notes due 2027 (the “2027 Notes”), $1.0 billion aggregate principal amount of 4.300% Senior Notes due 2029 (the “2029 Notes”) and $1.0 billion aggregate principal amount of 4.700% Senior Notes due 2034 (the “2034 Notes” and together with the 2027 Notes and the 2029 Notes, the “New Notes”). Interest on the New Notes is payable semi-annually in arrears in March and September of each year, beginning in March 2025. As of December 31, 2024, we were in compliance with all covenants associated with the New Notes.
Current report
We used a portion of the net proceeds of the New Notes issued in September 2024 to fully prepay the outstanding principal and accrued interest of our term loan facility due on September 7, 2025 (the “2025 Term Loan”) and our term loan facility due on May 20, 2026 (the “2026 Term Loan”). In October 2024, we also settled the outstanding principal of $350.0 million and accrued interest on the 4.375% Senior Notes that were due October 15, 2024 (the “2024 Notes”) at maturity.
Current report
(1) Includes future payments under leases that had commenced as of December 31, 2024 as well as leases that had been signed but not yet commenced as of December 31, 2024.
Removed paragraphs (22)
Previous report
Cadence is a leading pioneer in electronic system design software and IP, building upon more than 35 years of computational software expertise. Since our inception, we have been at the forefront of technology innovation, solving highly complex challenges in the semiconductor and electronic systems industries. We are a global company that provides computational software, special-purpose computational hardware, IP and services to multiple vertical sectors including automotive, AI, aerospace and defense, high-performance and mobile computing, hyperscalers, wireless communications, IIoT and medical equipment.
Previous report
Our 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.
Previous report
•Custom IC Design and Simulation;
Previous report
•Digital IC Design and Signoff;
Previous report
•Functional Verification;
Previous report
Consistent with our Intelligent System Design strategy, we completed several acquisitions since the beginning of fiscal 2023 that we believe enhance our talent, our technology portfolio and our ability to pursue attractive opportunities in the markets we serve. During fiscal 2023, these acquisitions increased expenses, including amortization of acquired intangible assets, more than revenue.
Previous report
Fiscal Year End
Previous report
Historically, our fiscal years were 52- or 53-week periods ending on the Saturday closest to December 31. During fiscal 2022, our Board of Directors approved a change in our fiscal year end from the Saturday closest to December 31 of each year to December 31 of each year. The fiscal year change became effective beginning with our fiscal year 2023, which began on January 1, 2023. Fiscal year 2022, which is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for comparative purposes, represents a 52-week period.
Previous report
Our first three fiscal quarters end on March 31, June 30, and September 30. No transition report was required in connection with this change.
Previous report
More recently, the conflict in the Middle East has had an impact on our employees and our customers in that region of the world. Our assessment of the potential impact that this conflict could have on our business and our operations is ongoing.
Previous report
•Increased revenue in each of our five product categories, primarily driven by growth in revenue from our software and emulation and prototyping hardware offerings;
Previous report
•Incremental costs resulting from integration of acquired businesses; and
Previous report
Up-front revenue as a percentage of total revenue increased during fiscal 2023, as compared to fiscal 2022, primarily due to growth in our emulation and prototyping hardware offerings. This growth was driven by increased production capacity during fiscal 2023 to address demand for our emulation and prototyping hardware offerings.
Previous report
Product and maintenance revenue increased during fiscal 2023, as compared to fiscal 2022, primarily due to increased demand across our five product categories. This growth was driven by our customers investing in new, complex designs for their products that included the design of electronic systems for consumer, hyperscale computing, mobile, 5G communications, automotive, aerospace and defense, industrial and healthcare.
Previous report
Operating margin increased during fiscal 2023, as compared to fiscal 2022, primarily because revenue growth in each of our five product categories exceeded growth in operating expenses.
Previous report
Interest expense increased during fiscal 2023, as compared to fiscal 2022, primarily due to the fact that borrowings under our 2025 Term Loan were outstanding for the full year during fiscal 2023, and only a partial year during fiscal 2022. For an additional description of our debt arrangements, including our 2025 Term Loan, see Note 5 in the notes to consolidated financial statements.
Previous report
The United States enacted the Tax Cuts and Jobs Act in December 2017, which requires companies to capitalize all of their R&D costs, including software development costs, incurred in tax years beginning after December 31, 2021. Beginning in fiscal 2022, we began capitalizing and amortizing R&D costs over five years for domestic research and fifteen years for international research rather than expensing these costs as incurred. As a result, our fiscal 2023 and 2022 effective tax rates and our cash tax payments increased significantly as compared to fiscal 2021. We also recognized increases to our deferred tax assets as we begin to capitalize domestic research costs.
Previous report
Cash used for financing activities increased during fiscal 2023, as compared to fiscal 2022, primarily due to a decrease in proceeds from debt, partially offset by a decrease in payments for repurchases of our common stock.
Previous report
2024 Notes
Previous report
In October 2014, we issued $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024 (the “2024 Notes”). We received net proceeds of $342.4 million from the issuance of the 2024 Notes, net of a discount of $1.4 million and issuance costs of $6.2 million. Interest is payable in cash semi-annually. The 2024 Notes are unsecured and rank equal in right of payment to all of our existing and future senior indebtedness. As of December 31, 2023, the net balance of the 2024 Notes of $349.3 million was classified as a current liability on our consolidated balance sheet.
Previous report
2025 Term Loan
Previous report
(1)Contractual interest payments on our variable rate indebtedness were calculated based on outstanding borrowings and the weighted average interest rates as of December 31, 2023.
Reworded paragraphs (46)
Previous wording
We group our products into categories related to major design activities:
Current wording
We group our products into the following categories:
Previous wording
For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Products and Product Categories.”
Current wording
For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Product Categories.”
Previous wording
Because we operate globally, our business is subject to the effects of expanded trade control laws and regulations, geopolitical conflict in and around Ukraine, the Middle East, and other areas of the world, volatility in foreign currency exchange rates relative to the U.S. dollar and the rise in interest rates.
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, inflation, changing interest rates, expanded trade control laws and regulations, potential imposition of new or higher tariffs and geopolitical conflicts.
Previous wording
We have been impacted by the continued expansion of trade control laws and regulations, including certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the Bureau of Industry and Security (“BIS”) “Entity List” and regulations governing the sale of certain technologies. Based on our current assessments, we expect the impact of these expanded trade control laws and regulations on our business to be limited.
Current wording
We have been impacted by the continued expansion of trade control laws and regulations, including certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the Bureau of Industry and Security “Entity List” and regulations governing the sale of certain technologies. Based on our current assessments, we expect the impact of these expanded trade control laws and regulations on our business to be limited. In addition, President Trump has announced the imposition of broad-based tariffs on imports from many countries, including China and Mexico. We are monitoring the imposition of these new or higher tariffs, including any pauses on the tariffs imposed, and will assess their potential impact on our business either directly, such as on our hardware business, or due to downstream effects.
Previous wording
We also continuously monitor geopolitical conflicts around the world and their effects on our business. During the first half of fiscal 2022, due to the ongoing conflict between Russia and Ukraine and the corresponding sanctions imposed by the United States and other countries, we terminated our operations in Russia. The termination of our operations in Russia has not materially limited our ability to develop or support our products and has not had a material impact on our results of operations, financial condition, liquidity or cash flows. We do not have operations or employees in Ukraine.
Current wording
We also continuously monitor geopolitical conflicts around the world, including the ongoing conflict between Russia and Ukraine and conflicts in the Middle East, and assess their impact on our business. To date, these conflicts have not materially limited our ability to develop or support our products and have not had a material impact on our results of operations, financial condition, liquidity or cash flows.
Previous wording
The discussion of our fiscal 2023 consolidated results of operations includes year-over-year comparisons to fiscal 2022 for revenue, cost of revenue, operating expenses, operating margin, other non-operating expenses, income taxes and cash flows. For a discussion of the fiscal 2022 changes compared to fiscal 2021, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 13, 2023.
Current wording
The discussion of our fiscal 2024 consolidated results of operations includes year-over-year comparisons to fiscal 2023 for revenue, cost of revenue, operating expenses, operating margin, other non-operating income and expenses, income taxes and cash flows. For a discussion of the fiscal 2023 changes compared to fiscal 2022, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 14, 2024.
Previous wording
•Continued investment in research and development activities and technical sales support;
Current wording
•Continued investment in research and development activities and technical sales support, including headcount from acquisitions;
Previous wording
We primarily generate revenue from licensing our software and IP, selling or leasing our emulation and prototyping hardware technology, providing maintenance for our software, hardware and IP, providing engineering and cloud services and earning royalties generated from the use of our IP. The timing of our revenue is significantly affected by the mix of software, hardware and IP products generating revenue in any given period, whether the revenue is recognized over time, or recognized at a point in time upon completion of delivery.
Current wording
We primarily generate revenue from licensing our software and IP, selling or leasing our hardware products, providing maintenance for our software, hardware and IP, providing engineering services and earning royalties generated from the use of our IP. The timing of our revenue is significantly affected by the mix of software, hardware and IP products generating revenue in any given period and whether the revenue is recognized over time or at a point in time, upon completion of delivery.
Previous wording
Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products or services.
Current wording
Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware products, and operating leases of hardware. Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products or services.
Previous wording
The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by our sales of emulation and prototyping hardware and individual IP licenses. The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies are impacted by delivery of hardware and IP products to our customers in any single fiscal period.
Current wording
The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by our sales of hardware products, individual IP licenses and certain software licenses. The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies in any single fiscal period are primarily impacted by delivery of hardware and IP products to our customers.
Previous wording
While the percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters, the overall mix of revenue was relatively consistent over the course of twelve consecutive months during both fiscal 2023 and fiscal 2022. The following table shows the percentage of recurring revenue for the twelve-month periods ended concurrently with our five most recent fiscal quarters:
Current wording
The following table shows the percentage of recurring revenue for the twelve-month periods ended concurrently with our five most recent fiscal quarters:
Previous wording
Services revenue increased during fiscal 2023, as compared to fiscal 2022, primarily due to increased revenue from our Cadence-managed cloud-based offerings, including our computational molecular modeling and simulation solution associated with our acquisition of OpenEye. 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 fiscal 2024, as compared to fiscal 2023, primarily due to growth in 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
The following table shows the percentage of product and related maintenance revenue contributed by each of our five product categories and services during fiscal 2023 and 2022:
Current wording
The following table shows the percentage of revenue contributed by each of our product categories during fiscal 2024 and 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. 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 from any one product category as a percentage of total revenue may fluctuate from period to period based on the mix of products and services sold in a given period and the timing of revenue recognition, particularly for our hardware, IP and certain software products. While revenue from our Core EDA product category increased during fiscal 2024, as compared to fiscal 2023, Core EDA as a percentage of total revenue decreased over the same period. As shown in the table below, revenue from China decreased during the same period and the substantial majority of that decreased revenue is included in the Core EDA category, resulting in lower revenue growth in the Core EDA category compared to both the IP and System Design and Analysis categories. 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
Revenue in each of the six geographies presented in the table above increased during fiscal 2023, as compared to fiscal 2022, primarily due to increased revenue from our software offerings, resulting from our customers’ continued investment in new, complex designs for their products. Also, during fiscal 2023, as compared to fiscal 2022, revenue growth from our emulation and prototyping hardware offerings contributed to the growth experienced in each geography, except the United States. This growth was driven by increased production capacity during fiscal 2023 to address continued demand from our customers.
Current wording
During fiscal 2024, as compared to fiscal 2023, revenue in the United States increased primarily due to growth in revenue from our hardware, software, IP and service offerings, while revenue in China decreased primarily due to a decrease in revenue from our hardware and IP offerings. Revenue in the remaining geographies presented in the table above increased during fiscal 2024, as compared to fiscal 2023, primarily due to growth in revenue from software offerings.
Previous wording
Cost of product and maintenance includes costs associated with the sale and lease of our emulation and prototyping hardware and licensing of our software and IP products, certain employee salary and benefits and other employee-related costs, cost of our customer support services, amortization of technology-related and maintenance-related acquired intangibles, costs of technical documentation and royalties payable to third-party vendors. Cost of product and maintenance depends primarily on our hardware product sales in any given period, but is also affected by employee salary and benefits and other employee-related costs, reserves for inventory, and the timing and extent to which we acquire intangible assets, license third-party technology or IP, and sell our products that include such acquired or licensed assets, technology or IP.
Current wording
Cost of product and maintenance includes costs associated with the sale and lease of our hardware products and licensing of our software and IP products, certain employee salary and benefits and other employee-related costs, cost of our customer support services, amortization of technology-related and maintenance-related acquired intangibles, costs of technical documentation and royalties payable to third-party vendors. Cost of product and maintenance depends primarily on our hardware product sales in any given period, but is also affected by employee salary and benefits and other employee-related costs, reserves for inventory, and the timing and extent to which we acquire intangible assets, license third-party technology or IP, and sell our products that include such acquired or licensed assets, technology or IP.
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. The increase in emulation and prototyping hardware costs during fiscal 2023, as compared to fiscal 2022, was primarily due to increased revenue from emulation and prototyping hardware products.
Current wording
Costs associated with our hardware products include components, assembly, testing, applicable reserves and overhead. These costs make our cost of hardware products higher, as a percentage of revenue, than our cost of software and IP products. Hardware product costs increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased installations of hardware products and increased charges for excess and obsolete inventory related to previous generations of our hardware products.
Previous wording
Cost of services primarily includes employee salary, benefits and other employee-related costs to perform work on revenue-generating projects and costs to maintain the infrastructure necessary to manage a services organization. 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.
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 fiscal 2024, as compared to fiscal 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 mid-year promotion and pay raise 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, industry trends for salary and other employee benefits, stock-based compensation, foreign exchange rate movements, acquisition-related costs, and volatility in variable compensation programs that are driven by operating results.
Previous wording
The changes in marketing and sales expense were due to the following:
Current wording
The increase in marketing and sales expense were 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 fiscal 2023, as compared to fiscal 2022, 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 2022 and fiscal 2023. Facilities and other infrastructure costs included in marketing and sales expense increased during fiscal 2023, as compared to fiscal 2022, primarily due to our growing workforce. Costs related to marketing programs and events, travel and sales meetings increased during fiscal 2023, as compared to fiscal 2022, primarily due to an increased number of in-person meetings and events. 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 fiscal 2024, as compared to fiscal 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 fiscal 2024, as compared to fiscal 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 changes in research and development expense were due to the following:
Current wording
The increase in research and development expense were 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 fiscal 2023, as compared to fiscal 2022, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from the acquisitions completed in both fiscal 2022 and fiscal 2023. Facilities and other infrastructure costs increased during fiscal 2023, as compared to fiscal 2022, primarily due to an increase in costs associated with our acquisitions and our growing work force. 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 fiscal 2024, as compared to fiscal 2023, 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 increased during fiscal 2024, as compared to fiscal 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
Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during fiscal 2023, as compared to fiscal 2022, primarily due to additional headcount. Also, during fiscal 2023, as compared to fiscal 2022, we experienced an increase in foreign service tax, primarily because we did not benefit from any foreign service tax refunds as we did during fiscal 2022.
Current wording
Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to additional headcount from acquisitions. Also, during fiscal 2024, as compared to fiscal 2023, we experienced an increase in foreign service tax expense, because we did not benefit from any foreign service tax refunds as we did during fiscal 2023. Contributions to non-profit organizations decreased during fiscal 2024, as compared to fiscal 2023, primarily due to the timing of our periodic contributions to support charitable initiatives, including the Cadence Giving Foundation.
Previous wording
Amortization of acquired intangibles decreased during fiscal 2023, as compared to fiscal 2022, primarily due to certain intangible assets becoming fully amortized, partially offset by amortization from intangible assets acquired with our fiscal 2023 and fiscal 2022 acquisitions.
Current wording
Amortization of acquired intangibles increased during fiscal 2024, as compared to fiscal 2023, primarily due to amortization from intangible assets acquired with our fiscal 2024 and fiscal 2023 acquisitions, partially offset by certain intangible assets that became fully amortized.
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. For additional information about our restructuring plans, see Note 11 in the notes to consolidated financial statements.
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 11 in the notes to consolidated financial statements.
Previous wording
Other income (expense), net consists primarily of interest earned on cash, cash equivalents and investments in debt securities, realized and unrealized gains and losses from our investments in equity securities of other companies and foreign exchange gains and losses. Other income (expense), net increased during fiscal 2023, as compared to fiscal 2022, primarily due to unrealized gains from our investments in equity securities of publicly held companies and increased interest earned from deposits. For additional information about other income (expense), net, see Note 12 in the notes to consolidated financial statements.
Current wording
Other income (expense), net consists primarily of interest earned on cash, cash equivalents and investments in debt securities, realized and unrealized gains and losses from our investments in equity securities of other companies, gains and losses from investments held in the Nonqualified Deferred Compensation (“NQDC”) trust and foreign exchange gains and losses. Other income (expense), net increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased interest earned from deposits and net gains from our investments in equity securities of publicly held companies. For additional information about other income (expense), net, see Note 12 in the notes to consolidated financial statements.
Previous wording
Our provision for income taxes for fiscal 2022 was primarily attributable to federal, state and foreign income taxes on our fiscal 2022 income, partially offset by the tax benefit of $42.1 million related to stock-based compensation that vested or was exercised during the period. We also recognized a tax benefit of $68.7 million related to the release of the valuation allowance on our California R&D tax credits because we expect to utilize these tax credits based on strong current earnings and future taxable income projections.
Current wording
Our provision for income taxes for fiscal 2024 was primarily attributable to federal, state and foreign income taxes on our fiscal 2024 income. We also recognized tax benefits of $42.9 million related to stock-based compensation that vested or was exercised during the period.
Previous wording
In 2021, the OECD announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a minimum rate of 15%. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States such as Ireland and Hungary) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-U.S. tax jurisdictions in which we operate.
Current wording
In 2021, the OECD 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 fiscal 2024.
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 23.0%. 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.” For further discussion regarding our income taxes, see Note 8 in the notes to consolidated financial statements.
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 2025 effective tax rate will be approximately 25%. We expect that our quarterly effective tax rates will vary from our fiscal 2025 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.
Previous wording
As of December 31, 2023, our principal sources of liquidity consisted of $1,008.2 million of cash and cash equivalents as compared to $882.3 million as of December 31, 2022.
Current wording
As of December 31, 2024, our principal sources of liquidity consisted of $2,644.0 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 fiscal 2023 were 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 year, proceeds from the sale of investments, and proceeds from our revolving credit facility.
Current wording
Our primary sources of cash and cash equivalents during fiscal 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 year and proceeds from the sale and maturity of investments.
Previous wording
Our primary uses of cash and cash equivalents during fiscal 2023 were payments related to employee salaries and benefits, operating expenses, repurchases of our common stock, purchases of inventory, payments for income taxes, cash paid for acquired businesses, payments on our revolving credit facility, purchases of investments, payment of employee taxes on vesting of restricted stock and purchases of property, plant and equipment.
Current wording
Our primary uses of cash and cash equivalents during fiscal 2024 were payments related to employee salaries and benefits, operating expenses, payments on debt, cash paid for acquired businesses, repurchases of our common stock, purchases of inventory, payments for income taxes, payment of employee taxes on vesting of restricted stock and purchases of property, plant and equipment.
Previous wording
Approximately 55% of our cash and cash equivalents was held by our foreign subsidiaries as of December 31, 2023. 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 34% of our cash and cash equivalents was held by our foreign subsidiaries as of December 31, 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.
Previous wording
Net working capital is comprised of current assets less current liabilities, as shown on our consolidated balance sheets. The increase in our net working capital as of December 31, 2023, as compared to December 31, 2022, is primarily due to the timing of cash receipts from customers and disbursements made for operating and financing activities, offset by our 2024 Notes being classified as current liabilities as of December 31, 2023.
Current wording
Net working capital is comprised of current assets less current liabilities, as shown on our consolidated balance sheets. Our net working capital varies from period to period due to changes in operating assets and liabilities and the timing of investing and financing activities.
Previous wording
Cash flows provided by operating activities include net income, adjusted for certain non-cash items, as well as changes in the balances of certain assets and liabilities. Our cash flows from operating activities are significantly influenced by business levels and the payment terms set forth in our customer agreements. The increase in cash flows from operating activities during fiscal 2023, as compared to fiscal 2022, was primarily due to improved results from operations, the timing of cash receipts from customers and the timing of cash disbursements.
Current wording
Cash flows provided by operating activities include net income, adjusted for certain non-cash items, as well as changes in the balances of certain assets and liabilities. Our cash flows from operating activities are significantly influenced by business levels and the payment terms set forth in our customer agreements. The decrease in cash flows from operating activities during fiscal 2024, as compared to fiscal 2023, was primarily due to the timing of cash receipts from customers and the timing of cash disbursements for operating assets and liabilities.
Previous wording
Cash used for investing activities decreased during fiscal 2023, as compared to fiscal 2022, primarily due to a decrease in cash used for business combinations, partially offset by an increase in cash used for investments in equity and debt securities. We expect to continue our investing activities, including purchasing property, plant and equipment, purchasing intangible assets, acquiring other companies and businesses, and making investments.
Current wording
Cash used for investing activities increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased payments for business combinations and purchases of property, plant and equipment, partially offset by a decrease in cash used for investments in equity and debt securities. We expect to continue our investing activities, including purchasing property, plant and equipment, purchasing intangible assets, acquiring other companies and businesses, and making investments.
Previous wording
Cash flows used for financing activities during fiscal 2023 and 2022 were as follows:
Current wording
Cash flows provided by (used for) financing activities during fiscal 2024 and 2023 were as follows:
Previous wording
In June 2021, we 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, as amended in September 2022 (the “2021 Credit Facility”). The 2021 Credit Facility provides for borrowings up to $700.0 million, with the right to request increased capacity up to an additional $350.0 million upon receipt of lender commitments, for total maximum borrowings of $1.05 billion. The 2021 Credit Facility expires on June 30, 2026. Any outstanding loans drawn under the 2021 Credit Facility are due at maturity on June 30, 2026, subject to an option to extend the maturity date. Outstanding borrowings may be repaid at any time prior to maturity. Interest rates associated with the 2021 Credit Facility are variable, so interest expense is impacted by changes in the interest rates, particularly for periods when there are outstanding borrowings under the revolving credit facility. Interest is payable quarterly. As of December 31, 2023, there were no borrowings outstanding under the 2021 Credit Facility, and we were in compliance with all financial covenants associated with such credit facility.
Current wording
In August 2024, we terminated our 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 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. Interest rates associated with the 2024 Credit Facility are variable, so interest expense is impacted by changes in the interest rates, particularly for periods when there are outstanding borrowings under the revolving credit facility. Interest is payable quarterly. As of December 31, 2024, there were no borrowings outstanding under the 2024 Credit Facility, and we were in compliance with all covenants associated with such credit facility.
Previous wording
In August 2023, our Board of Directors increased the prior authorization to repurchase shares of our common stock by authorizing an additional $1.0 billion. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. As of December 31, 2023, approximately $1.4 billion of the share repurchase authorization remained available to repurchase shares of our common stock. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for additional information on share repurchases.
Current wording
We are authorized to repurchase shares of our common stock under a publicly announced program that was most recently increased by our 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. Our repurchase authorization does not obligate us to acquire a minimum amount of shares, does not have an expiration date and may be modified, suspended or terminated without prior notice. As of December 31, 2024, approximately $0.8 billion of the share repurchase authorization remained available to repurchase shares of our common stock. See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for additional information on share repurchases.
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Current report — wording carried from elsewhere
For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors.” For further discussion regarding our income taxes, see Note 8 in the notes to consolidated financial statements.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
•Gains from our investments in equity securities.
Previous report — wording carried elsewhere
During fiscal 2023, as compared to fiscal 2022, contributions to non-profit organizations decreased, primarily due to the timing of our periodic contributions to support charitable initiatives, including the Cadence Giving Foundation. Also, during fiscal 2023, as compared to fiscal 2022, we experienced a decrease in legal fees and related costs primarily due to non-recurring legal services and legal matters that were active during fiscal 2022 and are now resolved.
Previous report — wording carried elsewhere
Cash Flows Used for Financing Activities
Previous report — wording carried elsewhere
In September 2022, we entered into a $300.0 million three-year senior non-amortizing term loan facility due on September 7, 2025, with a group of lenders led by Bank of America, N.A., as administrative agent (the “2025 Term Loan”). The 2025 Term Loan is unsecured and ranks equal in right of payment to all of our unsecured indebtedness. Interest rates associated with the 2025 Term Loan are variable, so interest expense is impacted by changes in interest rates. Interest is payable quarterly. As of December 31, 2023, we were in compliance with all financial covenants associated with the 2025 Term Loan.