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, 2025 (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 controls, tariffs, conflicts around the world, volatility in foreign currency exchange rates, inflation and changes in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; legal, administrative and tax proceedings, including our settlements with BIS and the DOJ and ongoing obligations; restructuring actions and associated charges and benefits; pending acquisitions, the accounting for acquisitions and 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,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report and this Quarterly 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, 2025 (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 controls, tariffs, conflicts around the world, volatility in foreign currency exchange rates, inflation, increased energy costs, supply chain constraints and changes in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; legal, administrative and tax proceedings; obligations under our BIS and DOJ settlement agreements; restructuring actions and associated charges and benefits; pending acquisitions, the accounting for acquisitions and 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,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report and this Quarterly 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

Cadence® is a global technology leader that develops computational, AI-driven software, accelerated hardware, and silicon intellectual property (“IP”) products and solutions. Our customers include semiconductor companies that design and manufacture integrated circuits (“ICs”), as well as systems companies that design and manufacture electromechanical systems containing various types of semiconductor and other electronics. Our products and solutions empower our customers to design and verify and bring to life new and innovative products. Our mission is to empower the world’s most innovative companies to deliver extraordinary electronic products that drive the global economy and improve everyday life.

Current wording

Cadence® is a global technology leader that develops computational, AI-driven software, accelerated hardware, and silicon intellectual property (“IP”) products and solutions. Our customers include companies that design and manufacture semiconductors, as well as companies that design and manufacture electromechanical systems containing various types of semiconductor and other electronics. Our products and solutions empower our customers to design, verify and bring to life new and innovative products. Our mission is to empower the world’s most innovative companies to deliver extraordinary electronic products that drive the global economy and improve everyday life.

Previous wording

Our customers include semiconductor companies that design and manufacture semiconductor devices, as well as systems companies that design and manufacture products containing many different types of semiconductors. Semiconductors, also referred to as integrated circuits (“ICs”), or chips, are integral components in a wide range of products across multiple industries, including both industrial and consumer end markets. As our customers tackle the challenges of designing increasingly intricate systems, they rely on our advanced AI-driven computational software, hardware, IP, and services to manage this complexity without proportional cost increases. Our products and solutions are critical for optimizing the performance, power, and area (“PPA”) of semiconductors and electronic systems while accelerating time-to-market.

Current wording

Semiconductors, also referred to as integrated circuits (“ICs”), or chips, are integral components in a wide range of products across multiple industries, including both industrial and consumer end markets. As our customers tackle the challenges of designing increasingly intricate systems, they rely on our advanced AI-driven computational software, hardware, IP, and services to manage this complexity without proportional cost increases. Our products and solutions are critical for optimizing the performance, power, and area (“PPA”) of semiconductors and electronic systems while accelerating time-to-market.

Previous wording

On February 23, 2026, we completed our acquisition of the design and engineering (“D&E”) business of Hexagon Smart Solutions AB. This acquisition is expected to accelerate our ISD strategy by expanding our SD&A portfolio, building upon our acquisition of BETA CAE in fiscal 2024. The acquisition includes substantially all of the subsidiaries and related assets comprising Hexagon's design and engineering business. For the three months ended March 31, 2026, revenue associated with contracts assumed with our acquisition of the D&E business was primarily classified as product and maintenance revenue in our SD&A product category, and cost of revenue associated with these contracts was primarily classified as cost of product and maintenance in our condensed consolidated income statements.

Current wording

On February 23, 2026, we completed our acquisition of the design and engineering (“D&E”) business of Hexagon Smart Solutions AB. This acquisition accelerates our ISD strategy by expanding our SD&A portfolio, building upon our acquisition of BETA CAE in fiscal 2024. The acquisition includes substantially all of the subsidiaries and related assets comprising Hexagon's design and engineering business. For the three and six months ended June 30, 2026, revenue associated with contracts assumed with our acquisition of the D&E business was primarily classified as product and maintenance revenue in our SD&A product category, and cost of revenue associated with these contracts was primarily classified as cost of product and maintenance in our condensed consolidated income statements.

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, inflation, changing interest rates, expanded trade control laws and regulations, imposition of new or higher tariffs 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, inflation, increased energy costs, supply chain constraints, changing interest rates, expanded trade control laws and regulations, imposition of new or higher tariffs and geopolitical conflicts.

Previous wording

Trade control laws and regulations have been amended over the past years, including through the imposition of certain export control restrictions concerning advanced node IC production in China and the inclusion of additional Chinese technology companies on the BIS “Entity List” and regulations governing the sale of certain technologies. In furtherance of these regulations, effective September 29, 2025, BIS issued an interim final rule that extended the export restrictions imposed on entities identified on the Entity List or the Military End-User List and other certain sanctioned parties, to entities that are 50% or more owned by one or more such entities. However, on November 11, 2025, BIS published a one-year suspension of the new rule that is currently set to expire on November 9, 2026, absent a future extension. We expect the impact of these current expanded trade control laws and regulations on our business to be limited, but we will continue to monitor future developments.

Current wording

Trade control laws and regulations have been amended over the past years, including through the imposition of certain export control restrictions concerning advanced node IC production in China and the inclusion of additional Chinese technology companies on the BIS “Entity List” and regulations governing the sale of certain technologies. In furtherance of these regulations, effective September 29, 2025, BIS issued an interim final rule that extended the export restrictions imposed on entities identified on the Entity List or the Military End-User List and other certain sanctioned parties, to entities that are 50% or more owned by one or more such entities. However, on November 11, 2025, BIS published a one-year suspension of the new rule that is currently set to expire on November 9, 2026, absent a future extension. We expect the impact of these current expanded trade control laws and regulations on our business to be limited, but we will continue to monitor future developments. These laws, regulations and rules are subject to change.

Previous wording

In addition, U.S. President Trump has made a series of announcements regarding the imposition of new and higher U.S. tariffs on imports from many countries, including China and Mexico. In response, China and other countries, as well as the European Union, have announced retaliatory tariffs on imports of U.S. goods and other countermeasures. We are monitoring these actions, including any pauses, escalations, exemptions, removal of exemptions, court rulings, refunds or replacements, with respect to the threatened or imposed tariffs, and will continue to assess their potential impact on our business either directly, such as on our hardware business, or due to downstream effects.

Current wording

In addition, U.S. President Trump has imposed new and higher U.S. tariffs on imports from many countries, including China, Canada and Mexico. In February 2026, the U.S. Supreme Court struck down tariffs previously imposed under the International Emergency Economic Powers Act. However, tariffs imposed pursuant to other statutes remain in effect, and the administration has announced new tariff measures under alternative legal authorities and has continued to implement and pursue significant changes to U.S. trade policies, treaties and tariffs and conduct investigations on imports from foreign countries. In response, China and other countries have announced retaliatory tariffs on imports of U.S. goods and other countermeasures, though certain retaliatory measures have been suspended pursuant to bilateral negotiations and trade framework agreements. We are monitoring these developments, including any pauses, escalations, exemptions, court rulings, refunds, replacements and new investigations, with respect to the threatened or imposed tariffs and trade policy, and will continue to assess their potential impact on our business either directly, such as on our hardware business and cost of imported components, or due to downstream effects on our customers and the broader economy.

Previous wording

Our financial results reflect the following for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 (unless otherwise stated):

Current wording

Our financial results reflect the following for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 (unless otherwise stated):

Previous wording

•Increases in operating expenses related to marketing, sales and research and development activities from continued investment in research and development and technical sales support, including additional headcount from acquisitions; and

Current wording

•Increases in operating expenses related to marketing, sales and research and development activities from continued investment in research and development and technical sales support, including additional headcount from acquisitions;

Previous wording

•Increased amortization of acquired intangibles from our recent acquisitions.

Current wording

•Increased amortization of acquired intangibles from our recent acquisitions; and

Previous wording

The following table shows the percentage of our revenue that is classified as recurring or up-front for the three months ended March 31, 2026 and March 31, 2025:

Current 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, 2026 and June 30, 2025:

Previous wording

Product and maintenance revenue increased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to growth in revenue from our software and hardware product offerings as a result of existing customers' continued investment in complex designs for their products.

Current wording

Product and maintenance revenue increased during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, due to growth in revenue from our software, hardware and IP product offerings as a result of existing customers’ continued investment in complex designs for their products.

Previous wording

No single customer accounted for 10% or more of total revenue during the three months ended March 31, 2026 or March 31, 2025.

Current wording

No single customer accounted for 10% or more of total revenue during the three and six months ended June 30, 2026 or June 30, 2025.

Previous 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 SD&A software products for which revenue is recognized up-front.

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, the timing of revenue recognition, particularly for our hardware, IP and SD&A software products for which revenue is recognized up-front, which are affected by demand for, and our ability to deliver, existing products and services as well as the introduction or acquisition of new products and services.

Previous wording

The following table shows revenue by geographic region for the three months ended March 31, 2026 and March 31, 2025 and the change in revenue between periods:

Current wording

The following table shows revenue by geographic region for the three and six months ended June 30, 2026 and June 30, 2025 and the change in revenue between periods:

Previous wording

The changes in product and maintenance-related costs for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, were due to the following:

Current wording

The changes in product and maintenance-related costs for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, were due to the following:

Previous 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 the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to increased installations of our 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 costs may vary from period to period based on the mix of hardware products delivered to customers during each period and the timing of charges for excess or obsolete inventory.

Previous wording

Amortization of acquired intangibles included in cost of product and maintenance may fluctuate from period to period depending on the timing of newly acquired assets relative to assets becoming fully amortized in any given period. The increase in amortization of intangibles during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, is primarily due to definite-lived intangible assets acquired with our acquisition of the D&E business.

Current wording

Amortization of acquired intangibles included in cost of product and maintenance may fluctuate from period to period depending on the timing of newly acquired assets relative to assets becoming fully amortized in any given period. The increase in amortization of intangibles during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, is primarily due to definite-lived intangible assets acquired with our acquisition of the D&E business.

Previous wording

Our operating expenses, as a percentage of total revenue, for the three months ended March 31, 2026 and March 31, 2025 were as follows:

Current wording

Our operating expenses, as a percentage of total revenue, for the three and six months ended June 30, 2026 and June 30, 2025 were as follows:

Previous wording

The increase in marketing and sales expense for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was due to the following:

Current wording

The increase in marketing and sales expense for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, 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 months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions. 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 six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions. 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 months ended March 31, 2026, as compared to the three months ended March 31, 2025, was due to the following:

Current wording

The increase in research and development expense for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, 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 months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from 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 six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from acquisitions.

Previous wording

Facilities and other infrastructure costs included in research and development expense increased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, 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

Facilities and other infrastructure costs included in research and development expense increased during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, 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 changes in general and administrative expense for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, were due to the following:

Current wording

The changes in general and administrative expense for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, were due to the following:

Previous wording

Professional services increased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to increased legal and consulting services associated with acquisition-related activities.

Current wording

Professional services increased during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, primarily due to increased consulting services associated with acquisition-related activities. We expect to continue to utilize professional services as we continue to acquire and integrate companies and businesses.

Previous wording

Stock-based compensation included in general and administrative expense increased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to incremental expense from equity awards granted to certain members of senior management.

Current wording

Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, primarily due to headcount from acquisitions and incremental expense from equity awards granted to certain members of senior management.

Previous wording

Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three months ended March 31, 2026 and the three months ended March 31, 2025 was as follows:

Current 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, 2026 and the three and six months ended June 30, 2025 was as follows:

Previous wording

Our operating margin may fluctuate from period to period depending on the mix of products and services sold during each period, the timing and magnitude of restructuring plans and other significant, infrequent expenses. In addition, our acquisitions may result in incremental expenses, including amortization of acquired intangibles, that exceed incremental revenue for a period of time.

Current wording

Our operating margin may fluctuate from period to period depending on the mix of products and services sold during each period, the timing and magnitude of restructuring plans and other significant, infrequent expenses. During the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, our operating margin increased, primarily due to the loss related to a contingent liability recognized during the three and six months ended June 30, 2025, partially offset by incremental expenses from our recent acquisitions, including amortization of acquired intangibles, that exceed incremental revenue for the periods presented.

Previous wording

Interest expense increased during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, primarily due to incremental interest expense related to outstanding borrowings under our revolving credit facility. For additional information relating to our debt arrangements, see Note 5 in the notes to condensed consolidated financial statements.

Current wording

Interest expense increased during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, primarily due to incremental interest expense related to borrowings under our revolving credit facility at various times during the periods presented. For additional information relating to our debt arrangements, see Note 5 in the notes to condensed consolidated financial statements.

Previous wording

Other income, 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, net may fluctuate from period to period based on levels of cash deposits, the change in fair value of our marketable equity securities and movements in exchange gains and losses.

Current wording

Other income, 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, net may fluctuate from period to period based on levels of cash deposits, gains and losses from the sale of investments, changes in the fair value of our marketable equity securities and movements in exchange gains and losses.

Previous wording

The following table presents the provision for income taxes and the effective tax rate for the three months ended March 31, 2026 and March 31, 2025:

Current wording

The following table presents the provision for income taxes and the effective tax rate for the three and six months ended June 30, 2026 and June 30, 2025:

Previous wording

Our provision for income taxes for the three months ended March 31, 2026 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2026 income. We also recognized tax benefits of $13.6 million related to stock-based compensation that vested or was exercised during the period. The increase in our provision for income taxes during the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was primarily attributable to an increase in our earnings and nondeductible expenses.

Current wording

Our provision for income taxes for the three and six months ended June 30, 2026 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2026 income. We also recognized tax benefits of $3.1 million and $16.7 million related to stock-based compensation that vested or was exercised during the respective periods. The increase in our provision for income taxes during the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025, was primarily attributable to an increase in our earnings.

Previous wording

Our provision for income taxes for the three months ended March 31, 2025 was primarily attributable to federal, state and foreign income taxes on our then anticipated fiscal 2025 income. We also recognized tax benefits of $18.6 million related to stock-based compensation that vested or was exercised during the period.

Current wording

Our provision for income taxes for the three and six months ended June 30, 2025 was primarily attributable to federal, state and foreign income taxes on our then anticipated fiscal 2025 income. We also recognized tax benefits of $2.8 million and $21.4 million related to stock-based compensation that vested or was exercised during the respective periods.

Previous wording

As of March 31, 2026, our principal sources of liquidity consisted of $1,406.7 million of cash and cash equivalents as compared to $3.0 billion as of December 31, 2025.

Current wording

As of June 30, 2026, our principal sources of liquidity consisted of $1.4 billion of cash and cash equivalents as compared to $3.0 billion as of December 31, 2025.

Previous wording

Our primary sources of cash and cash equivalents during the three months ended March 31, 2026 were proceeds from our revolving credit facility, cash generated from operations and proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period.

Current wording

Our primary sources of cash and cash equivalents during the six months ended June 30, 2026 were cash generated from operations, proceeds from our revolving credit facility, proceeds from the sale and maturity of investments and proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period.

Previous wording

Our primary uses of cash and cash equivalents during the three months ended March 31, 2026 were payments related to business combinations, repurchases of our common stock, payment of employee taxes on vesting of restricted stock, purchases of property, plant and equipment and purchases of investments.

Current wording

Our primary uses of cash and cash equivalents during the six months ended June 30, 2026 were payments related to business combinations, operating costs and expenses, payments on our revolving credit facility, repurchases of our common stock, payment of employee taxes on vesting of restricted stock, purchases of property, plant and equipment and purchases of investments.

Previous wording

Approximately 79% of our cash and cash equivalents was held by our foreign subsidiaries as of March 31, 2026. 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 84% of our cash and cash equivalents was held by our foreign subsidiaries as of June 30, 2026. 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 condensed 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. The decrease in our working capital as of March 31, 2026, as compared to December 31, 2025, was primarily due to cash paid in business combinations.

Current wording

Net working capital is comprised of current assets less current liabilities, as shown on our condensed 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. The decrease in our working capital as of June 30, 2026, as compared to December 31, 2025, was primarily due to an increase in cash paid in business combinations.

Previous wording

Cash flows provided by operating activities during the three months ended March 31, 2026 and March 31, 2025 were as follows:

Current wording

Cash flows provided by operating activities during the six months ended June 30, 2026 and June 30, 2025 were as follows: