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What changed in Synopsys's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Synopsys's 2023 and 2024 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 2024 report.

+446 added−424 removedSource: 10-K (2024-12-19) vs 10-K (2023-12-12)

Top changes in Synopsys's 2024 10-K

446 paragraphs added · 424 removed · 281 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+26 added−49 removed25 unchanged
Biggest changeOur 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.
Biggest changeOur 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 tools are used for designing and verifying complex chips, and for designing the advanced processes and models required to manufacture those chips; • Field programmable gate array (FPGA) design, which accelerate time-to-shipping hardware with deep debug visibility, incremental design, broad language support, and optimal performance and area for FPGA-based products. • 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 capabilities to boost productivity and improve efficiency throughout the EDA flow. 4 Table of Contents Digital and Custom IC Design Our Digital Design Family provides customers with a comprehensive digital design implementation solution that includes industry-leading products and redefines conventional design tool boundaries to deliver a more integrated flow than ever before, with better quality and time to results.
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.
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. (Ansys) 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.
The platform supports multiple technology nodes, including advanced nodes at 12nm, 10nm, 8/7nm, 6 nm, 5/4nm, and 3nm, with technology collaborations on next-generation process technologies.
The platform supports multiple technology nodes, including advanced nodes at 12nm, 10nm, 8/7nm, 6 nm, 5/4nm, 3nm and 2 nm, with technology collaborations on next-generation process technologies.
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.
Our issued patents have expiration dates through 2044 and generally have a term of 20 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.
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.
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 3,400 United States and foreign patents issued, and we will continue to pursue additional patents in the future.
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.
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, access self-help and receive support. Updated regularly, the SolvNet Plus portal includes technical documentation, design tips and answers to user questions.
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.
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 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.
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. 13 Table of Contents
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 compensation and benefits programs are tailored to the various geographies in which we operate and, for eligible employees, may include: • Market-competitive salary and cash bonus opportunity; 11 Table of Contents • 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.
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.
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 and shall not be deemed to be incorporated by reference.
Our broad Synopsys IP portfolio includes: • High-quality solutions for widely used wired and wireless interfaces such as USB, PCI Express, DDR, Ethernet, MIPI, HDMI, and Bluetooth Low Energy; • Logic libraries and embedded memories, including memory compilers, non-volatile memory, and standard cells with integrated test and repair; • Processor solutions, including configurable ARC ® processors, Neural Network processors, Digital Signal Processor cores, and software and application-specific instruction-set processor tools for embedded applications; • Security IP solutions, including cryptographic cores and software, security subsystems, platform security and secured interface IP; • An industry-leading IP offering for the automotive market, optimized for strict functional safety and reliability standards such as ISO 26262; and • SoC infrastructure IP, datapath and building block IP, mathematical and floating-point components, Arm ® AMBA ® interconnect fabric and peripherals, and verification IP.
Our broad Synopsys IP portfolio includes: • High-quality solutions for widely used interfaces such as UCIe, USB, PCI Express, DDR, Ethernet, MIPI and HDMI; • Logic libraries and embedded memories, including memory compilers, non-volatile memory, and standard cells with integrated test and repair; • Processor solutions, including configurable ARC ® processors, Neural Network processors, Digital Signal Processor cores, and software and application-specific instruction-set processor tools for embedded applications; • Security IP solutions, including cryptographic cores and software, security subsystems, platform security and secured interface IP; • An industry-leading IP offering for the automotive market, optimized for strict functional safety, reliability and cybersecurity standards such as ISO 26262 and ISO 21434; and • SoC infrastructure IP, datapath and building block IP, mathematical and floating-point components, Arm ® AMBA ® interconnect fabric and peripherals, and verification IP.
Through our Stronger Through Wellbeing campaign, our leaders and managers are encouraged to model the importance of health and wellbeing, and many create opportunities to engage in wellness-related activities as a team. We also offer a variety of programs and resources at no cost to employees and their family members to support their mental, emotional, and financial wellbeing.
Our Stronger Through Wellbeing campaign encourages our leaders and managers to model the importance of health and wellbeing and create opportunities to engage in wellness-related activities as a team. We also offer a variety of programs and resources at no cost to employees and their family members to support their mental, emotional, and financial wellbeing.
Employee Engagement We have a comprehensive employee feedback program, and we use the feedback to gain an understanding of the employee experience and to make improvements in a variety of areas—from how we interact with customers to how we share best practices, and more.
Employee Engagement We have a comprehensive employee feedback program, and we use the feedback to gain an understanding of the employee experience and to make improvements in a variety of areas. These areas include how we interact with customers to how we share best practices, and more.
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.
Risks related to disruptions in our supply chain affecting our business are described in Part I, Item 1A, Risk Factors of this Annual Report. Our professional services team typically provides design consulting services to our customers under consulting agreements with statements of work specific to each project.
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.
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.
We license software and other intellectual property from third parties, including, in several instances, for inclusion in our products. Risks related to our use of third-party technology are described in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K .
We license software and other intellectual property from third parties, including, in several instances, for inclusion in our products. Risks related to our use of third-party technology are described in Part I, Item 1A, Risk Factors of this Annual Report .
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.
Designers have turned to new manufacturing techniques to solve these problems, such as multiple-patterning lithography, FinFET 3D transistors 3 Table of Contents and Gate-All-Around Field-Effect transistor structures, which in turn have introduced new challenges to design and production.
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.
Key design products are available as part of the Digital Design Family and include Fusion Compiler TM RTL to GDSII design implementation, Design Compiler ® NXT logic synthesis, IC Compiler TM II physical design, Synopsys TestMAX TM test and diagnosis, PrimeTime ® static timing analysis, PrimePower power analysis, PrimeLib library characterization, StarRC TM parasitic extraction, IC Validator TM 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.
Other Our Other product group includes revenue from sales of products to university programs as well as our optical products, mechatronic simulation, and the impact of gains and losses from foreign currency hedges. Design IP Segment Our Design IP segment includes our Design IP products, which service companies primarily in the semiconductor and electronics industry.
Other Our Other product group includes revenue from sales of products to university programs as well as our optical products, mechatronic simulation, and the impact of gains and losses from foreign currency hedges. 6 Table of Contents Design IP Segment Our Design IP segment includes our Design IP products, which service companies primarily in the semiconductor and electronics industries.
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.
In addition, effective copyright and trade secret protection may be unavailable or limited in some foreign countries in which we operate. While protecting our proprietary technology is important, our business as a whole is not significantly dependent upon any single patent, copyright, trademark, or license.
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 AI/data center markets, enabling designers to quickly develop SoCs in these areas .
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.
Our Role—As the Silicon to Systems Design Solutions Partner Synopsys' silicon to systems design solutions 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.
The solution is integrated with the Digital Design Family for design calibration and analytics and includes Yield Explorer ® for product ramp analytics, SiliconDash for test and production analytics, TestMAX ALE (adaptive learning engine) for intelligent data extraction and communication to the SLM database and DesignWare PVT IP for in-chip monitoring and sensing.
The solution is integrated with the Digital Design Family for design calibration and analytics and includes Yield Explorer ® for product ramp analytics, Silicon.da for AI-driven test and production analytics, TestMAX ALE (adaptive learning engine) for intelligent data extraction and communication to the SLM database and PVT IP for in-chip monitoring and sensing.
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.
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 . We typically license Synopsys IP products under nonexclusive license agreements that provide usage rights for a specific number of designs.
Transistors are the basic building blocks for ICs, each of which may have features that are less than 1/1,000th the diameter of a human hair. These devices are manufactured using masks to direct beams of light onto a wafer of silicon.
The most complex chips today contain more than a billion transistors. Transistors are the basic building blocks for ICs, each of which may have features that are less than 1/1,000th the diameter of a human hair. These devices are manufactured using masks to direct beams of light onto a wafer of silicon.
Health, Safety and Wellbeing Our commitment to health, safety, and wellness was underscored this year by the support and resources we offered to help employees thrive in a hybrid work environment while balancing their personal lives.
Health, Safety and Wellbeing Our commitment to health, safety, and wellness was underscored this year by the support and resources we offered to help employees continue to thrive in a hybrid work environment, and achieve balance between their work and personal lives.
The Synopsys.ai solutions include: • DSO.ai – Design Space Optimization for best quality of results and productivity with scaling of exploration design workflows; 6 Table of Contents • VSO.ai – Verification Space Optimization for improved functional verification coverage & faster turnaround time; • TSO.ai – Test Space Optimization for reduced pattern count, turnaround time and higher coverage; • ASO.ai – Analog Space Optimization for analog layout optimization & migration; • Design.da – Design data analytics for actionable insights to unlock untapped power, performance, and area; • Silicon.da – Silicon data analytics for root-cause analysis and part-level traceability of failures; and • Fab.da – Manufacturing data analytics for improved process control, time-to-market, and user productivity.
The Synopsys.ai suite of solutions include: • DSO.ai TM – Design Space Optimization for best quality of results and productivity with scaling of exploration design workflows; • VSO.ai TM – Verification Space Optimization for optimal functional verification coverage and faster turnaround time; • TSO.ai TM – Test Space Optimization for reduced pattern count, turnaround time and higher coverage; • ASO.ai TM – Analog Space Optimization for analog design and layout optimization and migration; • Design.da – Design data analytics for actionable insights to unlock untapped power, performance, and area; • Silicon.da – Silicon data analytics for root-cause analysis and part-level traceability of failures to improve key production and silicon operational metrics; and • Fab.da – Manufacturing data analytics for improved process control, time to market and higher yield.
In certain cases, we also provide our customers with limited indemnification with respect to claims that their use of our software products infringes on patents, copyrights, trademarks or trade secrets. We have not experienced material warranty or indemnity claims to date.
In certain cases, we also provide our customers with limited indemnification with respect to claims that their use of our software products infringes on patents, copyrights, trademarks or trade secrets.
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.
Revenue attributable to each of our three 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 12.6%, 13.5% and 12.8% of our total revenue in fiscal 2024, 2023 and 2022, respectively.
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.
Total Rewards Our Total Rewards program offers meaningful global benefits and compensation for the time, energy, commitment, skills, and expertise employees bring to the company every day. Our practices are intended to deliver fair and equitable compensation for employees based on their contribution and performance.
The 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.
The individual products and solutions included in the Verification Family include the following: • VC SpyGlass TM 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 ® , our next generation platform that provides AI-based SoC debug solution with an integrated development environment and advanced verification management capabilities system; 5 Table of Contents • VC Formal TM , which leverages ML-based techniques to verify complex SoC designs, find deep corner-case design bugs, and enables formal signoff for control and datapath blocks; • 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, hardware verification and system validation of IP blocks to processor subsystems to complete SoCs, including the use of at-speed interfaces, for better performance, higher quality and faster time to market; • Virtualizer TM 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; • Platform Architect TM 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.
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.
Information about our Executive Officers The executive officers of Synopsys and their ages as of December 18, 2024 were as follows: Name Age Position Sassine Ghazi 54 President and Chief Executive Officer Aart J. de Geus 70 Executive Chair of the Board of Directors Shelagh Glaser 60 Chief Financial Officer Richard Mahoney 62 Chief Revenue Officer John F.
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.
Customer Service and Technical Support A high level of customer service and support is critical to the adoption and successful use of our products. 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.
The majority of licenses to our EDA products are network licenses that allow a number of individual users to access the software on a defined network, including, in some cases, regional or global networks.
The majority of licenses to our EDA products are network licenses that allow a number of individual users to access the software on a defined network, including, in some cases, regional or global networks. License fees depend on the type of license, product mix, and number of copies of each product licensed.
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. Our customers, who design those products, are facing intense pressure to deliver innovative offerings in shorter timeframes and at lower prices.
The rise of silicon-powered intelligent devices and AI has increased demand for chips and systems with greater functionality and performance, reduced size, and lower power consumption. Our customers, who design silicon and software-defined systems, are facing intense pressure to deliver innovative offerings in shorter timeframes and at lower prices.
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.
Our management training is designed to increase capability in the areas of communication, engagement, coaching, inclusion and belonging, hiring, and key business skills. This is based on our belief that our employees should work for and with great managers and leaders. The training aims to promote an ethical and supportive work environment that is free from bias and harassment.
Support for Industry Standards We actively create and support standards that help our EDA and IP customers increase productivity, facilitate efficient design flows, improve interoperability of tools from different vendors and ensure connectivity, functionality and interoperability of IP building blocks.
We have not experienced material warranty or indemnity claims to date. 7 Table of Contents Support for Industry Standards We actively create and support standards that help our EDA and IP customers increase productivity, facilitate efficient design flows, improve interoperability of tools from different vendors and ensure connectivity, functionality and interoperability of IP building blocks.
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.
Our offices are further described under Part I, Item 2, Properties of this Annual Report . 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.
Risks related to our foreign operations are described in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K. 9 Table of Contents Revenue Attributable to Product Groups Revenue from our products and services is categorized into four groups: • EDA, which includes digital and custom IC design software, verification hardware and software products, manufacturing-related design products, FPGA design software, AI driven EDA solutions, and professional services; • Design IP, which includes our Synopsys IP portfolio; • Software Integrity, which includes solutions that test software code for security vulnerabilities and quality defects, as well as professional and managed services; and • Other, which includes university programs, optical products, mechatronic simulation, and the impact of gains and losses from foreign currency hedges.
Risks related to our foreign operations are described in Part I, Item 1A, Risk Factors of this Annual Report. 8 Table of Contents Revenue Attributable to Product Groups Revenue from our products and services is categorized into three groups: • EDA, which includes digital and custom IC design software, verification hardware and software products, manufacturing-related design products, FPGA design software, AI driven EDA solutions, and professional services; • Design IP, which includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services; and • Other, which includes university programs, optical products, mechatronic simulation, and the impact of gains and losses from foreign currency hedges.
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.
Verification Our Verification Family is built from our industry-leading verification technologies and provides virtual prototyping, static and formal verification, simulation, emulation, FPGA-based prototyping and debug in a unified environment with verification IP, planning, and coverage technology.
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.
We attribute the strong retention of our talented workforce to several factors, including exciting and challenging assignments; growth opportunities; strong leadership and management; a culture of integrity and caring; our commitment to inclusion; competitive and equitable compensation and benefits; our leading products and technology; and the strength of our customer relationships.
Designers use our EDA products to automate the IC design process, reduce errors and enable more powerful and robust designs.
Designers use our EDA products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market.
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.
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 offer regularly scheduled public and private courses in a variety of locations worldwide, as well as online training (live or on-demand) through our Virtual Classrooms.
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. We offer regularly scheduled public and private courses in a variety of locations worldwide, as well as online training (live or on-demand) through our Virtual Classrooms.
Manufacturing Our manufacturing solutions include Sentaurus technology computer-aided design device and process simulation products, Proteus mask synthesis tools, CATS ® mask data preparation software, Yield Explorer ® Odyssey, Yield-Manager ® yield management solutions and QuantumATK atomic-scale modeling software.
Manufacturing Our manufacturing solutions include Synopsys technology computer-aided design (TCAD), mask synthesis and manufacturing analytics. Synopsys TCAD enables computer-aided simulations to develop and optimize semiconductor process technologies. We also offer Proteus TM Mask Synthesis tools, CATS ® mask data preparation software, Yield Explorer Odyssey, Yield-Manager ® yield management solutions and QuantumATK TM atomic-scale modeling software.
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.
Significant Accounting Policies and Bases of Presentation of the Notes to Consolidated Financial Statements in this Annual Report for further information. 9 Table of Contents Our hardware products, which principally consist of our emulation and prototyping systems, are either sold or leased to our customers.
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.
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. Dr. de Geus has also served on the board of directors of Applied Materials, Inc. since July 2007.
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.
We provide software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them, including cloud-based digital design flow to boost chip-design development productivity. 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.
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.
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. Shelagh Glaser has served as our Chief Financial Officer since December 2022. Prior to joining Synopsys, Ms. Glaser served as Chief Financial Officer of Zendesk, Inc. from May 2021 to November 2022. Ms.
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.
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. These are two key drivers of the overall employee experience. We also believe ongoing performance feedback encourages greater engagement in our business and improved individual performance.
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.
Aart J. de Geus co-founded Synopsys and served as a member of our Board of Directors since our inception and as Chair of our Board of Directors from 1986 to 1992 and from 1998 until his transition to Executive Chair of our Board of Directors in January 2024.
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 .
We typically distribute our software products and documentation to customers electronically. 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.
In fiscal 2023, we introduced a new leadership training, and focused on helping our many managers thrive in connecting team work to company priorities while giving them the tools to be great coaches and leaders. In addition, our regions and business teams customize development programs for their specific needs.
In fiscal 2024, we introduced courses for our front line and middle 12 Table of Contents management focused on helping our many managers lead through change and giving them the tools to be great coaches and leaders. In addition, our regions and business teams customize development programs for their specific demographic.
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.
Our IP Accelerated initiative augments our established, broad portfolio of silicon-proven Synopsys IP with SoC architecture design support, customized IP subsystems, signal/power integrity analysis and IP hardening to accelerate the product development cycle.
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.
Standards in the electronic design industry can be established by formal accredited organizations, industry consortia, intercompany licensing , de facto usage, or through open-source licensing. Our products support multiple Application Programming Interfaces (APIs) including numerous commonly used frameworks and data and file formats.
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.
Through our annual SHAPE Synopsys surveys, we obtain employee insight into our values, manager effectiveness, ability to innovate, perceptions on inclusion and belonging, and other critical factors. We also use pulse 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.
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 was a design engineer at Intel Corporation. Mr. 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.
It is now common for a single chip to combine many components (processor, communications, memory, custom logic, input/output) and embedded software into a single system-on-chip (SoC), necessitating highly complex chip designs. The most complex chips today contain more than a billion transistors.
In turn, this is driving an increase in the activity of new and existing chip and system design companies around the world. These developments are accompanied by increasing complexity. It is now common for a single chip to combine many components (processor, communications, memory, custom logic, input/output) and embedded software into a single system-on-chip (SoC), requiring highly complex chip designs.
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.
In our Design Automation segment, our EDA products support many standards, including the many commonly used hardware description languages: SystemVerilog, Verilog, VHDL and SystemC. Our products utilize numerous industry-standard data formats, APIs and databases for the seamless exchange of design data among our tools, other EDA vendors’ products and applications that customers develop internally across design flows.
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.
Each year, our employees participate in our performance development process, which summarizes key accomplishments for the preceding year, establishes new stretch goals and objectives, 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.
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.
In addition, we host 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 is intended to build new technical skills and core capabilities.
Risks related to our human capital are described in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K. Recruitment and Retention Our workforce is representative of the industry we serve.
We focus on several human capital measures and objectives, including recruitment and retention; inclusion and belonging; total rewards; employee health, safety, and wellbeing; employee engagement; and talent development and succession planning. Risks related to our human capital are described in Part I, Item 1A, Risk Factors of this Annual Report.
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.
He served as Chief Executive Officer from 1994 to 2012 and as Co-Chief Executive Officer with Dr. Chi-Foon Chan from May 2012 until April 2022, and Chief Executive Officer from April 2022 until January 2024.
Customers can also engage, for additional charges, with our worldwide network of applications consultants for additional support needs. In our Software Integrity segment, post-contract customer support for our products includes access to our support community portal, where customers can access our product documentation, self-service training materials, customer forums and our product knowledge base.
Customers can also engage, for additional charges, with our worldwide network of applications consultants for additional support needs. In addition, we offer training workshops designed to increase customer design proficiency and productivity with our products.
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.
The PrimeWave TM design environment provides comprehensive analysis and improved productivity and ease of use across all tools in PrimeSim. Our Silicon Lifecycle Management (SLM) family of products improves silicon health and operational metrics at every phase of the device lifecycle. This family of products is built on a foundation of enriched in-chip observability, analytics and integrated automation.
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 or silicon. We provide software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them, including cloud-based digital design flow to boost chip-design development productivity.
We are a global leader in supplying the mission-critical EDA software that engineers use to design and test integrated circuits (ICs), also known as chips or silicon, and we are pioneering artificial intelligence (AI) driven chip design across the full-stack EDA suite to improve efficiency and accelerate the design, verification testing and manufacturing of advanced digital and analog chips.
Environment, Social and Governance Matters At Synopsys, our Smart Future Environment, Social and Governance (ESG) strategy provides a framework for how we manage our own operational impact on the world and our ability to influence others to do the same, as we 11 Table of Contents believe this approach supports the success of the business.
Our Environmental, Social and Governance (ESG) strategy provides a focus and structure for how we manage our own operational impact and help others in our ecosystem to do the same.
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.
To accelerate IP integration and silicon bring-up, our IP Accelerated initiative provides architecture design expertise, hardening, and signal and power integrity analysis. These products and services are part of our Design IP segment. Corporate Information 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/.
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.
Our Custom Design Family is a unified suite of design and verification tools that accelerates the transistor-level design of robust analog, mixed-signal, and custom-digital ICs. This product family features visually assisted layout automation, high-performance circuit simulation, reliability-aware verification, and natively integrated parasitic RC extraction and physical verification.
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.
Ghazi joined Synopsys in March 1998 as an applications engineer and held a series of sales positions with increasing responsibility, culminating in leadership of worldwide strategic accounts. Prior to his appointment as Chief Operating Officer, Mr. Ghazi was the general manager for all digital and custom products, the largest business group in Synopsys. Prior to joining Synopsys, Mr.
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 also offer a broad and comprehensive portfolio of semiconductor IP solutions, which are pre-designed circuits that engineers use as components of larger chip designs to reduce integration risk and speed time to market. Our high quality, silicon-proven semiconductor IP includes logic libraries, embedded memories, analog IP, wired and wireless interface IP, security IP, embedded processors and subsystems.
We received an engagement score of 82, which is calculated by computing the average score set to a 100-point scale, for all employee responses to the questions pertaining to employee satisfaction and job satisfaction. These results demonstrate Synopsys' stability, resiliency, and a global workforce that is highly engaged.
In October 2024, approximately 91% of our employees participated in the SHAPE survey. We received an engagement score of 80, which was calculated by averaging the scores of all employee responses to questions about job satisfaction on a 100-point scale.
The customers for products in our Software Integrity segment include many of these companies as well as companies from a wider array of industries, including electronics, financial services, automotive, medicine, energy and industrials. We market our products and services principally through direct sales in the United States and our principal foreign markets.
In our Design IP segment, we support a wide range of industry standards within our IP product family to ensure usability and interconnectivity. Sales and Distribution Our Design Automation and Design IP segment customers are primarily semiconductor and electronics systems companies. We market our products and services primarily through direct sales in the United States and our principal foreign markets.
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Item 1. Business Company and Segment Overview Synopsys, Inc. (Synopsys, we, our or us) provides products and services used across the entire Silicon to Software spectrum to bring Smart Everything to life.
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Item 1. Business Company and Segment Overview Synopsys, Inc. (Synopsys, we, our or us) delivers trusted and comprehensive silicon to systems design solutions, from electronic design automation (EDA), including system verification and validation solutions, to silicon intellectual property (IP).
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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.
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We partner closely with semiconductor and systems customers across a wide range of industries to maximize their engineering and research and development capacity. We are catalyzing the era of pervasive intelligence, powering innovation today that ignites the ingenuity of tomorrow.
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We are also a leading provider of software tools and services that improve the security, quality and compliance of software in a wide variety of industries, including electronics, financial services, automotive, medicine, energy and industrials. These tools and services are part of our Software Integrity segment.
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Background In today’s era of pervasive intelligence, we have seen an acceleration in innovation cycles and a growing opportunity for Synopsys. The proliferation of silicon to power our digital world, where technology is omnipresent and interconnected, means computing is being reinvented with the rise of AI and software-defined systems.
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Background In this era of Smart Everything, we have seen a remarkable proliferation of consumer and wireless electronic products, particularly mobile devices. The growth of the Internet and cloud computing has provided people with new ways to create, store, and share information.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur 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.
Biggest changeThese efforts may not be successful due to a variety of factors, including, but not limited to, our ability to: • Attract a new customer base, including in industries in which we have less experience; • Successfully develop new sales and marketing strategies to meet customer requirements; • Accurately predict, prepare for and promptly respond to technological developments in new fields; • Compete with new and existing competitors, many of which may have more financial resources, industry experience, brand recognition, relevant intellectual property rights or established customer relationships than we do; • Balance our investment in adjacent markets with investment in our existing products and services; and • Attract and retain employees with expertise in new fields.
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 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 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.
The United States has published significant changes to the Export Regulations with respect to China and Russia, and we anticipate additional changes to the Export Regulations in the future.
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.
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 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, 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.
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. These controls expand the scope of foreign-produced items subject to license requirements for certain entities on the U.S. government's Entity List.
Further, whether such divestitures are ultimately consummated or not, their pendency could have a number of negative effects on our current business, including potentially disrupting our regular operations, diverting the attention of our workforce and management team and increasing undesired workforce turnover.
Further, whether such divestitures are ultimately consummated or not, their pendency could have a number of negative effects on our current business, including disrupting our regular operations, diverting the attention of our workforce and management team and increasing undesired workforce turnover.
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.
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, some of our customers internally develop design tools and capabilities that compete with our products.
These risks and uncertainties could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this report. Investors should carefully consider all relevant risks and uncertainties before investing in our common stock.
These risks and uncertainties could cause our actual results to differ materially from the results contemplated by the forward-looking statements contained in this Annual Report. Investors should carefully consider all relevant risks before investing in our common stock.
We depend in large part upon the services of our senior management team and key employees to drive our future success, and certain of such personnel depart our company from time to time, with the frequency and number of such departures varying widely.
We depend in large part upon the services of our senior management team and key employees to drive our future success, and certain of these personnel depart our company from time to time, with the frequency and number of such departures varying widely.
For example, if we decide to sell or otherwise dispose of certain product lines or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all.
For example, if we sell or otherwise dispose of certain product lines or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all.
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.
Any acquisitions and strategic investments we may undertake, including the Ansys Merger, are difficult, time-consuming, and pose a number of risks, including, but not limited to: • Potential negative impact on our net income resulting from acquisition or investment-related costs or on our earnings per share; • Failure of acquired products to achieve projected sales; • Problems in integrating the acquired products with our products; 20 Table of Contents • Difficulties entering into new markets in which we are inexperienced or our competitors 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 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; 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.
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.
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 or financial condition could be adversely affected.
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.
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 senior management and key employees.
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.
Such risks that may be heightened by uncertain macroeconomic conditions include China’s stated policy of becoming a global leader in the semiconductor industry, which may lead to increased competition or further disruption of international trade relationships, including, but not limited to, additional government trade restrictions.
A number of business combinations and strategic partnerships among our customers in the semiconductor and electronics industries have occurred over the last several years, and more could occur in the future. Consolidation among our customers could lead to fewer customers or the loss of customers, increased customer bargaining power or reduced customer spending on software and services.
A number of business combinations and strategic partnerships among our customers in the semiconductor and electronics industries have occurred over the last several years, and more could occur in the future. Consolidation among our customers could lead to fewer customers or the loss of customers, increased customer bargaining power or reduced customer spending on products and services.
Similarly, we work closely with other major providers of semiconductor IP, particularly microprocessor IP, to optimize our EDA tools for use with their IP designs and to assure that their IP and our own IP products work effectively together, as we may each provide for the design of separate components on the same chip.
Similarly, we work closely with other major providers of semiconductor IP, particularly microprocessor IP, to optimize our EDA tools for use with their IP designs and to ensure that their IP and our own IP products work effectively together, as we may each provide for the design of separate components on the same chip.
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.
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 may be adversely affected.
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.
The growth in sales of our hardware products subjects us to 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; • 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 sustained global inflationary pressures and elevated interest rates, or global semiconductor shortages.
To be successful, we must also attract senior management and key employees who join us organically and through acquisitions. There are a limited number of qualified engineers. Competition for these individuals and other qualified employees is intense and has increased globally, including in major markets such as Asia.
To be successful, we must also attract senior management and key employees who join us organically and through acquisitions, such as the Ansys Merger. There are a limited number of qualified engineers. Competition for these individuals and other qualified employees is intense and has increased globally, including in major markets such as Asia.
In addition, if our customers or distributors build elevated inventory levels, we could experience a decrease in short-term and/or long-term demand for our products. If any of these events or disruptions were to occur, the demand for our products and services could be adversely affected along with our business, operating results and financial condition.
In addition, if our customers or distributors build elevated inventory levels, we could experience a decrease in demand for our products. If any of these events or disruptions were to occur, the demand for our products and services could be adversely affected along with our business, operating results and financial condition.
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.
The timing of revenue recognition is affected by factors including: • 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; • 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 generally recognized upfront and are primarily dependent upon our ability to provide the latest technology and meet customer requirements.
Uncertainty in the macroeconomic environment, including the effects of, among other things, increased global inflationary pressures and interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, fluctuations in foreign exchange rates and associated global economic conditions have resulted in volatility in credit, equity and foreign currency markets.
Uncertainty in the macroeconomic environment, including the effects of, among other things, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, fluctuations in foreign exchange rates and associated global economic conditions, have resulted in volatility in credit, equity and foreign currency markets.
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.
In some cases, such changes could prevent the export or import of our products. 17 Table of Contents 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.
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.
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, among other things, financial constraints, unfavorable credit markets, commercially unacceptable terms, failure to obtain regulatory approvals, competitive bid dynamics or other risks, which could harm our operating results.
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.
Infringement claims have in the past and could in the future 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.
In the normal course of business, our systems are and have been the target of malicious cyber attack attempts and have been and may be subject to compromise due to employee error, malfeasance or other disruptions that have and could result in unauthorized disclosure or loss of sensitive information.
In the normal course of business, our systems are and have been the target of malicious cyberattack attempts and have been and may be subject to compromise due to employee error, malfeasance or other disruptions that have and could result in unauthorized disclosure or loss of sensitive information.
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.
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 an adverse impact on our backlog, future revenue and profits and our customers’ and suppliers’ business, operating results and financial 18 Table of Contents condition.
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.
For example, in response to this increasing complexity, some customers have chosen 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.
The departure of key employees could result in significant disruptions to our operations, including adversely affecting the timeliness of our product releases, the successful implementation and completion of our initiatives, the adequacy of our internal control over financial reporting, and our business, operating results and financial condition.
The departure of key employees could result in significant disruptions to our operations, including, among other things, adversely affecting the timeliness of our product releases, the successful implementation and completion of our initiatives, the adequacy of our internal control over financial reporting, and our business, operating results and financial condition.
Additionally, we have divested and may in the future divest certain product lines or technologies that no longer fit our long-term strategies.
We have also divested and may in the future divest certain product lines or technologies that no longer fit our long-term strategies.
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.
Future changes to 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.
We maintain a variety of information security policies, procedures, and controls to protect our business and proprietary information, prevent data loss and other security breaches and incidents, keep our IT systems operational and reduce the impact of a security breach or incident, but these securities measures cannot provide and have not provided absolute security.
We maintain a variety of information security policies, procedures, and controls to protect our business and proprietary information, prevent data loss and other security breaches and incidents, keep our IT systems operational and reduce the impact of a security breach or 21 Table of Contents incident, but these security measures cannot provide and have not provided absolute security.
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.
Many factors have in the past and may in the future cause our backlog, revenue or earnings to fluctuate, including, among other things: • Changes in demand for our products and services—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 as well as EDA and IP products and services; • Changes in demand for our products due to customers reducing their expenditures, which may be a result of customer cost-cutting measures or insolvency or bankruptcy, sustained global inflationary pressures and elevated interest rates or other reasons; • Product competition in the EDA, IP or semiconductor industries, 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; 19 Table of Contents • 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, including our expenses related to the Ansys Merger; • 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, changes in Export Regulations, 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.
Our employees are often recruited aggressively by our competitors and our customers worldwide. Any failure to recruit and/or retain senior management and key employees could harm our business, operating results and financial condition. Additionally, efforts to recruit such employees could be costly and negatively impact our operating expenses.
Our employees are often recruited aggressively by our competitors and our customers worldwide. Any failure to recruit and/or retain senior management and key employees could harm our business, operating results and 23 Table of Contents financial condition. Additionally, efforts to recruit such employees could be costly and negatively impact our operating expenses.
In addition, any allegations of manufacturability issues resulting from use of our IP products could, even if untrue, adversely affect our reputation and our customers’ willingness to license IP products from us.
In addition, any allegations of manufacturability issues resulting from use of our IP 24 Table of Contents products could, even if untrue, adversely affect our reputation and our customers’ willingness to license IP products from us.
We compete principally on the basis of technology, product quality and features (including ease-of-use), license or usage terms, post-contract customer support, interoperability among products, and price and payment terms.
We compete principally on the basis of technology, product quality and features, license or usage terms, post-contract customer support, interoperability among products, and price and payment terms.
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 may pursue new product and technology initiatives or expand into adjacent markets, 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.
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.
For more on risks related to government export and import restrictions see “ 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.
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.
Our software products and hosted 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 attacks conducted or sponsored by nation-states, advanced persistent threat intrusions, ransomware and other malware.
We may also communicate certain initiatives and goals regarding environmental matters, diversity, responsible sourcing, social investments and other ESG matters in our SEC filings or in other public disclosures.
We may also communicate certain initiatives and goals regarding environmental matters, diversity, responsible sourcing, social investments and other ESG matters in our public disclosures.
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.
Additionally, as the EDA industry has matured, stronger competition has emerged from companies better able to compete as sole source vendors. This increased competition could 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.
The techniques used to obtain unauthorized access to networks or to sabotage systems of companies such as ours change frequently and generally are not recognized until launched against a target.
The techniques used to obtain unauthorized access to networks or to sabotage systems of companies such as ours change frequently, increasingly leverage technologies such as AI, and generally are not recognized until launched against a target.
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.
If growth in the semiconductor and electronics industries slows or stalls, including, among other things, due to sustained global inflationary pressures and elevated interest rates, a continued or worsening global supply chain disruption, geopolitical pressures or economic slowdowns or recessions then demand for our products and services could decrease and our business, operating results and financial condition could be adversely affected.
In addition, we are subject to customs and other import requirements that regulate imports that may be important for our business. If we fail to comply with the U.S.
In addition, we are subject to customs and other import requirements that regulate imports that may be important for our business. Any failure to comply with the U.S.
Export Administration Regulations or other U.S. or non-U.S. export requirements (collectively, the Export Regulations), we could be subject to substantial civil and criminal penalties, including fines for the company and the possible loss of the ability to engage in exporting and other international transactions.
Export Administration Regulations or other U.S. or non-U.S. export requirements (collectively, the Export Regulations) could subject us to substantial civil and criminal penalties, including fines and the possible loss of the ability to engage in exporting and other international transactions.
Our success depends in part upon protecting our proprietary technology. Our efforts to protect our technology may be costly and unsuccessful. We rely on agreements with customers, employees and other third parties as well as intellectual property laws worldwide to protect our proprietary technology. These agreements may be breached, and we may not have adequate remedies for any breach.
Our efforts to protect our technology may be costly and unsuccessful. We rely on agreements with customers, employees and other third parties as well as intellectual property laws worldwide to protect our proprietary technology. These agreements may be breached, and we may not have adequate remedies for any breach.
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.
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. 30 Table of Contents Item 1B. Unresolved Staff Comments None.
For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and Export Regulations (as defined below), 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. ” Adverse economic conditions affect demand for devices that our products help create, such as the ICs incorporated in personal computers, smartphones, automobiles and servers.
For more on risks related to government export and import restrictions, see “ 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. ” Adverse economic conditions affect demand for devices that our products help create, such as the ICs incorporated in personal computers, smartphones, automobiles, servers and more.
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.
The growth of the EDA industry as a whole and our sales in our Design Automation and Design IP segments are primarily 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.
For example, the adoption of cloud computing and artificial intelligence (AI) technologies can bring new demand and also challenges in terms of disruption to both business models and our existing technology 17 Table of Contents offerings. Our efforts in developing such new technology solutions, including, for example, our current efforts in creating cloud computing and AI solutions, may not succeed.
For example, the adoption of cloud computing and AI technologies may bring new demands and also challenges in terms of disruption to both our business models and existing technology offerings. Our efforts in 16 Table of Contents developing such new technology solutions, including, for example, our current efforts in creating cloud computing and AI solutions, may not succeed.
For example, we have recently experienced significant changes to our executive leadership team due to planned succession and other departures.
For example, we have in the past experienced significant changes to our executive leadership team due to planned succession and other departures.
A deterioration of conditions in worldwide credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. In addition, difficult economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults.
A deterioration of conditions in worldwide credit markets could limit our ability to obtain external financing to fund our operations, capital expenditures or pending acquisitions, such as the Ansys Merger. In addition, difficult economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults.
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.
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.
We may also be liable for potential tax liabilities of businesses we acquire. The final determination in an audit may be materially different than the treatment reflected in our historical income tax provisions and accruals.
We may also be liable for potential tax liabilities of businesses we acquire. The final determination in an audit may be materially different than the treatment reflected in our historical income tax provisions and accruals. An assessment of additional taxes could adversely affect tax expense and materially affect our financial results.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.
Changing rules, regulations as well as customer, employee and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying 29 Table of Contents with or meeting such regulations and expectations.
From time to time, we may need to commence litigation or other legal proceedings in order to assert claims of infringement of our intellectual property; defend our products from piracy; protect our trade secrets or know-how; or determine the enforceability, scope and validity of the propriety rights of others.
Our trade secrets may also be stolen, otherwise become known, or be independently developed by competitors. 22 Table of Contents From time to time, we may need to commence litigation or other legal proceedings in order to assert claims of infringement of our intellectual property, defend our products from piracy, protect our trade secrets or know-how, or determine the enforceability, scope and validity of the propriety rights of others.
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.
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. Acquisitions and strategic investments are an important part of our growth strategy.
Due to the nature of our business and technology, the Export Regulations may also subject us to governmental inquiries regarding transactions between us and certain foreign entities. For example, we have received administrative subpoenas from the U.S. Bureau of Industry and Security (the BIS) requesting production of information and documentation relating to transactions with certain Chinese entities.
Due to the nature of our business and technology, governmental agencies from time to time review certain transactions for compliance with applicable Export Regulations. For example, we have received administrative subpoenas from the U.S. Bureau of Industry and Security (the BIS) requesting production of information and documentation relating to transactions with certain Chinese entities.
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.
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; • 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.
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.
We may be required to incur debt at higher than anticipated interest rates, access other funding sources or repatriate cash, any of which could negatively affect our operating results, capital structure or the market price of our common stock.
The inclusion of third-party intellectual property in our products can also subject us and our customers to infringement claims. We may not be able to sufficiently limit our potential liability contractually. Regardless of outcome, infringement claims may require us to use significant resources and may divert management’s attention from the operation of our business.
The inclusion of third-party intellectual property in our products can also subject us and our customers to infringement claims. We may not be able to sufficiently limit our potential liability contractually.
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.
Our ability to use these deferred tax assets is dependent upon having sufficient future taxable income in the relevant jurisdiction. 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.
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.
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. We may be subject to litigation proceedings that could harm our business.
Our 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.
Our international operations and sales subject us to a number of increased risks, including, among others: • Economic slowdowns, recessions or uncertainty in financial markets, including, among other things, the impact of sustained global inflationary pressures and elevated interest rates; • Uncertain economic, legal and political conditions in China, Europe, the Middle East 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; and • Financial risks such as longer payment cycles, changes in currency exchange rates and difficulty in collecting accounts receivable.
Consolidated competitors could have considerable financial resources and channel influence as well as broad geographic reach, which may enable them to be more competitive in, among other things, product differentiation, breadth of technology portfolio, pricing, marketing, services or support. Such consolidations or acquisitions could negatively impact 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. Consolidated competitors could have considerable financial resources and channel influence as well as broad geographic reach, which may enable them to be more competitive in, among other things, product differentiation, breadth of technology portfolio, pricing, marketing, services or support.
Additionally, uncertain macroeconomic conditions could also have the effect of increasing other risks and uncertainties facing our business, which could have a material adverse effect on our operating results and financial condition.
If these macroeconomic uncertainties persist and economic conditions continue to deteriorate, then the semiconductor and electronics industries could fail to grow. Additionally, uncertain macroeconomic conditions could also have the effect of increasing other risks and uncertainties facing our business, which could have a material adverse effect on our operating results and financial condition.
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.
Additionally, due to our business model, the negative impact of these events or disruptions may not be immediately realized. 15 Table of Contents Further economic uncertainty 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.
Due to the global nature of our business, our operating results may be negatively impacted by catastrophic events and the effects of climate change, pandemics, such as the recent COVID-19 pandemic, or other unexpected events throughout the world.
Due to the global nature of our business, our operating results may be negatively impacted by catastrophic events and the effects of climate change, pandemics, such as the COVID-19 pandemic, or other unexpected events throughout the world. We rely on a global network of infrastructure applications, enterprise applications and technology systems for our development, marketing, operational, support and sales activities.
There is uncertainty regarding how proposed, contemplated or future changes to the laws, policies and regulations governing our industry, the banking and financial services industry and the economy could affect our business, including increased global interest rates and global inflationary pressure.
Additionally, the banking and financial services industries are subject to complex laws and are heavily regulated. There is uncertainty regarding how proposed, contemplated or future changes to the laws, policies and regulations governing the banking and financial services industry could affect our business.
Further, we depend 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 revenues. Consolidation among our customers could also reduce demand for our products and services if customers streamline research and development or operations, or reduce or delay purchasing decisions.
Further, we depend 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 revenues.
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).
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, the Financial Accounting Standards Board, states and the international governing bodies such as the European Union. These rules and regulations continue to evolve in scope and complexity making compliance difficult and uncertain.
Attacks on our products could potentially disrupt the proper functioning of our software, cause errors in the output of our customers’ work, allow unauthorized access to our or our customers’ proprietary information or cause other destructive outcomes. We also offer software security and quality testing solutions.
Attacks on our products could potentially disrupt the proper functioning of our software, cause errors in the output of our customers’ work, allow unauthorized access to our or our customers’ proprietary information or cause other destructive outcomes. If we fail to protect our proprietary technology, our business will be harmed. Our success depends in part upon protecting our proprietary technology.
If customers reduce or slow the need to upgrade or enhance their product offerings, our revenue and operating results may be adversely affected. Additionally, our periodic research and development expenses may be independent of our level of revenue, which could negatively impact our financial results. New products may not adequately address the changing needs of the marketplace.
Additionally, our periodic research and development expenses may be independent of our level of revenue, which could negatively impact our financial results. New products may not adequately address the changing needs of the marketplace. New software products may contain undetected errors, defects or vulnerabilities.
Item 1A. Risk Factors A description of the risk factors associated with our business is set forth below. Some of these risks are highlighted in the following discussion, and in Management’s Discussion and Analysis of Financial Condition and Results of Operations, Legal Proceedings, and Quantitative and Qualitative Disclosures About Market Risk.
Some of these risks are highlighted in the following discussion and in Management's Discussion and Analysis of Financial Condition and Results of Operations , Legal Proceedings , Controls and Procedures and Quantitative and Qualitative Disclosures About Market Risk of this Annual Report.
Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation, particularly that of our security testing solutions.
Cybersecurity threats or other security breaches could compromise sensitive information belonging to us or our customers and could harm our business and our reputation. 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.
New competitors, technological advances in the semiconductor industry or by competitors, our acquisitions, our entry into new markets or other competitive factors may require us to invest significantly greater resources than we anticipate. If we are required to invest significantly greater resources than anticipated without a corresponding increase in revenue, our operating results could decline.
We may be required to invest significantly greater resources than anticipated due to certain competitive factors, including, among others, the emergence of new competitors, technological advances in the semiconductor industry or by competitors, our acquisitions or our entry into new markets.
If we do not manage the foregoing risks, the transactions that we complete or are unable to complete may have an adverse effect on our business, operating results and financial condition. 24 Table of Contents If we fail to timely recruit and/or retain senior management and key employees globally, our business may be harmed.
If we do not manage the foregoing risks, the transactions that we complete or are unable to complete, including the Ansys Merger and the Optical Solutions Divestiture (as defined below), may have an adverse effect on our business, operating results and financial condition.
These licenses may need to be renegotiated or renewed from time to time, or we may need to obtain new licenses in the future. Third parties may stop adequately supporting or maintaining their technology, or they or their technology may be acquired by our competitors.
Third parties may stop adequately supporting or maintaining their technology, or they or their technology may be acquired by our competitors.
We license third-party software and other intellectual property for use in product research and development and, in several instances, for inclusion in our products. We also license third-party software, including the software of our competitors, to test the interoperability of our products with other industry products and in connection with our professional services.
We also license third-party software, including the software of our competitors, to test the interoperability of our products with other industry products and in connection with our professional services. These licenses may need to be renegotiated or renewed from time to time, or we may need to obtain new licenses in the future.
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.
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. The risks associated with open source usage may not be eliminated despite our best efforts and may, if not properly addressed, result in unanticipated obligations that harm our business.

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Item 2. Properties

Properties — owned and leased real estate

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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 .
Biggest changeWe currently lease approximately 3.3 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 likewise used primarily for sales and support, service, and research and development activities for our business segments.
We believe that our existing facilities, including both owned and leased properties, are in good condition and suitable for our current needs and that suitable additional or substitute space will be available on commercially reasonable terms as needed to accommodate any expansion of our operations.
We believe that our existing facilities, including both owned and leased properties, are in good condition and suitable for our current needs and that suitable additional or substitute space will be available on commercially reasonable terms as needed to accommodate any expansion of our operations. 32 Table of Contents
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.
Item 2. Properties Our principal o ffices are currently located in Sunnyvale, California. We currently lease approximately 1.1 million square feet of space in 24 offices throughout the United States, of which we sublet 340,000 square feet to third parties. We own a 118,000 square foot building in California, which we lease to a third party.
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.
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.
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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 changeIf 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.
Biggest changeIf 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.
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Income 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.
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We are not aware of any legal proceedings that would materially impact our business, operating results or financial condition.
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Examinations.” Bell Semic Actions On April 27, 2022, Bell Semiconductor LLC (Bell Semic), a patent monetization entity, began filing a series of patent infringement lawsuits against certain technology companies alleging that certain semiconductor devices designed using certain design tools offered by electronic design automation (EDA) vendors, including Synopsys, infringe upon one or more patents held by Bell Semic.
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Bell Semic seeks money damages, attorneys’ fees and costs, and a permanent injunction prohibiting the defendants from using allegedly infringing EDA design tools. On April 29, 2022, Bell Semic also began filing a series of complaints with the U.S.
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International Trade Commission (ITC) alleging violations of Section 337 of the Tariff Act of 1930 and seeking limited exclusion orders preventing the respondents from importing into the United States semiconductor devices designed using certain design tools offered by EDA vendors, including Synopsys, and cease-and-desist orders prohibiting respondents from importing, selling, offering for sale, advertising, or transferring products made using certain design tools offered by EDA vendors, including Synopsys.
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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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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.
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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.
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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.
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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.
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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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeThe table below sets forth information regarding our repurchases of our common stock during the three months ended November 2, 2024: Period Total number of shares purchased Average price paid per share 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 August 4, 2024 through September 7, 2024 — $ — — $ 194,276,393 Month #2 September 8, 2024 through October 5, 2024 — $ — — $ 194,276,393 Month #3 October 6, 2024 through November 2, 2024 — $ — — $ 194,276,393 Total — — $ 194,276,393
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.
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, 2024, $194.3 million remained available for future repurchases under the Program.
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.
The graph assumes that $100 was invested in Synopsys common stock on November 1, 2019 (the last trading day before the beginning of our fifth preceding fiscal year) and in each of the indexes on October 31, 2019 (the closest month end) and that all dividends were reinvested. No cash dividends were declared on our common stock during such time.
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 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 1, 2019 in stock or October 31, 2019 in index, including reinvestment of dividends.
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.
Fiscal year ending November 2. 34 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.
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.
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 16, 2024, we had 198 stockholders of record.
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In 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.
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However, in connection with the pending Ansys Merger, we have suspended the Program until we reduce our expected debt levels.
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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

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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.
Biggest changeSales and Marketing Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Sales and marketing expenses $ 859.3 $ 724.9 $ 642.7 $ 134.4 19 % $ 82.2 13 % Percentage of total revenue 14 % 14 % 14 % The increase in sales and marketing expenses for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $90.9 million in employee-related costs due to headcount increases, $19.6 million in the change in the fair value of our executive deferred compensation plan assets, and $7.0 million in travel and marketing costs due to an increased number of in-person meetings and events.
Change in Fair Value of Deferred Compensation The income or loss arising from the change in fair value of our non-qualified deferred compensation plan obligation is recorded in cost of sales and each functional operating expense, with the offsetting change in the fair value of the related assets recorded in other income (expense), net.
Change in Fair Value of Deferred Compensation The income or loss arising from the change in the fair value of our non-qualified deferred compensation plan obligation is recorded in cost of sales and each functional operating expense, with the offsetting change in the fair value of the related assets recorded in interest and other income (expense), net.
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.
As a result, decreases as well as increases in customer spending do not immediately affect our revenue 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The following overview is qualified in its entirety by the more complete discussion contained in this Item 7, the risk factors set forth in Item 1A of this Form 10-K, and our consolidated financial statements and the notes thereto set forth in Item 8 of this Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The following overview is qualified in its entirety by the more complete discussion contained in this Item 7, the risk factors set forth in Part I, Item 1A of this Form 10-K, and our consolidated financial statements and the notes thereto set forth in Item 8 of this Form 10-K.
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.
Further disaggregation of the revenues into various products and services within these two 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.
As a result of the IRS tax relief for the California winter storms, the due date for our fiscal 2023 federal tax payment was November 16, 2023 and as such, we have deferred our fiscal 2023 federal cash tax payments until the first quarter of fiscal 2024.
Additionally, as a result of the IRS tax relief for the California winter storms, the due date for our fiscal 2023 federal tax payment was November 16, 2023 and as such, we deferred our fiscal 2023 federal cash tax payments until the first quarter of fiscal 2024.
For more on risks related to the current macroeconomic and geopolitical environment, see Part I, Item 1A, Risk Factors , “ 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 ” of this Annual Report on Form 10-K.
For more on risks related to the current macroeconomic and geopolitical environment, see Part I, Item 1A, Risk Factors , “ 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 ” of this Annual Report.
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.
Summary of Significant Accounting Polices and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report 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.
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.
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.
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.
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 acquired intangible assets. Amortization of acquired intangible assets, included in cost of revenue, consists of the amortization and impairment charges of core/developed technology and certain contract rights intangible assets related to acquisitions.
The second performance obligation is to provide maintenance on the hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer.
The second performance obligation is to provide maintenance on the hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term 41 Table of Contents and have the same time-based pattern of transfer to the customer.
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 42 Table of Contents particular products and services.
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.
Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report , 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.
We are also actively monitoring geopolitical pressures around the world, including, among others, changes in the China-Taiwan relations, the conflicts in Ukraine, the Middle Ea st and other regional or global military conflicts.
We are also actively monitoring geopolitical pressures around the world, including, among others, changes in China-Taiwan relations, the conflicts in Ukraine and the Middle East and other regional or global military conflicts.
Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) as of October 31, 2023 were approximately $8.6 billion, which includes $1.4 billion in non-cancellable FSA commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) as of October 31, 2024 were approximately $8.1 billion, which includes $1.2 billion in non-cancellable FSA commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
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.
There is no impact on our net income from the fair value changes in our deferred compensation plan obligation and related assets. 45 Table of Contents Amortization of Acquired Intangible Assets Amortization of acquired intangible assets included in operating expenses consists of the amortization of trademarks, trade names, and customer relationships intangible assets related to acquisitions.
Recent Developments Impact of the Current Macroeconomic and Geopolitical Environment Uncertainty in the macroeconomic environment, including the effects of, among other things, increased global inflationary pressures and interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, fluctuations in foreign exchange rates, and associated global economic conditions, have resulted in volatility in credit, equity and foreign currency markets.
Impact of the Current Macroeconomic and Geopolitical Environment Uncertainty in the macroeconomic environment, including the effects of, among other things, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, fluctuations in foreign exchange rates, and associated global economic conditions, have resulted in volatility in credit, equity and foreign currency markets.
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 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.
Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example, Synopsys has employees, operations, customers and strategic partners in the Middle East and in Armenia, which are each experiencing geopolitical conflicts.
Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example, Synopsys has employees, operations, customers and strategic partners in the Middle East.
Our short-term investments include U.S. government and municipal obligations, investment-grade available-for-sale debt and asset backed securities with an overall weighted-average credit rating of approximately AA. As of October 31, 2023, approximately $753.7 million of our cash and cash equivalents were domiciled in various foreign jurisdictions.
Our short-term investments include U.S. government and municipal obligations, investment-grade available-for-sale debt and asset backed securities with an overall weighted-average credit rating of approximately AA. As of October 31, 2024, approximately $916.9 million of our cash and cash equivalents were domiciled in various foreign jurisdictions.
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 increase in cost of revenue for fiscal 2023 compared to fiscal 2022 was primarily due to increases of $53.4 million in hardware-related costs including inventory provisions, $45.8 million in employee-related costs as a result of headcount increases from hiring, $13.1 million in facility costs, $7.8 million in costs to fulfill IP consulting arrangements, and $6.0 million in the change in the fair value of our executive deferred compensation plan assets.
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.
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 AI/data center markets, enabling designers to quickly develop SoCs in these areas.
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.
While we are actively monitoring this conflict, at this time, it has not had a material impact on our business, operating results or financial condition to date. While our time-based 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.
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.
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; 40 Table of Contents • 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.
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.
Currently, a reasonably reliable estimate of timing of payments related to uncertain tax benefits in individual years beyond fiscal 2024 cannot be made due to uncertainties in timing of the commencement and settlement of potential tax audits. 51 Table of Contents
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.
For a discussion of fiscal 2023 changes compared to fiscal 2022, see the discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report for the fiscal year ended October 31, 2023, filed on December 12, 2023.
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%.
The economic useful life was determined based on historical customer turnover rates. Projected income from existing customer relationships considered customer retention rates ranging from 55% to 95%. The present value of operating cash flows from existing customers was determined using discount rates ranging from approximately 11% to 14%.
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.
As of October 31, 2024 , we held $4.1 billion in cash, cash equivalents and short-term investments. We also held $2.2 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.
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.
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, 2024 , we had $650.0 million of purchase obligations, with $558.5 million payable within 12 months.
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.
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. See Note 2.
Design Automation. This segment includes our advanced silicon design, verification products and services and system integration products. This segment also includes digital, custom and FPGA IC design software, verification software and hardware products, system integration products and services, and manufacturing software products.
This segment includes our advanced silicon design, verification products and services and system integration products. This segment also includes digital, custom and field programmable gate array (FPGA) integrated circuit (IC) design software, verification software and hardware products, system integration products and services, and manufacturing software products.
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.
Term Loan Refer to "Bridge Commitment Letter, Term Loan and Revolving Credit Facilities” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report for more information. Long Term Accrued Income Taxes As of October 31, 2024 , we had $18.8 million of long-term accrued income taxes which represent uncertain tax benefits.
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.
As of October 31, 2024, we were in compliance with the financial covenant. 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%.
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.
Year Ended October 31, 2024 2023 $ Change (dollars in millions) Cash provided by operating activities $ 1,407.0 $ 1,703.3 $ (296.3) Cash provided by (used in) investing activities $ 1,223.0 $ (482.1) $ 1,705.1 Cash used in financing activities $ (181.3) $ (1,196.9) $ 1,015.6 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.
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.
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 interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services.
Effective fiscal 2023, our research and development expenditures are required to be capitalized and amortized under the Tax Act instead of being deducted when incurred for US tax purposes.
Effective fiscal 2023, our research and development expenditures were required to be capitalized and amortized under the Tax Cuts and Jobs Act instead of being deducted when incurred for US tax purposes, which significantly increases our federal cash tax liability.
We have elected to exclude future sales-based royalty payments from the remaining performance obligations. 40 Table of Contents Approximately 40% of the backlog as of October 31, 2023, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months. The majority of the remaining backlog is expected to be recognized in the following three years .
We have elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 41% of the backlog as of October 31, 2024, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder recognized thereafter.
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.
Operating Expenses Research and Development Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Research and development expenses $ 2,082.4 $ 1,849.9 $ 1,589.8 $ 232.5 13 % $ 260.1 16 % Percentage of total revenue 34 % 35 % 34 % The increase in research and development expenses for fiscal 2024 compared to fiscal 2023 was primarily due to higher employee-related costs of $148.2 million as a result of headcount increases as we continue to expand and 44 Table of Contents enhance our product portfolio, increases of $36.5 million in the change in the fair value of our executive deferred compensation plan assets, $20.6 million in facility costs, $6.7 million in depreciation expenses, and $2.4 million in consultant and contractor costs.
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 .
Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Amortization of acquired intangible assets $ 16.2 $ 9.3 $ 11.6 $ 6.9 74 % (2.3) (20) % Percentage of total revenue — % — % — % The increase in amortization of acquired intangible assets for fiscal 2024 compared to fiscal 2023 was primarily due to amortization expense related to intangible assets acquired during fiscal 2024, partially offset by certain intangible assets becoming fully amortized during fiscal 2024 .
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.
Time-Based Products Revenue Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Time-based products revenue $ 3,224.3 $ 3,016.3 $ 2,657.7 $ 208.0 7 % $ 358.6 13 % Percentage of total revenue 53 % 57 % 58 % The increase in time-based products revenue for fiscal 2024 compared to fiscal 2023 and for fiscal 2023 compared to fiscal 2022 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods.
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.
The increase in upfront products revenue for fiscal 2024 compared to fiscal 2023 and for fiscal 2023 compared to fiscal 2022 was primarily due to an increase in the sale of IP and hardware products driven by higher demand from customers.
The backlog was approximately $7.1 billion as of October 31, 2022, which included $1.1 billion in non-cancellable FSA commitments from customers. The amount and composition of unsatisfied performance obligations will fluctuate period to period.
The majority of the remaining backlog is expected to be recognized in the following three years . The backlog was approximately $8.1 billion as of October 31, 2023, which included $1.4 billion in non-cancellable FSA commitments from customers. The amount and composition of unsatisfied performance obligations will fluctuate period to period.
This results in 45 Table of Contents a significant increase to our cash outflows beginning in fiscal 2024. See Note 15. Income Taxes of the Notes to Consolidated Financial Statements for further discussion.
This resulted in a significant increase to our cash outflows beginning in fiscal 2024. See Note 18. Income Taxes of the Notes to Consolidated Financial Statements in this Annual Report for further discussion. 48 Table of Contents Cash Flows Our consolidated statements of cash flows include cash flows related to the Software Integrity business.
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.
Upfront Products Revenue Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Upfront products revenue $ 1,802.2 $ 1,400.1 $ 1,221.2 $ 402.1 29 % $ 178.9 15 % Percentage of total revenue 29 % 26 % 26 % 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.
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.
Material Cash Requirements Our material cash requirements include the following contractual and other obligations. Leases We have operating lease arrangements for office space, data center, equipment and other corporate assets. As of October 31, 2024 , we had lease payment obligations, net of immaterial sublease income, of $631.0 million, with $93.2 million payable within 12 months.
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.
Restructuring Charges of the Notes to Consolidated Financial Statements in this Annual Report for additional information . 46 Table of Contents Interest and Other Income (Expense), Net Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Interest income $ 67.0 $ 36.7 $ 8.5 $ 30.3 83 % $ 28.2 332 % Interest expense (35.2) (1.2) (1.7) (34.0) 2,833 % 0.5 (29) % Gains (losses) on assets related to executive deferred compensation plan 85.4 20.2 (67.5) 65.2 323 % 87.7 (130) % Gain on sale of strategic investments 55.1 — — 55.1 100 % — — % Foreign currency exchange gains (losses) 6.3 (1.5) 4.7 7.8 (520) % (6.2) (132) % Other, net (20.5) (22.0) 10.7 1.5 (7) % (32.7) (306) % Total $ 158.1 $ 32.2 $ (45.3) $ 125.9 391 % $ 77.5 (171) % The increase in interest and other income (expense) for fiscal 2024 as compared to fiscal 2023 was primarily due to the increase in the fair value of our executive deferred compensation plan assets and the impact of gain recognized from the sale of strategic investments.
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.
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.
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) 2023 $ — $ 77.0 $ (68.3) $ 8.7 2022 $ 14.2 $ 12.1 $ (26.3) $ — 2021 $ 1.3 $ 33.4 $ (20.5) $ 14.2 See Note 18.
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) 2024 $ 8.2 $ — $ (3.6) $ 4.6 2023 $ — $ 53.1 $ (44.9) $ 8.2 2022 $ 12.9 $ 11.2 $ (24.1) $ — See Note 21.
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).
On February 13, 2024, we entered into a Sixth Amendment Agreement (the Sixth Amendment), which amended and restated our previous revolving credit agreement, dated as of December 14, 2022 (as amended and restated, the Revolving Credit Agreement).
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.
Design Automation Segment Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Adjusted operating income $ 1,631.9 $ 1,413.9 $ 1,176.1 $ 218.0 15 % $ 237.8 20 % Adjusted operating margin 39 % 37 % 36 % 2 % 5 % 1 % 3 % The increase in adjusted operating income for fiscal 2024 compared to fiscal 2023 and for fiscal 2023 compared to fiscal 2022 was primarily due to an increase in revenue from arrangements booked in prior periods.
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.
Total Revenue Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Design Automation $ 4,221.1 $ 3,775.3 $ 3,300.2 $ 445.8 12 % $ 475.1 14 % Design IP 1,906.3 1,542.7 1,315.5 363.6 24 % 227.2 17 % Total $ 6,127.4 $ 5,318.0 $ 4,615.7 $ 809.4 15 % $ 702.3 15 % Our revenues are subject to fluctuations, primarily due to customer requirements including the timing and value of contract renewals.
We expect growth across our geographies in fiscal 2024; however, we are expecting a challenging near-term growth environment in China due to macroeconomic factors as well as, to a lesser degree, entity list and trade restrictions as further discussed below and in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K .
We expect growth across our geographies in fiscal 2025; however, we are expecting a challenging near-term growth environment, including in China, due to macroeconomic factors as well as, to a lesser degree, Entity List and other global trade restrictions.
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.
Our effective tax rate for fiscal 2023 was 6.9%, which included $60.5 million of U.S. federal research tax credit benefit, $80.0 million of FDII deduction benefit, and $40.0 million of net excess tax benefit from stock-based compensation. See Note 18.
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.
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. 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.
Software Integrity Segment Year Ended October 31, $ Change % Change $ Change % Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (dollars in millions) Adjusted operating income $ 76.3 $ 47.0 $ 38.3 $ 29.3 62 % $ 8.7 23 % Adjusted operating margin 15 % 10 % 10 % 5 % 50 % — % — % 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. 44 Table of Contents Income Taxes Our effective tax rate for fiscal 2023 is 6.4%, which included a tax benefit of $65.9 million of U.S. federal research tax credit, a foreign derived intangible income (FDII) deduction of $82.4 million, and excess tax benefits from stock-based compensation of $84.5 million.
Design IP Segment Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Adjusted operating income $ 730.2 $ 514.1 $ 403.8 $ 216.1 42 % $ 110.3 27 % Adjusted operating margin 38 % 33 % 31 % 5 % 15 % 2 % 6 % The increase in adjusted operating income for fiscal 2024 compared to fiscal 2023 and for fiscal 2023 compared to fiscal 2022 was primarily due to an increase in the revenue of IP products driven by timing of customer demands. 47 Table of Contents Income Taxes Our effective tax rate for fiscal 2024 is 6.6%, which included $70.1 million of U.S. federal research tax credit benefit, $104.8 million of foreign derived intangible income (FDII) deduction benefit, and $43.4 million of net excess tax benefit from stock-based compensation.
Fiscal 2023 Financial Performance Summary The following table sets forth some of our key consolidated financial information for each of our last three fiscal years: Year Ended October 31, 2023 2022 2021 (in millions, except per share amounts) Revenue $ 5,842.6 $ 5,081.5 $ 4,204.2 Cost of revenue $ 1,222.2 $ 1,063.7 $ 861.8 Operating expenses $ 3,351.2 $ 2,855.8 $ 2,607.6 Operating income $ 1,269.3 $ 1,162.0 $ 734.8 Net income attributed to Synopsys $ 1,229.9 $ 984.6 $ 757.5 Diluted net income per share attributed to Synopsys $ 7.92 $ 6.29 $ 4.81 Fiscal 2023 compared to fiscal 2022 financial performance summary • Revenues were $5.8 billion, an increase of $761.1 million or 15%, primarily due to revenue growth across all products and geographies. • Total cost of revenue and operating expenses was $4.6 billion, an increase of $653.9 million or 17%, primarily due to an increase of $287.7 million in employee-related costs resulting from headcount increases through organic growth and acquisitions. • Operating income was $1.3 billion, an increase of $107.2 million or 9%.
The following table sets forth some of our key consolidated financial information for each of our last three fiscal years: Year Ended October 31, 2024 2023 2022 (in millions, except per share amounts) Revenue $ 6,127.4 $ 5,318.0 $ 4,615.7 Cost of revenue $ 1,245.3 $ 1,030.9 $ 898.0 Operating expenses $ 3,526.4 $ 3,013.9 $ 2,569.0 Operating income $ 1,355.7 $ 1,273.2 $ 1,148.7 Net income from continuing operations attributed to Synopsys $ 1,441.7 $ 1,227.0 $ 970.2 Net income from discontinued operations attributed to Synopsys $ 821.7 $ 2.8 $ 14.4 Diluted net income per share attributed to Synopsys: Continuing operations $ 9.25 $ 7.91 $ 6.20 Discontinued operations $ 5.26 $ 0.01 $ 0.09 Fiscal 2024 compared to fiscal 2023 financial performance summary • Revenues were $6.1 billion, an increase of $809.4 million or 15%, primarily due to revenue growth across all products and geographies. • Total cost of revenue and operating expenses was $4.8 billion, an increase of $726.9 million or 18%, primarily due to an increase of $325.8 million in employee-related costs resulting from headcount increases through organic growth and acquisitions. • Operating income was $1.4 billion, an increase of $82.5 million or 6%. • Net income from discontinued operations was $821.7 million, an increase of $818.9 million, primarily due to the gain on Software Integrity Divestiture.
For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and other U.S.
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. For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and other U.S.
Restructuring Charges In the first quarter of fiscal 2023, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2023 Plan). The 2023 Plan was substantially completed in the third quarter of fiscal 2023, and total charges under the 2023 Plan were $77.0 million, consisting primarily of severance costs and facility exit costs.
The 2023 Plan was substantially completed in the third quarter of fiscal 2023, and total charges under the 2023 Plan consisting primarily of severance costs and facility exit costs were $77.0 million, of which $23.9 million were related to discontinued operations.
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.
The increase in interest and 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. Segment Operating Results We do not allocate certain operating expenses managed at a consolidated level to our reportable segments.
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.
Maintenance and Service Revenue Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Maintenance revenue $ 429.4 $ 358.1 $ 291.6 $ 71.3 20 % $ 66.5 23 % Professional service and other revenue 671.5 543.5 445.2 128.0 24 % 98.3 22 % Total $ 1,100.9 $ 901.6 $ 736.8 $ 199.3 22 % $ 164.8 22 % Percentage of total revenue 18 % 17 % 16 % The increase in maintenance revenue for fiscal 2024 compared to fiscal 2023 and for fiscal 2023 compared to fiscal 2022 was primarily due to an increase in the volume of arrangements that include maintenance.
Such fluctuations will continue to be impacted by the timing of shipments and FSA drawdowns due to customer requirements.
Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP and hardware product sales. Such fluctuations will continue to be impacted by the timing of shipments and FSA drawdowns due to customer requirements.
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.
The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. As of October 31, 2024, 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 .
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.
Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report for more information about our reportable segments and revenue by geographic regions.
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.
The increase in professional service and other revenue for fiscal 2024 compared to fiscal 2023 and for fiscal 2023 compared to fiscal 2022 was primarily due to the timing of IP customization projects . 43 Table of Contents Cost of Revenue Year Ended October 31, $ Change % Change $ Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) Cost of products revenue $ 770.2 $ 697.7 $ 594.0 $ 72.5 10 % $ 103.7 17 % Cost of maintenance and service revenue 367.1 287.9 259.3 79.2 28 % 28.6 11 % Amortization of acquired intangible assets 108.0 45.3 44.7 62.7 138 % 0.6 1 % Total $ 1,245.3 $ 1,030.9 $ 898.0 $ 214.4 21 % $ 132.9 15 % Percentage of total revenue 20 % 19 % 19 % We divide cost of revenue into three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of acquired intangible assets.
Payments for IP contracts are generally received upon delivery of the IP. Revenue related to the customization of certain IP is recognized over time, generally using costs incurred or hours expended to measure progress. Software Integrity Segment • We sell Software Integrity products in arrangements that provide customers the right to software licenses, maintenance updates and technical support.
Payments for IP contracts are generally received upon delivery of the IP. Revenue related to the customization of certain IP is recognized over time, generally using costs incurred or hours expended to measure progress. Our customer arrangements can involve multiple products and various license rights, and our customers negotiate with us over many aspects of these arrangements.
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.
For fiscal 2024 compared to fiscal 2023 and fiscal 2023 compared to fiscal 2022, revenues increased due to the continued organic growth of our business in all product groups and geographies. For a discussion of revenue by geographic areas, see Note 20. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report .
The current uncertain macroeconomic environment could lead some of our customers to postpone their decision-making, decrease their spending and/or delay their payments to us.
For more on the anticipated impact of export control regulations, see the discussion below and in Part I, Item 1A, Risk Factors of this Annual Report. The current uncertain macroeconomic environment could lead some of our customers to postpone their decision-making, decrease their spending and/or delay their payments to us.
For acquisitions completed in fiscal 2023, the fair value for acquired existing technology was determined by applying the relief from royalty method under the income approach. The relief from royalty method applies a royalty rate to projected income to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset.
The fair value of the definite-lived intangibles was determined using variations of the income approach. For acquisitions completed in fiscal 2024, the fair value for acquired existing technology was determined by applying the relief from royalty method under the income approach.
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.
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, 2024 , $194.3 million remained available for future stock repurchases under the Program.
Our customer arrangements can involve multiple products and various license rights, and our customers negotiate with us over many aspects of these arrangements. For example, they generally request a broader portfolio of solutions, support and services and seek more favorable terms such as expanded license usage, future purchase rights and other unique rights at an overall lower total cost.
For example, they generally request a broader portfolio of solutions, support and services and seek more favorable terms such as expanded license usage, future purchase rights and other unique rights at an overall lower total cost. No single factor typically drives our customers’ buying decisions, and we compete on all fronts to serve customers in highly competitive markets.
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.
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 Revenue Our revenues are generated from two business segments: the Design Automation segment and the Design IP segment. See Note 20.
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 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. Revenue Recognition Our contracts with customers often include promises to transfer multiple products and services to a customer.
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.
Our fiscal quarters will end on January 31, April 30, July 31 and October 31 of each year. For presentation purposes, this Annual Report refers to the closest calendar month end. 39 Table of Contents Critical Accounting Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP.
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.
Income Taxes of the Notes to Consolidated Financial Statements in this Annual Report for further discussion of the provision for income taxes . 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.
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.
The increase in cash provided by investing activities was primarily driven by net cash proceeds of $1.4 billion from the Software Integrity Divestiture, lower cash paid for acquisitions of $140.7 million, lower purchases of property and equipment of $66.5 million and higher proceeds from the sales and maturities of investments of $55.7 million.
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.
See Part I, Item 1A, Risk Factors of this Annual Report for further discussion of the impact of global economic and geopolitical uncertainty on our business, operations and financial condition. 38 Table of Contents Developments in Export Control Regulations 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, see Part I, Item 1A, Risk Factors, “ Industry Risks – We are subject to 36 Table of Contents 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 .” Business Segments Effective in the first quarter of fiscal 2023, we realigned our organizational structure to evaluate the results of our Design IP business separately.
Export Regulations, see Part I, Item 1A, Risk Factors , “ 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 .” Software Integrity Divestiture On May 5, 2024, we entered into an Equity Purchase Agreement (the Purchase Agreement), by and between Synopsys and Sapphire Software Buyer, Inc.
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.
Export Regulations will not have a material impact on our business. We anticipate additional changes to U.S. Export Regulations in the future, but we cannot forecast the scope or timing of such changes, nor the impact on our business.
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.
Cash Used in Financing Activities The decrease in cash used in financing activities was primarily due to lower stock repurchases of $1.2 billion, as we have suspended the Program in connection with the pending Ansys Merger until we reduce our expected debt levels, partially offset by higher taxes paid for net share settlements of $96.1 million, the payment of costs related to the Bridge Commitment and the Term Loan of $72.3 million in connection with the Ansys Merger, and lower proceeds from issuance of common stock of $20.8 million.
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.
The Revolving Credit Agreement provides an unsecured $850.0 million committed multicurrency revolving credit facility and an unsecured uncommitted incremental revolving loan facility of up to $150.0 million. The maturity date of the revolving credit facility is December 14, 2027, which may be extended at our option.

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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 removed11 unchanged
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.
Biggest changeOur cash equivalents and debt by fiscal year of expected maturity and average interest rates as of October 31, 2024 are as follows: Maturing in Year Ending 2025 2026 2027 2028 2029 and thereafter Total Fair Value (in thousands) Cash & Cash equivalents $ 3,778,164 $ 3,778,164 $ 3,778,164 Approx. average interest rate 3.56 % Short-term investments $ 57,156 $ 58,484 $ 27,380 $ 4,260 $ 6,589 $ 153,869 $ 153,869 Approx. average coupon rate 3.25 % 4.17 % 4.29 % 4.43 % 5.37 % Short-term debt (variable rate): Credit Facility in China $ 15,601 $ 15,601 $ 15,601 Average interest rate LPR + .74% of such rate Foreign Currency Risk.
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.
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, 2024, all of our cash, cash equivalents, and debt were at short-term variable or fixed interest rates.
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 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. 53 Table of Contents
Although we engage in foreign currency hedging activity, we may be unable to hedge all of our foreign currency risk, which could have a negative impact on our results of operations. We enter into foreign exchange forward contracts with financial institutions and have not experienced nonperformance by counterparties.
Although we engage in foreign currency hedging activity, we may be unable to hedge all of our foreign currency risk, which could have a negative impact on our results of operations. We enter into foreign exchange forward contracts with financial institutions and have not experienced nonperformance by counterparties. Further, we anticipate performance by all counterparties to such agreements.
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.
Our non-marketable equity securities investments totaled $15.7 million and $19.1 million as of October 31, 2024 and 2023, 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.
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.
At the same time, the U.S. dollar value of our Euro-based expenses would decline, resulting in positive cash flow of approximately $16.4 million that would offset the loss and negative cash flow on the maturing forward contracts.
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.
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, 2024, the fair value of the contracts would decrease by approximately $16.4 million, and we would be required to pay approximately $16.4 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. Summary of Significant Accounting Policies and Basis of Presentation and Note 7.
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 2 months to 29 months. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation and Note 9.
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.
As of October 31, 2024, we had short term fixed income investment portfolio of $153.9 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.
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.
Financial Assets and Liabilities of the Notes to Consolidated Financial Statements in this Annual Report for a description of our accounting for foreign currency contracts . 52 Table of Contents The success of our hedging activities depends upon the accuracy of our estimates of various balances and transactions denominated in non-functional currencies.
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.
Information about the gross notional values of our foreign currency contracts as of October 31, 2024 is as follows: Gross Notional Amount in U.S.
Removed
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.
Added
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.
Added
Dollars Average Contract Rate (in thousands) Forward Contract Values: Indian rupee $ 589,799 86.973 Japanese yen 469,566 151.041 Euro 164,701 1.100 Canadian dollar 157,536 1.369 Chinese renminbi 122,191 7.013 Korean won 68,720 1,342.594 Taiwanese dollar 64,599 32.042 Israel shekel 34,919 3.704 British pound sterling 10,055 1.257 Singapore dollar 2,557 1.328 Swiss franc 1,698 0.883 $ 1,686,341 Equity Price Risk.

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