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INCOME TAXES (Tables) | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income before provision for income taxes | Cadence’s income before provision for income taxes included income from the United States and from foreign subsidiaries for fiscal 2024, 2023 and 2022, was as follows:
| 2024 |  | 2023 |  | 2022
| (In thousands)
United States | $ | 600,088 |  |  | $ | 533,442 |  |  | $ | 402,083 |
Foreign subsidiaries | 795,731 |  |  | 748,484 |  |  | 643,280 |
Total income before provision for income taxes | $ | 1,395,819 |  |  | $ | 1,281,926 |  |  | $ | 1,045,363 |
Components of income taxes provision | Cadence’s provision for income taxes was comprised of the following items for fiscal 2024, 2023 and 2022:
| 2024 |  | 2023 |  | 2022
| (In thousands)
Current: |  |  |  |  |
Federal | $ | 281,674 |  |  | $ | 156,495 |  |  | $ | 212,380 |
State and local | 50,430 |  |  | 15,933 |  |  | 7,280 |
Foreign | 136,968 |  |  | 104,866 |  |  | 84,357 |
Total current | 469,072 |  |  | 277,294 |  |  | 304,017 |
Deferred: |  |  |  |  |
Federal | (130,490) |  |  | (87,851) |  |  | (79,170) |
State and local | (5,127) |  |  | 25,440 |  |  | (50,640) |
Foreign | 6,880 |  |  | 25,899 |  |  | 22,204 |
Total deferred | (128,737) |  |  | (36,512) |  |  | (107,606) |
Total provision for income taxes | $ | 340,335 |  |  | $ | 240,782 |  |  | $ | 196,411 |
Summary of income tax reconciliation | The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rates of 21% to income before provision for income taxes for fiscal 2024, 2023, and 2022 as follows:
| 2024 |  | 2023 |  | 2022
| (In thousands)
Provision computed at federal statutory income tax rate | $ | 293,122 |  |  | $ | 269,205 |  |  | $ | 219,526 |
State and local income tax, net of federal tax effect | 50,130 |  |  | 40,304 |  |  | 29,622 |
Intercompany transfers of intangible property rights | 7,833 |  |  | 23,826 |  |  | — |
Foreign income tax rate differential | (62,798) |  |  | (54,210) |  |  | (49,949) |
Foreign-derived intangible income deduction | (13,344) |  |  | (14,253) |  |  | (2,335) |
U.S. tax on foreign entities | 144,222 |  |  | 113,011 |  |  | 132,563 |
Stock-based compensation | (6,181) |  |  | (26,805) |  |  | (17,023) |
Change in deferred tax asset valuation allowance | 11,441 |  |  | 9,077 |  |  | (38,073) |
Tax credits | (135,344) |  |  | (130,383) |  |  | (105,366) |
Non-deductible acquisitions-related costs | 11,770 |  |  | 6,709 |  |  | 4,273 |
Withholding taxes | 20,175 |  |  | 15,300 |  |  | 17,459 |
Tax settlements, foreign | — |  |  | 4,034 |  |  | — |
Increase (decrease) in unrecognized tax benefits | 9,061 |  |  | (19,660) |  |  | 2,354 |
Other | 10,248 |  |  | 4,627 |  |  | 3,360 |
Provision for income taxes | $ | 340,335 |  |  | $ | 240,782 |  |  | $ | 196,411 |
Effective tax rate | 24 | % |  | 19 | % |  | 19 | %
Components of deferred tax assets and liabilities | The components of deferred tax assets and liabilities consisted of the following as of December 31, 2024, and December 31, 2023:
| As of |  |
| December 31, 2024 |  | December 31, 2023 |  |
| (In thousands) |  |
Deferred tax assets: |  |  |  |  |
Tax credit carryforwards | $ | 110,031 |  |  | $ | 129,513 |  |  |
Reserves and accruals | 103,731 |  |  | 78,993 |  |  |
Intangible assets | 487,947 |  |  | 506,398 |  |  |
Capitalized research and development expense for income tax purposes | 368,085 |  |  | 242,465 |  |  |
Operating loss carryforwards | 9,781 |  |  | 9,598 |  |  |
Deferred income | 79,195 |  |  | 77,066 |  |  |
Capital loss carryforwards | 16,861 |  |  | 16,483 |  |  |
Stock-based compensation costs | 34,045 |  |  | 27,409 |  |  |
Depreciation and amortization | 17,228 |  |  | 10,671 |  |  |
Investments | 20,757 |  |  | 15,949 |  |  |
Lease liability | 33,341 |  |  | 33,639 |  |  |
Prepaid expenses | — |  |  | 3,253 |  |  |
Total deferred tax assets | 1,281,002 |  |  | 1,151,437 |  |  |
Valuation allowance | (90,603) |  |  | (79,162) |  |  |
Net deferred tax assets | 1,190,399 |  |  | 1,072,275 |  |  |
Deferred tax liabilities: |  |  |  |  |
Intangible assets | (107,251) |  |  | (83,308) |  |  |
Undistributed foreign earnings | (76,045) |  |  | (64,371) |  |  |
ROU assets | (33,341) |  |  | (33,639) |  |  |
Investments | (14,171) |  |  | (6,318) |  |  |
Other | (7,869) |  |  | (13,455) |  |  |
Total deferred tax liabilities | (238,677) |  |  | (201,091) |  |  |
Total net deferred tax assets | $ | 951,722 |  |  | $ | 871,184 |  |  |
Summary of operating loss carryforward | As of December 31, 2024, Cadence’s operating loss carryforwards were as follows:
| Amount |  | Expiration Periods
| (In thousands) |  |
Federal | $ | 61 |  |  | 2033
California | 26,872 |  |  | from 2025 through 2043
Other states (tax effected, net of federal benefit) | 410 |  |  | from 2025 through indefinite
Foreign (tax effected) | 8,077 |  |  | indefinite
Summary of tax credit carryforwards | As of December 31, 2024, Cadence had tax credit carryforwards of:
| Amount |  | Expiration Periods
| (In thousands) |  |
Federal* | $ | 51,535 |  |  | from 2031
California | 58 |  |  | indefinite
Other states | 11,331 |  |  | from 2033 through indefinite
Foreign | 47,107 |  |  | from 2044 through indefinite
_____________ *Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.
Earliest tax years open to examination by jurisdiction | As of December 31, 2024, Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:
Jurisdiction |  | Earliest Tax Year Open to Examination
United States – Federal |  | 2020
United States – California |  | 2020
Ireland |  | 2020
Israel |  | 2017
Korea |  | 2019
Unrecognized tax benefits roll forward | The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2024, 2023 and 2022 are as follows:
| 2024 |  | 2023 |  | 2022
| (In thousands)
Unrecognized tax benefits at the beginning of the fiscal year | $ | 94,311 |  |  | $ | 126,073 |  |  | $ | 130,530 |
Gross amount of the increase (decrease) in unrecognized tax benefits of tax positions taken during a prior year* | 10,109 |  |  | (1,401) |  |  | 2,152 |
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year | 6,669 |  |  | 2,565 |  |  | 2,660 |
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes | — |  |  | (8,000) |  |  | — |
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations | (3,173) |  |  | (24,768) |  |  | (7,430) |
Effect of foreign currency translation | (528) |  |  | (158) |  |  | (1,839) |
Unrecognized tax benefits at the end of the fiscal year | $ | 107,388 |  |  | $ | 94,311 |  |  | $ | 126,073 |
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate | $ | 106,420 |  |  | $ | 93,398 |  |  | $ | 121,415 |
_____________ * Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions
Interest and penalties recognized in consolidated income statements and balance sheets | The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision for income taxes for fiscal 2024, 2023 and 2022 were as follows:
| 2024 |  | 2023 |  | 2022
| (In thousands)
Interest | $ | 3,893 |  |  | $ | 2,282 |  |  | $ | 434 |
Penalties | 143 |  |  | 267 |  |  | 7 |
The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 31, 2024, and December 31, 2023, were as follows:
| As of
| December 31, 2024 |  | December 31, 2023
| (In thousands)
Interest | $ | 9,010 |  |  | $ | 4,813 |
Penalties | 1,261 |  |  | — |

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