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What changed in Synopsys's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Synopsys's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+403 added−388 removedSource: 10-K (2023-12-12) vs 10-K (2022-12-12)

Top changes in Synopsys's 2023 10-K

403 paragraphs added · 388 removed · 309 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

86 edited+25 added−27 removed36 unchanged
Biggest changeThe solutions reported in our EDA revenue include the following: 5 Table of Contents • VC SpyGlass family of static verification technologies including lint, CDC (clock domain crossing), RDC (reset domain crossing), Constraint Checking, Synopsys TestMAX Advisor , and low-power analysis and verification; • VCS ® functional verification solution, our comprehensive RTL and gate-level simulation technology, including Fine-Grained Parallelism; • Verdi ® automated debug system, the industry’s most comprehensive SoC debug; • VC Formal, our next-generation formal verification product; • ZeBu ® emulation systems, which use high-performance hardware to emulate SoC designs so that designers can accelerate hardware, software and power verification of large complex SoCs and perform earlier verification and optimization of the SoC together with software; and • Other principal individual verification solutions, including the PrimeSim solution and the PrimeWave design environment.
Biggest changeThe individual products and solutions included in the Verification Family include the following: • VC SpyGlass family of static verification technologies including lint, CDC (clock domain crossing), RDC (reset domain crossing), Constraint Checking, Synopsys TestMAX Advisor , and low-power analysis and verification; • VCS ® functional verification solution, our comprehensive RTL and gate-level simulation technology, including Fine-Grained Parallelism; • Verdi ® automated debug system, the industry’s most comprehensive SoC debug; • VC Formal, our next-generation formal verification product; • ZeBu ® emulation systems, which use high-performance hardware to emulate SoC designs so that designers can accelerate hardware, software and power verification of large complex SoCs and perform earlier verification and optimization of the SoC together with software; • HAPS ® FPGA-based prototyping systems, which are integrated and scalable hardware-software solutions for early software development and faster time to market; • Virtualizer virtual prototyping solution, which addresses the increasing development challenges associated with software-rich semiconductor and electronic products by accelerating both the development and deployment of virtual prototypes; and • Platform Architect solution, which provides for early analysis and optimization of multi-core SoC architectures for performance and power; and • Other principal individual verification solutions, including the PrimeSim solution and the PrimeWave design environment.
Our Role—As the Silicon to Software Partner Synopsys' Silicon to Software technologies and services are designed to help our customers — chip and system engineers and software developers — to speed up time to market, achieve the highest quality of results, mitigate risk, and maximize profitability.
Our Role—As the Silicon to Software Partner Synopsys' Silicon to Software technologies and services are designed to help our customers — chip and system engineers and software developers — speed up time to market, achieve the highest quality of results, mitigate risk, and maximize profitability.
Key design products, available as part of the Digital Design Family, include Fusion Compiler RTL to GDSII design implementation, Design Compiler ® logic synthesis, IC Compiler II physical design, Synopsys TestMAX test and diagnosis, PrimeTime ® static timing analysis, StarRC parasitic extraction, IC Validator physical verification and 3DIC Compiler, the industry’s first next-generation chip packaging solution, aimed at enabling customers to combine or stack multiple dice on a single chip.
Key design products are available as part of the Digital Design Family and include Fusion Compiler RTL to GDSII design implementation, Design Compiler ® logic synthesis, IC Compiler II physical design, Synopsys TestMAX test and diagnosis, PrimeTime ® static timing analysis, StarRC parasitic extraction, IC Validator physical verification and 3DIC Compiler, the industry’s first next-generation chip packaging solution, aimed at enabling customers to combine or stack multiple dice on a single chip.
The PrimeWave design environment is also included and provides comprehensive analysis and improved productivity and ease of use across all tools in PrimeSim. Our Silicon Lifecycle Management (SLM) Family is a new data analytics-driven platform that uses in-chip monitoring and sensing to optimize all phases of the silicon lifecycle—from design and manufacturing to in-field deployment and maintenance.
The PrimeWave design environment is also included and provides comprehensive analysis and improved productivity and ease of use across all tools in PrimeSim. Our Silicon Lifecycle Management (SLM) Family is a data analytics-driven platform that uses in-chip monitoring and sensing to optimize all phases of the silicon lifecycle—from design and manufacturing to in-field deployment and maintenance.
Our IP products offer proven, high-quality pre-configured circuits that are ready to use in a chip design, saving customers time and enabling them to direct resources to features that differentiate their products. Our global service and support engineers also provide expert technical support and design assistance to our customers.
Our IP products offer proven, high-quality pre-configured circuits that are ready to use in a chip design, saving customers time and enabling them to direct resources to features that differentiate their products. Our global service and support engineers provide expert technical support and design assistance to our customers.
Key offerings in this space include: • Intelligent Orchestration solution, which enables DevOps to build a testing pipeline that enables a company to define—within its particular policy guidelines—the rules to determine which tests to run, including the Synopsys portfolio tests, third party products, or open source tests; • Code Dx, which correlates and prioritizes findings from the Synopsys portfolio, third party products, and open source tools, providing a comprehensive view of software security risk; • Coverity ® static analysis tools , which analyze software code to find crash-causing bugs, incorrect program behavior, the latest security vulnerabilities, memory leaks and other performance-degrading flaws; • Black Duck software composition analysis tools, which scan binary and source code for license and compliance issues and other known security vulnerabilities stemming from incorporated third-party and open source code; • WhiteHat ® Dynamic, our latest dynamic application security testing solution, which rapidly and accurately finds vulnerabilities in websites and applications; • Seeker ® IAST tool, which identifies exploitable security vulnerabilities while web applications are running, thereby verifying results and eliminating false positives; and 7 Table of Contents • Defensics ® fuzz testing tools, which examine security vulnerabilities in software binaries and libraries, particularly network protocols and file formats, by systematically sending invalid or unexpected inputs to the system under test .
Key offerings in this space include: • Intelligent Orchestration solution, which enables DevOps to build a testing pipeline that enables a company to define—within its particular policy guidelines—the rules to determine which tests to run, including the Synopsys portfolio tests, third party products, or open source tests; • Software Risk Manager, which correlates and prioritizes findings from the Synopsys portfolio, third party products, and open source tools, providing a comprehensive view of software security risk; • Coverity ® static analysis tools , which analyze software code to find crash-causing bugs, incorrect program behavior, the latest security vulnerabilities, memory leaks and other performance-degrading flaws; • Black Duck software composition analysis tools, which scan binary and source code for license and compliance issues and other known security vulnerabilities stemming from incorporated third-party and open source code; • WhiteHat ® Dynamic, our latest dynamic application security testing solution, which rapidly and accurately finds vulnerabilities in websites and applications; • Seeker ® IAST tool, which identifies exploitable security vulnerabilities while web applications are running, thereby verifying results and eliminating false positives; and • Defensics ® fuzz testing tools, which examine security vulnerabilities in software binaries and libraries, particularly network protocols and file formats, by systematically sending invalid or unexpected inputs to the system under test .
In addition, we offer training workshops designed to increase customer design proficiency and productivity with our products. Workshops cover our EDA products and methodologies used in our design and verification flows, as well as specialized modules addressing system design, logic design, physical design, simulation and testing.
In addition, we offer training workshops designed to increase customer design proficiency and productivity with our products. Workshops cover our EDA products and methodologies used in our design and verification flows, as well as specialized modules addressing systems design, logic design, physical design, simulation and testing.
Standards in the electronic design industry can be established by formal accredited organizations, industry consortia, company licensing made available to all, de facto usage, or through open source licensing. In our Semiconductor & System Design segment, our EDA products support many standards, including the most commonly used hardware description languages: SystemVerilog, Verilog, VHDL and SystemC ® .
Standards in the electronic design industry can be established by formal accredited organizations, industry consortia, company licensing made available to all, de facto usage, or through open source licensing. In our Design Automation segment, our EDA products support many standards, including the most commonly used hardware description languages: SystemVerilog, Verilog, VHDL and SystemC.
Customers can also raise support tickets, request replacement license keys and validate the terms of their active license keys through the portal. Our support community portal is frequently updated with new and supplemental materials on a variety of topics. Customers may engage dedicated support engineers for an additional charge.
Customers can also raise support tickets, request replacement license keys and validate the terms of their active license keys through the portal. Our support community portal is 8 Table of Contents frequently updated with new and supplemental materials on a variety of topics. Customers may engage dedicated support engineers for an additional charge.
IP and System Integration IP Products As more functionality converges into a single chip or even a multi-die system, the number of third-party IP blocks incorporated into designs is rapidly increasing. We provide the broadest, most comprehensive portfolio of high-quality, silicon-proven IP solutions for SoCs.
Design IP Products As more functionality converges into a single chip or even a multi-die system, the number of third-party IP blocks incorporated into designs is rapidly increasing. We provide the broadest, most comprehensive portfolio of high-quality, silicon-proven IP solutions for SoCs.
Ms. Glaser has served as a director and member of the Audit Committee at PubMatic, Inc. since June 2022. Ms. Glaser holds a B.A. in Economics from the University of Michigan and an M.B.A. in Finance from Carnegie Mellon University. Richard Mahoney has served as our Chief Revenue Officer since November 2022. Mr. Mahoney succeeds Joseph W.
Ms. Glaser has served as a director and member of the Audit Committee at PubMatic, Inc. since June 2022. Ms. Glaser holds a B.A. in Economics from the University of Michigan and an M.B.A. in Finance from Carnegie Mellon University. Richard Mahoney has served as our Chief Revenue Officer since November 2022. Mr.
Chip and system designers must determine how best to design, locate and connect the building blocks of chips, and to verify that the resulting design behaves as intended and can be manufactured efficiently and cost-effectively. This is a complex, multi-step process that is both expensive and time-consuming.
Chip and systems designers must determine how best to design, locate and connect the building blocks of chips, and to verify that the resulting design behaves as intended and can be manufactured efficiently and cost-effectively. This is a complex, multi-step process that is expensive and time-consuming.
Our offerings include security and quality testing products, managed services, programs and professional services, and training offered as on-premises and cloud-based delivery. The Polaris Software Integrity Platform is designed to bring our products and services together into an integrated, easy-to-use solution that enables security and development teams to build secure, high-quality software faster.
Our offerings include security 7 Table of Contents and quality testing products, managed services, programs and professional services, and training offered as on-premises and cloud-based delivery. The Polaris Software Integrity Platform is designed to bring our products and services together into an integrated, easy-to-use solution that enables security and development teams to build secure, high-quality software faster.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, including those relating to our Annual Meeting of Stockholders, and any amendments to such reports or other information filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available through the Investor Relations page of our website ( https://www.synopsys.com/company/investor-relations/financials.html ) free of charge as soon as reasonably practicable after we file them with, or furnish them to, the SEC ( www.sec.gov ).
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, including those relating to our Annual Meeting of Stockholders, and any amendments to such reports or other information filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available through the Investor Relations page of our website ( https://investor.synopsys.com/overview/default.aspx ) free of charge as soon as reasonably practicable after we file them with, or furnish them to, the SEC ( www.sec.gov ).
The increasing impact of artificial intelligence and machine learning is driving an increase in the activity of new and existing chip and system design companies around the world. These developments have been fueled by innovation in the semiconductor and software industries.
The increasing impact of artificial intelligence (AI) and machine learning is driving an increase in the activity of new and existing chip and system design companies around the world. These developments have been enabled by innovation in the semiconductor and software industries.
Runkel, Jr. 67 General Counsel and Corporate Secretary Aart J. de Geus co-founded Synopsys and has served as Chairman of our Board of Directors since February 1998 and Chief Executive Officer since January 1994. He served as Co-Chief Executive Officer with Dr. Chi-Foon Chan from May 2012 until April 2022.
Runkel, Jr. 68 General Counsel and Corporate Secretary Aart J. de Geus co-founded Synopsys and has served as Chair of our Board of Directors since February 1998 and Chief Executive Officer since January 1994. He served as Co-Chief Executive Officer with Dr. Chi-Foon Chan from May 2012 until April 2022.
Based upon the belief that our employees deserve great managers, our management training is designed to increase capability in the areas of communication, engagement, coaching, inclusion and diversity, hiring and on-boarding, business skills and ensuring an ethical and supportive work environment free from bias and harassment.
Based upon the belief that our employees deserve great managers, our management training is designed to increase capability in the areas of communication, engagement, coaching, diversity, equity, and inclusion, hiring and on-boarding, and business skills and help promote an ethical and supportive work environment free from bias and harassment.
From engineers creating advanced semiconductors to product teams developing advanced electronic systems to software developers seeking to ensure the security and quality of their code, our customers trust that our technologies will enable them to meet new requirements for low power, reliability, mobility, security and more.
From engineers creating advanced semiconductors to product teams developing advanced electronic systems to software developers seeking to ensure the security and quality of their code, our customers trust that our technologies will enable them to meet new requirements for energy efficiency, reliability, mobility, security and more.
At such small dimensions, the wavelength of light itself can become an obstacle to production, proving too big to create such dense features and requiring creative and complicated new approaches.
At such small dimensions, the wavelength of light itself can become an obstacle to production, proving too big to create such 3 Table of Contents dense features and requiring creative and complicated new approaches.
In addition, we support many common compilers, development environments, frameworks, and data and file formats. Sales and Distribution Our Semiconductor & System Design segment customers are primarily semiconductor and electronics systems companies.
In addition, we support many common compilers, development environments, frameworks, and data and file formats. Sales and Distribution Our Design Automation and Design IP segment customers are primarily semiconductor and electronics systems companies.
Our compensation and benefit programs are tailored to the various geographies in which we operate, and for eligible employees, may include: • Market-competitive salary and cash bonus opportunity; • Robust medical, dental, vision, and wellness benefits; • Financial planning tools and employee assistance plans; • Comprehensive leave alternatives; • Employee Stock Purchase Plan; • Equity compensation for eligible employees; • Life insurance options; • Retirement plans and associated benefits; • Student loan repayment assistance; and • Parental resources and adoption benefits.
Our compensation and benefit programs are tailored to the various geographies in which we operate, and for eligible employees may include: • Market-competitive salary and cash bonus opportunity; • Employee Stock Purchase Plan; • Equity compensation; • Robust medical, dental, vision, and wellness benefits; • Comprehensive leave plans; • Life insurance options; • Retirement plans and associated benefits; • Financial planning tools and employee assistance plans; • Student loan repayment assistance; • Cancer-specific prevention, early detection, treatment and support programs; and • Parental resources and adoption benefits.
Our products utilize 8 Table of Contents numerous industry-standard data formats, APIs and databases for the exchange of design data among our tools, other EDA vendors’ products and applications that customers develop internally. We also comply with a wide range of industry standards within our IP product family to ensure usability and interconnectivity.
Our products utilize numerous industry-standard data formats, APIs and databases for the exchange of design data among our tools, other EDA vendors’ products and applications that customers develop internally. In our Design IP segment, we comply with a wide range of industry standards within our IP product family to ensure usability and interconnectivity.
We also deliver a significant amount of engineering and design consulting for our products. No single factor drives an EDA customer’s buying decision, and we compete on all fronts to capture a higher portion of our customers’ budgets. Our competitors include EDA vendors that offer varying ranges of products and services, such as Cadence Design Systems, Inc. and Siemens EDA.
No single factor drives an EDA customer’s buying decision, and we compete on all fronts to capture a higher portion of our customers’ budgets. Our competitors include EDA vendors that offer varying ranges of products and services, such as Cadence Design Systems, Inc. and Siemens EDA.
Glaser previously served in senior finance roles at Intel Corporation, a multinational technology company, including serving as its Corporate Vice President and Chief Financial Officer and Chief Operating Officer for its Data Platform Group since July 2019 and serving as its Corporate Vice President and Chief Financial Officer and in various other senior roles in its Client Computing Group from December 2013 to July 14 Table of Contents 2019.
Glaser previously served in senior finance roles at Intel Corporation, a multinational technology company, including serving as its Corporate Vice President and Chief Financial Officer and Chief Operating Officer for its Data Platform Group from July 2019 to May 2021 and serving as its Corporate Vice President and Chief Financial Officer and in various other senior roles in its Client Computing Group from December 2013 to July 2019.
Dr. de Geus holds an M.S.E.E. from the Swiss Federal Institute of Technology in Lausanne, Switzerland and a Ph.D. in Electrical Engineering from Southern Methodist University. Sassine Ghazi has served as our Chief Operating Officer since August 2020 and became our President in November 2021. Mr.
Dr. de Geus holds an M.S.E.E. from the Swiss Federal Institute of Technology in Lausanne, Switzerland and a Ph.D. in Electrical Engineering from Southern Methodist University. Sassine Ghazi has served as our Chief Operating Officer since August 2020, became our President in November 2021 and joined our Board of Directors in August 2023. Effective January 1, 2024, Mr.
Products and Services Semiconductor & System Design Segment Our Semiconductor & System Design segment includes the EDA, IP and System Integration and Other revenue categories. EDA Designing ICs involves many complex steps, including, among others architecture definition, register transfer level (RTL) design, functional/RTL verification, logic design or synthesis, gate-level verification, floorplanning, place and route, and physical verification.
Products and Services Design Automation Segment Our Design Automation segment includes the EDA and Other revenue groups. EDA Designing ICs involves many complex steps, including, among others architecture definition, register transfer level (RTL) design, functional/RTL verification, logic design or synthesis, gate-level verification, floorplanning, place and route, and physical verification.
We care deeply about the diversity of our teams, talent pipelines and pay and development programs, with a goal to ensure inclusive, equitable practices.
We value the diversity of our teams, talent pipelines and pay and development programs, with a goal to ensure inclusive, equitable practices.
Our solutions comprehensively address the design process, featuring a large number of EDA products that generally fall into the following categories: 4 Table of Contents • Digital and custom IC design and field programmable gate array (FPGA) design, which includes software tools to design an IC; • Verification, which includes technology to verify that an IC design behaves as intended; and • Manufacturing, which includes products that both enable early manufacturing process development and convert IC design layouts into the masks used to manufacture the chips.
Our solutions comprehensively address the design process, featuring a large number of EDA products that generally fall into the following categories: • Digital and custom IC design and field programmable gate array (FPGA) design, which includes software tools to design, verify, implement and prepare an IC for manufacturing; • Verification, which includes technology to verify that an IC design behaves as intended; • Manufacturing, which includes products that both enable early manufacturing process development and convert IC design layouts into the masks used to manufacture the chips; and • AI driven EDA solutions, which include AI and machine learning tools to complement our EDA software stack.
We provide technical support for our products through both field-based and corporate-based application engineering teams. Post-contract customer support includes providing frequent updates to maintain the utility of the software due to rapid changes in technology.
We provide technical support for our products through application engineering teams. Post-contract customer support includes providing frequent updates to maintain the utilization of the software due to rapid changes in technology.
We maintain sales and support centers throughout the United States. Outside the United States, we maintain sales, support or service offices in Canada, multiple countries in Europe, Israel and throughout Asia, including Japan, China, Korea, and Taiwan. Our offices are further described under Part I, Item 2, Properties.
We maintain sales and support centers throughout the United States. Outside the United States, we maintain sales, support or service offices in Canada, multiple countries in Europe, Israel and throughout Asia, including Japan, China, Korea, India and Taiwan. Our offices are further described under Part I, Item 2, Properties of this Annual Report on Form 10-K .
Additional information about our approach to CSR and ESG issues is available on our CSR website, including our Environmental Policy, our CSR Report, and our CDP Climate Change Questionnaire. The contents of our website, CSR Report and CDP Climate Change Questionnaire are referenced for general information only and are not incorporated into this Form 10-K.
Additional information about our approach to our ESG priorities is available on our ESG website, including our Environmental Policy and our ESG Report. The contents of our website and ESG Report are referenced for general information only and are not incorporated into this Annual Report on Form 10-K.
In our Semiconductor & System Design segment, post-contract customer support for our EDA and IP products also includes access to the SolvNet ® Plus portal, where customers can explore our complete design knowledge database. Updated daily, the SolvNet Plus portal includes technical documentation, design tips and answers to user questions.
In our Design Automation and Design IP segments, post-contract customer support for our EDA and IP products also includes access to the SolvNet ® Plus portal, where customers can explore our complete design knowledge database, get self-help and get support. Updated regularly, the SolvNet Plus portal includes technical documentation, design tips and answers to user questions.
Despite these challenges, it is crucial to have high-quality, secure code to ensure consumers' privacy and safety, especially at a time when software is critical in many industries across a growing array of smart devices.
Bugs, defects and security vulnerabilities in code can be difficult to detect and expensive to fix. Despite these challenges, it is crucial to have high-quality, secure code to ensure consumers' privacy and safety, especially at a time when software is critical in many industries across a growing array of smart devices.
Information relating to domestic and foreign operations, including revenue and long-lived assets by geographic area, is contained in Part II, Item 8, Financial Statements and Supplementary Data .
Information relating to domestic and foreign operations, including revenue and long-lived assets by geographic area, is contained in Part II, Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Information about our Executive Officers The executive officers of Synopsys and their ages as of December 12, 2022 were as follows: Name Age Position Aart J. de Geus 68 Chief Executive Officer and Chairman of the Board of Directors Sassine Ghazi 52 President and Chief Operating Officer Shelagh Glaser 58 Chief Financial Officer Richard Mahoney 60 Chief Revenue Officer John F.
Information about our Executive Officers The executive officers of Synopsys and their ages as of December 12, 2023 were as follows: Name Age Position Aart J. de Geus 69 Chief Executive Officer and Chair of the Board of Directors Sassine Ghazi 53 President and Chief Operating Officer Shelagh Glaser 59 Chief Financial Officer Richard Mahoney 61 Chief Revenue Officer John F.
Ghazi received his bachelor’s degree in Business Administration from Lebanese American University; a B.S.E.E from the Georgia Institute of Technology in 1993; and an M.S.E.E. from the University of Tennessee in 1995. Shelagh Glaser joined Synopsys as our Chief Financial Officer on December 2, 2022 and succeeds Trac Pham, our former Chief Financial Officer. Prior to joining Synopsys, Ms.
Ghazi received his bachelor’s degree in Business Administration from Lebanese American 14 Table of Contents University; a B.S.E.E from the Georgia Institute of Technology in 1993; and an M.S.E.E. from the University of Tennessee in 1995. Shelagh Glaser has served as our Chief Financial Officer since December 2022. Prior to joining Synopsys, Ms.
Ghazi joined Synopsys in March 1998 as an Application Engineer and most recently served as General Manager of the Design Group. Prior to joining Synopsys, Mr. Ghazi was a design engineer at Intel Corporation. Mr.
Ghazi will assume the role of President and Chief Executive Officer. Mr. Ghazi joined Synopsys in March 1998 as an Application Engineer and served as General Manager of the Design Group. Prior to joining Synopsys, Mr. Ghazi was a design engineer at Intel Corporation. Mr.
He has served as a member of Synopsys’ Board of Directors since 1986, and served as Chairman of our Board of Directors from 1986 to 1992 and again from 1998 until present. Dr. de Geus has also served on the board of directors of Applied Materials, Inc. since July 2007.
He has served as a member of our Board of Directors since 1986, and as Chair of our Board of Directors from 1986 to 1992 and again from 1998 until his upcoming transition to Executive Chair on January 1, 2024. Dr. de Geus has also served on the board of directors of Applied Materials, Inc. since July 2007.
We use our Investor Relations page as a routine channel for distribution of important information, including news releases, investor presentations and financial information. The contents of our website are not part of this Form 10-K and shall not be deemed incorporated by reference.
We use our Investor Relations page as a routine channel for distribution of important information, including, among other things, news releases, investor presentations and financial information and to comply with our disclosure obligations under Regulation Fair Disclosure. The contents of our website are not part of this Annual Report on Form 10-K and shall not be deemed incorporated by reference.
Verification Our Verification Family is built from our industry-leading verification technologies, providing virtual prototyping, static and formal verification, simulation, emulation, FPGA-based prototyping, and debug in a unified environment with verification IP, planning, and coverage technology.
For FPGA design, we offer Synplify ® implementation software. 5 Table of Contents Verification Our Verification Family is built from our industry-leading verification technologies, providing virtual prototyping, static and formal verification, simulation, emulation, FPGA-based prototyping, and debug in a unified environment with verification IP, planning, and coverage technology.
Corporate Information We incorporated in 1986 in North Carolina and reincorporated in 1987 in Delaware. Our headquarters are located at 690 East Middlefield Road, Mountain View, California 94043, and our headquarters’ telephone number is (650) 584-5000. Our website is https://www.synopsys.com/. We have approximately 125 offices worldwide.
Corporate Information We incorporated in 1986 in North Carolina and reincorporated in 1987 in Delaware. Our headquarters are located at 675 Almanor Avenue, Sunnyvale, California 94085, and our headquarters’ telephone number is (650) 584-5000. Our website is https://www.synopsys.com/. We have approximately 122 offices worldwide.
Risks related to disruptions in our supply chain affecting our business are described in Part I, Item 1A, Risk Factors . 10 Table of Contents Our professional services team typically provides design consulting services to our customers under consulting agreements with statements of work specific to each project. Competition The EDA industry is highly competitive.
Risks related to disruptions in our supply chain affecting our business are described in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K. Our professional services team typically provides design consulting services to our customers under consulting agreements with statements of work specific to each project.
While many of our solutions have been used in cloud-based environments for years, such as in a customer’s own server and/or cloud environment, in fiscal 2022 we launched a new Synopsys Cloud offering that provides customers additional options for accessing our EDA products.
While many of our solutions have been used in cloud-based environments for years, such as in a customer’s own server and/or cloud environment, in fiscal 2022 we launched a Synopsys Cloud 4 Table of Contents offering that provides customers additional options for accessing our EDA products in their own cloud environments and in the industry’s first EDA Software-as-a-Service solution developed in partnership with Microsoft Azure.
We compete against other EDA vendors and against our customers’ own design tools and internal design capabilities. In general, we compete principally on technology leadership, product quality and features (including ease-of-use), license terms, price and payment terms, post-contract customer support, flexibility of tool use, and interoperability with our own and other vendors’ products.
In general, we compete principally on technology leadership, product quality and features (including ease-of-use), license terms, price and payment terms, post-contract customer support, flexibility of tool use, and interoperability with our own and other vendors’ products. We also deliver a significant amount of engineering and design consulting for our products.
Mahoney held several senior management positions with Ansys, Inc. from 2016 to 2022, including most recently as Senior Vice President of Worldwide Sales, Marketing and Customer Excellence from December 2016 to May 2022. Prior to joining Ansys, from 2014 to 2016, Mr. Mahoney was Senior Vice President, Design Enablement and International Sales, at Global Foundries, a semiconductor manufacturing company. Mr.
Mahoney joined Synopsys as a Special Projects Advisor in May 2022. Prior to joining Synopsys, Mr. Mahoney held several senior management positions with Ansys, Inc. from 2016 to 2022, including most recently as Senior Vice President of Worldwide Sales, Marketing and Customer Excellence from December 2016 to May 2022. Prior to joining Ansys, from 2014 to 2016, Mr.
Runkel was also a partner at the law firm of Sheppard, Mullin, Richter & Hampton LLP for 11 years. Mr. Runkel holds a Bachelor of Arts and a Juris Doctorate from the University of California, Los Angeles. There are no family relationships among any Synopsys executive officers or directors. 15 Table of Contents
Runkel holds a Bachelor of Arts and a Juris Doctorate from the University of California, Los Angeles. There are no family relationships among any Synopsys executive officers or directors. 15 Table of Contents
Human Capital Resources At Synopsys, we are helping our employees pursue their passion and make their mark on the world of Smart Everything. We believe this creates value for us, our stockholders, and the lives of the people we impact every day. Our commitment to attracting, developing and retaining the brightest and best talent makes this goal possible.
Human Capital Resources At Synopsys, we are committed to empowering our employees to pursue their passion, challenge themselves and their peers, and make their mark on the world. We believe this creates value for us, our stockholders, and the lives of the people we impact every day.
Since the inception of Synopsys in December 1986, Dr. de Geus has held a variety of positions, including President, Senior Vice President of Engineering and Senior Vice President of Marketing.
Effective January 1, 2024, Dr. de Geus will transition into the role of Executive Chair of our Board of Directors. Since the inception of Synopsys in December 1986, Dr. de Geus has held a variety of positions, including President, Senior Vice President of Engineering and Senior Vice President of Marketing.
For a full discussion of our software product offerings, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. We typically license Synopsys IP products under nonexclusive license agreements that provide usage rights for specific designs. Fees under these licenses are typically charged on a per design basis plus, in some cases, royalties.
For a full discussion of our software product offerings, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K . 10 Table of Contents We typically license Synopsys IP products under nonexclusive license agreements that provide usage rights for specific designs.
Our IP Accelerated initiative augments our established, broad portfolio of silicon-proven Synopsys IP with IP Prototyping Kits and customized IP subsystems to accelerate prototyping, software development, and integration of IP into SoCs. 6 Table of Contents We offer a broad portfolio of IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, Internet of things, and cloud computing markets, enabling designers to quickly develop SoCs in these areas .
We offer a broad portfolio of IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, Internet of things, and cloud computing markets, enabling designers to quickly develop SoCs in these areas .
We generally compete on the basis of product quality, reliability, features, availability of titles for new manufacturing processes, ease of integration with customer designs, compatibility with design tools, license terms, price and payment terms, and customer support. Our Software Integrity segment competes with numerous other solution providers, many of which focus on specific aspects of software security or quality analysis.
Within our Design IP segment, Synopsys competes against numerous other IP providers, including Cadence Design Systems, Inc., and our customers' internally developed IP. We generally compete on the basis of product quality, reliability, features, availability of titles for new manufacturing processes, ease of integration with customer designs, compatibility with design tools, license terms, price and payment terms, and customer support.
FPGA Design FPGAs are complex chips that can be customized or programmed to perform a specific function after they are manufactured. For FPGA design, we offer Synplify ® (Pro ® and Premier) implementation and Identify ® debug software tools.
FPGA Design FPGAs are complex chips that can be customized or programmed to perform a specific function after they are manufactured.
We also provide consulting and design services that address all phases of the SoC development process, as well as a broad range of expert training and workshops on our latest tools and methodologies.
We also provide consulting and design services that address all phases of the SoC development process, as well as a broad range of expert training and workshops on our latest tools and methodologies. AI Driven EDA Stack Our EDA software stack spanning design, verification, and manufacturing is augmented with AI and machine learning through our Synopsys.ai suite of complementary solutions.
As of our fiscal year-end, our undesired turnover rate was 6.9%. We calculate undesired turnover rate by dividing the number of undesired exits from Synopsys by the average headcount for fiscal 2022, and we define undesired turnover as exits by high-performing employees who resigned from Synopsys (or its subsidiaries) to pursue other work opportunities.
We carefully study retention trends and feedback from diverse groups to identify areas where we can improve. 1 We calculate undesired turnover rate by dividing the number of undesired exits from Synopsys by the average headcount for fiscal 2023, and we define undesired turnover as exits by high-performing employees who resigned from Synopsys (or its subsidiaries) to pursue other work opportunities.
Mahoney holds an A.S. in Computer Science from the Maxwell Institute of Technology. John F. Runkel, Jr. has served as our General Counsel and Corporate Secretary since May 2014. From October 2008 to March 2013, he was Executive Vice President, General Counsel, and Corporate Secretary of Affymetrix, Inc.
Mahoney was Senior Vice President, Design Enablement and International Sales, at Global Foundries, a semiconductor manufacturing company. Mr. Mahoney holds an A.S. in Computer Science from the Maxwell Institute of Technology. John F. Runkel, Jr. has served as our General Counsel and Corporate Secretary since May 2014.
By inviting employees to share their experiences, we create space for important conversations about who we are, where we are going, and how we can connect with each other and our work. At mid-year fiscal 2022, approximately 90% of our employee population participated in the SHAPE survey.
We also use the surveys to create space for important conversations about who we are, where we are going, and how we can connect with each other and our work. Approximately 94% of our employees participated in our SHAPE survey in May 2023.
We aim to influence positive social and environmental change across our ecosystem by applying our resources, competencies, and team-based problem-solving approach. Our technology is in action in countless ways, from bringing safety and security to the driverless car revolution to enabling the technologies that are an 11 Table of Contents increasingly vital component of protecting human health and well-being.
Our technology is in action in countless ways, from bringing safety and security to the driverless car revolution to enabling the technologies that are an increasingly vital component of protecting human health and well-being.
As a result, we may from time to time need to defend claims that our customers’ use of our products infringes on these third-party rights. We license software and other intellectual property from third parties, including, in several instances, for inclusion in our products.
In many cases, under our customer agreements and other license agreements, we offer to indemnify our customers if the licensed products infringe on a third party’s intellectual property rights. As a result, we may from time to time need to defend claims that our customers’ use of our products infringes on these third-party rights.
See Note 2 of the Notes to Consolidated Financial Statements for further information. Our hardware products, which principally consist of our prototyping and emulation systems, are either sold or leased to our customers.
Fees under these licenses are typically charged on a per design basis plus, in some cases, royalties. See Note 2. Significant Accounting Policies and Bases of Presentation of the Notes to Consolidated Financial Statements for further information. Our hardware products, which principally consist of our prototyping and emulation systems, are either sold or leased to our customers.
We provide software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them. To complement these offerings, we provide technical services and support to help our customers develop advanced chips and electronic systems. These products and services are part of our Semiconductor & System Design segment.
We also provide technical services and support to help our customers develop advanced chips and electronic systems. These products and services are part of our Design Automation segment.
Many of our EDA solutions are bolstered by AI and machine learning capabilities. In addition, we offer DSO.ai, the first product in the market that brings AI to the entire design process. This groundbreaking solution autonomously learns through quickly exploring potential design alternatives, enabling engineers to develop superior design outcomes with our design tools.
Many of our EDA solutions are bolstered by AI and machine learning capabilities. In addition, we offer Synopsys.ai TM , the first product in the market that brings AI to the entire design process.
Aggregate revenue derived from one of our customers and its subsidiaries through multiple agreements accounted for 11.7%, 10.6% and 12.4% of our total revenue in fiscal 2022, 2021 and 2020, respectively. In each such year, the revenue derived from such customer and its subsidiaries was primarily attributable to our Semiconductor & System Design segment.
Revenue attributable to each of our four product groups is shown below as a percentage of our total revenue for those fiscal years. Aggregate revenue derived from one of our customers and its subsidiaries through multiple agreements accounted for 12.4%, 11.7% and 10.6% of our total revenue in fiscal 2023, 2022 and 2021, respectively.
We are a global leader in supplying the electronic design automation (EDA) software that engineers use to design and test integrated circuits (ICs), also known as chips. We also offer semiconductor intellectual property (IP) products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves.
We also offer a broad and comprehensive portfolio of semiconductor intellectual property (IP) products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. These products and services are part of our Design IP segment.
We benchmark market practices and regularly review our compensation against the market to ensure it remains competitive. We also offer a comprehensive and tailored set of benefits for employees and their families, providing protection from unexpected losses or medical expenses.
We benchmark market practices and regularly review our compensation and benefits against the market to help ensure that it is competitive. We also offer a comprehensive set of benefits for employees and their families, focused on physical, mental and financial health and wellbeing.
This product family includes Custom Compiler layout and schematic editor, StarRC parasitic extraction, and IC Validator physical verification. It also includes PrimeSim, which was launched in fiscal 2021. The PrimeSim solution integrates PrimeSim SPICE, PrimeSim HSPICE, PrimeSim Pro and PrimeSim XA.
The platform features visually assisted layout automation, high-performance circuit simulation, reliability-aware verification, and natively integrated StarRC extraction and physical verification. This product family includes Custom Compiler layout and schematic editor, StarRC parasitic extraction, IC Validator physical verification and PrimeSim. The PrimeSim solution integrates PrimeSim SPICE, PrimeSim HSPICE, PrimeSim Pro and PrimeSim XA.
He served as Senior Vice President, General Counsel and Corporate Secretary of Intuitive Surgical, Inc. from 2006 to 2007. Mr. Runkel served in several roles at VISX, Inc. from 2001 to 2005, most recently as Senior Vice President of Business Development and General Counsel. Mr.
Runkel served in several roles at VISX, Inc. from 2001 to 2005, most recently as Senior Vice President of Business Development and General Counsel. Mr. Runkel was also a partner at the law firm of Sheppard, Mullin, Richter & Hampton LLP for 11 years. Mr.
Inclusion and Diversity Inclusion and diversity run through our corporate values at every level—from our foundation of integrity to our execution excellence, from our dedicated leadership to our united passion for a better tomorrow. We have always strived to be a company where different perspectives and backgrounds are celebrated, which we believe helps make Synopsys stronger.
Diversity, Equity and Inclusion We seek to integrate diversity, equity and inclusion into our corporate values at every level—from our foundation of integrity to our execution excellence and from our dedicated leadership to our united passion for a better tomorrow.
We attribute the strong retention of our talented workforce to a number of factors, including exciting and challenging assignments, strong leadership and management, a culture of integrity, the opportunity to learn new skills and advance careers, our commitment to inclusion and diversity, and the strength of our technology and customer relationships, along with competitive and equitable total rewards.
As of our fiscal 2023 year-end, our undesired turnover rate was 2.7%. 1 We attribute the strong retention of our talented workforce to a number of factors, including exciting and challenging assignments; growth opportunities; strong leadership and management; a culture of integrity; our commitment to diversity, equity and inclusion; competitive and equitable compensation and benefits; our leading products and technology; and the strength of our customer relationships.
Employee Engagement We use employee feedback to drive and improve processes that support our customers and ensure a deep understanding of our culture and vision among our employees. Through our semi-annual SHAPE Synopsys surveys, we obtain employee insights on our values, manager effectiveness, ability to innovate, perceptions on inclusion and diversity, and other critical factors.
Through our semi-annual SHAPE Synopsys surveys, we obtain employee insight into our values, manager effectiveness, ability to innovate, perceptions on diversity, inclusion and belonging, 13 Table of Contents and other critical factors.
The pace of innovation often requires developers to deliver more secure, high-quality software, which can include millions of lines of code, in increasingly frequent release cycles. Bugs, defects and security vulnerabilities in code can be difficult to detect and expensive to fix.
A similar dynamic is at work in the software arena, whether the software is embedded on a chip or used in other applications. The pace of innovation often requires developers to deliver more secure, high-quality software, which can include millions of lines of code, in increasingly frequent release cycles.
Each year, our employees participate in our performance development process that summarizes key accomplishments for the preceding year, establishes new stretch goals, and identifies critical capabilities for development. As part of this process, we encourage managers to solicit and share supportive multi-rater feedback, further strengthening the focus on teamwork and team success.
As part of this process, we encourage managers to solicit and share supportive multi-rater feedback, further strengthening the focus on teamwork and team success. Talent Development and Succession Planning We offer several programs to support the career advancement of our employees.
In fiscal 2022, we increased our employee headcount by approximately 16%, with a continued focus on increasing the number of women in technical positions and ensuring a vibrant talent pipeline with early career hiring and investment in training and development. As with many other companies in the technology industry, we experienced an increase in total employee turnover in fiscal 2022.
In fiscal 2023, we increased our employee headcount by approximately 7%, with a continued focus on promoting gender diversity with respect to those in technical and senior level positions and ensuring a vibrant talent pipeline with early career hiring and investment in training and development.
Our customers, who design those products, are facing intense pressure to deliver innovative offerings in shorter timeframes and at lower prices. In other words, innovation in chip and system design often hinges on providing products “better,” “sooner,” and “cheaper” than competitors. The design of these chips and systems is extremely complex and necessitates state-of-the-art solutions.
In other words, innovation in chip and systems design often hinges on providing products “better,” “sooner,” and “cheaper” than competitors. The design of these chips and systems is extremely complex and necessitates state-of-the-art solutions. Over the past several years, market verticals including AI, 5G, automotive and cloud computing infrastructure have contributed to the ongoing demand for our products and services.
We have a diversified portfolio of more than 3,400 United States and foreign patents issued, and we will continue to pursue additional patents in the future. Our issued patents have expiration dates through 2041. Our patents primarily relate to our products and the technology used in connection with our products.
Proprietary Rights We primarily rely upon a combination of copyright, patent, trademark, and trade secret laws and license and non-disclosure agreements to establish and protect our proprietary rights. We have a diversified portfolio of more than 3,300 United States and foreign patents issued, and we will continue to pursue additional patents in the future.
In addition, we hosted a series of in-person and on-demand learning sessions designed to build capability and adaptability required for the future. As employees advance in their careers, our training framework builds new capabilities on established foundational skills.
Through our digital learning platform, we foster and support an “always learning” culture where employees can access training, external articles, videos, and blogs. In addition, we host a series of in-person and on-demand learning sessions designed to build capability and adaptability required for the future.
Designers have turned to new manufacturing techniques to solve these problems, such as multiple-patterning lithography and FinFET 3D transistors, which in turn have introduced new challenges to design and production. 3 Table of Contents The popularity of mobile devices and other electronic products has increased demand for chips and systems with greater functionality and performance, reduced size, and lower power consumption.
Designers have turned to new manufacturing techniques to solve these problems, such as multiple-patterning lithography, FinFET 3D transistors and Gate-All-Around Field-Effect transistor structures, which in turn have introduced new challenges to design and production.
While protecting our proprietary technology is important to our success, our business as a whole is not significantly dependent upon any single patent, copyright, trademark, or license. In many cases, under our customer agreements and other license agreements, we offer to indemnify our customers if the licensed products infringe on a third party’s intellectual property rights.
In addition, effective copyright and trade secret protection may be unavailable or limited in some foreign countries. While protecting our proprietary technology is important to our success, our business as a whole is not significantly dependent upon any single patent, copyright, trademark, or license.
This reinforces that inclusion and diversity are a key part of our culture and amplifies the importance of executive involvement to advance our progress. Total Rewards To ensure a compelling total rewards philosophy, we have practices in place to deliver fair and equitable compensation for employees based on their contribution and performance.
Total Rewards Our Total Rewards are designed to offer meaningful benefits and compensation for the time, energy, commitment, skills, and expertise employees bring to the company every day. We have practices in place that are intended to deliver fair and equitable compensation for employees based on their contribution and performance.
Our source code is protected both as a trade secret and as an unpublished copyrighted work. However, third parties may independently develop similar technology. In addition, effective copyright and trade secret protection may be unavailable or limited in some foreign countries.
Our issued patents have expiration dates through 2044 and generally have a term of twenty years from filing. Our patents primarily relate to our products and the technology used in connection with our products. Our source code is protected both as a trade secret and as an unpublished copyrighted work. However, third parties may independently develop similar technology.
Results showed our global workforce to be highly engaged, with our overall score outpacing the industry engagement benchmark. We saw strong scores from our people regarding their connection to our culture, their personal investment in Synopsys’ strategies and objectives, and their team’s ability to innovate.
We saw strong scores from our employees regarding their connection to our culture, their personal investment in Synopsys’ strategies and objectives, and their team’s ability to innovate. As we grow, we aspire to maintain our results-oriented culture by balancing productivity with smart investments in our employees’ development, while also supporting individual wellbeing—two key drivers of the overall employee experience.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur international operations and sales subject us to a number of increased risks, including: • Ineffective or weaker legal protection of intellectual property rights; • Uncertain economic, legal and political conditions in China, Europe and other regions where we do business, including, for example, changes in China-Taiwan relations, the military conflict between Russia and Ukraine and the related sanctions and other penalties imposed on Russia by the United States, the European Union, the United Kingdom and other countries; • Economic recessions or uncertainty in financial markets, including the impact of rising inflation and global interest rates; • Government trade restrictions, including tariffs, export controls or other trade barriers, and changes to existing trade arrangements between various countries such as China; • Difficulties in adapting to cultural differences in the conduct of business, which may include business practices in which we are prohibited from engaging by the Foreign Corrupt Practices Act or other anti-corruption laws; • Financial risks such as longer payment cycles, changes in currency exchange rates and difficulty in collecting accounts receivable; • Inadequate local infrastructure that could result in business disruptions; • Additional taxes, interest and potential penalties and uncertainty around changes in tax laws of various countries; and • Other factors beyond our control such as natural disasters, terrorism, civil unrest, war and infectious diseases and pandemics, including COVID-19 and its variants.
Biggest changeOur international operations and sales subject us to a number of increased risks, including: • Economic slowdowns, recessions or uncertainty in financial markets, including, among other things, the impact of increased global inflationary pressures and interest rates; • Uncertain economic, legal and political conditions in China, Europe and other regions where we do business, including, for example, changes in China-Taiwan relations, regional or global military conflicts, and related sanctions and financial penalties imposed on participants in such conflicts; • Government trade restrictions, including tariffs, export controls or other trade barriers, and changes to existing trade arrangements, including the unknown impact of current and future U.S. and Chinese trade regulations; • Ineffective or weaker legal protection of intellectual property rights; • Difficulties in adapting to cultural differences in the conduct of business, which may include business practices in which we are prohibited from engaging by the Foreign Corrupt Practices Act or other anti-corruption laws; • Financial risks such as longer payment cycles, changes in currency exchange rates and difficulty in collecting accounts receivable; • Inadequate local infrastructure that could result in business disruptions; • Additional taxes, interest and potential penalties and uncertainty around changes in tax laws of various countries; and • Other factors beyond our control such as natural disasters, terrorism, civil unrest, war and infectious diseases and pandemics, such as the COVID-19 pandemic. 19 Table of Contents Furthermore, if any of the foreign economies in which we do business deteriorate or if we fail to effectively manage our global operations, our business and operating results will be harmed.
The occurrence of any of these risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, operating results and stock price.
The occurrence of any of these risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, operating results, financial condition, and stock price.
The United States has published significant changes to Export Regulations with respect to Russia and China, and we anticipate additional changes to the Export Regulations in the future.
The United States has published significant changes to the Export Regulations with respect to Russia and China, and we anticipate additional changes to the Export Regulations in the future.
For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and Export Regulations see “ Industry Risks – We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets .” In response to the U.S. adopting tariffs and trade barriers or taking other actions, other countries may also adopt tariffs and trade barriers that could limit our ability to offer our products and services.
For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and the Export Regulations see “ Industry Risks – We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets. ” In response to the U.S. adopting tariffs and trade barriers or taking other actions, other countries may also adopt tariffs and trade barriers that could limit our ability to offer our products and services.
The timing of revenue recognition is affected by factors that include: • Cancellations or changes in levels of orders or the mix between upfront products revenue and time-based products revenue; • Delay of one or more orders for a particular period, particularly orders generating upfront products revenue, such as hardware; 21 Table of Contents • Delay in the completion of professional services projects that require significant modification or customization and are accounted for using the percentage of completion method; • Delay in the completion and delivery of IP products in development as to which customers have paid for early access; • Customer contract amendments or renewals that provide discounts or defer revenue to later periods; and • The levels of our hardware and IP revenues, which are recognized upfront and are primarily dependent upon our ability to provide the latest technology and meet customer requirements.
The timing of revenue recognition is affected by factors that include: • Cancellations or changes in levels of orders or the mix between upfront products revenue and time-based products revenue; • Delay of one or more orders for a particular period, particularly orders generating upfront products revenue, such as hardware; • Delay in the completion of professional services projects that require significant modification or customization and are accounted for using the percentage of completion method; • Delay in the completion and delivery of IP products in development as to which customers have paid for early access; 21 Table of Contents • Customer contract amendments or renewals that provide discounts or defer revenue to later periods; and • The levels of our hardware and IP revenues, which are recognized upfront and are primarily dependent upon our ability to provide the latest technology and meet customer requirements.
In addition, if we select a vendor that uses cloud storage of information as part of their service or product offerings, or if we are selected as a vendor for our cloud-based solutions, our proprietary information could be misappropriated by third parties despite our attempts to validate the security of such services.
In addition, if we select a vendor that uses cloud storage as part of their service or product offerings, or if we are selected as a vendor for our cloud-based solutions, our proprietary information could be misappropriated by third parties despite our attempts to validate the security of such services.
On December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was enacted, which significantly changed prior U.S. tax law and includes numerous provisions that affect our business.
On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted, which significantly changed prior U.S. tax law and includes numerous provisions that affect our business.
The IR Act includes a minimum tax rate of 15%, as well as tax credit incentives for reductions in greenhouse gas emissions. The details of the computation of the tax and implementation of the incentives will be subject to regulations to be issued by the U.S. Department of the Treasury.
The IR Act includes a 15% minimum tax rate, as well as tax credit incentives for reductions in greenhouse gas emissions. The details of the computation of the tax and implementation of the incentives will be subject to regulations to be issued by the U.S. Department of the Treasury.
Additionally, as the EDA industry has matured, consolidation has resulted in stronger competition from companies better able to compete as sole source vendors. This increased competition may cause our revenue growth rate to decline and exert downward pressure on our operating margins, which may have an adverse effect on our business and financial condition.
Additionally, as the EDA industry has matured, consolidation has resulted in stronger competition from companies better able to compete as sole source vendors. This increased competition may cause our revenue growth rate to decline and exert downward pressure on our operating margins, which would have an adverse effect on our business and financial condition.
For example, the United States government has implemented controls on advanced computing ICs, computer commodities that contain such ICs, and certain semiconductor manufacturing items, as well as controls on transactions involving items for supercomputer and semiconductor manufacturing end-users. The new controls expand the scope of foreign-produced items subject to license requirements for certain entities on the U.S. government's Entity List.
For example, the United States government has implemented controls on advanced computing ICs, computer commodities that contain such ICs, and certain semiconductor manufacturing items, as well as controls on transactions involving items for supercomputer and semiconductor manufacturing end-users. The controls expand the scope of foreign-produced items subject to license requirements for certain entities on the U.S. government's Entity List.
If we are unable to anticipate technological changes in our industry by introducing new or enhanced products in a timely and cost-effective manner, or if we fail to introduce products that meet market demand, we may lose our competitive position, our products may become obsolete, and our business, financial condition or results of operations could be adversely affected.
If we are unable to anticipate technological changes in our industry by introducing new or enhanced products in a timely and cost-effective manner, or if we fail to introduce products that meet market demand, we may lose our competitive position, our products may become obsolete, and our business, operating results and financial condition or results of operations could be adversely affected.
Furthermore, the semiconductor and electronics industries have become increasingly complex ecosystems. Many of our customers outsource the manufacturing of their semiconductor designs to foundries. Our customers also frequently incorporate third-party IP, whether provided by us or other vendors, into their designs to improve the efficiency of their design process.
Furthermore, the semiconductor and electronics industries have become increasingly complex and interconnected ecosystems. Many of our customers outsource the manufacturing of their semiconductor designs to foundries. Our customers also frequently incorporate third-party IP, whether provided by us or other vendors, into their designs to improve the efficiency of their design process.
These factors, or any other factors or risks discussed herein, could negatively impact our revenue or earnings and cause our stock price to decline. Additionally, our results may fail to meet or exceed the expectations of securities analysts and investors, or such analysts may change their recommendation regarding our stock, which could cause our stock price to decline.
These factors, or any other factors or risks discussed herein, could negatively impact our backlog, revenue or earnings and cause our stock price to decline. Additionally, our results may fail to meet or exceed the expectations of securities analysts and investors, or such analysts may change their recommendation regarding our stock, which could cause our stock price to decline.
Specifically, we believe the following competitive factors affect our success: • Our ability to anticipate and lead critical development cycles and technological shifts, innovate rapidly and efficiently, improve our existing software and hardware products and successfully develop or acquire such new products; • Our ability to offer products that provide both a high level of integration into a comprehensive platform and a high level of individual product performance; 17 Table of Contents • Our ability to enhance the value of our offerings through more favorable terms such as expanded license usage, future purchase rights, price discounts and other differentiating rights, such as multiple tool copies, post-contract customer support, “re-mix” rights that allow customers to exchange the software they initially licensed for other Synopsys products and the ability to purchase pools of technology; • Our ability to manage an efficient supply chain to ensure availability of hardware products; • Our ability to compete on the basis of payment terms; and • Our ability to provide engineering and design consulting for our products.
Specifically, we believe the following competitive factors affect our success: • Our ability to anticipate and lead critical development cycles and technological shifts, innovate rapidly and efficiently, improve our existing software and hardware products, and successfully develop or acquire such new products; • Our ability to offer products that provide both a high level of integration into a comprehensive platform and a high level of individual product performance; • Our ability to enhance the value of our offerings through more favorable terms such as expanded license usage, future purchase rights, price discounts and other differentiating rights, such as multiple tool copies, post-contract customer support, “re-mix” rights that allow customers to exchange the software they initially licensed for other Synopsys products, and the ability to purchase pools of technology; • Our ability to manage an efficient supply chain to ensure hardware product availability; • Our ability to compete on the basis of payment terms; and • Our ability to provide engineering and design consulting for our products.
Acquisitions and strategic investments are difficult, time-consuming, and pose a number of risks, including: • Potential negative impact on our earnings per share; • Failure of acquired products to achieve projected sales; • Problems in integrating the acquired products with our products; • Difficulties entering into new markets in which we are not experienced or where competitors may have stronger positions; • Potential downward pressure on operating margins due to lower operating margins of acquired businesses, increased headcount costs, and other expenses associated with adding and supporting new products; • Difficulties in retaining and integrating key employees; • Substantial reductions of our cash resources and/or the incurrence of debt, which may be at higher than anticipated interest rates; • Failure to realize expected synergies or cost savings; • Difficulties in integrating or expanding sales, marketing and distribution functions and administrative systems, including information technology and human resources systems; 23 Table of Contents • Dilution of our current stockholders through the issuance of common stock as part of the merger consideration; • Difficulties in negotiating, governing and realizing value from strategic investments; • Assumption of unknown liabilities, including tax, litigation, cybersecurity and commercial-related risks, and the related expenses and diversion of resources; • Incurrence of costs and use of additional resources to remedy issues identified prior to or after an acquisition; • Disruption of ongoing business operations, including diversion of management’s attention and uncertainty for employees and customers, particularly during the post-acquisition integration process; • Potential negative impacts on our relationships with customers, distributors and business partners; • Exposure to new operational risks, regulations and business customs to the extent acquired businesses are located in regions where we are not currently conducting business; • The need to implement controls, processes and policies appropriate for a public company at acquired companies that may have previously lacked such controls, processes and policies in areas such as cybersecurity, information technology, privacy and more; • Negative impact on our net income resulting from acquisition or investment-related costs; and • Requirements imposed by government regulators in connection with their review of an acquisition, including required divestitures or restrictions on the conduct of our business or the acquired business.
Acquisitions and strategic investments are difficult, time-consuming, and pose a number of risks, including, but not limited to: • Potential negative impact on our earnings per share; • Failure of acquired products to achieve projected sales; • Problems in integrating the acquired products with our products; • Difficulties entering into new markets in which we are not experienced or where competitors may have stronger positions; 23 Table of Contents • Potential downward pressure on operating margins due to lower operating margins of acquired businesses, increased headcount costs, and other expenses associated with adding and supporting new products; • Difficulties in retaining and integrating key employees; • Substantial reductions of our cash resources and/or the incurrence of debt, which may be at higher than anticipated interest rates; • Failure to realize expected synergies or cost savings; • Difficulties in integrating or expanding sales, marketing and distribution functions and administrative systems, including IT and human resources systems; • Dilution of our current stockholders through the issuance of common stock as a part of transaction consideration; • Difficulties in negotiating, governing and realizing value from strategic investments; • Assumption of unknown liabilities, including tax, litigation, cybersecurity and commercial-related risks, and the related expenses and diversion of resources; • Incurrence of costs and use of additional resources to remedy issues identified prior to or after an acquisition; • Disruption of ongoing business operations, including diversion of management’s attention and uncertainty for employees and customers, particularly during the post-acquisition integration process; • Potential negative impacts on our relationships with customers, distributors and business partners; • Exposure to new operational risks, regulations and business customs to the extent acquired businesses are located in regions where we are not currently conducting business; • The need to implement controls, processes and policies appropriate for a public company at acquired companies that may have previously lacked such controls, processes and policies in areas such as cybersecurity, IT, privacy and more; • Negative impact on our net income resulting from acquisition or investment-related costs; and • Requirements imposed by government regulators in connection with their review of an acquisition, including required divestitures or restrictions on the conduct of our business or the acquired business.
We believe that current Export Regulations do not materially impact our business at this time, but we cannot predict the impact that additional regulatory changes may have on our business in the future.
We believe that the Export Regulations do not materially impact our business at this time, but we cannot predict the impact that additional regulatory changes may have on our business in the future.
Under our customer agreements and other license agreements, we agree in many cases to indemnify our customers if our products are alleged to infringe a third party’s intellectual property rights.
Under our customer agreements and other license agreements, we agree in many cases to indemnify our customers if our products are alleged to infringe on a third party’s intellectual property rights.
Should our cash spending needs in the U.S. rise and exceed these liquidity sources, we may be required to incur additional debt at higher than anticipated interest rates or access other funding sources, which could negatively affect our results of operations, capital structure or the market price of our common stock.
Should our cash spending needs in the U.S. rise and exceed these liquidity sources, we may be required to incur additional debt at higher than anticipated interest rates or access other funding sources, which could negatively affect our operating results, capital structure or the market price of our common stock.
Additionally, from time to time, we may invest in efforts to expand into adjacent markets, including, for example, software security and quality testing solutions.
Additionally, from time to time, we may invest in efforts to expand into adjacent markets, including, for example, software security, quality testing solutions and AI.
Any such errors or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could cause us to lose customers, increase our service costs, subject us to liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business and operating results.
Any such errors or delays in releasing new products or new versions of products or allegations of unsatisfactory performance could cause us to lose customers, increase our service costs, subject us to liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business, operating results and financial condition.
These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by Congress, making compliance difficult and uncertain. In addition, increasingly regulators, customers, investors, employees and other stakeholders are focusing on environmental, social and governance (ESG) matters and related disclosures.
These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by Congress, making compliance difficult and uncertain. In addition, regulators, customers, investors, employees and other stakeholders are increasingly focused on environmental, social and governance (ESG) matters and related disclosures.
Our success in these and other new markets depends on a variety of factors, including the following: • Our ability to attract a new customer base, including in industries in which we have less experience; • Our successful development of new sales and marketing strategies to meet customer requirements; • Our ability to accurately predict, prepare for and promptly respond to technological developments in new fields, including, in the case of our software quality testing and security tools and services, identifying new security vulnerabilities in software code and ensuring support for a growing number of programming languages; • Our ability to compete with new and existing competitors in these new industries, many of which may have more financial resources, industry experience, brand recognition, relevant intellectual property rights or established customer relationships than we currently do, and could include free and open source solutions that provide similar software quality testing and security tools without fees; • Our ability to skillfully balance our investment in adjacent markets with investment in our existing products and services; 24 Table of Contents • Our ability to attract and retain employees with expertise in new fields; • Our ability to sell and support consulting services at profitable margins; and • Our ability to manage our revenue model in connection with hybrid sales of licensed products and consulting services.
Our success in these and other new markets depends on a variety of factors, including, but not limited to, the following: • Our ability to attract a new customer base, including in industries in which we have less experience; • Our successful development of new sales and marketing strategies to meet customer requirements; • Our ability to accurately predict, prepare for and promptly respond to technological developments in new fields, including, in the case of our software quality testing and security tools and services, identifying new security vulnerabilities in software code and ensuring support for a growing number of programming languages; • Our ability to compete with new and existing competitors in these new industries, many of which may have more financial resources, industry experience, brand recognition, relevant intellectual property rights or established customer relationships than we currently do, and could include free and open source solutions that provide similar software quality testing, security tools and AI solutions without fees; • Our ability to skillfully balance our investment in adjacent markets with investment in our existing products and services; • Our ability to attract and retain employees with expertise in new fields; • Our ability to sell and support consulting services at profitable margins; and 25 Table of Contents • Our ability to manage our revenue model in connection with hybrid sales of licensed products and consulting services.
Infringement claims can result in costly and time-consuming litigation, require us to enter into royalty arrangements, subject us to damages or injunctions restricting our sale of products, invalidate a patent or family of patents, require us to refund license fees to our customers or to forgo future payments, or require us to redesign certain of our products, any one of which could harm our business and operating res ults.
Infringement claims can result in costly and time-consuming litigation, require us to enter into royalty arrangements, subject us to damages or injunctions restricting our sale of products, invalidate a patent or family of patents, require us to refund license fees to our customers or to forgo future payments, or require us to redesign certain of our products, any one of which could harm our business and operating results.
Moreover, our corporate headquarters, a significant portion of our research and development activities, our data centers, and 29 Table of Contents certain other critical business operations are located in California, near major earthquake faults and sites of recent wildfires, which may become more frequent, along with other extreme weather events, due to climate change.
Moreover, our corporate headquarters, a significant portion of our research and development activities, our data centers, and certain other critical business operations are located in California, near major earthquake faults and sites of recent wildfires, which may become more frequent, along with other extreme weather events, due to climate change.
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including the SEC, the Nasdaq Stock Market and the Financial Accounting Standards Board (FASB).
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including, among others, the SEC, the Nasdaq Stock Market and the Financial Accounting Standards Board (FASB).
An unfavorable ruling could include monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from manufacturing or selling one or more products. If we were to receive an unfavorable ruling on a matter, our business and results of operations could be materially harmed.
An unfavorable ruling could include monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from manufacturing or selling one or more products. If we were to receive an unfavorable ruling on a matter, our business and operating results could be materially harmed.
In addition, we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in the issuer’s credit quality or changes in interest rates. Catastrophic events and the effects of climate change may disrupt our business and harm our operating results.
In addition, we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in the issuer’s credit quality or changes in interest rates. Catastrophic events and the effects of climate change, pandemics or other unexpected events may disrupt our business and harm our operating results.
A disruption or failure of these systems in the event of a major earthquake, fire, extreme temperatures, drought, flood, telecommunications failure, cybersecurity attack, terrorist attack, epidemic or pandemic (including the ongoing COVID-19 pandemic), or other catastrophic events or climate change-related events could cause system interruptions, delays in our product development and loss of critical data and could prevent us from fulfilling our customers’ orders.
A disruption or failure of these systems in the event of a major earthquake, fire, extreme temperatures, drought, flood, telecommunications failure, cybersecurity attack, terrorist attack, epidemic or pandemic, or other catastrophic events or climate change-related events could cause system interruptions, delays in our product development and loss of critical data and could prevent us from fulfilling our customers’ orders.
For example, in response 16 Table of Contents to this increasing complexity, some customers may choose to focus on one discrete phase of the design process or opt for less advanced, but less risky, manufacturing processes that may not require the most advanced EDA products.
For example, in response to this increasing complexity, some customers may choose to focus on one discrete phase of the design process or opt for less advanced, but less risky, manufacturing processes that may not require the most advanced EDA products.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our business, financial performance and growth could be adversely affected. 28 Table of Contents Changes in the U.S. generally accepted accounting principles (U.S.
If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our business, financial performance and growth could be adversely affected. Changes in the U.S. generally accepted accounting principles (U.S.
A significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where we do business could reduce customer demand and cause customers to search for substitute products and services, make our products and services more expensive or unavailable for customers, increase the cost of our products and services, have a negative impact on customer confidence and spending, make our products less competitive, or otherwise have a materially adverse impact on our future revenue and profits, our customers’ and suppliers’ businesses, and our results of operations.
A significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where we do business could reduce customer demand and cause customers to search for substitute products and services, make our products and services more expensive or unavailable for customers, increase the cost of our products and services, have a negative impact on customer confidence and spending, make our products less competitive, or otherwise have a materially adverse impact on our backlog, future revenue and profits, our customers’ and suppliers’ business, operating results and financial condition.
The growth in sales of our hardware products subjects us to several risks, including: • Increased dependence on a sole supplier for certain hardware components, which may reduce our control over product quality and pricing and may lead to delays in production and delivery of our hardware products, should our supplier fail to deliver sufficient quantities of acceptable components in a timely fashion; • Increasingly variable revenue and less predictable revenue forecasts, due to fluctuations in hardware revenue, which is recognized upfront upon shipment, as opposed to most sales of software products for which revenue is recognized over time; • Potential reductions in overall margins, as the gross margin for our hardware products, is typically lower than those of our software products; • Longer sales cycles, which create risks of insufficient, excess or obsolete inventory and variations in inventory valuation, which can adversely affect our operating results; 25 Table of Contents • Decreases or delays in customer purchases in favor of next-generation releases, which may lead to excess or obsolete inventory or require us to discount our older hardware products; • Longer warranty periods than those of our software products, which may require us to replace hardware components under warranty, thus increasing our costs; and • Potential impacts on our supply chain, including due to the effects of increasing inflationary pressures and rising global interest rates, a sustained global semiconductor shortage and the COVID-19 pandemic.
The growth in sales of our hardware products subjects us to several risks, including, but not limited to: • Increased dependence on a sole supplier for certain hardware components, which may reduce our control over product quality and pricing and may lead to delays in production and delivery of our hardware products, should our supplier fail to deliver sufficient quantities of acceptable components in a timely fashion; • Increasingly variable revenue and less predictable revenue forecasts, due to fluctuations in hardware revenue, which is recognized upfront upon shipment, as opposed to most sales of software products for which revenue is recognized over time; • Potential reductions in overall margins, as the gross margin for our hardware products, is typically lower than those of our software products; • Longer sales cycles, which create risks of insufficient, excess or obsolete inventory and variations in inventory valuation, which can adversely affect our business, operating results and financial condition; • Decreases or delays in customer purchases in favor of next-generation releases or competitive products, which may lead to excess or obsolete inventory or require us to discount our older hardware products; 26 Table of Contents • Longer warranty periods than those of our software products, which may require us to replace hardware components under warranty, thus increasing our costs; and • Potential impacts on our supply chain, including the effects of increased global inflationary pressures and interest rates, and a sustained global semiconductor shortage.
We issue equity awards from employee equity plans as a key component of our overall compensation. We face pressure to limit the use of such equity-based compensation due to its dilutive effect on stockholders. If we are unable to grant attractive equity-based packages in the future, it could limit our ability to attract and retain key employees.
We issue equity awards from employee equity plans as a key component of our overall compensation. We face pressure to limit the use of such equity-based compensation due to dilutive effects on stockholders. If we are unable to offer attractive compensation packages in the future, it could limit our ability to attract and retain key employees.
For example, the ongoing geopolitical and economic uncertainty between the U.S. and China, the unknown impact of current and future U.S. and Chinese trade regulations as described above, and other geopolitical risks with respect to China and Taiwan may cause disruptions in the markets and industries we serve and our supply chain, decrease demand from customers for products using our solutions or cause other disruptions which could, directly or indirectly, materially harm our 19 Table of Contents business, financial condition and results of operations.
For example and as described above, the ongoing geopolitical and economic uncertainty between the U.S. and China, the unknown impact of current and future U.S. and Chinese trade regulations, and other geopolitical risks with respect to China and Taiwan may cause disruptions in the markets and industries we serve and our supply chain, decreased demand from customers for products using our solutions or other disruptions, which could, directly or indirectly, materially harm our business, operating results and financial condition.
Longer-term reduced demand for these or other products could result in reduced demand for design solutions and significant decreases in our average selling prices and product sales over time. Future economic downturns could also adversely affect our business.
Longer-term reduced demand for these or other products could result in reduced demand for design solutions and significant decreases in our average selling prices and product sales over time. Future economic downturns could also adversely affect our business, operating results and financial condition.
If we fail to successfully manage these competitive factors, fail to successfully balance the conflicting demands for innovative technology and lower overall costs, or fail to address new competitive forces, our business and financial condition will be adversely affected.
If we fail to successfully manage any of these competitive factors, fail to successfully balance the conflicting demands for innovative technology and lower overall costs, or fail to address new competitive forces, our business, operating results and financial condition will be adversely affected.
Further information regarding certain of these matters is contained in Part I, Item 3, Legal Proceedings . There are inherent limitations on the effectiveness of our controls and compliance programs. Regardless of how well designed and operated it is, a control system can provide only reasonable assurance that its objectives will be met.
Further information regarding certain of these matters is contained in Part I, Item 3, Legal Proceedings of this Annual Report on Form 10-K . There are inherent limitations on the effectiveness of our controls and compliance programs. Regardless of how well designed and operated it is, a control system can provide only reasonable assurance that its objectives will be met.
Many factors may cause our revenue or earnings to fluctuate, including: • Changes in demand for our products—especially products, such as hardware, generating upfront revenue—due to fluctuations in demand for our customers’ products and due to constraints in our customers’ budgets for research and development and EDA products and services; • Changes in demand for our products due to customers reducing their expenditures, whether as a cost-cutting measure or a result of their insolvency or bankruptcy, and whether due to inflationary pressures, rising global interest rates, a sustained global semiconductor shortage, the ongoing COVID-19 pandemic or other reasons; • Product competition in the EDA industry, which can change rapidly due to industry or customer consolidation and technological innovation; • Our ability to innovate and introduce new products and services or effectively integrate products and technologies that we acquire; • Failures or delays in completing sales due to our lengthy sales cycle, which often includes a substantial customer evaluation and approval process because of the complexity of our products and services; • Our ability to implement effective cost control measures; • Our dependence on a relatively small number of large customers, and on such customers continuing to renew licenses and purchase additional products from us, for a large portion of our revenue; • Changes to the amount, composition and valuation of, and any impairments to or write-offs of, our inventory; • Changes in the mix of our products sold, as increased sales of our products with lower gross margins, such as our hardware products, may reduce our overall margins; • Expenses related to our acquisition and integration of businesses and technologies; • Changes in tax rules, as well as changes to our effective tax rate, including the tax effects of infrequent or unusual transactions and tax audit settlements; • Delays, increased costs or quality issues resulting from our reliance on third parties to manufacture our hardware products, which includes a sole supplier for certain hardware components; • Natural variability in the timing of IP drawdowns, which can be difficult to predict; • General economic and political conditions that affect the semiconductor and electronics industries, such as disruptions to international trade relationships, including tariffs, export licenses, or other trade barriers affecting our or our suppliers’ products, as well as impacts due to the ongoing COVID-19 pandemic; and • Changes in accounting standards, which may impact the way we recognize our revenue and costs and impact our earnings.
Our historical results should not be viewed as indicative of our future performance due to these periodic fluctuations. 20 Table of Contents Many factors may cause our backlog, revenue or earnings to fluctuate, including, among other things: • Changes in demand for our products—especially products, such as hardware, generating upfront revenue—due to fluctuations in demand for our customers’ products and due to constraints in our customers’ budgets for research and development and EDA products and services; • Changes in demand for our products due to customers reducing their expenditures, whether as a cost-cutting measure or a result of their insolvency or bankruptcy, and whether due to increased global inflationary pressures and interest rates and a sustained global semiconductor shortage or other reasons; • Product competition in the EDA industry, which can change rapidly due to industry or customer consolidation and technological innovation; • Our ability to innovate and introduce new products and services or effectively integrate products and technologies that we acquire; • Failures or delays in completing sales due to our lengthy sales cycle, which often includes a substantial customer evaluation and approval process because of the complexity of our products and services; • Our ability to implement effective cost control measures; • Our dependence on a relatively small number of large customers, and on such customers continuing to renew licenses and purchase additional products from us, for a large portion of our revenue; • Changes to the amount, composition and valuation of, and any impairments to or write-offs of, our assets or strategic investments; • Changes in the mix of our products sold, as increased sales of our products with lower gross margins, such as our hardware products, may reduce our overall margins; • Expenses related to our acquisition and integration of businesses and technologies; • Changes in tax rules, as well as changes to our effective tax rate, including the tax effects of infrequent or unusual transactions and tax audit settlements; • Delays, increased costs or quality issues resulting from our reliance on third parties to manufacture our hardware products, which includes a sole supplier for certain hardware components; • Natural variability in the timing of IP drawdowns, which can be difficult to predict; • General economic and political conditions that affect the semiconductor and electronics industries, such as disruptions to international trade relationships, including tariffs, export licenses, or other trade barriers affecting our or our suppliers’ products; and • Changes in accounting standards, which may impact the way we recognize our revenue and costs and impact our earnings.
We also offer software security and quality testing solutions. If we fail to identify new and increasingly sophisticated methods of cyber attacks or fail to invest sufficient resources in research and development regarding new threat vectors, our security testing products and services may fail to detect vulnerabilities in our customers’ software code.
If we fail to identify new and increasingly sophisticated methods of cyber attacks or fail to invest sufficient resources in research and development regarding new threat vectors, our security testing products and services may not detect vulnerabilities in our customers’ software code.
In addition, we could face scrutiny from certain stakeholders for the scope or nature of such initiatives or goals, or for any revisions to these goals.
We could also face scrutiny from certain stakeholders for the scope or nature of such initiatives or goals, or for any revisions to these goals.
The growth of the EDA industry as a whole, our Semiconductor & System Design segment product sales, and, to some extent, our Software Integrity segment product sales, are dependent on the semiconductor and electronics industries. A substantial portion of our business and revenue depends upon the commencement of new design projects by semiconductor manufacturers, systems companies and their customers.
The growth of the EDA industry as a whole, sales in our Design Automation and Design IP segments, and, to some extent, our Software Integrity segment sales are dependent on the semiconductor and electronics industries. A substantial portion of our business and revenue depends upon the commencement of new design projects by semiconductor manufacturers, systems companies and their customers.
Reduced customer spending or the loss of customers, particularly our large customers, could adversely affect our business and financial condition. In addition, we and our competitors may acquire businesses and technologies to 18 Table of Contents complement and expand our respective product offerings.
Reduced customer spending or the loss of customers, particularly our large customers, could adversely affect our business, operating results and financial condition. In addition, we and our competitors may acquire businesses and technologies to complement and expand our respective product offerings.
Moreover, although we have implemented compliance programs and compliance training for employees, such measures may not prevent our employees, contractors or agents from breaching or circumventing our policies or violating applicable laws and regulations. Failure of our control systems and compliance programs to prevent error, fraud or violations of law could have a material adverse impact on our business.
Our compliance programs and compliance training for employees may not prevent our employees, contractors or agents from breaching or circumventing our policies or violating applicable laws and regulations. Failure of our control systems and compliance programs to prevent error, fraud or violations of law could have a material adverse impact on our business.
A catastrophic event or other extreme weather event that results in the destruction or disruption of our data centers or our critical business or information technology systems would severely affect our ability to conduct normal business operations and, as a result, our operating results would be adversely affected. Item 1B. Unresolved Staff Comments None.
A catastrophic event or other extreme weather event that results in the destruction or disruption of our data centers or our critical business or IT systems would severely affect our ability to conduct normal business operations and, as a result, our operating results would be adversely affected. Item 1B. Unresolved Staff Comments None. Item 1C. Cybersecurity Not applicable.
We expect to make additional acquisitions and strategic investments in the future, but we may not find suitable acquisition or investment targets, or we may not be able to consummate desired acquisitions or investments due to unfavorable credit markets, commercially unacceptable terms or other risks, which could harm our operating results.
We expect to make additional acquisitions and strategic investments in the future, but we may not find suitable acquisition or investment targets, or we may not be able to consummate desired acquisitions or investments due to unfavorable credit markets, commercially unacceptable terms, failure to obtain regulatory approvals, competitive bid dynamics or other risks, which could harm our operating results.
An actual or perceived failure to identify security flaws may harm the perceived reliability of our security testing products and services, and could result in a loss of customers or sales, or an increased cost to remedy a problem.
An actual or perceived failure to detect security flaws may negatively impact the perceived reliability of our security testing products and services, and could result in a loss of customers or sales, or an increased cost to remedy a problem.
Semiconductor device functionality requirements continually increase while feature widths decrease, substantially increasing the complexity, cost and risk of chip design and manufacturing. At the same time, our customers and potential customers continue to demand an overall lower total cost of design, which can lead to the consolidation of their purchases with one vendor.
Semiconductor device functionality requirements continually increase while feature widths decrease, which substantially increases the complexity, cost and risk of chip design and manufacturing. At the same time, our customers and potential customers continue to demand a lower total cost of design, which can lead to the consolidation of their purchases from one vendor.
Industry Risks Uncertainty in the global economy, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition.
Industry Risks Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition.
Changes to the Tax Act, other regulatory changes, and changes in our forecasts of future income could result in an adjustment to the deferred tax asset and a related charge to earnings that could materially affect our financial results.
Changes to tax laws and regulations, and changes in our forecasts of future income could result in an adjustment to the deferred tax asset and a related charge to earnings that could materially affect our financial results.
Difficulties in any of our new product development efforts or our efforts to enter adjacent markets, including as a result of delays or disruptions, new export control restrictions or the ongoing COVID-19 pandemic, could adversely affect our operating results and financial condition.
Difficulties in any of our new product development efforts or our efforts to enter adjacent markets, including as a result of delays or disruptions, or export control restrictions, could adversely affect our business, operating results and financial condition.
Future changes in the Export Regulations, including changes in the enforcement and scope of such regulations, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally. In some cases, such changes could prevent the export or import of our products.
Future changes to the Export Regulations, including 18 Table of Contents changes in the enforcement and scope of such regulations, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally.
Furthermore, our growth and recent acquisitions in the software security and quality testing space may increase our 22 Table of Contents visibility as a security-focused company and may make us a more attractive target for attacks on our own information technology infrastructure.
Furthermore, our growth and recent acquisitions in the software security and quality testing space may increase our visibility as a security-focused company and may make us a more attractive target for attacks on our own IT infrastructure.
Although we believe these solutions are complementary to our EDA tools, we have less experience and a more limited operating history in offering software quality testing and security products and services, and our efforts in this area may not be successful.
Although we believe these solutions are complementary to our EDA tools, we have less experience and a more limited operating history in offering software quality testing and security products and services, and our efforts in creating AI technology solutions such as Synopsys.ai may not be successful.
We have also continually expanded our non-U.S. operations. This strategy requires us to recruit and retain qualified technical and managerial employees, manage multiple remote locations performing complex software development projects and ensure intellectual property protection outside of the U.S.
This strategy requires us to recruit and retain qualified technical and managerial employees, manage multiple remote locations performing complex software development projects, and ensure intellectual property protection outside of the U.S.
Business Operations Risks The global nature of our operations exposes us to increased risks and compliance obligations that may adversely affect our business. We derive roughly half of our revenue from sales outside the United States, and we expect our orders and revenue to continue to depend on sales to customers outside the U.S.
Business Operations Risks The global nature of our operations exposes us to increased risks and compliance obligations. We derive roughly half of our revenue from sales outside the United States, and we expect our orders and revenue to continue to depend on sales to customers outside the U.S. We have also continually expanded our non-U.S. operations.
Further economic instability could also adversely affect the banking and financial services industry and result in credit downgrades of the banks we rely on for foreign currency forward contracts, credit and banking transactions, and deposit services, or cause them to default on their obligations. Additionally, the banking and financial services industries are subject to complex laws and are heavily regulated.
Further economic instability could also adversely affect the banking and financial services industry and result in bank failures or credit downgrades of the banks we rely on for foreign currency forward contracts, credit and banking transactions, and deposit services, or cause them to default on their obligations.
These changes, when enacted by various countries in which we do business, may increase our taxes in these countries. Changes to these and other areas in relation to international tax reform, including future actions taken by foreign governments in response to the Tax Act, could increase uncertainty and may adversely affect our tax rate and cash flow in future years.
Changes to these and other areas in relation to international tax reform, including future actions taken by foreign governments in response to the Tax Act, could increase uncertainty and may adversely affect our tax rate and cash flow in future years.
Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions.
Our operations are subject to income and transaction taxes in the U.S. and in multiple foreign jurisdictions.
Our software products, hosted solutions, and software security and quality testing solutions may also be vulnerable to attacks, including phishing, exploits of our code or our system configurations, malicious code (such as viruses and worms), distributed denial-of-service attacks, sophisticated attacks conducted or sponsored by nation-states, advanced persistent threat intrusions, ransomware and other malware.
Our software products, hosted solutions and software security and quality testing solutions are also targeted by hackers and may be compromised by, among other things, phishing, exploits of our code or our system configurations, malicious code (such as viruses and worms), distributed denial-of-service attacks, sophisticated 22 Table of Contents attacks conducted or sponsored by nation-states, advanced persistent threat intrusions, ransomware and other malware.
Legal and Regulatory Risks Our results could be adversely affected by a change in our effective tax rate as a result of tax law changes and related new or revised guidance and regulations, changes in our geographical earnings mix, unfavorable government reviews of our tax returns, material differences between our forecasted and actual annual effective tax rates, future changes to our tax structure, or by evolving enforcement practices.
Legal and Regulatory Risks Our results could be adversely affected by a change in our effective tax rate, changes in our geographical earnings mix, unfavorable government reviews of our tax returns, material differences between our forecasted and actual annual effective tax rates, or future changes to our tax structure.
Our investment portfolio carries both interest rate risk and credit risk and may be negatively impacted by deteriorating economic conditions and rising global interest rates.
Our investment portfolio carries both interest rate risk and credit risk and may be negatively impacted by deteriorating economic conditions, increased global inflationary pressures and interest rates and bank failures.
The Tax Act includes certain provisions that began to affect our income in the first quarter of fiscal 2019, while other sections of the Tax Act and related regulations will begin to affect our business in the first quarter of fiscal 2023. There are various proposals in Congress to amend certain provisions of the Tax Act.
The Tax Act includes certain provisions that began to affect our income in the first quarter of fiscal 2019, while other sections of the Tax Act and related regulations began to affect our business in the first quarter of fiscal 2023.
Consolidation among our customers and within the industries in which we operate, as well as our dependence on a relatively small number of large customers, may negatively impact our operating results.
In some cases, such changes could prevent the export or import of our products. Consolidation among our customers and within the industries in which we operate, as well as our dependence on a relatively small number of large customers, may negatively impact our operating results.
International Trade Commission by Bell Semiconductor LLC (Bell Semic), a patent monetization entity, based on Bell Semic’s allegation that the customers’ use of one or more features of certain of our products infringes one or more of six patents held by Bell Semic.
International Trade Commission by Bell Semiconductor LLC (Bell Semic), a patent monetization entity, based on Bell Semic’s allegation that the customers’ use of one or more features of certain of our products infringes one or more of six patents held by Bell Semic. We are defending some of our customers consistent with the terms of our End User License Agreement.
These assumptions, judgments and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual results could differ materially from our estimates, and such differences could significantly impact our financial results.
These assumptions, judgments and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements.
Our ability to use these credits is dependent upon having sufficient future taxable income in the relevant jurisdiction and in the case of foreign tax credits, how such credits are treated under current and potential future tax law.
Examinations." We maintain significant deferred tax assets related to certain tax credits and capitalized research and development expenditures. Our ability to use these deferred tax assets is dependent upon having sufficient future taxable income in the relevant jurisdiction and in the case of foreign tax credits, how such credits are treated under current and potential future tax law.
If any of the foregoing were to occur, we could experience negative publicity and our reputation could suffer, customers could stop buying our products, we could face lawsuits and potential liability, and our financial performance could be negatively impacted. If we fail to protect our proprietary technology, our business will be harmed.
As a result, we could experience negative publicity and our reputation could suffer, customers could stop buying our products, we could face lawsuits and potential liability, and our business, operating results and financial condition could be negatively impacted. If we fail to protect our proprietary technology, our business will be harmed.
Some open source licenses could require us, under certain circumstances, to make available or grant licenses to any modifications or derivative works we create based on the open source software.
Some of our products and technology, including those we acquire, may include software licensed under open source licenses. Some open source licenses could require us, under certain circumstances, to make available or grant licenses to any modifications or derivative works we create based on the open source software.
We store sensitive data, including intellectual property, our proprietary business information and that of our customers, and confidential employee information, in our data centers, on our networks or on the cloud.
We store sensitive data, including intellectual property, our proprietary business information and that of our customers, and personal information, in our data centers, on our networks or on the cloud. In addition, our operations depend upon our information technology (IT) systems.
Demand for our products and services could decrease and our financial condition and results of operations could be adversely affected if growth in the semiconductor and electronics industries slows or stalls, including due to rising inflation and global interest rates, a continued or worsening global supply chain disruption, or the impact of the COVID-19 pandemic.
Demand for our products and services could decrease and our business, financial condition and operating results could be adversely affected if growth in the semiconductor and electronics industries slows or stalls, including due to increased global inflationary pressures and interest rates, a continued or worsening global supply chain disruption, geopolitical pressures or economic slowdowns or recessions.
Furthermore, China’s stated policy of becoming a global leader in the semiconductor industry may lead to increased competition and further disruption of international trade relationships, including, but not limited to, additional government trade restrictions.
Such risks that may be heightened by uncertain macroeconomic conditions could include China’s stated policy of becoming a global leader in the semiconductor industry may lead to increased competition or further disruption of international trade relationships, including, but not limited to, additional government trade restrictions.
In particular, our sales and infrastructure are vulnerable to regional or worldwide health conditions, including the effects of the outbreak of contagious diseases such as the COVID-19 pandemic.
In particular, our sales and infrastructure are vulnerable to regional or worldwide health conditions, including the effects of the outbreak of contagious diseases, such as the government-imposed restrictions that curtailed global economic activity and caused substantial volatility in global financial markets during the COVID-19 pandemic.
In our Software Integrity segment, we compete with numerous other solution providers, many of which focus on specific aspects of software security or quality analysis. We also compete with frequent new entrants, which include start-up companies and more established software companies. The industries in which we operate are highly competitive, with new competitors entering these markets both domestically and internationally.
We also compete with frequent new entrants, which include start-up companies and more established software companies. The industries in which we operate are highly competitive, with new competitors entering these markets both domestically and internationally.
If we violate these laws and regulations, we could be subject to fines, penalties or criminal sanctions, and may be prohibited from conducting business in one or more countries.
If we violate these laws and regulations, we could be subject to fines, penalties or criminal sanctions, and may be prohibited from conducting business in one or more countries. Any violation individually or in the aggregate could have a material adverse effect on our operations and financial condition.
Legal fees related to such litigation will increase our operating expenses and may reduce our net income. We may not be able to realize the potential financial or strategic benefits of the acquisitions we complete, or find suitable target businesses and technology to acquire, which could hurt our ability to grow our business, develop new products or sell our products.
We may not be able to realize the potential financial or strategic benefits of the transactions we complete, or find suitable target businesses and technology to acquire, which could hurt our ability to grow our business, develop new products or sell our products and services. Acquisitions and strategic investments are an important part of our growth strategy.
As part of the evolution of our business, we have made substantial investments to develop new products and enhancements to existing products through our acquisitions and research and development efforts.
We may pursue new product and technology initiatives, and if we fail to successfully carry out these initiatives, we could be adversely impacted. As part of the evolution of our business, we have made substantial investments to develop new products and enhancements to existing products through our acquisitions and research and development efforts.
We intend to meet our U.S. cash spending needs primarily through our existing U.S. cash balances, ongoing U.S. cash flows, and available credit under our term loan and revolving credit facilities.
As of October 31, 2023, approximately 52% of our worldwide cash and cash equivalents balance is held by our international subsidiaries. We intend to meet our U.S. cash spending needs primarily through our existing U.S. cash balances, ongoing U.S. cash flows, and available credit under our term loan and revolving credit facilities.
In addition, difficult economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults. Any of the foregoing could cause adverse effects on our business, operating results and financial condition, and could cause our stock price to decline. The growth of our business depends primarily on the semiconductor and electronics industries.
Any of the foregoing could cause adverse effects on our business, operating results and financial condition, and could cause our stock price to decline. The growth of our business depends primarily on the semiconductor and electronics industries.
We operate in highly competitive industries, and if we do not continue to meet our customers’ demand for innovative technology at lower costs, our products may not be competitive or may become obsolete.
We operate in highly competitive industries, and if we do not continue to meet our customers’ demand for innovative technology at lower costs, our products may not be competitive or may become obsolete. In our Design Automation segment, we compete against EDA vendors that offer a variety of products and services, such as Cadence Design Systems, Inc. and Siemens EDA.
In our Semiconductor & System Design segment, we compete against EDA vendors that offer a variety of products and services, such as Cadence Design Systems, Inc. and Siemens EDA. We also compete with other EDA vendors, including new entrants to the marketplace, that offer products focused on one or more discrete phases of the IC design process.
We also compete with other EDA vendors, including new entrants to the marketplace, that offer products focused on one or more discrete phases of the IC design process. Moreover, our customers internally develop design tools and capabilities that compete with our products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe currently lease approximately 2.6 million square feet of space in 29 countries other than the United States, and own buildings in Wuhan, China and Hsinchu, Taiwan as well as office space in Xiamen, China and Yongin-si, South Korea . These offices are used primarily for sales and support, service, and research and development activities for our business segments.
Biggest changeThese offices are used primarily for sales and support, marketing, and administrative activities as well as research and development for our business segments. 30 Table of Contents We currently lease approximately 2.9 million square feet of space in 30 countries other than the United States, and own buildings in Wuhan, China and Hsinchu, Taiwan as well as office space in Xiamen, China and Yongin-si, South Korea .
As our needs change, from time to time, we may relocate, expand, and/or otherwise increase or decrease the size of our operations, offices or personnel.
These offices are used primarily for sales and support, service, and research and development activities for our business segments. As our needs change, from time to time, we may relocate, expand, and/or otherwise increase or decrease the size of our operations, offices or personnel.
We currently lease approximately 1 million square feet of space in 33 offices throughout the United States, inclusive of our principal offices, but excluding 407,000 square feet which are currently sublet to third parties and 120,000 square feet, which we own and currently lease to third parties. We own buildings in Oregon and California.
Item 2. Properties Our principal o ffices are currently located in Sunnyvale, California. We currently lease approximately 1.2 million square feet of space in 28 offices throughout the United States, of which we sublet 340,000 square feet to third parties. We currently own 357,000 square feet, of which we lease 238,000 square feet to third parties.
Removed
Item 2. Properties Our principal o ffices are currently located in Mountain View, California.
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These offices are used primarily for sales and support, marketing, and administrative activities as well as research and development for our business segments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn response to a request by the Administrative Court, we filed an additional brief on November 23, 2022. We expect a hearing to be scheduled in early 2023. 30 Table of Contents For further discussion of the Hungary audit, see Note 15 of the Notes to Consolidated Financial Statements under the heading “Non-U.S.
Biggest changeIncome Taxes of the Notes to Consolidated Financial Statements in this Annual Report for a discussion of our Hungary audit under the heading “Non-U.S.
If the potential loss from any claim or legal proceeding is considered probable and the amount is estimable, we accrue a liability for the estimated loss. Legal proceedings are inherently uncertain and as circumstances change, it is possible that the amount of any accrued liability may increase, decrease or be eliminated.
If the potential loss from any claim or legal proceeding is considered probable and the amount is estimable, we accrue a liability for the estimated loss. Legal proceedings are inherently uncertain and as circumstances change, it is possible that the amount of any accrued liability may increase, decrease or be eliminated. Hungarian Tax Matter See Note 15.
On November 8, 2022, the ITC instituted the investigations. Synopsys is not named as a respondent or defendant in any of the aforementioned actions; however, certain of the respondents and defendants are Synopsys customers and have sought defense and indemnity from Synopsys under their End User License Agreements in response to Bell Semic’s allegations.
Synopsys is not named as a respondent or defendant in any of the aforementioned actions; however, certain of the respondents and defendants are Synopsys customers and have sought defense and indemnity from Synopsys under their End User License Agreements in response to Bell Semic’s allegations.
Synopsys has offered to defend some of its customers consistent with the terms of its End User License Agreement. On November 18, 2022, Synopsys and another EDA vendor filed an action for Declaratory Judgment of invalidity and non-infringement as to each of the six patents asserted by Bell Semic in the aforementioned actions.
Synopsys is defending some of its customers consistent with the terms of its End User License Agreement. In November and December 2022, Synopsys and other EDA vendors filed actions for Declaratory Judgment of invalidity and/or non-infringement as to each of the six patents asserted by Bell Semic in the aforementioned actions.
On November 28, 2022, Synopsys and another EDA vendor also filed a Motion for Preliminary Injunction seeking to enjoin Bell Semic from proceeding with the ITC investigations. Item 4. Mine Safety Disclosures Not applicable. 31 Table of Contents PART II
Bell Semic’s motion to dismiss the Declaratory Judgment actions was denied on April 27, 2023. Synopsys and other EDA vendors also filed Motions for Preliminary Injunction seeking to enjoin Bell Semic from proceeding with the ITC investigations and patent infringement lawsuits. The Motions for Preliminary Injunction were denied without prejudice on April 27, 2023.
Removed
Hungarian Tax Matter In 2017, the Hungarian Tax Authority (the HTA) assessed withholding taxes of approximately $25.0 million and interest and penalties of $11.0 million against our Hungary subsidiary (Synopsys Hungary). Synopsys Hungary contested the assessment with the Hungarian Administrative Court (Administrative Court).
Added
On November 8, 2022, the ITC instituted the investigations. On May 8, 2023, Bell Semic filed motions to voluntarily withdraw the pending ITC investigations.
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In 2019, as required under Hungarian law, Synopsys Hungary paid the assessment and recorded a tax expense due to an unrecognized tax benefit of $17.4 million, which is net of estimated U.S. foreign tax credits. The Administrative Court found against Synopsys Hungary, and we appealed to the Hungarian Supreme Court.
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Bell Semic responded to the Declaratory Judgment complaint on May 11, 2023, asserting counterclaims for patent infringement against the EDA vendors. On December 6, the Court granted Synopsys’ Motion for Summary Judgment of No Indirect Infringement of the Asserted Claims and stated it would entertain a motion for attorneys fees. The other EDA vendors settled with Bell Semic.
Removed
During 2021, the Hungarian Supreme Court heard our appeal and remanded the case to the Administrative Court for further proceedings. The Administrative Court once again ruled against Synopsys Hungary, and we filed another appeal with the Hungarian Supreme Court.
Added
The actions for Declaratory Judgment is set for trial on January 16, 2024. 31 Table of Contents Item 4. Mine Safety Disclosures Not applicable. 32 Table of Contents PART II
Removed
The Hungarian Supreme Court heard our appeal on January 27, 2022, vacated the lower court's decision and remanded th e case back to the Administrative Court for further proceedings . Hearings with the Administrative Court were held on June 30, 2022 and September 22, 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePursuant to the August 2022 ASR, we made a prepayment of $240.0 million to receive initial deliveries of shares valued at $192.0 million. The remaining balance of $48.0 million was settled in October 2022. Total shares purchased under the August 2022 ASR were approximately 0.8 million shares, at an average purchase price of $307.60 per share.
Biggest changeIn August 2023, we entered into an accelerated share repurchase agreement (the August 2023 ASR) to repurchase an aggregate of $300.0 million of our common stock. Pursuant to the August 2023 ASR, we made a prepayment of $300.0 million to receive initial deliveries of shares valued at $255.0 million. The remaining balance of $45.0 million was settled in November 2023.
The graph assumes that $100 was invested in Synopsys common stock on October 27, 2017 (the last trading day before the beginning of our fifth preceding fiscal year) and in each of the indexes on October 27, 2017 (the closest month end) and that all dividends were reinvested. No cash dividends were declared on our common stock during such time.
The graph assumes that $100 was invested in Synopsys common stock on November 2, 2018 (the last trading day before the beginning of our fifth preceding fiscal year) and in each of the indexes on October 31, 2018 (the closest month end) and that all dividends were reinvested. No cash dividends were declared on our common stock during such time.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the Nasdaq Global Select Market under the symbol “SNPS.” As of December 7, 2022, we had 227 stockholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the Nasdaq Global Select Market under the symbol “SNPS.” As of December 6, 2023, we had 219 stockholders of record.
The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* *$100 invested on October 27, 2017 in stock or index, including reinvestment of dividends. Fiscal year ending October 29.
The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* *$100 invested on November 2, 2018 in stock or October 31, 2018 in index, including reinvestment of dividends.
The information presented above in the stock performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, except to the extent that we subsequently specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or Exchange Act. 32 Table of Contents Dividends We have not paid cash dividends on our common stock.
Fiscal year ending October 28. 33 Table of Contents The information presented above in the stock performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, except to the extent that we subsequently specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or Exchange Act.
The table below sets forth information regarding our repurchases of our common stock during the three months ended October 31, 2022: Period Total number of shares purchased (1) Average price paid per share (1) Total number of shares purchased as part of publicly announced programs Maximum dollar value of shares that may yet be purchased under the programs Month #1 July 31, 2022 through September 3, 2022 644,623 $ 364.14 637,013 $ 1,500,000,000 Month #2 September 4, 2022 through October 1, 2022 191,624 $ 313.09 — $ 1,440,005,356 Month #3 October 2, 2022 through October 29, 2022 372,813 $ 236.06 244,954 $ 1,400,000,207 Total 1,209,060 881,967 $ 1,400,000,207 (1) Amounts are calculated based on the settlement date.
The table below sets forth information regarding our repurchases of our common stock during the three months ended October 28, 2023: Period Total number of shares purchased (1) Average price paid per share (1) Total number of shares purchased as part of publicly announced programs Maximum dollar value of shares that may yet be purchased under the programs Month #1 July 30, 2023 through September 2, 2023 610,574 $ 491.34 610,574 $ 194,276,393 Month #2 September 3, 2023 through September 30, 2023 $ 194,276,393 Month #3 October 1, 2023 through October 28, 2023 $ 194,276,393 Total 610,574 610,574 $ 194,276,393 (1) Amounts are calculated based on the settlement date.
Stock Repurchase Program Our Board of Directors (the Board) previously approved a stock repurchase program (the Program) with authorization to purchase up to $1.0 billion of our common stock in December 2021. The Board approved a replenishment of the Program with authorization to purchase up to $1.5 billion in September 2022.
Dividends We have not paid cash dividends on our common stock. Stock Repurchase Program In fiscal 2022, our Board of Directors approved a stock repurchase program (the Program) with authorization to purchase up to $1.5 billion of our common stock. As of October 31, 2023, $194.3 million remained available for future repurchases under the Program.
Removed
As of October 31, 2022, $1.4 billion remained available for future repurchases under the program. In August 2022, we entered into an accelerated share repurchase agreement (the August 2022 ASR) to repurchase an aggregate of $240.0 million of our common stock.
Added
T otal shares purchased under the August 2023 ASR were approximately 0.6 million shares, at an average purchase price of $466.71 per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

89 edited+34 added−25 removed26 unchanged
Biggest changeThese increases were partially offset by a decrease of $25.5 million in the fair value of our executive deferred compensation plan assets. 40 Table of Contents General and Administrative Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) $ 353.8 $ 323.0 $ 30.8 10 % Percentage of total revenue 7 % 8 % The increase in general and administrative expenses for fiscal 2022 compared to fiscal 2021 was primarily due to increases of $30.8 million in legal, consulting and other professional fees, $18.6 million in maintenance and depreciation expenses, and $13.3 million in personnel-related costs due to headcount increases from hiring.
Biggest changeSales and Marketing Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Sales and marketing expenses $ 889.0 $ 779.8 $ 109.2 14 % Percentage of total revenue 15 % 15 % The increase in sales and marketing expenses for fiscal 2023 compared to fiscal 2022 was primarily due to increases of $62.9 million in employee-related costs due to headcount increases and higher sales commissions, $13.4 million in the change in fair value of our executive deferred compensation plan assets, $12.0 million in travel and marketing costs due to an increased number of in-person meetings and events, and $8.5 million in facility costs. 42 Table of Contents General and Administrative Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) General and administrative expenses $ 410.3 $ 353.8 $ 56.5 16 % Percentage of total revenue 7 % 7 % The increase in general and administrative expenses for fiscal 2023 compared to fiscal 2022 was primarily due to increases of $23.4 million in personnel-related costs due to headcount increases from hiring, $16.4 million in maintenance and depreciation expenses, $12.9 million in the change in fair value of our executive deferred compensation plan assets, and $7.4 million in legal, consulting and other professional fees.
Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include, but are not limited to: • future expected cash flows from software license sales, subscriptions, support agreements, consulting contracts and acquired developed technologies and patents; • historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; • estimated obsolescence rates used in valuing technology related intangible assets; • the expected use of the acquired assets; and • discount rates used to discount expected future cash flows to present value, which are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. 36 Table of Contents The fair value of the definite-lived intangibles was determined using variations of the income approach.
Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include, but are not limited to: • future expected cash flows from software license sales, subscriptions, support agreements, consulting contracts and acquired developed technologies and patents; • historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; • estimated obsolescence rates used in valuing technology related intangible assets; • the expected use of the acquired assets; and • discount rates used to discount expected future cash flows to present value, which are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. 38 Table of Contents The fair value of the definite-lived intangibles was determined using variations of the income approach.
Recent Developments Developments in Export Control Regulations On October 7, 2022, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce published changes to U.S. export control regulations (U.S. Export Regulations), including new restrictions on Chinese entities' ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.
Developments in Export Control Regulations On October 7, 2022, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce published changes to U.S. export control regulations (U.S. Export Regulations), including new restrictions on Chinese entities' ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors.
F or more information regarding our revenue as of October 31, 2022, including our contract balances as of such date, see Note 3 of the Notes to Consolidated Financial Statements . For fiscal 2022 compared to fiscal 2021, revenues increased due to the continued organic growth of our business in all product groups and geographies.
F or more information regarding our revenue as of October 31, 2023, including our contract balances as of such date, see Note 3. Revenue of the Notes to Consolidated Financial Statements . For fiscal 2023 compared to fiscal 2022, revenues increased due to the continued organic growth of our business in all product groups and geographies.
Liquidity and Capital Resources Our principal sources of liquidity are funds generated from our business operations and funds that may be drawn down under our revolving credit and term loan facilities. As of October 31, 2022 , we held $1.6 billion in cash, cash equivalents and short-term investments.
Liquidity and Capital Resources Our principal sources of liquidity are funds generated from our business operations and funds that may be drawn down under our revolving credit and term loan facilities. As of October 31, 2023 , we held $1.6 billion in cash, cash equivalents and short-term investments.
We believe that our estimates and assumptions related to the fair value of acquired intangible assets are reasonable, but significant judgment is involved. Results of Operations The discussion of our consolidated results of operations includes year-over-year comparisons of fiscal 2022 changes compared to fiscal 2021.
We believe that our estimates and assumptions related to the fair value of acquired intangible assets are reasonable, but significant judgment is involved. Results of Operations The discussion of our consolidated results of operations includes year-over-year comparisons of fiscal 2023 changes compared to fiscal 2022.
Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
Although open purchase orders are considered enforceable and legally binding, the terms may allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
Currently, a reasonably reliable estimate of timing of payments related to uncertain tax benefits in individual years beyond fiscal 2022 cannot be made due to uncertainties in timing of the commencement and settlement of potential tax audits.
Currently, a reasonably reliable estimate of timing of payments related to uncertain tax benefits in individual years beyond fiscal 2023 cannot be made due to uncertainties in timing of the commencement and settlement of potential tax audits.
We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software 37 Table of Contents updates are integral to maintaining the utility of the software licenses.
We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses.
The pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions, our debt repayment obligations, our stock price, and economic and market conditions. The IR Act was enacted in the United States on August 16, 2022.
The pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions, our debt repayment obligations, our stock price, and economic and market conditions. 46 Table of Contents The IR Act was enacted in the United States on August 16, 2022.
Our revenue growth from period to period is expected to vary based on the mix of our time based and upfront products. Based on our leading technologies, customer relationships, business model, diligent expense management, and acquisition strategy, we believe that we will continue to execute our strategies successfully.
Our revenue growth from period to period is expected to vary based on the mix of our time based and upfront products. Based on our leading technologies, customer relationships, business model, diligent 35 Table of Contents expense management, and acquisition strategy, we believe that we will continue to execute our strategies successfully.
The increase in upfront products revenue for fiscal 2022 compared to fiscal 2021 was primarily due to an increase in the sale of IP products and hardware products driven by higher demand from customers. Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP products and hardware sales.
The increase in upfront products revenue for fiscal 2023 compared to fiscal 2022 was primarily due to an increase in the sale of IP products and hardware products driven by higher demand from customers. Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP and hardware product sales.
Export Regulations in the future, but we cannot forecast the scope or timing of such changes. We will continue to monitor such developments, including potential additional trade restrictions, and other regulatory or policy changes by the U.S. and foreign governments.
W e anticipate additional changes to U.S. Export Regulations in the future, but we cannot forecast the scope or timing of such changes. We will continue to monitor such developments, including potential additional trade restrictions, and other regulatory or policy changes by the U.S. and foreign governments.
Cost of products revenue. Cost of products revenue includes costs related to products sold and software licensed, hardware-related costs, allocated operating costs related to product support and distribution, royalties paid to third-party vendors, and the amortization of capitalized software development costs. Cost of maintenance and service revenue.
Cost of products revenue. Cost of products revenue includes costs related to products sold and software licensed, hardware-related costs including inventory provisions, allocated operating costs related to product support and distribution, royalties paid to third-party vendors, and the amortization of capitalized software development costs. Cost of maintenance and service revenue.
We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be sufficient to satisfy our cash requirements and capital return program over at least the next 12 months.
We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be sufficient to satisfy our cash requirements and capital return program over the next 12 months and beyond.
For example, we experience fluctuations in our revenues due to factors such as the timing of IP product sales, consulting projects, Flexible Spending Account (FSA) drawdowns, royalties, and hardware sales.
For example, we experience fluctuations in our revenues due to factors such as the timing of IP product sales, Flexible Spending Account (FSA) drawdowns, royalties, and hardware products sales.
When a 53-week year occurs, we include the additional week in the first quarter to realign fiscal quarters with calendar quarters. Fiscal 2022, 2021 and 2020 were 52-week years ending on October 29, 2022, October 30, 2021, and October 31, 2020, respectively. Fiscal 2023 will be a 52-week year.
When a 53-week year occurs, we include the additional week in the first quarter to realign fiscal quarters with calendar quarters. Fiscal 2023, 2022 and 2021 were 52-week years ending on October 28, 2023, October 29, 2022, and October 30, 2021, respectively. Fiscal 2024 will be a 53-week year.
For a discussion of revenue by geographic areas, see Note 17 of the Notes to Consolidated Financial Statements.
For a discussion of revenue by geographic areas, see Note 17. Segment Disclosure of the Notes to Consolidated Financial Statements.
Such fluctuations will continue to be impacted by the timing of shipments or FSA drawdowns due to customer requirements.
Such fluctuations will continue to be impacted by the timing of shipments and FSA drawdowns due to customer requirements.
Cost of maintenance and service revenue includes costs to deliver our maintenance and consulting services, such as hotline and on-site support, production services and documentation of maintenance updates. Amortization of intangible assets. Amortization of intangible assets, included in cost of revenue, includes the amortization of core/developed technology and certain contract rights intangible assets.
Cost of maintenance and service revenue includes costs to deliver our maintenance services, such as hotline and on-site support, production services and documentation of maintenance updates. Amortization of intangible assets. Amortization of intangible assets, included in cost of revenue, consists of the amortization of core/developed technology and certain contract rights intangible assets related to acquisitions.
The portion of the transaction price allocated to the hardware product is generally recognized as revenue at the time of shipment because the customer obtains control of the product at that point in time.
The portion of the transaction price allocated to the hardware product is generally recognized as revenue at the time of shipment because 39 Table of Contents the customer obtains control of the product at that point in time.
The amount and composition of unsatisfied performance obligations will fluctuate period to period. We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services.
We do not believe the amount. of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services.
Term Loan Refer to "Credit and Term Loan Facilities” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report on Form 10-K for more information. Long Term Accrued Income Taxes As of October 31, 2022 , we had $18.8 million of long-term accrued income taxes which represent uncertain tax benefits.
Term Loan Refer to "Credit and Term Loan Facilities” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report on Form 10-K for more information. Long Term Accrued Income Taxes As of October 31, 2023 , we had $22.0 million of long-term accrued income taxes which represent uncertain tax benefits.
For presentation purposes, this Form 10-K refers to the closest calendar month end. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In preparing these financial statements, we make assumptions, judgments and estimates that can affect the reported amounts of assets, liabilities, revenues and expenses, and net income.
For presentation purposes, this Annual Report on Form 10-K refers to the closest calendar month end. Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. In preparing these financial statements, we make assumptions, judgments and estimates that can affect the reported amounts of assets, liabilities, revenues and expenses, and net income.
For a discussion of the fiscal 2021 changes compared to fiscal 2020, 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 October 31, 2021, filed on December 13, 2021.
For a discussion of other 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 October 31, 2022, filed on December 12, 2022.
The IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. We are assessing the potential impact of the stock repurchase excise tax.
The IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year.
These assets are classified as trading securities. There is no impact on our net income from the fair value changes in our deferred compensation plan obligation and related assets. Amortization of Intangible Assets Amortization of intangible assets included within operating expenses consists of the amortization of trademarks, trade names, and customer relationships related to acquisitions.
There is no impact on our net income from the fair value changes in our deferred compensation plan obligation and related assets. Amortization of Intangible Assets Amortization of intangible assets included in operating expenses consists of the amortization of trademarks, trade names, and customer relationships intangible assets related to acquisitions.
Income Taxes Our effective tax rate for fiscal 2022 is 12.3%, which included a tax benefit of $61.5 million of U.S. federal research tax credit, a foreign derived intangible income (FDII) deduction of $38.9 million, and excess tax benefits from stock-based compensation of $88.8 million.
Our effective tax rate for fiscal 2022 was 12.3%, which included a tax benefit of $61.5 million of U.S. federal research tax credit, a FDII deduction of $38.9 million, and excess tax benefits from stock-based compensation of $88.8 million.
For acquired existing technology, the fair value was determined by applying the multi-period excess earnings method under the income approach, which involves isolating the net earnings attributable to the asset being measured based on present value of the incremental after-tax cash flows (excess earnings) attributable solely to the asset over its remaining useful life.
Their fair value was determined using the multi-period excess earnings method under the income approach, which involves isolating the net earnings attributable to the asset being measured based on the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the asset over its remaining useful life.
The economic useful life was determined based on historical customer turnover rates. Projected income from existing customer relationships considered customer retention rates ranging from 92.5% to 97.5%. The present value of operating cash flows from existing customers was determined using discount rates ranging from approximately 10% to 15%.
The economic useful life was determined based on historical customer turnover rates. Projected income from existing customer relationships considered customer retention rates ranging from 85% to 100%. The present value of operating cash flows from existing customers was determined using discount rates ranging from approximately 10% to 20%.
Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) 29.8 33.9 (4.1) (12) % Percentage of total revenue 1 % 1 % The decrease in amortization of intangible assets for fiscal 2022 compared to fiscal 2021 was primarily due to certain intangible assets becoming fully amortized in fiscal 2022, partially offset by amortization expense related to intangible assets acquired during fiscal 2022 .
Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Amortization of intangible assets $ 28.0 $ 29.8 $ (1.8) (6) % Percentage of total revenue — % 1 % The decrease in amortization of intangible assets for fiscal 2023 compared to fiscal 2022 was primarily due to certain intangible assets becoming fully amortized in fiscal 2023, partially offset by amortization expense related to intangible assets acquired during fiscal 2023 .
Upfront Products Revenue Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Upfront products revenue $ 1,226.7 $ 861.1 $ 365.6 42 % Percentage of total revenue 24 % 20 % Changes in upfront products revenue are generally attributable to normal fluctuations in the extent and timing of customer requirements, which can drive the amount of upfront orders and revenue in any particular period.
Upfront Products Revenue Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Upfront products revenue $ 1,429.3 $ 1,226.7 $ 202.6 17 % Percentage of total revenue 24 % 24 % Changes in upfront products revenue are generally attributable to normal fluctuations in the extent and timing of customer requirements, which can drive the amount of upfront orders and revenue in any particular period.
Segment Operating Results We do not allocate certain operating expenses managed at a consolidated level to our reportable segments. These unallocated expenses consist primarily of stock-based compensation expense, amortization of intangible assets, changes in the fair value of deferred compensation plan, restructuring, litigation and acquisition-related costs. See Note 17 of the Notes to Consolidated Financial Statements for more information.
Segment Operating Results We do not allocate certain operating expenses managed at a consolidated level to our reportable segments. These unallocated expenses consist primarily of stock-based compensation expense, amortization of intangible assets, changes in the fair value of deferred compensation plan, restructuring charges, and certain other operating expenses. See Note 17.
Purchase Obligations Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary course of business for which we have not received the goods or services. As of October 31, 2022 , we had $661.1 million of purchase obligations, with $367.4 million payable within 12 months.
Purchase Obligations Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary course of business for which we have not received the goods or services. As of October 31, 2023 , we had $604.3 million of purchase obligations, with $464.2 million payable within 12 months.
Revenue Our revenues are generated from two business segments: the Semiconductor & System Design segment and the Software Integrity segment. See Note 17 of the Notes to Consolidated Financial Statements for additional information about our reportable segments and revenue by geographic regions.
Revenue Our revenues are generated from three business segments: the Design Automation segment, the Design IP segment and the Software Integrity segment. See Note 17. Segment Disclosure of the Notes to Consolidated Financial Statements for more information about our reportable segments and revenue by geographic regions.
Leases We have operating lease arrangements for office space, data center, equipment and other corporate assets. As of October 31, 2022 , we had lease payment obligations, net of immaterial sublease income, of $569.3 million, with $54.5 million payable within 12 months.
Leases We have operating lease arrangements for office space, data center, equipment and other corporate assets. As of October 31, 2023 , we had lease payment obligations, net of immaterial sublease income, of $614.8 million, with $84.6 million payable within 12 months.
Credit and Term Loan Facilities On January 22, 2021, we entered into a Fourth Extension and Amendment Agreement (the Fourth Amendment), which amended and restated our previous credit agreement, dated as of November 28, 2016 (as amended and restated, the Credit Agreement).
Credit and Term Loan Facilities On December 14, 2022, we entered into a Fifth Extension and Amendment Agreement (the Fifth Amendment), which amended and restated our previous credit agreement, dated as of January 22, 2021 (as amended and restated, the Credit Agreement).
Synopsys Hungary contested the assessment with the Hungarian Administrative Court (Administrative Court). In 2019, as required under Hungarian law, Synopsys Hungary paid the assessment and recorded a tax expense due to an unrecognized tax benefit of $17.4 million, which is net of estimated U.S. foreign tax credits.
In 2019, as required under Hungarian law, Synopsys Hungary paid the assessment and recorded a tax expense due to an unrecognized tax benefit of $17.4 million, which is net of estimated U.S. foreign tax credits. During 2021 and 2022 a series of appeals, hearings and re-hearings occurred at the Administrative Court and Hungarian Supreme Court.
Cash Flows Year Ended October 31, $ Change 2022 2021 2021 to 2022 (dollars in millions) Cash provided by operating activities $ 1,738.9 $ 1,492.6 $ 246.3 Cash used in investing activities $ (572.6) $ (549.0) $ (23.6) Cash used in financing activities $ (1,116.3) $ (748.7) $ (367.6) Cash Provided by Operating Activities We expect cash from our operating activities to fluctuate as a result of a number of factors, including the timing of our billings and collections, our operating results, and the timing and amount of tax and other liability payments.
Cash Flows Year Ended October 31, 2023 2022 $ Change (dollars in millions) Cash provided by operating activities $ 1,703.3 $ 1,738.9 $ (35.6) Cash used in investing activities $ (482.1) $ (572.6) $ 90.5 Cash used in financing activities $ (1,196.9) $ (1,116.3) $ (80.6) Cash Provided by Operating Activities We expect cash from our operating activities to fluctuate as a result of a number of factors, including the timing of our billings and collections, our operating results, and the timing and amount of tax and other liability payments.
Further disaggregation of the revenues into various products and services within these two segments is summarized as follows: Semiconductor & System Design Segment This segment is comprised of the following: • EDA software includes digital, custom and FPGA IC design software, verification products and obligations to provide unspecified updates and support services.
Further disaggregation of the revenues into various products and services within these three segments is summarized as follows: Design Automation Segment • EDA solutions include digital, custom and FPGA IC design software, verification software and hardware products, system integration products and services, and obligations to provide unspecified updates and support services.
During the fiscal year 2022, we repurchased 3.6 million shares of common stock at an average price of $314.51 per share for an aggregate purchase price of $1.1 billion. As of October 31, 2022, $1.4 billion remained available for future stock repurchases.
During the fiscal year 2023, we repurchased 3.0 million shares of common stock at an average price of $387.92 per share for an aggregate purchase price of $1.2 billion. As of October 31, 2023, $194.3 million remained available for future stock repurchases.
Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain.
Accounting for business combinations requires management to make significant estimates and assumptions including our estimates for intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain.
Time-Based Products Revenue Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Time-based products revenue $ 2,993.8 $ 2,633.8 $ 360.0 14 % Percentage of total revenue 59 % 63 % The increase in time-based products revenue for fiscal 2022 compared to fiscal 2021 was primarily attributable to an increase in TSL license revenue and higher renewals from arrangements booked in prior periods.
Time-Based Products Revenue Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Time-based products revenue $ 3,383.6 $ 2,993.8 $ 389.8 13 % Percentage of total revenue 58 % 59 % The increase in time-based products revenue for fiscal 2023 compared to fiscal 2022 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods.
We have consistently grown our revenue since 2005, despite periods of global economic uncertainty. We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we generally recognize our revenue for software licenses over the arrangement period, which typically approximates three years.
We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we generally recognize our revenue for software licenses over the arrangement period, which typically approximates three years. See Note 2.
On an ongoing basis, we evaluate our estimates based on historical experience and various other assumptions we believe are reasonable under the circumstances. Our actual results may differ from these estimates. See Note 2 of the Notes to Consolidated Financial Statements for further information on our significant accounting policies.
On an ongoing basis, we evaluate our estimates based on historical experience and various other assumptions that we believe are reasonable under the circumstances. Our actual results may differ from these estimates. See Note 2.
The economic useful life was determined based on historical technology obsolescence patterns and prospective technology developments. For acquisitions completed in fiscal 2022, we assumed technological obsolescence ranging from 6 to 10 years. The present value of operating cash flows from the existing technology was determined using discount rates ranging from approximately 10% to 30%.
The economic useful life was determined based on historical technology obsolescence patterns and prospective technology developments. We assumed royalty rates ranging from 40% to 55%. The present value of operating cash flows from the existing technology was determined using discount rates ranging from approximately 10% to 20%.
EDA products and services are typically sold through Technology Subscription License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement.
EDA products and services are typically sold through TSL arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally three years, though it may vary for specific arrangements.
Cash Used in Financing Activities The increase in cash used in financing activities was primarily due to higher stock repurchases of $311.9 million, higher debt repayments of $48.8 million and higher taxes paid for net share settlements of $35.1 million, partially offset by higher proceeds from issuance of common stock of $27.2 million.
Cash Used in Financing Activities The increase in cash used in financing activities was primarily due to higher stock repurchases of $105.7 million, higher taxes paid for net share settlements of $67.4 million partially offset by lower debt repayments of $74.2 million and higher proceeds from issuance of common stock of $15.0 million.
Operating Expenses Research and Development Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) $ 1,680.4 $ 1,504.8 $ 175.6 12 % Percentage of total revenue 33 % 36 % The increase in research and development expenses for fiscal 2022 compared to fiscal 2021 was primarily due to higher employee-related costs of $199.1 million as a result of headcount increases as we continue to expand and enhance our product portfolio, increases of $19.2 million in facility costs, and $15.5 million in consultant and contractor costs.
Operating Expenses Research and Development Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Research and development expenses $ 1,946.8 $ 1,680.4 $ 266.4 16 % Percentage of total revenue 33 % 33 % The increase in research and development expenses for fiscal 2023 compared to fiscal 2022 was primarily due to higher employee-related costs of $139.2 million as a result of headcount increases as we continue to expand and enhance our product portfolio, increases of $57.4 million in the change in fair value of our executive deferred compensation plan assets, $31.0 million in facility costs, and $20.9 million in consultant and contractor costs.
Further, on October 14, 2022, a new rule went into effect imposing U.S. export controls on additional technologies, including electronic computer-aided design software specially designed for the development of ICs with Gate-All-Around Field-Effect Transistor structures. Based on our current understanding, we believe these regulations will not have a material impact on our business. We anticipate additional changes to U.S.
Further, on October 14, 2022, a new rule went into effect imposing U.S. export controls on additional technologies, including electronic computer-aided design software specially designed for the development of ICs with Gate-All-Around Field-Effect Transistor structure s.
This includes IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, IoT, and cloud computing markets, enabling designers to quickly develop SoCs in these areas. Software Integrity.
We are a leading provider of high-quality, silicon-proven IP solutions for system-on-chips (SoCs). This includes IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, internet of things and cloud computing markets, enabling designers to quickly develop SoCs in these areas. Software Integrity.
See Note 2 of the Notes to Consolidated Financial Statements for a discussion on our revenue recognition policy . The revenue we recognize in a particular period generally results from selling efforts in prior periods rather than the current period.
Summary of Significant Accounting Polices and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for a discussion on our revenue recognition policy . The revenue we recognize in a particular period generally results from selling efforts in prior periods rather than the current period.
We also held $2.3 million in restricted cash primarily associated with deposits for office leases. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less. Our short-term investments include U.S. government and municipal obligations, investment-grade available-for-sale debt and asset backed securities.
We also held $2.3 million in restricted cash primarily associated with deposits for office leases and employee loan programs. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less.
Arrangements with customers can involve multiple products and various license rights. Customers can negotiate for a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs. Analysis of the terms and conditions in these contracts and their effect on revenue recognition may require significant judgment.
Revenue Recognition Our contracts with customers often include promises to transfer multiple products and services to a customer. Arrangements with customers can involve multiple products and various license rights. Customers can negotiate for a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs.
Maintenance and Service Revenue Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Maintenance revenue $ 293.3 $ 235.9 $ 57.4 24 % Professional service and other revenue 567.7 473.5 94.2 20 % Total $ 861.0 $ 709.4 $ 151.6 21 % Percentage of total revenue 17 % 17 % The increase in maintenance revenue for fiscal 2022 compared to fiscal 2021 was primarily due to an increase in the volume of hardware and IP arrangements that include maintenance.
Maintenance and Service Revenue Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Maintenance revenue $ 361.7 $ 293.3 $ 68.4 23 % Professional service and other revenue 668.0 567.7 100.3 18 % Total $ 1,029.7 $ 861.0 $ 168.7 20 % Percentage of total revenue 18 % 17 % The increase in maintenance revenue for fiscal 2023 compared to fiscal 2022 was primarily due to an increase in the volume of hardware arrangements that include maintenance.
The increase in professional services and other revenue for fiscal 2022 compared to fiscal 2021 was primarily due to an increase in the volume of IP consulting projects . 39 Table of Contents Cost of Revenue Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Cost of products revenue $ 653.8 $ 542.1 $ 111.7 21 % Cost of maintenance and service revenue 343.0 271.2 71.8 26 % Amortization of intangible assets 66.9 48.5 18.4 38 % Total $ 1,063.7 $ 861.8 $ 201.9 23 % Percentage of total revenue 21 % 20 % We divide cost of revenue into three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of intangible assets.
The increase in professional services and other revenue for fiscal 2023 compared to fiscal 2022 was primarily due to the timing of IP customization projects . 41 Table of Contents Cost of Revenue Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Cost of products revenue $ 763.5 $ 653.8 $ 109.7 17 % Cost of maintenance and service revenue 383.8 343.0 40.8 12 % Amortization of intangible assets 74.9 66.9 8.0 12 % Total $ 1,222.2 $ 1,063.7 $ 158.5 15 % Percentage of total revenue 21 % 21 % We divide cost of revenue into three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of intangible assets.
Cash Used in Investing Activities The increase in cash used in investing activities was primarily due to higher cash paid for acquisitions of $126.4 million and higher purchases of property and equipment of $42.8 million, partially offset by higher proceeds from the sales and maturities of short-term investments of $80.8 million and lower purchases of short-term investments of $64.5 million.
Cash Used in Investing Activities The decrease in cash used in investing activities was primarily due to lower cash paid for acquisitions of $124.7 million and higher proceeds from the sales and maturities of investments of $44.6 million, partially offset by higher purchases of property and equipment of $53.0 million and higher purchases of investments of $27.3 million.
Total Revenue Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Semiconductor & System Design Segment $ 4,615.7 $ 3,810.4 $ 805.3 21 % Software Integrity Segment 465.8 393.8 72.0 18 % Total $ 5,081.5 $ 4,204.2 $ 877.3 21 % Our revenues are subject to fluctuations, primarily due to customer requirements including the timing and value of contract renewals.
Total Revenue Year Ended October 31, $ Change % Change $ Change % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in millions) Design Automation $ 3,775.3 $ 3,300.2 $ 2,754.7 $ 475.1 14 % $ 545.5 20 % Design IP 1,542.7 1,315.5 1,055.7 227.2 17 % 259.8 25 % Software Integrity 524.6 465.8 393.8 58.8 13 % 72.0 18 % Total $ 5,842.6 $ 5,081.5 $ 4,204.2 $ 761.1 15 % $ 877.3 21 % Our revenues are subject to fluctuations, primarily due to customer requirements including the timing and value of contract renewals.
As 38 Table of Contents revenues from IP products sales and hardware sales are recognized upfront, customer demand and timing requirements for such IP products and hardware could result in increased variability of our total revenues. Contracted but unsatisfied or partially unsatisfied performance obligations as of October 31, 2022 were $7.1 billion.
As revenues from IP products sales and hardware products sales are recognized upfront, customer demand and timing requirements for such IP products and hardware products could result in increased variability of our total revenues.
Software Integrity Segment Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Adjusted operating income $ 47.0 $ 38.3 $ 8.7 23 % Adjusted operating margin 10 % 10 % — % — % The increase in adjusted operating income for fiscal 2022 compared to fiscal 2021 was primarily due to an increase in revenue from arrangements booked in prior periods.
Design Automation Segment Year Ended October 31, $ Change % Change $ Change % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in millions) Adjusted operating income $ 1,439.7 $ 1,206.6 $ 924.6 $ 233.1 19 % $ 282.0 30 % Adjusted operating margin 38 % 37 % 34 % 1 % 3 % 3 % 9 % The increase in adjusted operating income for both fiscal 2023 compared to fiscal 2022 and fiscal 2022 compared to fiscal 2021 was primarily due to an increase in revenue from arrangements booked in prior periods.
Based on our preliminary assessment, we do not expect a material impact on our overall capital allocation strategy or our consolidated financial statements. Risks related to the IR Act are described in Part I, Item 1A, Risk Factors . 44 Table of Contents Contractual and Other Obligations Our material cash requirements include the following contractual and other obligations.
As of October 31, 2023, this does not have any impact on our consolidated financial statements. Risks related to the IR Act are described in Part I, Item 1A, Risk Factors . Material Cash Requirements Our material cash requirements include the following contractual and other obligations.
We have provided for foreign withholding taxes on undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries. 42 Table of Contents In 2017, the Hungarian Tax Authority (the HTA) assessed withholding taxes of approximately $25.0 million and interest and penalties of $11.0 million, against our Hungary subsidiary (Synopsys Hungary).
We have provided for foreign withholding taxes on undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries.
While our time-based business model provides stability to our business, operating results and overall financial position, the broader implications of these macroeconomic events, particularly in the long term, remain uncertain. Further, the negative impact of these events or disruptions may be deferred due to our business model.
While we are actively monitoring these conflicts, at this time, these geopolitical conflicts have not had a material impact on our business, financial condition, or results of operations. While our time-based business model provides stability to our business, operating results and overall financial position, the broader implications of these macroeconomic or geopolitical events, particularly in the long term, remain uncertain.
For example, in the fourth quarter of fiscal 2022, we experienced a minor impact from the current macroeconomic environment in our Software Integrity segment as customers applied elevated levels of scrutiny to purchasing decisions, which has, in some cases, caused some customers to elect shorter term contracts due to their own budget uncertainty.
For example, we continue to experience an impact from the current macroeconomic environment in our Software Integrity segment as customers have applied elevated levels of scrutiny to purchasing decisions due in part to their own budget uncertainty, which has, in some cases, affected customer order size, pricing and/or contract duration.
The following is a summary of our restructuring liabilities: Fiscal Year Balance at Beginning of Period Costs Incurred Cash Payments Balance at End of Period (dollars in millions) 2022 $ 14.2 $ 12.1 $ (26.3) $ — 2021 $ 1.3 $ 33.4 $ (20.5) $ 14.2 2020 $ 22.6 $ 36.1 $ (57.4) $ 1.3 See Note 18 of the Notes to Consolidated Financial Statements for additional information . 41 Table of Contents Other Income (Expense), Net Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Interest income $ 8.5 $ 2.4 $ 6.1 254 % Interest expense (1.7) (3.4) 1.7 (50) % Gains (losses) on assets related to executive deferred compensation plan (68.8) 71.6 (140.4) (196) % Foreign currency exchange gains (losses) 4.7 5.3 (0.6) (11) % Other, net 10.8 (5.2) 16.0 (308) % Total $ (46.5) $ 70.7 $ (117.2) (166) % The decrease in other income (expense) for fiscal 2022 as compared to fiscal 2021 was primarily due to the decrease in the fair value of our executive deferred compensation plan assets.
Restructuring Charges of the Notes to Consolidated Financial Statements for additional information . 43 Table of Contents Other Income (Expense), Net Year Ended October 31, 2023 2022 $ Change % Change (dollars in millions) Interest income $ 36.7 $ 8.5 $ 28.2 332 % Interest expense (1.2) (1.7) 0.5 (29) % Gains (losses) on assets related to executive deferred compensation plan 20.5 (68.8) 89.3 (130) % Foreign currency exchange gains (losses) (1.5) 4.7 (6.2) (132) % Other, net (22.0) 10.8 (32.8) (304) % Total $ 32.5 $ (46.5) $ 79.0 (170) % The increase in other income (expense) for fiscal 2023 as compared to fiscal 2022 was primarily due to the increase in the fair value of our executive deferred compensation plan assets.
Stock Repurchase Program Our Board of Directors (the Board) previously approved a stock repurchase program (the Program) with authorization to purchase up to $1.0 billion of our common stock in December 2021. The Board approved a replenishment of the Program up to $1.5 billion in September 2022.
Financial Assets and Liabilities of the Notes to Consolidated Financial Statements for further discussion. Stock Repurchase Program In fiscal 2022, our Board of Directors approved a stock repurchase program with authorization to purchase up to $1.5 billion of our common stock.
Summary of Significant Accounting Policies, as if we had originated the contracts. The excess of the fair value of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill. Accounting for business combinations requires management to make significant estimates and assumptions including our estimates for intangible assets.
Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K , as if we had originated the contracts. The excess of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill.
The increase in cost of revenue for fiscal 2022 compared to fiscal 2021 was primarily due to $102.7 million in employee-related costs as a result of headcount increases from organic growth and acquisitions, $51.7 million in hardware-related costs, $18.4 million in amortization of technology-related intangible assets, $16.4 million in costs to fulfill IP consulting arrangements, and $12.7 million in facility costs.
The increase in cost of revenue for fiscal 2023 compared to fiscal 2022 was primarily due to increases of $62.2 million in employee-related costs as a result of headcount increases from hiring, $53.5 million in hardware-related costs including inventory provisions, $13.1 million in facility costs, $8.0 million in amortization of technology-related intangible assets, $6.7 million in costs to fulfill IP consulting arrangements, and $6.1 million in the change in fair value of our executive deferred compensation plan assets.
The accounting policies that most frequently require us to make assumptions, judgments and estimates, and therefore are critical to understanding our results of operations, are: 35 Table of Contents • Revenue recognition; and • Business combinations. Revenue Recognition Our contracts with customers often include promises to transfer multiple products and services to a customer.
Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements for further information on our significant accounting policies. 37 Table of Contents The accounting policies that most frequently require us to make assumptions, judgments and estimates, and therefore are critical to understanding our results of operations, are: • Revenue recognition; and • Business combinations.
The Credit Agreement contains financial covenants requiring us to maintain a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio, as well as other non-financial covenants. As of October 31, 2022 , we were in compliance with all financial covenants. There was no outstanding balance under the Revolver as of October 31, 2022 and October 31, 2021.
The Credit Agreement also provides an uncommitted incremental revolving loan facility of up to $150.0 million in the aggregate principal amount. The Credit Agreement contains a financial covenant requiring us to maintain a maximum consolidated leverage ratio, as well as other non-financial covenants. There was no outstanding balance under the Revolver as of October 31, 2023.
Our growth strategy is based on maintaining and building on our leadership in our EDA products, expanding and proliferating our IP offerings, driving growth in the software security and quality market, and continuing to expand our product portfolio and our total addressable market.
As a result, decreases as well as increases in customer spending do not immediately affect our revenues in a significant way. Our growth strategy is based on maintaining and building on our leadership in our Design Automation products, expanding and proliferating our Design IP offerings and continuing to expand our product portfolio and our total addressable market.
We generally receive cash from upfront arrangements much sooner than from time-based products revenue, in which the license fee is typically paid either quarterly or annually over the term of the license. 43 Table of Contents The increase in cash provided by operating activities was primarily attributable to higher net income and higher accounts receivable collection, partially offset by timing of customer billings and higher disbursements for operations, including vendor and tax payments.
Cash provided by our operations is dependent primarily upon the payment terms of our license agreements. We generally receive cash from upfront arrangements much sooner than from time-based products revenue, in which the license fee is typically paid either quarterly or annually over the term of the license.
Borrowings bear interest at a floating rate based on the 5-year Loan Prime Rate plus 0.74%. As of October 31, 2022, we had a $20.8 million outstanding balance under the agreement.
In July 2018, we entered into a 12-year 220.0 million Renminbi (approximately $33.0 million) credit agreement with a lender in China to support our facilities expansion. Borrowings bear interest at a floating rate based on the 5-year Loan Prime Rate plus 0.74%. As of October 31, 2023, we had a $18.1 million outstanding balance under the agreement. See Note 7.
Designers use these products to automate the highly complex IC design process and to reduce defects that could lead to expensive design or manufacturing re-spins or suboptimal end products. For IP, we are a leading provider of high-quality, silicon-proven IP solutions for system-on-chips (SoCs).
Designers use these products to automate the highly complex IC design process and to reduce defects that could lead to expensive design or manufacturing re-spins or suboptimal end products. Design IP. This segment includes our Design IP products that serve companies primarily in the semiconductor and electronics industries.
The Fourth Amendment extended the termination date of the existing $650.0 million senior unsecured revolving credit facility (the Revolver) from November 28, 2021 to January 22, 2024, which could be further extended at our option. The Credit Agreement also provides an uncommitted incremental loan facility of up to $150.0 million in the aggregate principal amount.
The Fifth Amendment increased the existing senior unsecured revolving credit facility (the Revolver) from $650.0 million to $850.0 million and extended the maturity date from January 22, 2024 to December 14, 2027, which could be further extended at our option.
These increases were partially offset by a decrease of $16.9 million in the fair value of our executive deferred compensation plan assets and bad debt recoveries of $15.9 million.
These increases were partially offset by bad debt recoveries of $15.9 million in the second quarter of fiscal 2022.
A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Software Integrity Segment • We sell Software Integrity products in arrangements that provide customers the right to software licenses, maintenance updates and technical support.
A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Design IP Segment • Design IP includes our Synopsys IP portfolio.
Semiconductor & System Design Segment Year Ended October 31, $ Change % Change 2022 2021 2021 to 2022 (dollars in millions) Adjusted operating income $ 1,628.1 $ 1,243.1 $ 385.0 31 % Adjusted operating margin 35 % 33 % 2 % 6 % The increase in adjusted operating income for fiscal 2022 compared to fiscal 2021 was primarily due to an increase in revenue from arrangements booked in prior periods.
Design IP Segment Year Ended October 31, $ Change % Change $ Change % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in millions) Adjusted operating income $ 532.1 $ 421.5 $ 318.5 $ 110.6 26 % $ 103.0 32 % Adjusted operating margin 34 % 32 % 30 % 2 % 6 % 2 % 7 % The increase in adjusted operating income for both fiscal 2023 compared to fiscal 2022 and fiscal 2022 compared to fiscal 2021 was primarily due to an increase in the revenue of IP products driven by timing of customer demands.
See Part I, Item 1A, Risk Factors for further discussion of the impact of global economic uncertainty and ongoing COVID-19 pandemic on our business, operations and financial condition. Business Segments Semiconductor & System Design.
Further, the negative impact of these events or disruptions may be deferred due to our business model. See Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K for further discussion of the impact of global economic and geopolitical uncertainty on our business, operations and financial condition.
In response to a request by the Administrative Court we filed an additional brief on November 23, 2022. We expect a hearing to be scheduled in early 2023. See Note 15 of the Notes to Consolidated Financial Statements for further discussion of the provision for income taxes, the impacts related to the Tax Act, and the Hungarian audit .
Income Taxes of the Notes to Consolidated Financial Statements for further discussion of the provision for income taxes, the impacts related to the Tax Act, and the Hungarian audit .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−1 removed10 unchanged
Biggest changeOur policy also limits the amount of credit exposure to any one issue, issuer and type of instrument. 45 Table of Contents Our cash equivalents and debt by fiscal year of expected maturity and average interest rates as of October 31, 2022 were as follows: Maturing in Year Ending October 31, 2023 2024 2025 2026 2027 and thereafter Total Fair Value (in thousands) Cash & Cash equivalents $ 1,227,136 $ 1,227,136 $ 1,227,136 Approx. average interest rate 0.70 % Short-term investments $ 82,264 $ 39,410 $ 17,705 $ 2,265 $ 6,269 $ 147,913 $ 147,913 Approx. average coupon rate 2.01 % 2.01 % 3.11 % 0.98 % 1.45 % Short-term debt (variable rate): Credit Facility in China $ 20,824 $ 20,824 $ 20,824 Average interest rate LPR + 0.74% of such rate Foreign Currency Risk.
Biggest changeWhile par value generally approximates fair value on variable instruments, rising interest rates over time would increase both our interest income and our interest expense. 47 Table of Contents Our cash equivalents and debt by fiscal year of expected maturity and average interest rates as of October 31, 2023 are as follows: Maturing in Year Ending 2024 2025 2026 2027 2028 and thereafter Total Fair Value (in thousands) Cash & Cash equivalents $ 1,343,860 $ 1,343,860 $ 1,343,860 Approx. average interest rate 2.44 % Short-term investments $ 73,879 $ 38,851 $ 24,558 $ 9,501 $ 4,850 $ 151,639 $ 151,639 Approx. average coupon rate 2.07 % 3.19 % 3.71 % 5.11 % 4.48 % Short-term debt (variable rate): Credit Facility in China $ 18,078 $ 18,078 $ 18,078 Average interest rate LPR + 0.74% of such rate Foreign Currency Risk.
The evaluation of these investments is based on information provided by these companies, which is not subject to the same disclosure regulations as U.S. publicly traded companies and as such, the basis for these evaluations is subject to the timing and accuracy of the data provided. 47 Table of Contents
The evaluation of these investments is based on information provided by these companies, which is not subject to the same disclosure regulations as U.S. publicly traded companies and as such, the basis for these evaluations is subject to the timing and accuracy of the data provided. 49 Table of Contents
The primary objective of our investment activities is to preserve the principal while at the same time maximizing yields without significantly increasing the risk. To achieve this objective, we maintain our portfolio of investments in a mix of tax-exempt and taxable instruments that meet high credit quality standards, as specified in our investment policy.
The primary objective of our investment activities is to preserve the invested principal while maximizing yields without significantly increasing risk exposure. To achieve this objective, we maintain our portfolio of investments in a mix of tax-exempt and taxable instruments that meet high credit quality standards, as specified in our investment policy.
At the same time, the U.S. dollar value of our Euro-based expenses would decline, resulting in positive cash flow of approximately $19.5 million that would offset the loss and negative cash flow on the maturing forward contracts.
At the same time, the U.S. dollar value of our Euro-based expenses would decline, resulting in positive cash flow of approximately $26.1 million that would offset the loss and negative cash flow on the maturing forward contracts.
Our non-marketable equity securities investments totaled $31.9 million and $17.6 million as of October 31, 2022 and 2021, respectively. Our strategic investments include privately-held companies that are considered to be in the start-up or development stages and have a higher inherent risk.
Our non-marketable equity securities investments totaled $19.1 million and $31.9 million as of October 31, 2023 and 2022, respectively. Our strategic investments include privately-held companies that are considered to be in the start-up or development stages and have a higher inherent risk.
Further, we anticipate performance by all counterparties to such agreements. 46 Table of Contents Information about the gross notional values of our foreign currency contracts as of October 31, 2022 was as follows: Gross Notional Amount in U.S.
Further, we anticipate performance by all counterparties to such agreements. 48 Table of Contents Information about the gross notional values of our foreign currency contracts as of October 31, 2023 is as follows: Gross Notional Amount in U.S.
For example, if the Euro were to depreciate by 10% compared to the U.S. dollar prior to the settlement of the Euro forward contracts listed in the table below providing information as of October 31, 2022, the fair value of the contracts would decrease by approximately $19.5 million, and we would be required to pay approximately $19.5 million to the counterparty upon contract maturity.
For example, if the Euro were to depreciate by 10% compared to the U.S. dollar prior to the settlement of the Euro forward contracts listed in the table below as of October 31, 2023, the fair value of the contracts would decrease by approximately $26.1 million, and we would be required to pay approximately $26.1 million to the counterparty upon contract maturity.
The foreign currency contracts are carried at fair value and denominated in various currencies as listed in the tables below. The duration of forward contracts usually ranges from one month to 27 months. See Note 2 and Note 7 of the Notes to Consolidated Financial Statements for a description of our accounting for foreign currency contracts .
The foreign currency contracts are carried at fair value and denominated in various currencies as listed in the tables below. The duration of forward contracts usually ranges from one month to 27 months. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation and Note 7.
The success of our hedging activities depends upon the accuracy of our estimates of various balances and transactions denominated in non-functional currencies. Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty. Therefore, we cannot predict the prospective impact of exchange rate fluctuations.
Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty. Therefore, we cannot predict the prospective impact of exchange rate fluctuations.
Our exposure to market risk for changes in interest rates relates to our cash, cash equivalents, short-term investments, and outstanding debt. As of October 31, 2022, all of our cash, cash equivalents, and debt were at short-term variable or fixed interest rates. As of October 31, 2022, we had an investment portfolio of fixed income securities of $147.9 million.
Our policy also limits the amount of credit exposure to any one issue, issuer and type of instrument. Our exposure to market risk for changes in interest rates relates to our cash, cash equivalents, short-term investments, and outstanding debt. As of October 31, 2023, all of our cash, cash equivalents, and debt were at short-term variable or fixed interest rates.
These securities, as with all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase. While par value generally approximates fair value on variable instruments, rising interest rates over time would increase both our interest income and our interest expense.
As of October 31, 2023, we had short term fixed income investment portfolio of $151.6 million. These securities, as with all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase.
Removed
Dollars Average Contract Rate (in thousands) Forward Contract Values: Indian rupee $ 368,282 82.500 Japanese yen 264,649 146.852 Euro 195,285 1.086 Taiwanese dollar 130,412 29.967 Canadian dollar 102,201 1.321 Chinese renminbi 90,436 7.214 Korean won 83,935 1,289.396 Hungarian forint 51,056 423.933 British pound sterling 41,817 1.234 Israel shekel 38,386 3.419 Singapore dollar 10,498 1.396 Swiss franc 9,183 0.958 $ 1,386,140 Equity Price Risk.
Added
Financial Assets and Liabilities of the Notes to Consolidated Financial Statements for a description of our accounting for foreign currency contracts . The success of our hedging activities depends upon the accuracy of our estimates of various balances and transactions denominated in non-functional currencies.
Added
Dollars Average Contract Rate (in thousands) Forward Contract Values: Indian rupee $ 523,162 84.792 Japanese yen 286,654 144.426 Euro 260,562 1.086 Chinese renminbi 146,652 0.141 Canadian dollar 141,956 1.359 Taiwanese dollar 103,717 30.778 Korean won 80,903 1,326.344 Israel shekel 47,809 3.768 British pound sterling 32,556 0.819 Armenian dram 19,716 399.587 Singapore dollar 12,166 1.340 Swiss franc 8,324 0.865 Hungarian forint 2,581 359.851 $ 1,666,758 Equity Price Risk.

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