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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________ 
FORM 10-Q
_____________________________________  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 000-15867
_____________________________________ 
cdns-20211002_g1.jpg
CADENCE DESIGN SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
_____________________________________ 
Delaware 00-0000000
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
2655 Seely Avenue, Building 5, San Jose,California 95134
(Address of Principal Executive Offices) (Zip Code)
(408) 943-1234
Registrant’s Telephone Number, including Area Code
_____________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareCDNSNasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerSmaller Reporting Company
Non-accelerated FilerEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
On October 2, 2021, approximately 277,141,000 shares of the registrant’s common stock, $0.01 par value, were outstanding.




CADENCE DESIGN SYSTEMS, INC.
INDEX
 
  Page
PART I.FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II.OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.











PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
As of
October 2,
2021
January 2,
2021
ASSETS
Current assets:
Cash and cash equivalents$1,013,819 $928,432 
Receivables, net327,191 338,487 
Inventories101,575 75,956 
Prepaid expenses and other100,428 135,712 
Total current assets1,543,013 1,478,587 
Property, plant and equipment, net303,313 311,125 
Goodwill925,949 782,087 
Acquired intangibles, net247,628 210,590 
Deferred taxes766,036 732,290 
Other assets427,936 436,106 
Total assets$4,213,875 $3,950,785 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$363,835 $349,951 
Current portion of deferred revenue543,361 446,857 
Total current liabilities907,196 796,808 
Long-term liabilities:
Long-term portion of deferred revenue95,991 107,064 
Long-term debt347,385 346,793 
Other long-term liabilities232,041 207,102 
Total long-term liabilities675,417 660,959 
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock and capital in excess of par value2,411,791 2,217,939 
Treasury stock, at cost(2,622,675)(2,057,829)
Retained earnings2,869,709 2,350,333 
Accumulated other comprehensive loss(27,563)(17,425)
Total stockholders’ equity2,631,262 2,493,018 
Total liabilities and stockholders’ equity$4,213,875 $3,950,785 





See notes to condensed consolidated financial statements.



CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts)
(Unaudited)
 
 Three Months Ended Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Revenue:
Product and maintenance$706,160 $630,329 $2,093,098 $1,813,384 
Services44,735 36,278 122,110 109,598 
Total revenue750,895 666,607 2,215,208 1,922,982 
Costs and expenses:
Cost of product and maintenance54,185 64,800 174,933 175,915 
Cost of services22,402 17,484 62,380 56,047 
Marketing and sales143,401 123,738 412,194 369,958 
Research and development289,105 250,934 845,324 743,423 
General and administrative42,990 35,928 123,275 105,161 
Amortization of acquired intangibles5,000 4,438 14,661 13,234 
Restructuring and other charges (credits)(222)13 (968)(1,329)
Total costs and expenses556,861 497,335 1,631,799 1,462,409 
Income from operations194,034 169,272 583,409 460,573 
Interest expense(4,196)(5,325)(12,729)(15,876)
Other income (expenses), net(1,143)1,766 3,701 1,862 
Income before provision for income taxes188,695 165,713 574,381 446,559 
Provision for income taxes12,388 4,083 55,005 29,653 
Net income$176,307 $161,630 $519,376 $416,906 
Net income per share – basic$0.65 $0.59 $1.90 $1.52 
Net income per share – diluted$0.63 $0.58 $1.86 $1.49 
Weighted average common shares outstanding – basic273,194 273,996 273,636 273,633 
Weighted average common shares outstanding – diluted278,311 280,024 279,046 279,455 










See notes to condensed consolidated financial statements.



CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 Three Months Ended Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Net income$176,307 $161,630 $519,376 $416,906 
Other comprehensive income (loss), net of tax effects:
Foreign currency translation adjustments(5,483)11,539 (9,618)3,029 
Changes in defined benefit plan liabilities(288)(142)(520)277 
Total other comprehensive income (loss), net of tax effects(5,771)11,397 (10,138)3,306 
Comprehensive income$170,536 $173,027 $509,238 $420,212 






































See notes to condensed consolidated financial statements.



CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended October 2, 2021
Common Stock
Par ValueAccumulated
and CapitalOther
in ExcessTreasuryRetainedComprehensive
Sharesof ParStockEarningsLossTotal
Balance, July 3, 2021276,780 $2,354,801 $(2,509,668)$2,693,402 $(21,792)$2,516,743 
Net income
— — — 176,307 — $176,307 
Other comprehensive loss, net of taxes — — — — (5,771)$(5,771)
Purchase of treasury stock
(723)— (110,011)— — $(110,011)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures
1,249 9,319 22,061 — — $31,380 
Stock received for payment of employee taxes on vesting of restricted stock
(165)(5,075)(25,057)— — $(30,132)
Stock-based compensation expense
— 52,746 — — — $52,746 
Balance, October 2, 2021277,141 $2,411,791 $(2,622,675)$2,869,709 $(27,563)$2,631,262 
Three Months Ended September 26, 2020
Common Stock
Par ValueAccumulated
and CapitalOther
in ExcessTreasuryRetainedComprehensive
Sharesof ParStockEarningsLossTotal
Balance, June 27, 2020278,794 $2,143,016 $(1,856,333)$2,014,965 $(45,017)$2,256,631 
Net income
— — — 161,630 — $161,630 
Other comprehensive income, net of taxes — — — — 11,397 $11,397 
Purchase of treasury stock
(717)— (75,011)— — $(75,011)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures
1,093 4,328 23,267 — — $27,595 
Stock received for payment of employee taxes on vesting of restricted stock
(239)(5,828)(26,030)— — $(31,858)
Stock-based compensation expense
— 45,334 — — — $45,334 
Balance, September 26, 2020278,931 $2,186,850 $(1,934,107)$2,176,595 $(33,620)$2,395,718 



Nine Months Ended October 2, 2021
Common Stock
Par ValueAccumulated
and CapitalOther
in ExcessTreasuryRetainedComprehensive
Sharesof ParStockEarningsLossTotal
Balance, January 2, 2021278,941 $2,217,939 $(2,057,829)$2,350,333 $(17,425)$2,493,018 
Net income
— — — 519,376 — $519,376 
Other comprehensive loss, net of taxes — — — — (10,138)$(10,138)
Purchase of treasury stock
(3,766)— (502,301)— — $(502,301)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures
2,640 52,236 31,396 — — $83,632 
Stock received for payment of employee taxes on vesting of restricted stock
(674)(14,244)(93,941)— — $(108,185)
Stock-based compensation expense
— 155,860 — — — $155,860 
Balance, October 2, 2021277,141 $2,411,791 $(2,622,675)$2,869,709 $(27,563)$2,631,262 
Nine Months Ended September 26, 2020
Common Stock
Par ValueAccumulated
and CapitalOther
in ExcessTreasuryRetainedComprehensive
Sharesof ParStockEarningsLossTotal
Balance, December 28, 2019279,855 $2,046,237 $(1,668,105)$1,761,688 $(36,926)$2,102,894 
Cumulative effect adjustment— — — (1,999)— $(1,999)
Net income
— — — 416,906 — $416,906 
Other comprehensive income, net of taxes — — — — 3,306 $3,306 
Purchase of treasury stock
(3,124)— (250,047)— — $(250,047)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures
3,049 15,086 56,364 — — $71,450 
Stock received for payment of employee taxes on vesting of restricted stock
(849)(13,196)(72,319)— — $(85,515)
Stock-based compensation expense
— 138,723 — — — $138,723 
Balance, September 26, 2020278,931 $2,186,850 $(1,934,107)$2,176,595 $(33,620)$2,395,718 











See notes to condensed consolidated financial statements.



CADENCE DESIGN SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended
 October 2,
2021
September 26,
2020
Cash and cash equivalents at beginning of period$928,432 $705,210 
Cash flows from operating activities:
Net income519,376 416,906 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization106,962 107,019 
Amortization of debt discount and fees952 770 
Stock-based compensation155,860 138,723 
(Gain) loss on investments, net(330)5,118 
Deferred income taxes(34,566)(18,966)
Provisions for losses on receivables234 1,087 
ROU asset amortization and change in operating lease liabilities(2,917)2,064 
Other non-cash items146 410 
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables15,132 9,945 
Inventories(25,608)6,376 
Prepaid expenses and other36,632 22,769 
Other assets8,127 (21,287)
Accounts payable and accrued liabilities10,501 (30,455)
Deferred revenue84,183 124,491 
Other long-term liabilities10,417 4,430 
Net cash provided by operating activities885,101 769,400 
Cash flows from investing activities:
Proceeds from the sale of non-marketable investments128  
Purchases of property, plant and equipment(49,977)(63,745)
Cash paid in business combinations, net of cash acquired(220,026)(197,562)
Net cash used for investing activities(269,875)(261,307)
Cash flows from financing activities:
Proceeds from revolving credit facility 350,000 
Payment of debt issuance costs(1,285) 
Proceeds from issuance of common stock83,632 71,451 
Stock received for payment of employee taxes on vesting of restricted stock(108,185)(85,515)
Payments for repurchases of common stock(502,301)(250,047)
Net cash provided by (used for) financing activities(528,139)85,889 
Effect of exchange rate changes on cash and cash equivalents(1,700)7,372 
Increase in cash and cash equivalents85,387 601,354 
Cash and cash equivalents at end of period$1,013,819 $1,306,564 
Supplemental cash flow information:
Cash paid for interest$8,117 $10,982 
Cash paid for taxes, net47,687 44,679 






See notes to condensed consolidated financial statements.



CADENCE DESIGN SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared by Cadence Design Systems, Inc. (“Cadence”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, Cadence believes that the disclosures contained in this Quarterly Report on Form 10-Q comply with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) for a Quarterly Report on Form 10-Q and are adequate to make the information presented not misleading. These condensed consolidated financial statements are meant to be, and should be, read in conjunction with the consolidated financial statements and the Notes thereto included in Cadence’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021.
The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q reflect all adjustments (which include only normal, recurring adjustments and those items discussed in these Notes) that are, in the opinion of management, necessary to state fairly the results of operations, cash flows and financial position for the periods and dates presented. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year. Certain prior period balances have been reclassified to conform to the current period presentation. Management has evaluated subsequent events through the issuance date of the unaudited condensed consolidated financial statements.
Use of Estimates
Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.
Due to the ongoing COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Cadence is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of October 25, 2021, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Recently Adopted Accounting Standards
Accounting for Income Taxes
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Cadence adopted the standard on January 3, 2021, the first day of fiscal 2021. The adoption of this standard did not impact Cadence’s condensed consolidated financial statements for the period ended October 2, 2021.
NOTE 2. DEBT
Cadence’s outstanding debt as of October 2, 2021 and January 2, 2021 was as follows:
 October 2, 2021January 2, 2021
 (In thousands)
PrincipalUnamortized DiscountCarrying ValuePrincipalUnamortized DiscountCarrying Value
Revolving Credit Facility$ $— $ $ $— $ 
2024 Notes350,000 (2,615)347,385 350,000 (3,207)346,793 
Total outstanding debt$350,000 $(2,615)$347,385 $350,000 $(3,207)$346,793 
6


Revolving Credit Facility
In June 2021, Cadence terminated its existing revolving credit facility, dated January 30, 2017, 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 “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 the 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 such 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. Debt issuance costs of $1.3 million were recorded to other assets in Cadence’s condensed consolidated balance sheet at the inception of the agreement and are being amortized to interest expense over the term of the 2021 Credit Facility.
Interest accrues on borrowings under the 2021 Credit Facility at a rate equal to, at Cadence’s option, either (1) LIBOR plus a margin between 0.750% and 1.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt, or (2) the base rate plus a margin between 0.000% and 0.250% per annum, determined by reference to the credit rating of Cadence’s unsecured debt. Interest is payable quarterly. A commitment fee ranging from 0.070% to 0.175% is assessed on the daily average undrawn portion of revolving commitments. The 2021 Credit Facility also includes provisions addressing the potential transition from LIBOR to a new replacement benchmark.
The 2021 Credit Facility contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness and grant liens. In addition, the 2021 Credit Facility contains financial covenants that require Cadence to maintain a funded debt to EBITDA ratio not greater than 3.25 to 1, with a step up to 3.75 to 1 for one year following an acquisition by Cadence of at least $250.0 million that results in a pro forma leverage ratio between 3.00 to 1 and 3.50 to 1. As of October 2, 2021, Cadence was in compliance with all financial covenants associated with the 2021 Credit Facility.
2024 Notes
In October 2014, Cadence issued $350.0 million aggregate principal amount of 4.375% Senior Notes due October 15, 2024 (the “2024 Notes”). Cadence 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. Both the discount and issuance costs are being amortized to interest expense over the term of the 2024 Notes using the effective interest method. Interest is payable in cash semi-annually in April and October. The 2024 Notes are unsecured and rank equal in right of payment to all of Cadence’s existing and future senior indebtedness. The fair value of the 2024 Notes was approximately $382.7 million as of October 2, 2021.
Cadence may redeem the 2024 Notes, in whole or in part, at a redemption price equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, and (b) the sum of the present values of the remaining scheduled payments of principal and interest, plus any accrued and unpaid interest, as more particularly described in the indenture governing the 2024 Notes.
The indenture governing the 2024 Notes includes customary representations, warranties and restrictive covenants, including, but not limited to, restrictions on Cadence’s ability to grant liens on assets, enter into sale and lease-back transactions, or merge, consolidate or sell assets, and also includes customary events of default.
NOTE 3. RECEIVABLES, NET
Cadence’s current and long-term receivables balances as of October 2, 2021 and January 2, 2021 were as follows:
 As of
 October 2,
2021
January 2,
2021
 (In thousands)
Accounts receivable$184,298 $196,990 
Unbilled accounts receivable146,550 144,364 
Long-term receivables3,832 3,655 
Total receivables334,680 345,009 
Less allowance for doubtful accounts(3,657)(2,867)
Total receivables, net$331,023 $342,142 
Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of October 2, 2021, one customer accounted for 13% of Cadence’s total receivables. As of January 2, 2021, no customer accounted for 10% or more of Cadence’s total receivables.
7


NOTE 4. REVENUE
Cadence groups its products into five categories related to major design activities. The following table shows the percentage of product and related maintenance revenue contributed by each of Cadence’s five product categories and services for the three and nine months ended October 2, 2021 and September 26, 2020:
 Three Months Ended Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
Custom Integrated Circuit (“IC”) Design and Simulation23 %24 %23 %25 %
Digital IC Design and Signoff29 %27 %28 %28 %
Functional Verification, including Emulation and Prototyping Hardware*23 %23 %25 %23 %
Intellectual Property (“IP”)14 %15 %13 %14 %
System Design and Analysis11 %11 %11 %10 %
Total100 %100 %100 %100 %
_____________
* Includes immaterial amount of revenue accounted for under leasing arrangements.
Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them.
Significant Judgments
Cadence’s contracts with customers often include promises to transfer to a customer multiple software and/or IP licenses and services, including professional services, technical support services, and rights to unspecified updates. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some arrangements, such as most of Cadence’s IP license arrangements, Cadence has concluded that the licenses and associated services are distinct from each other. In others, like Cadence’s time-based software arrangements, the licenses and certain services are not distinct from each other. Cadence’s time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and Cadence has concluded that these promised goods and services are a single, combined performance obligation.
The accounting for contracts with multiple performance obligations requires the contract’s transaction price to be allocated to each distinct performance obligation based on relative standalone selling price (“SSP”). Judgment is required to determine the SSP for each distinct performance obligation because Cadence rarely licenses or sells products on a standalone basis. In instances where the SSP is not directly observable because Cadence does not sell the license, product or service separately, Cadence determines the SSP using information that maximizes the use of observable inputs and may include market conditions. Cadence typically has more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, Cadence may use information such as the size of the customer and geographic region of the customer in determining the SSP.
Revenue is recognized over time for Cadence’s combined performance obligations that include software licenses, updates, technical support and maintenance that are separate performance obligations with the same term. For Cadence’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. For Cadence’s other performance obligations recognized over time, revenue is generally recognized using a time-based measure of progress reflecting generally consistent efforts to satisfy those performance obligations throughout the arrangement term.
If a group of agreements are so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be one arrangement for revenue recognition purposes. Cadence exercises significant judgment to evaluate the relevant facts and circumstances in determining whether the separate agreements should be accounted for separately or as, in substance, a single arrangement. Cadence’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.
8


Cadence is required to estimate the total consideration expected to be received from contracts with customers. In limited circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on Cadence’s expectations of the term of the contract. Generally, Cadence has not experienced significant returns or refunds to customers. These estimates require significant judgment and the change in these estimates could have an effect on its results of operations during the periods involved.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on Cadence’s condensed consolidated balance sheets. For certain software, hardware and IP agreements with payment plans, Cadence records an unbilled receivable related to revenue recognized upon transfer of control because it has an unconditional right to invoice and receive payment in the future related to those transferred products or services. Cadence records a contract asset when revenue is recognized prior to invoicing and Cadence does not have the unconditional right to invoice or retains performance risk with respect to that performance obligation. Cadence records deferred revenue when revenue is recognized subsequent to invoicing. For Cadence’s time-based software agreements, customers are generally invoiced in equal, quarterly amounts, although some customers prefer to be invoiced in single or annual amounts.
The contract assets indicated below are included in prepaid expenses and other in the condensed consolidated balance sheet and primarily relate to Cadence’s rights to consideration for work completed but not billed as of the balance sheet date on services and customized IP contracts. The contract assets are transferred to receivables when the rights become unconditional, usually upon completion of a milestone.
Cadence’s contract balances as of October 2, 2021 and January 2, 2021 were as follows:
 As of
 October 2,
2021
January 2,
2021
 (In thousands)
Contract assets$7,834 $9,709 
Deferred revenue639,352 553,921 
Cadence recognized revenue of $59.8 million and $389.8 million during the three and nine months ended October 2, 2021, and $50.5 million and $292.1 million during the three and nine months ended September 26, 2020, respectively, that was included in the deferred revenue balance at the beginning of each fiscal year. All other activity in deferred revenue is due to the timing of invoices in relation to the timing of revenue as described above.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, Cadence has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing Cadence’s products and services, and not to facilitate financing arrangements.
Some customers enter into a non-cancellable IP Access Agreement (“IPAA”) 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 IP products or services. These arrangements do not meet the definition of a revenue contract until the customer executes a separate selection form to identify the products and services that they are purchasing. Each separate selection form under the IPAA is treated as an individual contract and accounted for based on the respective performance obligations.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $3.7 billion as of October 2, 2021, which included $89.1 million of non-cancellable IPAA commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. As of October 2, 2021, Cadence expected to recognize approximately 55% of the contracted but unsatisfied performance obligations, excluding non-cancellable IPAA commitments, as revenue over the next 12 months and the remainder thereafter.
Cadence recognized revenue of $13.3 million and $35.0 million during the three and nine months ended October 2, 2021, and $18.1 million and $38.9 million during the three and nine months ended September 26, 2020, respectively, from performance obligations satisfied in previous periods. These amounts represent royalties earned during the period and exclude contracts with nonrefundable prepaid royalties. Nonrefundable prepaid royalties are recognized upon delivery of the IP because Cadence’s right to the consideration is not contingent upon customers’ future shipments.
9


NOTE 5. ACQUISITIONS
On February 23, 2021, Cadence acquired all of the outstanding equity of Belgium-based Numerical Mechanics Applications International SA (“NUMECA”). The addition of NUMECA’s technologies and talent supports Cadence’s Intelligent System Design™ strategy, servicing the computational fluid dynamics (“CFD”) market segment as part of System Design and Analysis. The aggregate cash consideration for Cadence’s acquisition of NUMECA, net of cash acquired of $9.6 million, was $188.6 million. Cadence expects to recognize expense for consideration paid to certain former NUMECA shareholders that is subject to service and other conditions, through the first quarter of fiscal 2023.
The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates as follows:
 Acquisition Date Fair Value
 (In thousands)
Current assets$16,423 
Goodwill132,693 
Acquired intangibles72,200 
Other long-term assets6,928 
Total assets acquired228,244 
Current liabilities9,951 
Long-term liabilities20,091 
Total liabilities assumed30,042 
Total purchase consideration$198,202 
During the three months ended October 2, 2021, Cadence finalized certain estimates impacting total purchase consideration for NUMECA and recorded the resulting measurement period adjustment which decreased goodwill by $0.6 million. Cadence will continue to evaluate certain estimates and assumptions related to tax liabilities assumed from NUMECA during the remainder of the measurement period (up to one year from the acquisition date). The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies from combining operations of NUMECA with Cadence. Cadence expects all of the goodwill related to the acquisition of NUMECA to be deductible for tax purposes.
On April 14, 2021, Cadence acquired all of the outstanding equity of Pointwise, Inc. (“Pointwise”), a leader in mesh generation for CFD for cash consideration of approximately $31.4 million, net of cash acquired. The addition of Pointwise’s technologies and experienced team supports Cadence’s Intelligent System Design™ strategy and further broadens its System Design and Analysis portfolio, complementing its acquisition of NUMECA. The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Cadence recorded $16.7 million of definite-lived intangible assets and $16.7 million of goodwill with its acquisition of Pointwise. All of the goodwill related to Cadence’s acquisition of Pointwise will be deductible for tax purposes.
Definite-lived intangible assets acquired with Cadence’s fiscal 2021 acquisitions were as follows:
 Acquisition Date Fair ValueWeighted Average Amortization Period
 (In thousands) (in years)
Existing technology$55,400 14.2 years
Agreements and relationships28,900 13.7 years
Tradenames, trademarks and patents4,600 14.3 years
Total acquired intangibles with definite lives$88,900 14.1 years
Cadence has not presented pro forma financial information for its fiscal 2021 acquisitions because the results of operations for the acquired businesses are not material to Cadence’s condensed consolidated financial statements. During the three and nine months ended October 2, 2021, and the three and nine months ended September 26, 2020, transaction costs associated with acquisitions were not material and were expensed as incurred.
10


NOTE 6. GOODWILL AND ACQUIRED INTANGIBLES
Goodwill
The changes in the carrying amount of goodwill during the nine months ended October 2, 2021 were as follows:
 Gross Carrying
Amount
 (In thousands)
Balance as of January 2, 2021$782,087 
Goodwill resulting from acquisitions150,021 
Measurement period adjustments(633)
Effect of foreign currency translation(5,526)
Balance as of October 2, 2021$925,949 
Measurement period adjustments are the result of new information obtained about assets or liabilities that existed as of the acquisition date and, if known, would have resulted in changes to the initial recognition of those assets or liabilities as of that date. During the three months ended October 2, 2021, Cadence finalized certain estimates impacting total purchase consideration for its acquisition of NUMECA and recorded the resulting measurement period adjustment which decreased goodwill.
Acquired Intangibles, Net
Acquired intangibles as of October 2, 2021 were as follows, excluding intangibles that were fully amortized as of January 2, 2021:
Gross Carrying
Amount
Accumulated
Amortization
Acquired
Intangibles, Net
 (In thousands)
Existing technology$402,640 $(242,829)$159,811 
Agreements and relationships205,454 (125,436)80,018 
Tradenames, trademarks and patents10,741 (2,942)7,799 
Total acquired intangibles with definite lives$618,835 $(371,207)$247,628 
Acquired intangibles as of January 2, 2021 were as follows, excluding intangibles that were fully amortized as of December 28, 2019:
Gross Carrying
Amount
Accumulated
Amortization
Acquired
Intangibles, Net
 (In thousands)
Existing technology$370,838 $(230,654)$140,184 
Agreements and relationships180,023 (113,629)66,394 
Tradenames, trademarks and patents10,590 (6,578)4,012 
Total acquired intangibles with definite lives$561,451 $(350,861)$210,590 
Amortization expense from existing technology and maintenance agreements is included in cost of product and maintenance. Amortization expense for the three and nine months ended October 2, 2021 and September 26, 2020 by condensed consolidated income statement caption was as follows:
 Three Months Ended Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
 (In thousands)
Cost of product and maintenance$11,774 $11,447 $35,774 $33,791 
Amortization of acquired intangibles5,000 4,438 14,661 13,234 
Total amortization of acquired intangibles$16,774 $15,885 $50,435 $47,025 
11


As of October 2, 2021, the estimated amortization expense for acquired intangible assets with definite lives was as follows for the following five fiscal years and thereafter:
 (In thousands)
2021 - remaining period$16,724 
202250,022 
202334,492 
202432,732 
202522,092 
202617,087 
Thereafter74,479 
Total estimated amortization expense$247,628 

NOTE 7. STOCK-BASED COMPENSATION
Stock-based compensation expense is reflected in Cadence’s condensed consolidated income statements for the three and nine months ended October 2, 2021 and September 26, 2020 as follows:
Three Months Ended Nine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
(In thousands)
Cost of product and maintenance$885 $668 $2,601 $2,042 
Cost of services1,158 850 3,177 2,599 
Marketing and sales10,784 9,699 32,284 29,826 
Research and development32,957 28,652 97,101 87,688 
General and administrative6,962 5,465 20,697 16,568 
Total stock-based compensation expense$52,746 $45,334 $155,860 $138,723 
Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $375.0 million as of October 2, 2021, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 2.1 years.
NOTE 8. STOCK REPURCHASE PROGRAM
As of the end of the second quarter of fiscal 2021, approximately $346 million remained available under Cadence’s previously announced authorization to repurchase shares of Cadence common stock. In August 2021, Cadence’s Board of Directors increased the prior authorization to repurchase shares of Cadence common stock by authorizing an additional $1 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 October 2, 2021, approximately $1.2 billion of the share repurchase authorization remained available to repurchase shares of Cadence common stock.
The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during the three and nine months ended October 2, 2021 and September 26, 2020 were as follows:
Three Months Ended Nine Months Ended
October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
(In thousands)
Shares repurchased723 717 3,766 3,124 
Total cost of repurchased shares$110,011 $75,011 $502,301 $250,047 

12


NOTE 9. RESTRUCTURING AND OTHER TERMINATION BENEFITS
Restructuring
Cadence has initiated restructuring plans in an effort to better align its resources with its business strategy. The charges associated with these restructuring plans have primarily been comprised of severance payments and termination benefits related to headcount reductions and charges related to impacted facilities and are included in restructuring and other charges on Cadence’s condensed consolidated income statements.
The following table presents activity for Cadence’s restructuring plans during the nine months ended October 2, 2021:
Severance
and
Benefits

Facilities
Total
(In thousands)
Balance, January 2, 2021$7,321 $1,372 $8,693 
Restructuring and other credits(1,379)411 (968)
Cash payments(5,715)(1,596)(7,311)
Effect of foreign currency translation(67) (67)
Balance, October 2, 2021$160 $187 $347 
The remaining liability for Cadence’s restructuring plans is recorded in the condensed consolidated balance sheet as follows:
As of
October 2, 2021
(In thousands)
Accounts payable and accrued liabilities$340 
Other long-term liabilities7 
Total restructuring liabilities$347 
All liabilities for severance and related benefits under Cadence’s restructuring plans are included in accounts payable and accrued liabilities on Cadence’s condensed consolidated balance sheets as of October 2, 2021. Restructuring liabilities included in other long-term liabilities represent liabilities from impacted facilities, and Cadence expects to make cash payments to settle these liabilities through fiscal 2022.
Other Termination Benefits
During the second quarter of fiscal 2021, Cadence offered a voluntary retirement program to eligible employees in the United States. This program resulted in a one-time charge of $26.8 million for voluntary termination and post-employment benefits. These charges are included in each category of costs and expenses on Cadence’s condensed consolidated income statements. As of October 2, 2021, liabilities related to the voluntary retirement program were $21.5 million and were included in accounts payable and accrued liabilities and other long-term liabilities on Cadence’s condensed consolidated balance sheet. Cadence expects to make cash payments to settle these liabilities through fiscal 2023, including $20.5 million that is expected to be paid within the next twelve months.
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NOTE 10. NET INCOME PER SHARE
Basic net income per share is computed by dividing net income during the period by the weighted average number of shares of common stock outstanding during that period, less unvested restricted stock awards. Diluted net income per share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting.
The calculations for basic and diluted net income per share for the three and nine months ended October 2, 2021 and September 26, 2020 are as follows:
 Three Months Ended Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
 (In thousands, except per share amounts)
Net income$176,307 $161,630 $519,376 $416,906 
Weighted average common shares used to calculate basic net income per share273,194 273,996 273,636 273,633 
Stock-based awards5,117 6,028 5,410 5,822 
Weighted average common shares used to calculate diluted net income per share278,311 280,024 279,046 279,455 
Net income per share - basic$0.65 $0.59 $1.90 $1.52 
Net income per share - diluted$0.63 $0.58 $1.86 $1.49 
The following table presents shares of Cadence’s common stock outstanding for the three and nine months ended October 2, 2021 and September 26, 2020 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive:
 Three Months Ended Nine Months Ended
 October 2,
2021
September 26,
2020
October 2,
2021
September 26,
2020
 (In thousands)
Long-term market-based awards 105  510 
Options to purchase shares of common stock331 23 267 258 
Non-vested shares of restricted stock5