Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-19807
SYNOPSYS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
690 East Middlefield Road, Mountain View, California
(Address of principal executive offices)
56-1546236
(I.R.S. Employer
Identification No.)
94043
(Zip Code)
(650) 584-5000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock
Trading Symbol(s)
SNPS
Name of Each Exchange on Which Registered
Nasdaq Global Select Market
(par value of $0.01 per share)
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Table of Contents
Large accelerated filer
ý
Non-accelerated filer
☐
Accelerated Filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately
$27.5 billion. Aggregate market value excludes an aggregate of approximately 41.3 million shares of common stock held by the registrant’s
executive officers and directors and by each person known by the registrant to own 5% or more of the outstanding common stock on such date.
Exclusion of shares held by any of these persons should not be construed to indicate that such person possesses the power, direct or indirect, to
direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with
the registrant.
On December 8, 2021, 153,438,336 shares of the registrant’s Common Stock, par value of $0.01 per share, were outstanding.
Portions of the registrant’s Proxy Statement relating to the registrant’s 2022 Annual Meeting of Stockholders, scheduled to be held on April 12,
2022, are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Except as expressly incorporated by
reference, the registrant’s Proxy Statement shall not be deemed to be part of this report.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
SYNOPSYS, INC.
ANNUAL REPORT ON FORM 10-K
Fiscal year ended October 31, 2021
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results
of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Independence
Principal Accountant Fees and Services
PART IV
Item 15.
SIGNATURES
Exhibits and Financial Statement Schedules
Page No.
3
15
29
29
29
30
31
32
32
44
47
91
91
91
91
92
92
92
92
92
93
97
i
Table of Contents
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K (this Form 10-K or Annual Report) contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act
of 1995. Any statements herein that are not statements of historical fact are forward-looking statements. Words
such as “may,” “will,” “could,” “would,” “can,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project,”
“continue,” “forecast,” “likely,” “potential,” “seek,” or the negatives of such terms and similar expressions are
intended to identify forward-looking statements. This Form 10-K includes, among others, forward-looking statements
regarding:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our business, product and platform strategies;
our business outlook;
the continued impact and duration of the COVID-19 pandemic;
the impact of macroeconomic conditions, supply shortages, and trade disruptions on our business
and our customers’ businesses;
demand for our products and our customers’ products;
the expected realization of our contracted but unsatisfied or partially unsatisfied performance
obligations;
our ability to successfully compete in the markets in which we serve;
our license mix, our business model, and variability in our revenue;
the continuation of current industry trends towards customer and vendor consolidation, and the
impact of such consolidation;
prior and future acquisitions, including the expected benefits and risks of completed acquisitions;
customer license renewals;
the completion of development of our unfinished products, or further development or integration of
our existing products;
technological trends in integrated circuit design;
litigation;
our ability to protect our intellectual property;
our ability to attract and retain senior management and key employees;
the impact of tax laws and changes in such laws on our business;
the impact of new and recently adopted accounting pronouncements;
regulatory changes in the United States and other regions in which we operate;
our cash, cash equivalents and cash generated from operations; and
our future liquidity requirements.
These statements are based on our current expectations about future events and involve certain known and
unknown risks, uncertainties and other factors that could cause our actual results, time frames or achievements to
differ materially from those expressed or implied in our forward-looking statements. Accordingly, we caution readers
not to place undue reliance on these statements. Such risks and uncertainties include, among others, those listed in
Part I, Item 1A, Risk Factors of this Form 10-K. The information included herein represents our estimates and
assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any
forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in
these forward-looking statements, even if new information becomes available in the future. All subsequent written or
oral forward-looking statements attributable to Synopsys, Inc. or persons acting on our behalf are expressly
1
Table of Contents
qualified in their entirety by these cautionary statements. Readers are urged to carefully review and consider the
various disclosures made in this report and in other documents we file from time to time with the Securities and
Exchange Commission (SEC) that attempt to advise interested parties of the risks and factors that may affect our
business.
Fiscal Year End
Our fiscal year ends on the Saturday nearest to October 31 and consists of 52 weeks, with the exception that
approximately every five years, we have a 53-week year. When a 53-week year occurs, we include the additional
week in the first quarter to realign fiscal quarters with calendar quarters. Fiscal 2021, 2020 and 2019 were 52-week
years and ended on October 30, 2021, October 31, 2020, November 2, 2019, respectively. Fiscal 2022 will be a 52-
week year.
For presentation purposes, this Form 10-K refers to the closest calendar month end.
2
Table of Contents
Item 1. Business
Company and Segment Overview
PART I
Synopsys, Inc. provides products and services used across the entire Silicon to Software™ spectrum to bring Smart
Everything to life. From engineers creating advanced semiconductors to product teams developing advanced
electronic systems to software developers seeking to ensure the security and quality of their code, our customers
trust that our technologies will enable them to meet new requirements for low power as well as reliability, mobility,
and security.
We are a global leader in supplying the electronic design automation (EDA) software that engineers use to design
and test integrated circuits (ICs), also known as chips. We also offer semiconductor intellectual property (IP)
products, which are pre-designed circuits that engineers use as components of larger chip designs rather than
designing those circuits themselves. We provide software and hardware used to validate the electronic systems that
incorporate chips and the software that runs on them. To complement these offerings, we provide technical services
and support to help our customers develop advanced chips and electronic systems. These products and services
are part of our Semiconductor & System Design segment.
We 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.
Corporate Information
We incorporated in 1986 in North Carolina and reincorporated in 1987 in Delaware. Our headquarters are located at
690 East Middlefield Road, Mountain View, California 94043, and our headquarters’ telephone number is
(650) 584-5000. We have approximately 125 offices worldwide.
Our annual and quarterly reports on Forms 10-K and 10-Q (including related filings in XBRL format), current reports
on Form 8-K, and Proxy Statements relating to our annual meetings of stockholders (including any amendments to
these reports, as well as filings made by our executive officers and directors) are available through the Investor
Relations page of our website (www.synopsys.com) free of charge as soon as practicable after we file them with, or
furnish them to, the SEC (www.sec.gov). We use our Investor Relations page as a routine channel for distribution of
important information, including news releases, investor presentations, and financial information. The contents of
our website are not part of this Form 10-K.
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. At the same time, the increasing use of electronics in cars, buildings,
appliances, and other consumer products is creating a connected landscape of smart devices. Numerous software
applications (apps) have been developed to expand the potential of these connected devices. The increasing
impact of artificial intelligence and machine learning is driving an increase in the activity of new and existing chip
and system design companies around the world.
These developments have been fueled by innovation in the semiconductor and software industries. 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. 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. 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. Designers have turned to new
manufacturing techniques to solve these problems, such as multiple-patterning lithography and FinFET, or 3D
transistors, which in turn have introduced new challenges to design and production.
3
Table of Contents
The popularity of mobile devices and other electronic products has increased demand for chips and systems with
greater functionality and performance, reduced size, and lower power consumption. Our customers, who design
those products, are facing intense pressure to deliver innovative offerings in shorter timeframes and at lower prices.
In other words, innovation in chip and system design often hinges on providing products “better,” “sooner,” and
“cheaper” than competitors. The design of these chips and systems is extremely complex and necessitates state-of-
the-art solutions. Over the past several years, market verticals including AI, 5G, automotive and cloud computing
infrastructure have contributed to the ongoing demand for our products and services.
A similar dynamic is at work in the software arena, whether the software is embedded on a chip or used in other
applications. The pace of innovation often requires developers to deliver more secure, high-quality software, which
can include millions of lines of code, in increasingly frequent release cycles. Bugs, defects, and security
vulnerabilities in code can be difficult to detect and expensive to fix. But, at a time when software is critical in many
industries across a growing array of smart devices, it is crucial to have high-quality, secure code to ensure
consumers’ privacy and safety.
Our Role—As the Silicon to Software Partner
Synopsys' Silicon to Software technologies and services are designed to help our customers—chip and system
engineers and software developers—to speed time to market, achieve the highest quality of results, mitigate risk,
and maximize profitability.
Chip and system designers must determine how best to design, locate, and connect the building blocks of chips,
and to verify that the resulting design behaves as intended and can be manufactured efficiently and cost-effectively.
This is a complex, multi-step process that is both expensive and time-consuming. Our wide range of products help
at different steps in the overall design process, from the design of individual ICs to the design of larger systems. Our
products increase designer productivity and efficiency by automating tasks, keeping track of large amounts of data,
adding intelligence to the design process, facilitating reuse of past designs, and reducing errors. Our IP products
offer proven, high-quality pre-configured circuits that are ready to use in a chip design, saving customers time and
enabling them to direct resources to features that differentiate their products. Our global service and support
engineers also provide expert technical support and design assistance to our customers.
Software developers are responsible for writing code that not only accomplishes its goals as efficiently as possible,
but also runs securely and is free of defects. We offer products that can help developers write higher quality, more
secure code by analyzing code for quality defects and known security vulnerabilities, adding intelligence and
automation to the software testing process, and helping to eliminate defects in a systematic manner. As developers
make use of open source software in their code, our products can help developers better manage the composition
and security of the code. Our products enable software developers to catch flaws earlier in the development cycle,
when they are less costly to fix.
Products and Services
Semiconductor & System Design Segment
Our Semiconductor & System Design segment includes the EDA, IP and System Integration and Other revenue
categories.
EDA
Designing ICs involves many complex steps: architecture definition, register transfer level (RTL) design, functional/
RTL verification, logic design or synthesis, gate-level verification, floorplanning, place and route, and physical
verification, to name just a few. Designers use our EDA products to automate the IC design process, reduce errors,
and enable more powerful and robust designs.
As the availability and amount of cloud-based data storage grows, also growing in EDA is customer interest in
accessing EDA on the cloud, and the scalability and flexibility that cloud computing can offer to customer flows and
engineering teams. This customer shift in interest has started and continues to grow. 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, we have been working directly with customers and commercial cloud vendors, including Amazon Web
4
Table of Contents
Services, Microsoft Azure, Google Cloud and Alibaba Cloud, to further enhance our EDA-on-cloud products and
platforms.
Our platforms comprehensively address the 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 an IC;
Verification, which includes technology to verify that an IC design behaves as intended; and
Manufacturing, which includes products that both enable early manufacturing process development
and convert IC design layouts into the masks used to manufacture the chips.
Digital and Custom IC Design
Our Fusion Design Platform™ 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. The platform gives designers the flexibility to integrate
internally developed tools as well as those from third parties. With innovative technologies, a common foundation,
and flexibility, our Fusion Design Platform helps reduce design times, decrease uncertainties in design steps, and
minimize the risks inherent in advanced, complex IC design. 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.
Key design products, available as part of the Fusion Design Platform, include Fusion Compiler™ RTL to GDSII
design implementation, Design Compiler® logic synthesis, IC Compiler™ II physical design, Synopsys TestMAXTM
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. Many of our EDA solutions are bolstered by AI and
machine learning capabilities. In addition, we offer DSO.ai™, which brings AI to the entire design process. It
autonomously learns through quickly exploring potential design alternatives, enabling engineers to develop superior
design outcomes with+
our design tools.
Our Custom Design Platform™ is a unified suite of design and verification tools that accelerates the transistor-level
design of robust analog, mixed-signal, and custom-digital ICs. The platform features visually assisted layout
automation, high-performance circuit simulation, reliability-aware verification, and natively integrated StarRC™
extraction and physical verification. Platform tools include Custom Compiler layout and schematic editor, StarRC
parasitic extraction, and IC Validator physical verification. The platform also includes PrimeSim™ Continuum.
Launched in 2021, the PrimeSim Continuum solution integrates PrimeSim SPICE, PrimeSim HSPICE, PrimeSim
Pro and PrimeSim XA. The PrimeWave™ design environment is also included and provides comprehensive
analysis and improved productivity and ease of use across all tools in PrimeSim Continuum.
Our Silicon Lifecycle Management Platform is a new data analytics-driven platform that uses in-chip monitoring and
sensing to optimize all phases of the silicon lifecycle—from design and manufacturing to in-field deployment and
maintenance. The platform is integrated with the Fusion Design Platform 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.
FPGA Design
FPGAs are complex chips that can be customized or programmed to perform a specific function after they are
manufactured. For FPGA design, we offer Synplify® (Pro® and Premier) implementation and Identify® debug
software tools.
Verification
Our Verification Continuum® platform is built from our industry-leading and fastest 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. By providing consistent
5
Table of Contents
compile, runtime and debug environments across the flow of verification tasks and by enabling seamless transitions
across functions, the platform helps our customers accelerate chip verification, bring up software earlier, and get to
market sooner with advanced SoCs.
The individual products included in the Verification Continuum platform are reported in our EDA and IP and System
Integration revenue categories. The solutions reported in our EDA revenue 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; and
Other principal individual verification solutions, including the PrimeSim Continuum solution and the
PrimeWave™ design environment.
The verification IP, virtual prototyping, and FPGA-based prototyping solutions that are part of our Verification
Continuum platform are included in our IP and System Integration category and further described below.
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.
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.
IP and System Integration
IP Products
As more functionality converges into a single device or even a single chip, and as chip designs grow more complex,
the number of third-party IP blocks incorporated into designs is rapidly increasing. We provide the broadest, most
comprehensive portfolio of high-quality, silicon-proven IP solutions for SoCs. Our broad DesignWare IP portfolio
includes:
•
•
•
•
•
•
High-quality solutions for widely used wired and wireless interfaces such as USB, PCI Express,
DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth Low Energy;
Logic libraries and embedded memories, including memory compilers, non-volatile memory,
standard cells, and integrated test and repair;
Processor solutions, including configurable ARC® processor cores, software, Embedded Vision
processor cores and application-specific instruction-set processor tools for embedded applications;
IP subsystems for audio, sensor, and data fusion functionality that combine IP blocks, an efficient
processor, and software into an integrated, pre-verified subsystem;
Security IP solutions, including cryptographic cores and software, security subsystems, platform
security and content protection IP;
An industry-leading offering of IP for the automotive market, optimized for strict functional safety
and reliability standards such as ISO 26262;
6
Table of Contents
•
•
Analog IP including data converters and audio codecs; and
SoC infrastructure IP, datapath and building block IP, mathematical and floating-point components,
Arm® AMBA® interconnect fabric and peripherals, and verification IP.
Our IP Accelerated initiative augments our established, broad portfolio of silicon-proven DesignWare IP with IP
Prototyping Kits and customized IP subsystems to accelerate prototyping, software development, and integration of
IP into SoCs.
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.
Our Verification IP portfolio, part of our Verification Continuum platform, is also part of the IP Products category.
System Integration Solutions
Our System Integration verification solutions include the following elements of our Verification Continuum platform:
•
•
•
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.
We also provide a series of tools used in the design of optical systems and photonic devices. Our CODE V® solution
enables engineers to model, analyze and optimize designs for optical imaging and communication systems. Our
LightTools® design and analysis software allows designers to simulate and improve the performance of a broad
range of illumination systems, from vehicle lighting to projector systems.
Other
Our Other revenue category includes revenue from sales of products to academic and research institutions.
Software Integrity Segment
Our Software Integrity segment helps organizations align people, processes, and technology to intelligently address
software risks across their portfolio and at all stages of the application lifecycle. The testing tools, services, and
programs enable our customers to manage open source license compliance and detect, prioritize, and remediate
security vulnerabilities and defects across their entire software development lifecycle. Our offerings include security
and quality testing products, managed services, programs and professional services, and training offered as on-
premises and cloud-based delivery.
The Polaris Software Integrity PlatformTM is designed to bring our products and services together into an integrated,
easy-to-use solution that enables security and development teams to build secure, high-quality software faster.
7
Table of Contents
Key offerings in this space include:
•
•
•
•
•
•
Intelligent Orchestration solution, which enables DevOps to build a testing pipeline that enables a
company to define – within its particular policy guidelines – the rules to determine which tests to
run, including the Synopsys portfolio tests, third party products, or open source tests;
Code Dx, which correlates and prioritizes findings from the Synopsys portfolio, third party products,
and open source tools, providing a comprehensive view of software security risk;
Coverity® static analysis tools, which analyze software code to find crash-causing bugs, incorrect
program behavior, the latest security vulnerabilities, memory leaks and other performance-
degrading flaws;
Black Duck™ software composition analysis tools, which scan binary and source code for license
and compliance issues and other known security vulnerabilities stemming from incorporated third-
party and open source code;
Seeker® IAST tool, which identifies exploitable security vulnerabilities while web applications are
running, thereby verifying results and eliminating false positives; and
Defensics® fuzz testing tools, which examine security vulnerabilities in software binaries and
libraries, particularly network protocols and file formats, by systematically sending invalid or
unexpected inputs to the system under test.
Managed services allow developers to test code across many dimensions, and to rapidly respond to changing
testing requirements and evolving threats. This includes Mobile Application Security Testing services to find
vulnerabilities in mobile applications as well as Dynamic Application Security Testing services which identify security
vulnerabilities while web applications are running, without the need for source code.
Programs and professional services address unique security and quality needs with specialized consulting by skilled
experts, including the Building Security in Maturity Mode, which measures the effectiveness of software security
initiatives by assessing the current state as compared to industry benchmarks, and the Black Duck™ on demand
audit services, which provides open source compliance and software vulnerability assessments as part of the due
diligence process for mergers and acquisitions.
Finally, training includes eLearning and instructor-led training that prepares developers and security professionals to
build security and quality into their software development process and remediate found vulnerabilities and defects.
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 both field-based and corporate-based application engineering
teams.
Post-contract customer support includes providing frequent updates and upgrades to maintain the utility of the
software due to rapid changes in technology. In our Semiconductor & System Design segment, post-contract
customer support for our EDA and IP products also includes access to the SolvNet® Plus portal, where customers
can explore our complete design knowledge database. Updated daily, the SolvNet Plus portal includes technical
documentation, design tips, and answers to user questions. 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 raise support tickets, request replacement
license keys and validate the terms of their active license keys through the portal. Our support community portal is
frequently updated with new and supplemental materials on a variety of topics. Customers may engage dedicated
support engineers for an additional charge.
8
Table of Contents
In addition, we offer training workshops designed to increase customer design proficiency and productivity with our
products. Workshops cover our EDA products and methodologies used in our design and verification flows, as well
as specialized modules addressing system design, logic design, physical design, simulation and testing. 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.
Product Warranties
We generally warrant our products to be free from defects in media and to substantially conform to material
specifications for a period of 90 days for our software products and for up to 6 months for our hardware products. In
many 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.
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. Standards in the electronic design industry can be established by formal
accredited organizations, industry consortia, company licensing made available to all, de facto usage, or through
open source licensing.
In our Semiconductor & System Design segment, our EDA products support many standards, including the most
commonly used hardware description languages: SystemVerilog, Verilog, VHDL, and SystemC®. 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. We also comply with a wide
range of industry standards within our IP product family to ensure usability and interconnectivity.
In our Software Integrity segment, our solutions support several existing and emerging industry standards for
software coding and security, such as the Motor Industry Software Reliability Association coding standards for the
automotive industry. In addition, our products support multiple major programming languages, including C/C++,
Objective C, C#, JavaScript (including many commonly used frameworks), and others. In addition, we support many
common compilers, development environments, frameworks, and data and file formats.
Sales and Distribution
Our Semiconductor & System Design segment customers are primarily semiconductor and electronics systems
companies. 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. We typically distribute our software products and documentation to customers electronically, but provide
physical media (e.g., DVD-ROMs) when requested by the customer.
We maintain sales and support centers throughout the United States. Outside the United States, we maintain sales,
support or service offices in Canada, multiple countries in Europe, Israel and throughout Asia, including Japan,
China, Korea, and Taiwan. Our international headquarters are located in Dublin, Ireland. Our offices are further
described under Part I, Item 2, Properties.
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. Risks related to our foreign
operations are described in Part I, Item 1A, Risk Factors.
Revenue Attributable to Product Categories and Segments
Revenue attributable to each of our four product categories (with EDA, IP & Systems Integration, and Other
comprising our Semiconductor & System Design segment) is shown below as a percentage of our total revenue for
those fiscal years.
9
Table of Contents
Aggregate revenue derived from one of our customers and its subsidiaries through multiple agreements accounted
for 10.6%, 12.4% and 12.8% of our total revenue in fiscal 2021, 2020 and 2019, respectively. In each such year, the
revenue derived from such customer and its subsidiaries was primarily attributable to our Semiconductor & System
Design segment.
Product Sales and Licensing Agreements
We typically license our software to customers under non-exclusive license agreements that restrict use of our
software to specified purposes within specified geographical areas. 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 Software Integrity products are capacity
or user licenses that allow a number of users to access the software based on a specified number of team members
or specified code-bases in a defined territory. License fees depend on the type of license, product mix, and number
of copies of each product licensed.
For a full discussion of our software product offerings, see Part II, Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations.
We typically license our DesignWare IP products under nonexclusive license agreements that provide usage rights
for specific designs. Fees under these licenses are typically charged on a per design basis plus, in some cases,
royalties. See Note 2 of 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. Our professional services team typically provides design consulting services to our customers
under consulting agreements with statements of work specific to each project.
Competition
The EDA industry is highly competitive. We compete against other EDA vendors and against our customers’ own
design tools and internal design capabilities. In general, we compete principally on technology leadership, product
quality and features (including ease-of-use), license terms, price and payment terms, post-contract customer
10
Revenue by Product Category56%57%59%35%33%31%9%10%10%EDAIP and System IntegrationSoftware IntegrityFiscal 2021Fiscal 2020Fiscal 20190%10%20%30%40%50%60%70%80%90%100% Table of Contents
support, flexibility of tool use, and interoperability with our own and other vendors’ products. We also deliver a
significant amount of engineering and design consulting for our products. No single factor drives an EDA customer’s
buying decision, and we compete on all fronts to capture a higher portion of our customers’ budgets. Our
competitors include EDA vendors that offer varying ranges of products and services, such as Cadence Design
Systems, Inc. and Siemens EDA (formerly Mentor Graphics Corporation). 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, as well as with customers’ internally developed design tools and capabilities.
Within our Semiconductor & System Design segment, Synopsys also competes against numerous other IP
providers, including Cadence Design Systems, Inc., and our customers' internally developed IP. We generally
compete on the basis of product quality, reliability and features, availability of titles for new manufacturing
processes, ease of integration with customer designs, compatibility with design tools, license terms, price and
payment terms, and customer support.
Our Software Integrity segment competes with numerous other solution providers, many of which focus on specific
aspects of software security or quality analysis. We also compete with frequent new entrants, which include start-up
companies and more established software companies. For example, competitors named in the Gartner Magic
Quadrant for Application Security Testing include Checkmarx Ltd., Veracode (now part of Thoma Bravo, LLC) and
Micro Focus International plc.
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. Our
issued patents have expiration dates through 2040. 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. 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 many cases, under our customer agreements and other license agreements, we offer to indemnify our customers
if the licensed products infringe on a third party’s intellectual property rights. As a result, we may from time to time
need to defend claims that our customers’ use of our products infringes on these third-party rights. 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.
Corporate Social Responsibility at Synopsys
We recognize that our significant role in shaping a future of Smart Everything brings important responsibilities. The
future is not smart if it is not sustainable, fair and secure. Our "Smart Future" Corporate Social Responsibility (CSR)
program provides a focus and structure for how we address both our own operational impact on the world and our
ability to influence others around us. Through CSR, we are taking action on important Environmental, Social and
Governance (ESG) matters, including sustainability initiatives to procure more renewable energy and to reduce our
operational footprint as well as driving a culture of diversity and inclusion throughout our workforce and on our
Board of Directors.
We aim to influence positive social and environmental change across our ecosystem by applying our
resources, competencies, and team-based problem-solving approach. Our technology is in action in countless
ways, from bringing safety and security to the driverless car revolution to enabling the technologies that are an
increasingly vital component of protecting human health and well-being. As the role of computing increases
exponentially, IoT, 5G and machine learning applications risk driving similarly exponential energy consumption and
carbon emissions. This makes our work to enable low-power computing at the device level and in the cloud
especially critical to the industry’s sustainability.
Additional information about our approach to CSR and to ESG issues is available on our CSR website, including our
Environmental Policy, our CSR Report, and our CDP Climate Change Questionnaire. The contents of our website,
11
Table of Contents
Corporate Social Responsibility Report and CDP Climate Change Questionnaire are referenced for general
information only and are not incorporated into this 10-K.
Human Capital Resources
Synopsys continues our commitment to attracting and retaining the brightest and best talent, and investing in and
inspiring our people to do their best work is critical for our success. As of fiscal year-end, Synopsys had 16,361
employees, of which approximately 28% are in the United States, and 72% in other locations around the world.
Approximately 78% of our employees are engineers, and over half of those employees hold Masters’ or PhD
degrees. Human capital measures and objectives that Synopsys focuses on in managing its business include
employee health, safety and wellbeing, talent acquisition and retention, employee engagement, development and
training, inclusion and diversity, and compensation and pay equity.
Health, Safety and Wellbeing
The health and safety of our employees, their families, our customers and the communities in which we live and
work, remains a top priority. We have held multiple clinics in our offices for employees to be vaccinated, and have
provided ongoing assistance to our employees and their families throughout the pandemic. With employee wellness
at the forefront of our efforts, we provided our employees with a variety of benefits and support initiatives to address
the inherent challenges of working remotely during the pandemic, including a parental resources website with
information to assist working parents co-educating children at home, and our Stronger Through Wellbeing campaign
focused on employee empowerment, which included five recharge days to ensure employees were taking time off
and truly getting a restful break.
Recruitment and Retention
Our workforce is representative of the industry we serve. We are highly technical, enjoy pushing the boundaries of
what is possible and are individually innovative. In 2021, we grew our employee headcount by approximately 9%
with a continued focus on increasing the number of women in technical positions in our workforce and ensuring a
vibrant talent pipeline through early career hiring. While we experienced an increase in employee turnover in 2021,
our turnover rate remains notably lower than our competitive benchmarks. We attribute the strong retention of our
talented workforce to a number of factors, including exciting and challenging assignments, strong leadership and
management, a culture of integrity, the opportunity to learn new skills and advance careers, our commitment to
diversity and inclusion, and the strength of our technology and customer relationships, along with competitive and
equitable total rewards, as described below.
Inclusion and Diversity
Inclusion and Diversity (I&D) runs through our corporate values at every level—from our foundation of integrity to
our execution excellence, from our dedicated leadership to our united passion for a better tomorrow. We have
always strived to be a company where different perspectives and backgrounds are leveraged and celebrated. We
care deeply about the diversity of our teams, talent pipelines and pay and development programs with a goal to
ensure inclusive, equitable practices. We carefully study retention trends and feedback from diverse groups to
identify areas where we can improve.
In 2021, we continued to increase the representation of women in our workforce globally and increased
representation of Black, Latinx and Indigenous individuals in our U.S. employee base. We provide leadership
training designed to promote inclusion and diversity in attracting, retaining and developing our workforce, and we
are developing a training program to actively attract and engage individuals with disabilities. In addition, we
established employee resource groups, which are employee led communities that serve to foster an inclusive and
diverse workplace and align with Synopsys’ mission and values in support of our goals for inclusion and diversity.
Total Rewards
To ensure a compelling total rewards philosophy and practice, we have practices in place to deliver fair and
equitable compensation for employees based on their contribution and performance. We benchmark market
practices, and regularly review our compensation against the market to ensure it remains competitive. We also offer
a comprehensive and tailored set of benefits for employees and their families, providing protection from unexpected
losses or medical expenses. Our compensation and benefit programs are tailored to the various geographies in
which we operate and for eligible employees, may include:
•
•
market-competitive salary and cash bonus opportunity;
robust medical, dental, vision, and wellness benefits;
12
Table of Contents
•
•
•
•
•
•
•
•
financial planning tools and employee assistance plans;
comprehensive leave alternatives;
Employee Stock Purchase Plan (ESPP);
equity compensation for eligible employees;
life insurance options;
retirement plans and associated benefits;
student loan repayment assistance;
and parental resources and adoption benefits.
Employee Engagement
We use employee feedback to drive and improve processes that support our customers and ensure a deep
understanding of our culture and vision among our employees. Through our semi-annual SHAPE Synopsys
surveys, we obtain employee insights on our values, manager effectiveness, ability to innovate, perceptions on
inclusion and diversity, and other critical factors. By inviting employees to share their experiences, we create space
for important conversations about who we are, where we are going, and how we can connect with each other and
our work.
In mid-year 2021, 88% of our employee population participated in the SHAPE Synopsys survey. Results showed
our global workforce to be highly engaged, with our overall score outpacing the industry engagement benchmark.
We were pleased to see strong scores from our people in both how they were coping with the challenging
circumstances related to the pandemic, and our managers’ demonstrated ability to consider the wellbeing of their
team members. We also observed positive scores and trends on items related to the employee experience.
Ongoing performance feedback encourages greater engagement in our business and improved individual
performance. Each year, our employees participate in our performance development process that summarizes key
accomplishments for the preceding year, establishes new stretch goals, and identifies critical capabilities for
development. As part of this process, we encourage managers to solicit and share supportive multi-rater feedback,
further strengthening the focus on teamwork and team success.
Talent Development
We regard every member of our employee base as a leader. We provide a number of leadership programs to
address the career advancement and associated business impact of our employees, emerging leaders and
executives. Through our digital platform, which was heavily utilized by our employees in 2021, we drive a culture of
continuous learning where employees can access training, external articles, videos and blogs. In addition, we
hosted a series of in-person and on-demand learning sessions designed to build capability and adaptability required
for the future. As employees advance in their careers, our training framework builds new capabilities on established
foundational skills.
Based upon the belief that our employees deserve great managers, our management training is designed to
increase capability in the areas of communication, engagement, coaching, inclusion and diversity, hiring and on-
boarding, business skills and ensuring an ethical and supportive work environment free from bias and harassment.
Our regions and business teams also customize development programs for their specific needs.
13
Table of Contents
Information about our Executive Officers
The executive officers of Synopsys and their ages as of December 13, 2021 were as follows:
Name
Aart J. de Geus
Chi-Foon Chan
Sassine Ghazi
Trac Pham
Joseph W. Logan
John F. Runkel, Jr.
Age Position
67
Co-Chief Executive Officer and Chairman of the Board of Directors
72
51
52
62
66
Co-Chief Executive Officer
President and Chief Operating Officer
Chief Financial Officer
Chief Revenue Officer
General Counsel and Corporate Secretary
Aart J. de Geus co-founded Synopsys and has served as Chairman of our Board of Directors since February 1998
and Chief Executive Officer since January 1994. He has served as Co-Chief Executive Officer with Dr. Chi-Foon
Chan since May 2012. 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. He has
served as a member of Synopsys’ Board of Directors since 1986, and served as Chairman of our Board from 1986
to 1992 and again from 1998 until present. Dr. de Geus has also served on the board of directors of Applied
Materials, Inc. since July 2007. 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.
Chi-Foon Chan has served as our Co-Chief Executive Officer since May 2012 and a member of our Board of
Directors since February 1998. Prior to his appointment as our Co-Chief Executive Officer in May 2012, he served
as our President from February 1998 to October 2021. Dr. Chan joined Synopsys in May 1990 and has held various
senior management positions, including Chief Operating Officer from April 1997 to May 2012. Dr. Chan has also
held senior management and engineering positions at NEC Electronics and Intel Corporation. Dr. Chan holds a B.S.
in Electrical Engineering from Rutgers University, and an M.S. and a Ph.D. in Computer Engineering from Case
Western Reserve University.
Sassine Ghazi has served as our Chief Operating Officer since August 2020 and became our President in
November 2021. Mr. Ghazi joined Synopsys in March 1998 as an Application Engineer and most recently served as
General Manager of the Design Group. Prior to joining Synopsys, Mr. Ghazi was a design engineer at Intel.
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.
Trac Pham is our Chief Financial Officer. Mr. Pham joined Synopsys in November 2006 as Vice President, Financial
Planning and Strategy. He became our Vice President, Corporate Finance, in August 2012, assuming additional
responsibility for our tax and treasury functions, before being appointed Chief Financial Officer in December 2014.
Mr. Pham holds a Bachelor of Arts in Economics from the University of California, Berkeley and an MPIA (Master of
Pacific International Affairs) from the University of California, San Diego. He is an active status California CPA.
Joseph W. Logan has served as our Chief Revenue Officer since June 2021. Previously, Mr. Logan was our Sales
and Corporate Marketing Officer from July 2017 to June 2021, Senior Vice President of Worldwide Sales from
September 2006 to July 2017, and Head of Sales for Synopsys’ North America East region from September 2001 to
September 2006. Prior to Synopsys, Mr. Logan was head of North American Sales and Support at Avant!
Corporation. Mr. Logan holds a B.S.E.E. from the University of Massachusetts, Amherst.
John F. Runkel, Jr. has served as our General Counsel and Corporate Secretary since May 2014. From October
2008 to March 2013, he was Executive Vice President, General Counsel, and Corporate Secretary of Affymetrix,
Inc. He served as Senior Vice President, General Counsel and Corporate Secretary of Intuitive Surgical, Inc. from
2006 to 2007. Mr. Runkel served in several roles at VISX, Inc. from 2001 to 2005, most recently as Senior Vice
President of Business Development and General Counsel. Mr. Runkel was also a partner at the law firm of
Sheppard, Mullin, Richter & Hampton LLP for 11 years. He 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.
14
Table of Contents
Item 1A. Risk Factors
A description of the risk factors associated with our business is set forth below. The risks and uncertainties
described below 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 these risks and uncertainties before
investing in our common stock.
COVID-19 Pandemic Risks
The COVID-19 pandemic could have a material adverse effect on our business, operations and financial
condition.
The COVID-19 pandemic has caused minor disruptions to our business operations to date and could have a
material adverse effect on our business, operations and financial condition in the future. For example, we have
experienced limited hardware supply chain and logistical challenges as well as a slowdown in customer
commitments in our Software Integrity segment. In response to the COVID-19 pandemic, governments and
businesses have taken unprecedented actions to contain the virus, including requiring social distancing,
implementing travel restrictions, instituting shelter-in-place orders and various other restrictions on non-essential
businesses. These restrictions have significantly curtailed global economic activity and have caused substantial
volatility and disruption in global financial markets. We transitioned most of our employees in affected regions to
work remotely in order to comply with applicable restrictions and government requirements, and implemented travel
restrictions and other changes to our business operations. We are continuing to transition employees back into
offices in select jurisdictions in conformity with local guidelines and regulations. Each office must follow physical
distancing guidelines and affirmative health measures in compliance with applicable local, state and national
requirements. For instance, on November 5, 2021, the Occupational Safety and Health Administration issued an
interim final rule that requires employers with 100 or more employees to develop, to implement and to enforce a
mandatory COVID-19 vaccination policy, unless unvaccinated employees comply with masking and testing
requirements. Such requirements are currently scheduled to be effective on January 4, 2022. Although we have
been able to navigate workplace restrictions and limitations with minimal disruptions to our business operations to
date, we may further modify our business practices and real estate needs in response to the risks and negative
impacts caused by the COVID-19 pandemic, but we cannot be certain that these measures will continue to be
successful.
The extent to which the COVID-19 pandemic impacts our business operations in future periods will depend on
multiple uncertain factors, including the duration and scope of the pandemic, its overall negative impact on the
global economy and, in some cases, the regional and national economies of areas experiencing a localized surge in
COVID-19 cases, continued responses by governments and businesses to COVID-19 and its variants, the ability to
secure timely payment from customers, the ability to accurately estimate customer demand, reduced willingness of
current and potential customers to purchase our products and services due to their own business and market
uncertainties, the ability of our business partners and third-party providers to fulfill their responsibilities and
commitments, the ability to secure adequate and timely supply of equipment and materials from suppliers for our
hardware products, and the ability to develop and deliver our products. While our operations have experienced
minor disruptions to date in connection with localized surges in cases, a continued and sustained increase in the
amount of COVID-19 cases, or the emergence of additional variants, in countries or regions where we have
operations could have a material adverse effect on our or our customers' businesses, operations and financial
conditions. In addition, continued weak economic conditions may result in impairment in value of our tangible and
intangible assets. The impact of the COVID-19 pandemic may also have the effect of heightening many of the other
risks and uncertainties described in this “Risk Factors” section.
Industry Risks
Uncertainty in the global economy, and its potential impact on the semiconductor and electronics
industries in particular, may negatively affect our business, operating results and financial condition.
Uncertainty caused by the recent challenging global economic conditions, including due to the effects of the
COVID-19 pandemic, could lead some of our customers to postpone their decision-making, decrease their spending
and/or delay their payments to us. Such caution by customers could, among other things, limit our ability to maintain
or increase our sales or recognize revenue from committed contracts. Outside of a slowdown in customer
commitments in our Software Integrity segment, we have not seen evidence of impacts on customer orders from the
COVID-19 pandemic to date.
15
Table of Contents
We cannot predict the stability of the economy as a whole or the industries in which we operate. Economic
conditions could deteriorate in the future, and, in particular, the semiconductor and electronics industries could fail to
grow, including as the result of the effects of, among other things, the COVID-19 pandemic, a sustained global
semiconductor shortage, supply chain disruptions or delays, and any disruption of international trade relationships
such as tariffs, export licenses or other government trade restrictions. Furthermore, China’s stated policy of
becoming a global leader in the semiconductor industry may lead to increased competition and further disruption of
international trade relationships, including, but not limited to, additional government trade restrictions. For more on
risks related to government trade restrictions such as the United States government’s “Entity List,” see “Business
Operations Risks–The global nature of our operations exposes us to increased risks and compliance obligations
that may adversely affect our business.”
Adverse economic conditions affect demand for devices that our products help create, such as the ICs incorporated
in personal computers, smartphones and automobiles, and servers. Longer-term reduced demand for these or other
products could result in reduced demand for design solutions and significant decreases in our average selling prices
and product sales over time. Future downturns could also adversely affect our business. 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 bookings for our products and
services could be adversely affected along with our business, operating results and financial condition. Further, the
negative impact of these events or disruptions may be deferred due to our business model. Similarly, in the event of
future improvements in economic conditions for our customers, the positive impact on our revenues and financial
results may be deferred due to our business model.
Further economic instability could also adversely affect the banking and financial services industry and result in
credit downgrades of the banks we rely on for foreign currency forward contracts, credit and banking transactions,
and deposit services, or cause them to default on their obligations. Additionally, the banking and financial services
industries are subject to complex laws and heavily regulated. There is uncertainty regarding how proposed,
contemplated or future changes to the laws and regulations governing our industry, the banking and financial
services industry and the economy could affect our business. 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. Any of the foregoing could cause adverse effects on our business, operating results and financial
condition, and could cause our stock price to decline.
The growth of our business depends primarily on the semiconductor and electronics industries.
The growth of the EDA industry as a whole, our Semiconductor & System Design segment product sales, and to
some extent our Software Integrity segment product sales, are dependent on the semiconductor and electronics
industries. A substantial portion of our business and revenue depends upon the commencement of new design
projects by semiconductor manufacturers, systems companies and their customers. The increasing complexity of
designs of systems-on-chips, ICs, electronic systems and customers’ concerns about managing costs have
previously led to, and in the future could lead to, a decrease in design starts and design activity in general. 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. Demand for our products and services could decrease and our financial condition and
results of operations could be adversely affected if growth in the semiconductor and electronics industries slows or
stalls, including due to the impact of the COVID-19 pandemic or a sustained global supply chain disruption.
Additionally, as the EDA industry has matured, consolidation has resulted in stronger competition from companies
better able to compete as sole source vendors. This increased competition may cause our revenue growth rate to
decline and exert downward pressure on our operating margins, which may have an adverse effect on our business
and financial condition.
Furthermore, the semiconductor and electronics industries have become increasingly complex ecosystems. Many of
our customers outsource the manufacture of their semiconductor designs to foundries. Our customers also
frequently incorporate third-party IP, whether provided by us or other vendors, into their designs to improve the
efficiency of their design process. We work closely with major foundries to ensure that our EDA, IP and
manufacturing solutions are compatible with their manufacturing processes. 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. If we fail to optimize our EDA and IP solutions for use with
major foundries’ manufacturing processes or major IP providers’ products, or if our access to such foundry
16
Table of Contents
processes or third-party IP products is hampered, then our solutions may become less desirable to our customers,
resulting in an adverse effect on our business and financial condition.
We operate in highly competitive industries, and if we do not continue to meet our customers’ demand for
innovative technology at lower costs, our products may not be competitive or may become obsolete, and
our business and financial condition may be harmed.
In our Semiconductor & System Design segment, we compete against EDA vendors that offer a variety of products
and services, such as Cadence Design Systems, Inc. and Siemens EDA (formerly Mentor Graphics Corporation).
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, including internal designs that compete with our IP products. In the area
of IP products, we compete against a growing number of IP providers as well as our customers’ internally developed
IP.
In our Software Integrity segment, we compete with numerous other solution providers, many of which focus on
specific aspects of software security or quality analysis. We also compete with frequent new entrants, which include
start-up companies and more established software companies.
The industries in which we operate are highly competitive, with new competitors entering these markets both
domestically and internationally. The demand for our products and services is dynamic and depends on a number of
factors, including demand for our customers’ products, design starts and our customers’ budgetary
constraints. Technology in these industries evolves rapidly and is characterized by frequent product introductions
and improvements as well as changes in industry standards and customer requirements. For example, the adoption
of cloud computing and artificial intelligence technologies can bring new demands and also challenges in terms of
disruption to both business models and our existing technology offerings. Semiconductor device functionality
requirements continually increase while feature widths decrease, substantially increasing the complexity, cost and
risk of chip design and manufacturing. At the same time, our customers and potential customers continue to
demand an overall lower total cost of design, which can lead to the consolidation of their purchases with one
vendor. In order to succeed in this environment, we must successfully meet our customers’ technology requirements
and increase the value of our products, while also striving to reduce their overall costs and our own operating costs.
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.
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 availability of hardware products;
Our ability to compete on the basis of payment terms; and
Our ability to provide engineering and design consulting for our products.
If we fail to successfully manage these competitive factors, fail to successfully balance the conflicting demands for
innovative technology and lower overall costs, or fail to address new competitive forces, our business and financial
condition will be adversely affected.
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.
A number of business combinations, including mergers, asset acquisitions 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.
Furthermore, 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 the demand for our products and services if customers streamline research and
development or operations, reduce purchases or delay purchasing decisions.
Reduced customer spending or the loss of a small number of customers, particularly our large customers, could
adversely affect our business and financial condition. In addition, we and our competitors from time to time acquire
businesses and technologies to complement and expand our respective product offerings. Consolidated competitors
could have considerable financial resources, channel influence, and broad geographic reach; thus, they can engage
in competition on the basis of product differentiation, pricing, marketing, services, support and more. If any of our
competitors consolidate or acquire businesses and technologies that we do not offer, they may be able to offer a
larger technology portfolio, additional support and service capability or lower prices, which could negatively impact
our business and operating results.
Business Operations Risks
The global nature of our operations exposes us to increased risks and compliance obligations that may
adversely affect our business.
We derive roughly half of our revenue from sales outside the United States, and we expect our orders and revenue
to continue to depend on sales to customers outside the U.S. We have also continually expanded our non-U.S.
operations. This strategy requires us to recruit and retain qualified technical and managerial employees, manage
multiple remote locations performing complex software development projects and ensure intellectual property
protection outside of the U.S. Our international operations and sales subject us to a number of increased risks,
including:
•
•
•
•
•
•
•
•
Ineffective or weaker legal protection of intellectual property rights;
Uncertain economic and political conditions in regions where we do business such as China or
Europe;
Government trade restrictions, including tariffs, export controls, or other trade barriers, and changes
to existing trade arrangements between various countries such as China;
Difficulties in adapting to cultural differences in the conduct of business, which may include
business practices in which we are prohibited from engaging by the Foreign Corrupt Practices Act
or other anti-corruption laws;
Financial risks such as longer payment cycles and difficulty in collecting accounts receivable;
Inadequate local infrastructure that could result in business disruptions;
Additional taxes, interest and potential penalties and uncertainty around changes in tax laws of
various countries; and
Other factors beyond our control such as natural disasters, terrorism, civil unrest, war and infectious
diseases and pandemics, including COVID-19.
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 results of operations will be harmed.
There is inherent risk, based on the complex relationships between certain Asian countries such as China, where
we derive a growing percentage of our revenue, and the United States, that political, diplomatic or military events
could result in trade disruptions, including tariffs, trade embargoes, export restrictions and other trade barriers. A
significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where
18
Table of Contents
we do business could reduce customer demand and cause customers to search for substitute products and
services, make our products and services more expensive or unavailable for customers, increase the cost of our
products and services, have a negative impact on customer confidence and spending, make our products less
competitive, or otherwise have a materially adverse impact on our future revenue and profits, our customers’ and
suppliers’ businesses, and our results of operations.
For example, the United States government has placed certain entities on the Entity List, restricting the sale of U.S.
technologies to the named entities. As a result of this government action, unless and until the restriction is lifted, we
are not able to ship technologies subject to the U.S. Export Administration Regulations or provide support to these
entities. Furthermore, any company with knowledge that a customer will use certain U.S. technologies to design or
produce any item for a Huawei-affiliated company on the Entity List must obtain a license prior to any export of such
technologies. The Bureau of Industry and Security (BIS) also added a military end user list, where they identified
more than one hundred Chinese and Russian companies that are considered to be military end users. We believe
that the restrictions imposed by the U.S. government thus far will not materially impact our business at this time, but
cannot predict the impact that additional regulatory changes may have on our business in the future. Due to the
nature of our business and technology, governmental authorities may inquire into transactions between us and
certain foreign entities. For example, we recently received an administrative subpoena from BIS requesting
production of information relating to transactions with certain Chinese entities. We believe we are in full compliance
with all applicable regulations and are currently working with BIS to respond to its subpoena. However, inquiries,
such as this one, are subject to a number of uncertainties, and we cannot predict the outcome of this inquiry or its
potential effect on our operations or financial condition.
In response to actions taken by the United States, other countries may adopt tariffs and trade barriers that could
limit our ability to offer our products and services. Current and potential customers who are concerned or affected by
such tariffs or restrictions may respond by developing their own products or replacing our solutions, which would
have an adverse effect on our business. In addition, government or customer efforts, attitudes, laws, or policies
regarding technology independence may lead to non-U.S. customers favoring their domestic technology solutions
that could compete with or replace our products, which would also have an adverse effect on our business.
In addition to tariffs and other trade barriers, our global operations are subject to numerous U.S. and foreign laws
and regulations such as those related to anti-corruption, tax, corporate governance, imports and exports, financial
and other disclosures, privacy and labor relations. These laws and regulations are complex and may have differing
or conflicting legal standards, making compliance difficult and costly. In addition, there is uncertainty regarding how
proposed, contemplated or future changes to these complex laws and regulations could affect our business. We
may incur substantial expense in complying with the new obligations to be imposed by these laws and regulations,
and we may be required to make significant changes in our business operations, all of which may adversely affect
our revenues and our business overall. If we violate these laws and regulations, we could be subject to fines,
penalties or criminal sanctions, and may be prohibited from conducting business in one or more countries. Although
we have implemented policies and procedures to help ensure compliance with these laws and regulations, there
can be no assurance that our employees, contractors, agents or partners will not violate such laws and regulations.
Any violation individually or in the aggregate could have a material adverse effect on our operations and financial
condition.
Our financial results are also affected by fluctuations in foreign currency exchange rates. A weakening U.S. dollar
relative to other currencies increases expenses of our foreign subsidiaries when they are translated into U.S. dollars
in our consolidated statements of income. Likewise, a strengthening U.S. dollar relative to other currencies,
including the renminbi or Yen, reduces revenue of our foreign subsidiaries upon translation and consolidation.
Exchange rates are subject to significant and rapid fluctuations, and therefore we cannot predict the prospective
impact of exchange rate fluctuations. 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.
Our operating results may fluctuate in the future, which may adversely affect our stock price.
Our operating results are subject to quarterly and annual fluctuations, which may adversely affect our stock price.
Our historical results should not be viewed as indicative of our future performance due to these periodic fluctuations.
19
Table of Contents
Many factors may cause our revenue or earnings to fluctuate, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Changes in demand for our products—especially products, such as hardware, generating upfront
revenue—due to fluctuations in demand for our customers’ products and due to constraints in our
customers’ budgets for research and development and EDA products and services;
Changes in demand for our products due to customers reducing their expenditures, whether as a
cost-cutting measure or a result of their insolvency or bankruptcy, and whether due to the
COVID-19 pandemic, 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
inventory;
Changes in the mix of our products sold, as increased sales of our products with lower gross
margins, such as our hardware products, may reduce our overall margins;
Expenses related to our acquisition and integration of businesses and technologies;
Changes in tax rules, as well as changes to our effective tax rate, including the tax effects of
infrequent or unusual transactions and tax audit settlements;
Delays, increased costs or quality issues resulting from our reliance on third parties to manufacture
our hardware products, which includes a sole supplier for certain hardware components;
Natural variability in the timing of IP drawdowns, which can be difficult to predict;
General economic and political conditions that affect the semiconductor and electronics industries,
such as disruptions to international trade relationships, including tariffs, export licenses, or other
trade barriers affecting our or our suppliers’ products, as well as impacts due to the COVID-19
pandemic; and
Changes in accounting standards, which may impact the way we recognize our revenue and costs
and impact our earnings.
The timing of revenue recognition may also cause our revenue and earnings to fluctuate. 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;
20
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.
These factors, or any other factors or risks discussed herein, could negatively impact our revenue or earnings and
cause our stock price to decline. Additionally, our results may fail to meet or exceed the expectations of securities
analysts and investors, or such analysts may change their recommendation regarding our stock, which could cause
our stock price to decline. Our stock price has been, and may continue to be, volatile, which may make it more
difficult for our stockholders to sell their shares at a time or a price that is favorable to them.
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.
We store sensitive data, including intellectual property, our proprietary business information and that of our
customers, and confidential employee information, in our data centers, on our networks or on the cloud. Despite our
security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or
breached due to employee error, malfeasance or other disruptions that could result in unauthorized disclosure or
loss of sensitive information. As a result of the COVID-19 pandemic and shelter-in-place orders, most of our
employees in affected areas are working remotely, which magnifies the importance of the integrity of our remote
access security measures.
For example, we discovered unauthorized third-party access to our products and product license files hosted on our
SolvNet Plus customer license and product delivery system in 2015. While we identified and remediated the
incident, it is possible that our security measures may be circumvented again in the future, and any such breach
could harm our business and reputation. The techniques used to obtain unauthorized access to networks, or to
sabotage systems, change frequently and generally are not recognized until launched against a target. We may be
unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, in the
operation of our business we also use third-party vendors that store certain sensitive data, including confidential
information about our employees, and these third parties are subject to their own cybersecurity threats. While our
standard vendor terms and conditions include provisions requiring the use of appropriate security measures to
prevent unauthorized use or disclosure of our data, as well as other safeguards, a breach may still occur. In
addition, if we select a vendor that uses cloud storage of information as part of their service or product offerings, or
if we are selected as a vendor for our cloud-based solutions, our proprietary information could be misappropriated
by third parties despite our attempts to validate the security of such services. Any security breach of our own or a
third-party vendor’s systems could cause us to be non-compliant with applicable laws or regulations, subject us to
legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our
products and services, any of which could adversely affect our business.
Our software products, our hosted solutions as well as our software security and quality testing solutions, may also
be vulnerable to attacks, including traditional computer hackers, 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. An attack could 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. If we fail to identify new and increasingly sophisticated
methods of cyber attacks, or fail to invest sufficient resources in research and development regarding new threat
vectors, our security testing products and services may fail to detect vulnerabilities in our customers’ software code.
An actual or perceived failure to identify security flaws may harm the perceived reliability of our security testing
products and services, and could result in a loss of customers or sales, or an increased cost to remedy a problem.
Furthermore, our growth and recent acquisitions in the software security and quality testing space may increase our
visibility as a security-focused company and may make us a more attractive target for attacks on our own
information technology infrastructure. As a result, if any of the foregoing were to occur, we could experience
negative publicity and our reputation could suffer, customers could stop buying our products, we could face lawsuits
and potential liability, and our financial performance could be negatively impacted.
21
Table of Contents
If we fail to protect our proprietary technology, our business will be harmed.
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. Additionally, despite our measures to prevent piracy, other
parties may attempt to illegally copy or use our products, which could result in lost revenue if their efforts are
successful. Some foreign countries do not currently provide effective legal protection for intellectual property and
our ability to prevent the unauthorized use of our products in those countries is therefore limited. Our trade secrets
may also be stolen, otherwise become known, or be independently developed by competitors.
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.
If we do not obtain or maintain appropriate patent, copyright or trade secret protection, for any reason, or cannot
fully defend our intellectual property rights in certain jurisdictions, our business and operating results would be
harmed. In addition, intellectual property litigation is lengthy, expensive and uncertain. Legal fees related to such
litigation will increase our operating expenses and may reduce our net income.
We may not be able to realize the potential financial or strategic benefits of the acquisitions we complete, or
find suitable target businesses and technology to acquire, which could hurt our ability to grow our
business, develop new products or sell our products.
Acquisitions and strategic investments are an important part of our growth strategy. We have completed a significant
number of acquisitions in recent years. We expect to make additional acquisitions and strategic investments in the
future, but we may not find suitable acquisition or investment targets or we may not be able to consummate desired
acquisitions or investments due to unfavorable credit markets, commercially unacceptable terms or other risks,
which could harm our operating results. Acquisitions and strategic investments are difficult, time-consuming, and
pose a number of risks, including:
•
•
•
•
•
•
•
•
•
•
•
Potential negative impact on our earnings per share;
Failure of acquired products to achieve projected sales;
Problems in integrating the acquired products with our products;
Difficulties entering into new markets in which we are not experienced or where competitors may
have stronger positions;
Potential downward pressure on operating margins due to lower operating margins of acquired
businesses, increased headcount costs and other expenses associated with adding and supporting
new products;
Difficulties in retaining and integrating key employees;
Substantial reductions of our cash resources and/or the incurrence of debt;
Failure to realize expected synergies or cost savings;
Difficulties in integrating or expanding sales, marketing and distribution functions and administrative
systems, including information technology and human resources systems;
Dilution of our current stockholders through the issuance of common stock as part of the merger
consideration;
Difficulties in negotiating, governing and realizing value from strategic investments;
22
Table of Contents
•
•
•
•
•
•
•
•
Assumption of unknown liabilities, including tax, litigation, cybersecurity and commercial-related
risks, and the related expenses and diversion of resources;
Incurrence of costs and use of additional resources to remedy issues identified prior to or after an
acquisition;
Disruption of ongoing business operations, including diversion of management’s attention and
uncertainty for employees and customers, particularly during the post-acquisition integration
process;
Potential negative impacts on our relationships with customers, distributors and business partners;
Exposure to new operational risks, regulations, and business customs to the extent acquired
businesses are located in regions where we are not currently conducting business;
The need to implement controls, processes and policies appropriate for a public company at
acquired companies that may have previously lacked such controls, processes and policies in
areas such as cybersecurity, information technology, privacy and more;
Negative impact on our net income resulting from acquisition or investment-related costs; and
Requirements imposed by government regulators in connection with their review of an acquisition,
including required divestitures or restrictions on the conduct of our business or the acquired
business.
If we do not manage the foregoing risks, the acquisitions or strategic investments that we complete may have an
adverse effect on our business and financial condition.
We pursue new product and technology initiatives from time to time, and if we fail to successfully carry out
these initiatives, our business, financial condition, or results of operations 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. If we are unable
to anticipate technological changes in our industry by introducing new or enhanced products in a timely and cost-
effective manner, or if we fail to introduce products that meet market demand, we may lose our competitive position,
our products may become obsolete, and our business, financial condition or results of operations could be
adversely affected.
Additionally, from time to time, we may invest in efforts to expand into adjacent markets, including, for example,
software security and quality testing solutions. Although we believe these solutions are complementary to our EDA
tools, we have less experience and a more limited operating history in offering software quality testing and security
products and services, and our efforts in this area may not be successful. Our success in these and other new
markets depends on a variety of factors, including the following:
•
•
•
•
•
•
Our ability to attract a new customer base, including in industries in which we have less experience;
Our successful development of new sales and marketing strategies to meet customer requirements;
Our ability to accurately predict, prepare for and promptly respond to technological developments in
new fields, including, in the case of our software quality testing and security tools and services,
identifying new security vulnerabilities in software code and ensuring support for a growing number
of programming languages;
Our ability to compete with new and existing competitors in these new industries, many of which
may have more financial resources, industry experience, brand recognition, relevant intellectual
property rights or established customer relationships than we currently do, and could include free
and open source solutions that provide similar software quality testing and security tools without
fees;
Our ability to skillfully balance our investment in adjacent markets with investment in our existing
products and services;
Our ability to attract and retain employees with expertise in new fields;
23
Table of Contents
•
•
Our ability to sell and support consulting services at profitable margins; and
Our ability to manage our revenue model in connection with hybrid sales of licensed products and
consulting services.
Difficulties in any of our new product development efforts or our efforts to enter adjacent markets, including delays
or disruptions as a result of the COVID-19 pandemic, could adversely affect our operating results and financial
condition.
We may have to invest more resources in research and development than anticipated, which could increase
our operating expenses and negatively affect our operating results.
We devote substantial resources to research and development. 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.
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. New software products may contain undetected errors,
defects, or vulnerabilities. The occurrence of any defects or errors in our products could result in lost or delayed
market acceptance and sales of our products, delays in payment by customers, loss of customers or market share,
product returns, damage to our reputation, diversion of our resources, increased service and warranty expenses or
financial concessions, increased insurance costs and potential liability for damages. Finally, there can be no
guarantee that our research and development investments will result in products that create additional revenue.
Product errors or defects could expose us to liability and harm our reputation and we could lose market
share.
Software products frequently contain errors or defects, especially when first introduced, when new versions are
released, or when integrated with technologies developed by acquired companies. Product errors, including those
resulting from third-party suppliers, could affect the performance or interoperability of our products, could delay the
development or release of new products or new versions of products and could adversely affect market acceptance
or perception of our products. 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. Any such errors or delays in releasing new products or new versions of products or allegations of
unsatisfactory performance could cause us to lose customers, increase our service costs, subject us to liability for
damages and divert our resources from other tasks, any one of which could materially and adversely affect our
business and operating results.
Our hardware products, which primarily consist of prototyping and emulation systems, subject us to
distinct risks.
The growth in sales of our hardware products subjects us to several risks, including:
•
•
•
•
•
Increased dependence on a sole supplier for certain hardware components, which may reduce our
control over product quality and pricing and may lead to delays in production and delivery of our
hardware products, should our supplier fail to deliver sufficient quantities of acceptable components
in a timely fashion;
Increasingly variable revenue and less predictable revenue forecasts, due to fluctuations in
hardware revenue, which is recognized upfront upon shipment, as opposed to most sales of
software products for which revenue is recognized over time;
Potential reductions in overall margins, as the gross margin for our hardware products is typically
lower than those of our software products;
Longer sales cycles, which create risks of insufficient, excess or obsolete inventory and variations
in inventory valuation, which can adversely affect our operating results;
Decreases or delays in customer purchases in favor of next-generation releases, which may lead to
excess or obsolete inventory or require us to discount our older hardware products;
24
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 due to the effects of the COVID-19 pandemic and a
sustained global semiconductor shortage.
If we fail to timely recruit and retain senior management and key employees globally, our business may be
harmed.
We depend in large part upon the services of key members of our senior management team to drive our future
success. If we were to lose the services of any member of our senior management team, our business could be
adversely affected.
To be successful, we must also attract and retain key employees who join us organically and through
acquisitions. There are a limited number of qualified engineers, and competition for these individuals and other
qualified employees is intense and has increased globally, including in major markets such as Asia. Our employees
are often recruited aggressively by our competitors and our customers worldwide. Any failure to recruit and retain
key employees could harm our business, results of operations and financial condition, and our recruiting and
retention efforts may be negatively impacted by restrictions on travel and business activity due to the COVID-19
pandemic. Additionally, efforts to recruit and retain qualified employees could be costly and negatively impact our
operating expenses.
We issue equity awards from employee equity plans as a key component of our overall compensation. We face
pressure to limit the use of such equity-based compensation due to its dilutive effect on stockholders. If we are
unable to grant attractive equity-based packages in the future, it could limit our ability to attract and retain key
employees.
From time to time we are subject to claims that our products infringe on third-party intellectual property
rights.
We are from time to time subject to claims alleging our infringement of third-party intellectual property rights,
including patent rights. Under our customer agreements and other license agreements, we agree in many cases to
indemnify our customers if our products infringe a third party’s intellectual property rights. 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.
We may not be able to continue to obtain licenses to third-party software and intellectual property on
reasonable terms or at all, which may disrupt our business and harm our financial results.
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. 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. If we are unable to obtain licenses to these third-party
software and intellectual property on reasonable terms or at all, we may not be able to sell the affected products,
our customers’ use of the products may be interrupted, or our product development processes and professional
services offerings may be disrupted, which could in turn harm our financial results, our customers, and our
reputation.
The inclusion of third-party intellectual property in our products can also subject us and our customers to
infringement claims. Although we seek to mitigate this risk contractually, we may not be able to sufficiently limit our
potential liability. Regardless of outcome, infringement claims may require us to use significant resources and may
divert management’s attention.
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. Although we
have tools and processes to monitor and restrict our use of open source software, the risks associated with open
25
Table of Contents
source usage may not be eliminated and may, if not properly addressed, result in unanticipated obligations that
harm our business.
In preparing our financial statements we make certain assumptions, judgments and estimates that affect
amounts reported in our consolidated financial statements, which, if not accurate, may significantly impact
our financial results.
We make assumptions, judgments and estimates for a number of items, including the fair value of financial
instruments, goodwill, long-lived assets and other intangible assets, the realizability of deferred tax assets, the
recognition of revenue and the fair value of stock awards. We also make assumptions, judgments and estimates in
determining the accruals for employee-related liabilities, including commissions and variable compensation, and in
determining the accruals for uncertain tax positions, valuation allowances on deferred tax assets, allowances for
doubtful accounts, and legal contingencies. These assumptions, judgments and estimates are drawn from historical
experience and various other factors that we believe are reasonable under the circumstances as of the date of the
consolidated financial statements. Actual results could differ materially from our estimates, and such differences
could significantly impact our financial results. In addition, we cannot predict the full impact of the COVID-19
pandemic on our business operations. The uncertainty affects management’s estimates and assumptions, which
could result in greater variability in a variety of areas that depend on these estimates and assumptions.
Liquidity requirements in our U.S. operations may require us to raise cash in uncertain capital markets,
which could negatively affect our financial condition.
As of October 31, 2021, approximately 51% of our worldwide cash and cash equivalents balance is held by our
international subsidiaries. We intend to meet our U.S. cash spending needs primarily through our existing U.S. cash
balances, ongoing U.S. cash flows, and available credit under our term loan and revolving credit facilities. Should
our cash spending needs in the U.S. rise and exceed these liquidity sources, due to the impact of the COVID-19
pandemic or otherwise, we may be required to incur additional debt at higher than anticipated interest rates or
access other funding sources, which could negatively affect our results of operations, capital structure or the market
price of our common stock.
Legal and Regulatory Risks
Our results could be adversely affected by a change in our effective tax rate as a result of tax law changes
and related new or revised guidance and regulations, changes in our geographical earnings mix,
unfavorable government reviews of our tax returns, material differences between our forecasted and actual
annual effective tax rates, future changes to our tax structure, or by evolving enforcement practices.
Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions.
Because we have a wide range of statutory tax rates in the multiple jurisdictions in which we operate, any changes
in our geographical earnings mix, including those resulting from our intercompany transfer pricing or from changes
in the rules governing transfer pricing, could materially impact our effective tax rate. Furthermore, a change in the
tax law of the jurisdictions where we do business, including an increase in tax rates, an adverse change in the
treatment of an item of income or expense or limitations on our ability to utilize tax credits, could result in a material
increase in our tax expense and impact our financial position and cash flows. For example, in response to the fiscal
impact of the COVID-19 pandemic, the State of California enacted legislation on June 29, 2020 that would suspend
the use of certain corporate research and development tax credits for a three-year period beginning in our fiscal
2021, which resulted in an impact in our tax expense.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (Tax Act),
which significantly changed prior U.S. tax law and includes numerous provisions that affect our business. The Tax
Act includes certain new provisions that began to affect our income from foreign operations in the first quarter of
fiscal 2019. Further, President Biden has proposed The American Jobs Act and various bills have been introduced
by members of the House of Representatives and the Senate proposing changes to the corporate tax rate as well
as other provisions. On August 9, 2021 the Senate released the fiscal 2022 budget resolution with reconciliation
instructions for a potential $3.5 trillion spending bill. The House Ways and Means Committee introduced a $3.5
trillion spending bill on September 12, 2021 which proposes to raise the corporate rate to 26.5% and amend certain
provisions of the Tax Act and on October 28, 2021, the House Rules Committee introduced a revised bill which
maintains the current corporate tax rate at 21%, while introducing a new corporate minimum tax of 15% of adjusted
financial statement income as well as other modifications to the Tax Act, which if enacted may materially affect our
financial position. Accounting for certain of these provisions requires the exercise of significant judgment.
26
Table of Contents
Further changes in the tax laws of foreign jurisdictions could arise as a result of the Programme of Work to Develop
a Concensus Solution to the Tax Challenges Arising from the Digitalization of the Economy (Programme of Work)
agreement by the Organisation for Economic Co-operation and Development (OECD), which represents a coalition
of member countries, including the United States. The Programme of Work is evaluating potential changes to
numerous long-standing tax principles. On October 8, 2021 the OECD announced the OECD/G20 Inclusive
Framework on Base Erosion and Profit Shifting (Framework) which agreed to a two-pillar solution to address tax
challenges arising from the digitalization of the economy. Pillar one provides a framework for the reallocation of
certain residual profits of multinational enterprises to market jurisdictions using a revenue-based allocation key to
source to the end market jurisdictions where goods or services are used or consumed. Pillar two consists of two
interrelated rules referred to as Global Anti-Base Erosion Rules, which operate to impose a minimum tax rate of
15% calculated on a jurisdictional basis. The Framework calls for law enactment by OECD and G20 members in
2022 to take effect in 2023 and 2024. These changes, when enacted, by various countries in which we do business
may increase our taxes in these countries. Changes to these and other areas in relation to international tax reform,
including future actions taken by foreign governments in response to the Tax Act, could increase uncertainty and
may adversely affect our tax rate and cash flow in future years.
Our income and non-income tax filings are subject to review or audit by the Internal Revenue Service and state,
local and foreign taxing authorities. We exercise significant judgment in determining our worldwide provision for
income taxes and, in the ordinary course of our business, there may be transactions and calculations where the
ultimate tax determination is uncertain. We may also be liable for potential tax liabilities of businesses we acquire,
including future taxes payable related to the transition tax on earnings from their foreign operations, if any, under the
Tax Act. Although we believe our tax estimates are reasonable, 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 because of an audit could adversely affect our income tax provision and net income in the periods
for which that determination is made.
In July 2017, the Hungarian Tax Authority (HTA) issued a final assessment against our Hungarian subsidiary
(Synopsys Hungary) for fiscal years 2011 through 2013. The HTA has applied withholding taxes on certain
payments made to affiliates, resulting in an aggregate tax assessment of approximately $25.0 million and interest
and penalties of $11.0 million. We paid the tax assessments, penalties and interest in the first quarter of fiscal 2018
as required by law and recorded these amounts as prepaid taxes on our balance sheet. On April 30, 2019, the
Hungarian Administrative Court (the Administrative Court) ruled against Synopsys Hungary. We filed an appeal with
the Hungarian Supreme Court on July 5, 2019. The Hungarian Supreme Court heard our appeal on November 12,
2020 and remanded the case to the Administrative Court for further proceedings. We received the Hungarian
Supreme Court’s written decision in the first quarter of fiscal 2021. On April 27, 2021, the Administrative Court
reheard the case and again ruled against Synopsys Hungary. We received the written opinion from the
Administrative Court on May 19, 2021 and filed an appeal with the Hungarian Supreme Court on July 19, 2021. The
hearing for the appeal is scheduled for January 27, 2022. For further discussion of the Hungary audit, see Note 13
of Notes to Consolidated Financial Statements under the heading "Non-U.S. Examinations."
We maintain significant deferred tax assets related to certain tax credits. Our ability to use these credits is
dependent upon having sufficient future taxable income in the relevant jurisdiction and in the case of foreign tax
credits, how such credits are treated under current and potential future tax law. Changes to the Tax Act and changes
in our forecasts of future income could result in an adjustment to the deferred tax asset and a related charge to
earnings that could materially affect our financial results.
Changes in United States Generally Accepted Accounting Principles (U.S. GAAP) could adversely affect our
financial results and may require significant changes to our internal accounting systems and processes.
We prepare our consolidated financial statements in conformity with U.S. GAAP. These principles are subject to
interpretation by the Financial Accounting Standards Board (FASB), the SEC and various bodies formed to interpret
and create appropriate accounting principles and guidance.
The FASB periodically issues new accounting standards on a variety of topics, including, for example, revenue
recognition and accounting for leases. These and other such standards generally result in different accounting
principles, which may significantly impact our reported results or could result in variability of our financial results. For
example, the new revenue recognition standard became applicable to us at the beginning of fiscal 2019 and there is
an increased volatility in our total revenue with less predictability than under the prior accounting standard.
27
Table of Contents
We may be subject to litigation proceedings that could harm our business.
We may be subject to legal claims or regulatory matters involving stockholder, consumer, employment, customer,
supplier, competition and other issues on a global basis. Litigation is subject to inherent uncertainties, and
unfavorable rulings could occur. An unfavorable ruling could include monetary damages or, in cases for which
injunctive relief is sought, an injunction prohibiting us from manufacturing or selling one or more products. If we
were to receive an unfavorable ruling on a matter, our business and results of operations could be materially
harmed. Further information regarding certain of these matters is contained in Part I, Item 3, Legal Proceedings.
Our business is subject to evolving corporate governance and public disclosure regulations that have
increased both our compliance costs and the risk of noncompliance, which could have an adverse effect on
our stock price.
We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory
organizations, including the SEC, the Nasdaq Stock Market and the FASB. These rules and regulations continue to
evolve in scope and complexity and many new requirements have been created in response to laws enacted by
Congress, making compliance more difficult and uncertain. For example, our efforts to comply with the Dodd-Frank
Wall Street Reform and Consumer Protection Act and other regulations, including “conflict minerals” regulations
affecting our hardware products, have resulted in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and attention from revenue-generating activities to
compliance activities.
There are inherent limitations on the effectiveness of our controls and compliance programs.
Regardless of how well designed and operated it is, a control system can provide only reasonable assurance that its
objectives will be met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected. Moreover, although we have implemented compliance programs
and compliance training for employees, such measures may not prevent our employees, contractors or agents from
breaching or circumventing our policies or violating applicable laws and regulations. Failure of our control systems
and compliance programs to prevent error, fraud or violations of law could have a material adverse impact on our
business.
Our investment portfolio may be impaired by any deterioration of capital markets.
From time to time, our cash equivalent and short-term investment portfolio consists of investment-grade U.S.
government agency securities, asset-backed securities, corporate debt securities, commercial paper, certificates of
deposit, money market funds, municipal securities and other securities and bank deposits. Our investment portfolio
carries both interest rate risk and credit risk and may be negatively impacted by the economic effects of the
COVID-19 pandemic. Fixed rate debt securities may have their market value adversely impacted due to a credit
downgrade or a rise in interest rates, while floating rate securities may produce less income than expected if interest
rates fall or a credit downgrade occurs. As a result of capital pressures on certain banks, especially in Europe, and
the continuing low interest rate environment, some of our financial instruments may become impaired.
Our future investment income may fall short of expectations due to changes in interest rates or if the decline in fair
value of investments held by us is judged to be other-than-temporary. In addition, we may suffer losses in principal if
we are forced to sell securities that decline in market value due to changes in the issuer’s credit quality or changes
in interest rates.
General Risks
Catastrophic events may disrupt our business and harm our operating results.
Due to the global nature of our business, our operating results may be negatively impacted by catastrophic 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. A disruption or failure
of these systems in the event of a major earthquake, fire, extreme temperatures, drought, flood, telecommunications
failure, cybersecurity attack, terrorist attack, epidemic or pandemic (including the COVID-19 pandemic), or other
catastrophic event or climate change-related risk could cause system interruptions, delays in our product
development and loss of critical data and could prevent us from fulfilling our customers’ orders. In particular, our
28
Table of Contents
sales and infrastructure are vulnerable to regional or worldwide health conditions, including the effects of the
outbreak of contagious diseases such as the COVID-19 pandemic. Moreover, our corporate headquarters, a
significant portion of our research and development activities, our data centers, and certain other critical business
operations are located in California, near major earthquake faults and sites of recent historic wildfires. A catastrophic
event that results in the destruction or disruption of our data centers or our critical business or information
technology systems would severely affect our ability to conduct normal business operations and, as a result, our
operating results would be adversely affected.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal offices are in Mountain View, California and are leased through August 2030. The leased property
consists of two adjacent buildings, which together provide approximately 341,000 square feet of available space.
We currently sublease one of the two buildings to a third party under a lease agreement that runs through July
2024. We have two options to extend the lease term, the first to extend the term by ten years, followed by a second
option to extend by approximately nine additional years. We also lease approximately 350,000 square feet of space
in three adjacent buildings in Sunnyvale, California, which we have leased through October 2031. These buildings
in Mountain View and Sunnyvale are used for research and development, sales and support, marketing, and
administrative activities for both of our business segments.
Additionally, we own one building in Sunnyvale, California with approximately 120,000 square feet of space that was
vacated in February 2020 and is currently leased to a third party under a lease agreement that runs through
February 2031.
We currently lease 31 other offices throughout the United States, and own two office buildings in Oregon, one of
which is leased to a third party. These offices are used primarily for sales and support activities as well as research
and development for both of our business segments.
International Facilities
We lease additional space for sales, service, and research and development activities for both of our business
segments in 31 countries throughout the world, including 25,000 square feet in Dublin, Ireland for our international
headquarters, as well as significant sites in Yerevan, Armenia, Bangalore, India, Shanghai and Wuhan, China. We
own several buildings in Wuhan, China with approximately 551,000 square feet of combined space. In addition, we
own two buildings in Hsinchu, Taiwan with approximately 212,000 square feet of combined space. In March 2021,
we leased approximately 161,000 square feet of space in Shanghai, which we relocated to in August 2021.
We believe that our existing facilities, including both owned and leased properties, are in good condition and
suitable for the current conduct of our business.
Item 3. Legal Proceedings
We are subject to routine legal proceedings, as well as demands, claims and threatened litigation that arise in the
normal course of our business. The ultimate outcome of any litigation is often uncertain and unfavorable outcomes
could have a negative impact on our results of operations and financial condition. Regardless of outcome, litigation
can have an adverse impact on Synopsys because of the defense costs, diversion of management resources and
other factors.
We regularly review the status of each significant matter and assess its potential financial exposure. If the potential
loss from any claim or legal proceeding is considered probable and the amount is estimable, we accrue a liability for
the estimated loss. Legal proceedings are inherently uncertain and as circumstances change, it is possible that the
amount of any accrued liability may increase, decrease, or be eliminated.
29
Table of Contents
In July 2017, the HTA issued a final assessment against Synopsys Hungary for fiscal years 2011 through 2013. The
HTA disallowed Synopsys Hungary's tax positions taken during these years regarding the timing of the deduction of
research expenses and applied withholding taxes on certain payments made to affiliates, resulting in an aggregate
tax assessment of approximately $44.5 million and interest and penalties of $18.0 million. On August 2, 2017,
Synopsys Hungary filed a claim contesting the final assessment with the Administrative Court. On November 16,
2017, Synopsys Hungary paid the assessment as required by law, while continuing its challenge to the assessment
in court. Hearings were held in February and July 2018, February 26, 2019 and April 30, 2019. On December 10,
2018, Synopsys withdrew its claim contesting the final assessment with regard to the timing of the deduction of
research expenses, resulting in a remaining disputed tax assessment of approximately $25.0 million and interest
and penalties of $11.0 million. On April 30, 2019, the Administrative Court ruled against Synopsys Hungary. The
Administrative Court's opinion was received on May 16, 2019. Synopsys Hungary filed an appeal with the
Hungarian Supreme Court on July 5, 2019. In the second quarter of 2019, as a result of the Administrative Court's
decision, we recorded a tax expense due to an unrecognized tax benefit of $17.4 million, which is net of estimated
U.S. foreign tax credits for the tax assessments. The Hungarian Supreme Court heard our appeal on November 12,
2020 and remanded the case to the Administrative Court for further proceedings. We received the Hungarian
Supreme Court’s written decision in the first quarter of fiscal 2021. On April 27, 2021, the Administrative Court
reheard the case and again ruled against Synopsys Hungary. We received the written opinion from the
Administrative Court on May 19, 2021 and filed an appeal with the Hungarian Supreme Court on July 19, 2021. The
hearing for the appeal is scheduled for January 27, 2022.
For further discussion of the Hungary audit, see Note 13 of Notes to Consolidated Financial Statements under the
heading "Non-U.S. Examinations."
Item 4. Mine Safety Disclosures
Not applicable.
30
Table of Contents
PART II
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 8, 2021,
we had 228 stockholders of record.
Performance Graph
The following graph compares the five-year total return to stockholders of our common stock relative to the
cumulative total returns of the S&P 500 Index, the S&P Information Technology Index and the Nasdaq Composite
Index. The graph assumes that $100 was invested in Synopsys common stock on October 28, 2016 (the last trading
day before the beginning of our fifth preceding fiscal year) and in each of the indexes on October 28, 2016 (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 October 28, 2016 in stock or index, including reinvestment of dividends.
Fiscal year ending October 30.
31
Synopsys, Inc.NASDAQ CompositeS&P 500S&P Information Technology10/1610/1710/1810/1910/2010/21$0$50$100$150$200$250$300$350$400$450$500$550$600 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.
Stock Repurchase Program
Our Board of Directors (Board) previously approved a stock repurchase program pursuant to which we were
authorized to purchase up to $500.0 million of our common stock, and has periodically replenished the stock
repurchase program to such amount. Our Board approved a replenishment of the stock repurchase program up to
$500.0 million on June 17, 2021. As of October 31, 2021, $110.0 million remained available for future repurchases
under the program. In December 2021, our Board approved a new stock repurchase program with authorization to
purchase up to $1.0 billion of our common stock, that replaced the prior stock repurchase program in its entirety.
In August 2021, we entered into an accelerated share repurchase agreement (the August 2021 ASR) to repurchase
an aggregate of $175.0 million of our common stock. Pursuant to the August 2021 ASR, we made a prepayment of
$175.0 million to receive initial deliveries of shares valued at $140.0 million. The remaining balance of $35.0 million
was settled in November 2021. Total shares purchased under the August 2021 ASR were approximately 0.5 million
shares, at an average purchase price of $325.00 per share.
The table below sets forth information regarding our repurchases of our common stock during the three months
ended October 31, 2021:
Period
Month #1
August 1, 2021 through September 4, 2021
Month #2
September 5, 2021 through October 2, 2021
Month #3
October 3, 2021 through October 30, 2021
Total
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
530,329 $
329.98
530,329 $ 150,000,000
— $
—
— $ 150,000,000
136,152 $
666,481 $
293.78
322.59
— $ 110,001,399
530,329 $ 110,001,399
(1)
Amounts are calculated based on the settlement date.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following overview of our financial condition and results of operations 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. Please also see the
cautionary language at the beginning of Part I of this Form 10-K regarding forward-looking statements.
Business Summary
Synopsys, Inc. provides products and services used across the entire Silicon to Software spectrum, 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. We are a global leader in supplying the
electronic design automation (EDA) software that engineers use to design and test integrated circuits (ICs), also
known as chips. We also offer semiconductor intellectual property (IP) products, which are pre-designed circuits that
engineers use as components of larger chip designs rather than designing those circuits themselves. We provide
32
Table of Contents
software and hardware used to validate the electronic systems that incorporate chips and the software that runs on
them. To complement these offerings, we provide technical services and support to help our customers develop
advanced chips and electronic systems. These products and services are part of our Semiconductor & System
Design segment.
We 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.
Our EDA and IP customers are generally semiconductor and electronics systems companies. Our solutions help
these companies overcome the challenges of developing increasingly advanced electronics products while also
helping them reduce their design and manufacturing costs. While our products are an important part of our
customers’ development process, our sales could be affected based on their research and development budgets,
and our customers' spending decisions may be affected by their business outlook and willingness to invest in new
and increasingly complex chip designs.
Our Software Integrity business delivers products and services that enable software developers to test their code -
while it is being written - for known security vulnerabilities and quality defects, as well as testing for open source
security vulnerabilities and license compliance. Our Software Integrity customers are software developers across
many industries, including, but also well beyond, the semiconductor and systems industries. Our Software Integrity
products and services form a platform that helps our customers build security into the software development
lifecycle and across the entire cyber supply chain.
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 of Notes to Consolidated Financial Statements for 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. 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 EDA products, expanding and
proliferating our IP offerings, driving growth in the software security and quality market, and continuing to expand
our product portfolio and our total addressable market. 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.
COVID-19 Pandemic
While the COVID-19 pandemic has changed the physical working environment of the substantial majority of our
workforce to working from home, it has otherwise caused only minor disruptions to our business operations with a
limited impact on our operating results thus far. Given the unpredictable nature of the COVID-19 pandemic’s impact
on the global economy, our historical results may not be an indication of future performance.
The extent to which the COVID-19 pandemic impacts our business operations in future periods will depend on
multiple uncertain factors, including the duration and scope of the pandemic, its overall negative impact on the
global economy generally and the semiconductor and electronics industries specifically, and continued responses
by governments and businesses to COVID-19. We have not identified trends that we expect will materially impact
our future operating results at this time. As we generally recognize our revenue for software licenses over the
arrangement period, any potential impact related to COVID-19 may be delayed. We have not observed any
changes in the design activity of customers, but we experienced a slowdown in customer commitments in our
Software Integrity segment. We have not received any significant requests from our customers to either delay
payments or modify arrangements due to COVID-19. However, this situation could change in future periods and the
extent that these requests may impact our business is uncertain. We have also experienced minor disruptions in our
hardware supply chain, which we have been able to address with minimal impact to our business operations to
date.
We will continue to consider the potential impact of the COVID-19 pandemic on our business operations. Although
no material impairment or other effects have been identified to date related to the COVID-19 pandemic, there is
substantial uncertainty in the nature and degree of its continued effects over time. That uncertainty affects
33
Table of Contents
management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas
that depend on these estimates and assumptions as additional events and information become known.
See Part I, Item 1A, Risk Factors for further discussion of the possible impact of the COVID-19 pandemic on our
business, operations and financial condition.
Business Segments
Semiconductor & System Design. This segment includes our advanced silicon design, verification products and
services, and semiconductor IP portfolio, which encompasses products and services that serve companies primarily
in the semiconductor and electronics industries. EDA includes digital, custom and field programmable gate array
(FPGA) IC design software, verification products, and manufacturing software products. Designers use these
products to automate the highly complex IC design process and to reduce defects that could lead to expensive
design or manufacturing re-spins or suboptimal end products. For IP, we are a leading provider of high-quality,
silicon-proven IP solutions for system-on-chips (SoCs). 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. This segment includes a broad portfolio of products and services to intelligently address software
risks across the customer’s portfolio and at all stages of the application lifecycle. The testing tools, services, and
programs enable our customers to manage open source license compliance and detect, prioritize, and remediate
security vulnerabilities and defects across their entire software development lifecycle. Our offerings include security
and quality testing products, managed services, programs and professional services, and training.
Fiscal Year End
Our fiscal year ends on the Saturday nearest to October 31 and consists of 52 weeks, with the exception that
approximately every five years, we have a 53-week year. When a 53-week year occurs, we include the additional
week in the first quarter to realign fiscal quarters with calendar quarters. Fiscal 2021, 2020 and 2019 were 52-week
years ending on October 30, 2021, October 31, 2020 and November 2, 2019, respectively. Fiscal 2022 will be a 52-
week year.
For presentation purposes, this Form 10-K refers to the closest calendar month end.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial results under Results of Operations below are based on our audited
results of operations, which we have 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. On an ongoing basis, we evaluate our estimates based on
historical experience and various other assumptions we believe are reasonable under the circumstances. Our actual
results may differ from these estimates. See Note 2 of Notes to Consolidated Financial Statements for further
information on our significant accounting policies.
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;
Valuation of business combinations; and
Income taxes.
34
Table of Contents
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.
Analysis of the terms and conditions in these contracts and their effect on revenue recognition may require
significant judgment.
We have concluded that our EDA software licenses in Time-based Subscription License (TSL) contracts are not
distinct from our obligation to provide unspecified software updates to the licensed software throughout the license
term, because those promises represent inputs to a single, combined performance obligation. Where unspecified
additional software product rights are part of the contract with the customer, those rights are accounted for as part of
the single performance obligation that includes the licenses, updates, and technical support, because such rights
are provided during the same period of time and have the same time-based pattern of transfer to the customer.
For our IP licensing arrangements, we have concluded that the licenses and support services are distinct from each
other, and therefore treated as separate performance obligations. Revenues from IP licenses are recognized at a
point in time upon transfer of control of the IP license, and support services are recognized over the support period
as a stand ready obligation to the customer.
Valuation of Business Combinations
We allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities
assumed based upon their estimated fair values at the acquisition date. The purchase price allocation process
requires management to make significant estimates and assumptions with respect to intangible assets. Although we
believe the assumptions and estimates we have made are reasonable, they are based in part on historical
experience, market conditions and information obtained from management of the acquired companies and are
inherently uncertain. 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.
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions,
estimates or actual results.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is
recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Management
must make assumptions, judgments and estimates to determine our current provision for income taxes and also our
deferred tax assets and liabilities.
Our assumptions, judgments and estimates relative to the current provision for income taxes take into account
current tax laws, our interpretation of current tax laws and possible outcomes of current and future audits conducted
by foreign and domestic tax authorities. We have established reserves for income taxes to address potential
exposures involving tax positions that could be challenged by tax authorities. In addition, we are subject to the
continual examination of our income tax returns by the U.S. Internal Revenue Service (IRS) and other domestic and
foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to
determine the adequacy of our provision for income taxes and have reserved for potential adjustments that may
result from such examinations. We believe such estimates to be reasonable; however, the final determination of any
of these examinations could significantly impact the amounts provided for income taxes in our consolidated financial
statements.
35
Table of Contents
Changes from Prior Periodic Reports
In this Annual Report on Form 10-K, we have revised our disclosures to comply with SEC Release No. 33-10825,
“Modernization of Regulation S-K Items 101, 103, and 105.” In addition, we have adopted the changes in the
disclosure standards included in SEC Release No. 33-10890, “Management’s Discussion and Analysis, Selected
Financial Data, Supplementary Financial Information.”
Modernization of Regulation S-K Items 101, 103, and 105
The SEC issued Release No. 33-10825, “Modernization of Regulation S-K Items 101, 103, and 105,” effective for
annual periods beginning subsequent to November 2020. This release was adopted to simplify the description of
business, legal proceedings, and risk factor disclosures that registrants are required to make pursuant to Regulation
S-K. Specifically, this release requires registrants to provide disclosures relating to their human capital resources
and to restructure their risk factor disclosures. Additionally, the release increases the threshold for disclosure of
environmental proceedings to which the government is a party.
Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information
The SEC issued Release No. 33-10890 “Management’s Discussion and Analysis, Selected Financial Data,
Supplementary Financial Information” which became fully effective on August 9, 2021. This release was adopted to
simplify and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the SEC eliminated
the requirement for selected financial data, only requiring quarterly disclosure when there are retrospective changes
affecting comprehensive income, and amending the matters required to be presented under Management’s
Discussion and Analysis (MD&A) to, among other things, eliminate the requirement to include the contractual
obligations table.
With our adoption of this release, we have eliminated from this document the items discussed above that are no
longer required. Information on our contractual obligations is still disclosed in narrative form within the
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this
Annual Report on Form 10-K.
Results of Operations
The discussion of our consolidated results of operations include year-over-year comparisons of fiscal 2021 changes
compared to fiscal 2020. For a discussion of the fiscal 2020 changes compared to fiscal 2019, 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, 2020, filed on December 15, 2020.
Fiscal 2021 Financial Performance Summary
Results of operations for fiscal 2021, compared to fiscal 2020, reflect the following:
•
•
Revenues were $4,204.2 million, an increase of $518.9 million or 14%, primarily due to higher revenue
resulting from growth across all products and geographies.
Total cost of revenue and operating expenses were $3,469.4 million, an increase of $404.3 million or 13%,
primarily due to increases of $342.2 million in employee-related costs resulting from headcount increases
through organic growth and acquisitions.
• Operating income was $734.8 million, an increase of $114.6 million or 18%, as revenue growth exceeded
the growth of costs and expenses.
Revenue
Our revenues are generated from two business segments: the Semiconductor & System Design segment and the
Software Integrity segment. See Note 15 of Notes to Consolidated Financial Statements for additional information
about our reportable segments and revenue by geographic regions.
Further disaggregation of the revenues into various products and services within these two segments is
summarized as follows:
Semiconductor & System Design Segment
This segment is comprised of the following:
•
EDA software includes digital, custom and FPGA IC design software, verification products and
36
Table of Contents
obligations to provide unspecified updates and support services. EDA products and services are
typically sold through TSL arrangements that grant customers the right to access and use all of the
licensed products at the outset of an arrangement and software updates are generally made available
throughout the entire term of the arrangement. The duration of our TSL contracts is generally 3 years,
though it may vary for specific arrangements. We have concluded that the software licenses in TSL
contracts are not distinct from the obligation to provide unspecified software updates to the licensed
software throughout the license term, because the multiple software licenses and support represent
inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining
the utility of the software licenses. We recognize revenue for the combined performance obligation
under TSL contracts ratably over the term of the license.
•
•
•
IP & System Integration includes our DesignWare® IP portfolio and system-level products and services.
These arrangements generally have two performance obligations which consist of transferring of the
licensed IP and providing related support, which includes rights to technical support and software
updates that are provided over the support term and are transferred to the customer over time.
Revenue allocated to the IP licenses is recognized at a point in time upon the later of the delivery date
or the beginning of the license period, and revenue allocated to support is recognized over the support
term. Royalties are recognized as revenue in the quarter in which the applicable customer sells its
products that incorporate our IP. Payments for IP contracts are generally received upon delivery of the
IP. Revenue related to the customization of certain IP is recognized as “Professional Services.”
In the case of arrangements involving the sale of hardware products, we generally have two
performance obligations. The first performance obligation is to transfer the hardware product, which
includes software integral to the functionality of the hardware product. 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 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. We have concluded that control
generally transfers at that point in time because the customer has the ability to direct the use of the
asset and an obligation to pay for the hardware. The portion of the transaction price allocated to the
maintenance obligation is recognized as revenue ratably over the maintenance term.
Revenue from Professional Service contracts is recognized over time, generally using costs incurred or
hours expended to measure progress. We have a history of reasonably estimating project status and
the costs necessary to complete projects. A number of internal and external factors can affect these
estimates, including labor rates, utilization and efficiency variances and specification and testing
requirement changes.
Software Integrity Segment
• We sell Software Integrity products in arrangements that provide customers the right to software
licenses, maintenance updates and technical support. Over the term of these arrangements, the
customer expects us to provide integral maintenance updates to the software licenses, which help
customers protect their own software from new critical quality defects and potential security
vulnerabilities. The licenses and maintenance updates serve together to fulfill our commitment to the
customer as both work together to provide functionality to the customer and represent a combined
performance obligation. We recognize revenue for the combined performance obligation over the term
of the arrangement.
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 may 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. Customers generally negotiate the
total value of the arrangement rather than just unit pricing or volumes.
37
Table of Contents
Total Revenue
Semiconductor & System Design Segment
Software Integrity Segment
Total
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 3,810.4 $ 3,327.2 $
393.8
$ 4,204.2 $ 3,685.3 $
358.1
483.2
35.7
518.9
15 %
10 %
14 %
Our revenues are subject to fluctuations, primarily due to customer requirements including the timing and value of
contract renewals. For example, we experience fluctuations in our revenues due to factors such as the timing of IP
product sales, consulting projects, Flexible Spending Account (FSA) drawdowns, royalties, and hardware sales. As
revenues from IP products sales and hardware sales are recognized upfront, customer demand and timing
requirements for such IP products and hardware could result in increased variability of our total revenues.
For fiscal 2021 compared to fiscal 2020, revenues increased primarily due to the continued organic growth of our
business in most product categories and regions as a result of increased investments by our customers in new,
complex designs for their hardware and software products across a wide range of industries.
For a discussion of revenue by geographic areas, see Note 15 of Notes to Consolidated Financial Statements.
Time-Based Products Revenue
Time-based products revenue
Percentage of total revenue
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 2,633.8
$ 2,365.2
$
268.6
11 %
63 %
64 %
The increase in time-based products revenue for fiscal 2021 compared to fiscal 2020 was primarily attributable to an
increase in TSL license revenue and higher renewals from arrangements booked in prior periods.
Upfront Products Revenue
Upfront products revenue
Percentage of total revenue
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 861.1
$ 735.6
$
125.5
17 %
20 %
20 %
Changes in upfront products revenue are generally attributable to normal fluctuations in the extent and timing of
customer requirements, which can drive the amount of upfront orders and revenue in any particular period.
The increase in upfront products revenue for fiscal 2021 compared to fiscal 2020 was primarily due to an increase in
the sale of IP products and hardware products driven by higher demands from customers.
Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP products
and hardware sales. Such fluctuations will continue to be impacted by the timing of shipments or FSA drawdowns
due to customer requirements.
38
Table of Contents
Maintenance and Service Revenue
Maintenance revenue
Professional service and other revenue
Total
Percentage of total revenue
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 235.9
473.5
$ 709.4
$ 177.4
407.1
$ 584.5
$
$
58.5
66.4
124.9
33 %
16 %
21 %
17 %
16 %
The increase in maintenance revenue for fiscal 2021 compared to fiscal 2020 was primarily due to an increase in
the volume of hardware and IP arrangements that include maintenance.
The increase in professional services and other revenue for fiscal 2021 compared to fiscal 2020 was primarily due
to an increase in the volume of IP consulting projects.
Cost of Revenue
Cost of products revenue
Cost of maintenance and service revenue
Amortization of intangible assets
Total
Percentage of total revenue
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 542.1
271.2
48.5
$ 861.8
$ 487.3
254.9
52.5
$ 794.7
$
$
20 %
22 %
54.8
16.3
(4.0)
67.1
11 %
6 %
(8) %
8 %
We divide cost of revenue into three categories: cost of products revenue, cost of maintenance and service
revenue, and amortization of intangible assets. We segregate expenses directly associated with consulting and
training services from cost of products revenue associated with internal functions providing license delivery and
post-customer contract support services. We then allocate group costs between cost of products revenue and cost
of maintenance and service revenue based on products and maintenance and service revenue reported.
Cost of products revenue. Cost of products revenue includes costs related to products sold and software licensed,
hardware related direct costs, allocated operating costs related to product support and distribution costs, royalties
paid to third-party vendors, and the amortization of capitalized software development costs.
Cost of maintenance and service revenue. Cost of maintenance and service revenue includes costs to deliver our
maintenance and consulting services, such as hotline and on-site support, production services and documentation
of maintenance updates.
Amortization of intangible assets. Amortization of intangible assets, which is recorded to cost of revenue and
operating expenses, includes the amortization of core/developed technology and certain contract rights intangible.
The increase in cost of revenue for fiscal 2021 compared to fiscal 2020 was primarily due to increases of $54.8
million in personnel-related costs as a result of headcount increases from hiring and acquisitions, $20.0 million in
hardware related costs, and higher deferred compensation expenses of $4.6 million. These increases were partially
offset by a decrease of $5.3 million in depreciation and maintenance expense, a decrease of $4.0 million in
servicing IP consulting arrangements expense and a reduction of $4.0 million in amortization of intangible assets as
certain technology-related intangibles assets became fully amortized during 2021.
Changes in other cost of revenue categories for the above-mentioned periods were not individually material.
39
Table of Contents
Operating Expenses
Research and Development
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 1,504.8
$ 1,279.0
$
225.8
18 %
Percentage of total revenue
36 %
35 %
The increase in research and development expenses for fiscal 2021 compared to fiscal 2020 was primarily due to
higher personnel-related costs of $176.0 million from headcount increases from hiring and acquisitions as we
continue to expand and enhance our product portfolio, $9.7 million in consultant and contractor costs, $7.4 million in
facility expenses, as well as higher deferred compensation expenses of $29.3 million.
Changes in other research and development expense categories for the above-mentioned periods were not
individually material.
Sales and Marketing
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 712.5
$ 632.0
$
80.5
13 %
Percentage of total revenue
17 %
17 %
The increase in sales and marketing expenses for fiscal 2021 compared to fiscal 2020 was primarily due to an
increase of $71.8 million in personnel-related costs due to headcount increases from hiring and higher sales
commissions as well as higher deferred compensation expenses of $11.0 million, partially offset by a decrease of
$4.8 million in travel costs as a result of COVID-19 restrictions.
Changes in other sales and marketing expense categories for the above-mentioned periods were not individually
material.
General and Administrative
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
(dollars in millions)
$ 323.0
$ 284.5
$
38.5
14 %
Percentage of total revenue
8 %
8 %
The increase in general and administrative expenses for fiscal 2021 compared to fiscal 2020 was primarily due to
an increase of $39.6 million in personnel-related expenses from headcount increases from hiring and higher
deferred compensation expenses of $5.0 million.
Changes in other general and administrative expense categories for the above-mentioned periods were not
individually material.
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. These assets are classified as trading securities. There is
no impact to our net income from the fair value changes in our deferred compensation plan obligation and asset.
40
Table of Contents
Amortization of Intangible Assets
Amortization of intangible assets includes the amortization of contract rights and the amortization of core/developed
technology, trademarks, trade names, and customer relationships related to acquisitions completed in prior years.
Amortization expense is included in the consolidated statements of income as follows:
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
Included in cost of revenue
Included in operating expenses
Total
Percentage of total revenue
$
$
48.5
33.9
82.4
$
$
$
(dollars in millions)
52.5
38.8
91.3
$
(4.0)
(4.9)
(8.9)
2 %
2 %
(8) %
(13) %
(10) %
The decrease in amortization of intangible assets for fiscal 2021 compared to fiscal 2020 was primarily due to
certain intangible assets becoming fully amortized in fiscal 2021, partially offset by amortization expense related to
acquired intangible assets in fiscal 2021.
Restructuring Charges
In the third quarter of fiscal 2021, our management approved, committed and initiated a restructuring plan (the 2021
Plan) as part of a business reorganization. Total charges under the 2021 Plan are expected to be in the range of
$42 million to $53 million and consist primarily of severance, retirement benefits under the 2021 Voluntary
Retirement Program (2021 VRP), and lease abandonment costs. Restructuring charges under the 2021 Plan are
anticipated to be completed in the first quarter of fiscal 2022.
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
2021
2020
2019
$
$
$
1.3 $
22.6 $
8.1 $
(in millions)
33.4 $
36.1 $
47.2 $
(20.5) $
(57.4) $
(32.7) $
14.2
1.3
22.6
See Note 2 of Notes to Consolidated Financial Statements for additional information.
Interest and Other Income (Expense), Net
Interest income
Interest expense
Gain (loss) on assets related to executive deferred
compensation plan
Foreign currency exchange gain (loss)
Other, net
Total
Year Ended October 31,
$ Change
% Change
2021
2020
2020 to 2021
2.4 $
(3.4)
71.6
5.3
(5.2)
70.7 $
(dollars in millions)
3.6 $
(5.1)
(1.2)
1.7
21.5
5.5
(7.5)
18.0 $
50.1
(0.2)
2.3
52.7
$
$
(33) %
(33) %
233 %
(4) %
(31) %
293 %
The increase in other income (expense) for fiscal 2021 as compared to fiscal 2020 was primarily due to 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. These
unallocated expenses consist primarily of stock-based compensation expense, amortization of intangible assets,
restructuring, litigation and acquisition-related costs. See Note 15 of Notes to Consolidated Financial Statements for
more information.
41
Table of Contents
Semiconductor & System Design Segment
Adjusted operating income
Adjusted operating margin
Year Ended October 31,
$ Change % Change
2021
2020
2020 to 2021
(dollars in millions)
$ 1,243.1
$ 990.8
$ 252.3
33 %
30 %
3 %
25 %
10 %
The increase in adjusted operating income for fiscal 2021 compared to fiscal 2020 was primarily due to an increase
in revenue from arrangements booked in prior periods.
Software Integrity Segment
Adjusted operating income
Adjusted operating margin
Year Ended October 31,
$ Change % Change
2021
2020
2020 to 2021
(dollars in millions)
$ 38.3
$ 40.8
$ (2.5)
10 %
11 %
(1) %
(6) %
(9) %
The decrease in adjusted operating income for fiscal 2021 compared to fiscal 2020 was primarily due to an increase
in operating expenses, partially offset by an increase in revenue from arrangements booked in prior periods.
Income Taxes
Our effective tax rate for fiscal 2021 was 6.1%, which included a tax benefit of $45.5 million of U.S. federal research
tax credit, a foreign derived intangible income (FDII) deduction of $31.2 million, and excess tax benefits from stock-
based compensation of $94.0 million.
Our effective tax rate for fiscal 2020 was (4.0%), which included a tax benefit of $39.2 million of U.S. federal
research tax credit, a FDII deduction of $24.3 million, and excess tax benefits from stock-based compensation of
$72.3 million.
The Tax Act provides an exemption from federal income taxes for distributions from foreign subsidiaries made after
December 31, 2017 that were not subject to the one-time transition tax. We have provided for foreign withholding
taxes on undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer
considered to be indefinitely reinvested in the operations of those subsidiaries.
In July 2017, the Hungarian Tax Authority (the HTA) issued a final assessment against our Hungarian subsidiary
(Synopsys Hungary) for fiscal years 2011 through 2013. The HTA applied withholding taxes on certain payments
made to affiliates, resulting in an aggregate tax assessment of approximately $25.0 million and interest and
penalties of $11.0 million. We paid the tax assessments, penalties and interest in the first quarter of 2018 as
required by law and recorded these amounts as prepaid taxes on our balance sheet. On April 30, 2019, the
Hungarian Administrative Court ruled against Synopsys Hungary. We filed an appeal with the Hungarian Supreme
Court on July 5, 2019. In the second quarter of 2019, as a result of the Court's decision, we recorded a tax expense
due to an unrecognized tax benefit of $17.4 million, which is net of estimated U.S. foreign tax credits for the tax
assessments. The Hungarian Supreme Court heard our appeal on November 12, 2020 and remanded the case to
the Hungarian Administrative Court for further proceedings. We received the Hungarian Supreme Court's written
decision in the first quarter of fiscal 2021. On April 27, 2021, the Administrative Court reheard the case and again
ruled against Synopsys Hungary. We received the written opinion from the Administrative Court on May 19, 2021.
We filed an appeal with the Hungarian Supreme Court on July 19, 2021. The hearing for the appeal is scheduled for
January 27, 2022.
See Note 13 of Notes to Consolidated Financial Statements for further discussion of the provision for income taxes,
the impacts related to the Tax Act, and the Hungarian audit.
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.
42
Table of Contents
As of October 31, 2021, we held $1,580.8 million in cash, cash equivalents and short-term investments. Our cash
equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments
with maturities of three months or less. Our short-term investments include U.S. government and municipal
obligations, investment-grade available-for-sale debt and asset backed securities. We believe that the overall credit
quality of our portfolio is strong, with our global excess cash, and our cash equivalents, invested in banks and
securities with a weighted-average credit rating exceeding AA.
As of October 31, 2021, approximately $799.1 million of our cash and cash equivalents were domiciled in various
foreign jurisdictions. We have provided for foreign withholding taxes on the undistributed earnings of certain of our
foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the
operations of those subsidiaries.
We believe that our existing cash, cash equivalents and short-term investments and sources of liquidity will be
sufficient to satisfy our cash requirements and capital return program over the next 12 months and beyond. Our
future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our
sales and marketing activities, and the timing and extent of our spending to support our research and development
efforts. We also may invest in or acquire complementary businesses, applications or technologies, or may further
expand our board-authorized stock repurchase program, which may require the use of significant cash resources
and/or additional financing.
Cash Flows
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Cash Provided by Operating Activities
Year Ended October 31,
2021
2020
$ Change
2020 to 2021
(dollars in millions)
$
$
$
1,492.6 $
(549.0) $
(748.7) $
991.3 $
(360.4) $
(140.6) $
501.3
(188.6)
(608.1)
We expect cash from our operating activities to fluctuate as a result of a number of factors, including the timing of
our billings and collections, our operating results, and the timing and amount of tax and other liability payments.
Cash provided by our operations is dependent primarily upon the payment terms of our license agreements. We
generally receive cash from upfront arrangements much sooner than from time-based products revenue, in which
the license fee is typically paid either quarterly or annually over the term of the license.
Fiscal 2021 compared to fiscal 2020. The increase in cash provided by operating activities was primarily attributable
to higher operating income and higher cash collections.
Cash Used in Investing Activities
Fiscal 2021 compared to fiscal 2020. The increase in cash used in investing activities was primarily due to purchase
of short-term investments of $161.7 million and higher cash paid for acquisitions of $95.0 million, partially offset by
lower purchases of property and equipment of $61.0 million.
Cash Used in Financing Activities
Fiscal 2021 compared to fiscal 2020. The increase in cash used in financing activities was primarily due to higher
stock repurchases of $546.0 million and higher income taxes paid for net share settlements of $56.7 million.
Credit and Term Loan Facilities
On November 28, 2016, we entered into an amended and restated credit agreement with several lenders (as
amended and restated, the Credit Agreement) providing for (i) a $650.0 million senior unsecured revolving credit
facility (the Revolver) and (ii) a $150.0 million senior unsecured term loan facility (the Term Loan). On January 22,
2021, the Credit Agreement was amended (Credit Agreement) to extend the termination date of the existing $650
million senior unsecured revolving credit facility from November 28, 2021 to January 22, 2024, which may be further
extended at our option. Further, the Credit Agreement was also amended to provide an uncommitted incremental
loan facility of up to $150.0 million in the aggregate principal amount.
43
Table of Contents
Our outstanding term loan borrowings under the previous credit agreement carried over under the Credit
Agreement. As of October 31, 2021, we had $75.0 million in aggregate principal amount in outstanding balance
under the Term Loan. There was no outstanding balance under the Revolver as of October 31, 2021.
In July 2018, we entered into a 12-year 220.0 million RMB (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, 2021, we had $25.1 million outstanding under the agreement. The
remaining outstanding balance of $75.0 million was repaid in full on November 26, 2021.
Share Repurchase Program
Our Board of Directors previously approved a stock repurchase program up to $500.0 million of our common stock,
and approved a replenishment of the stock repurchase program of up to $500.0 million in June 2021. During the
fiscal year 2021, we repurchased 2.8 million shares of common stock at an average price of $270.84 per share for
an aggregate purchase price of $753.1 million. As of October 31, 2021, $110.0 million remained available for future
share repurchases. In December 2021, our Board approved a stock repurchase program with authorization to
purchase up to $1.0 billion of our common stock. The pace of our repurchase activity will depend on factors such as
our working capital needs, our cash requirements for acquisitions, our debt repayment obligations, our stock price,
and economic and market conditions.
Contractual and Other Obligations
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, 2021, we had lease payment obligations, net of immaterial sublease income, of $588.3 million, with
$80.4 million payable within 12 months.
Purchase Obligations
Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary
course of business for which we have not received the goods or services. As of October 31, 2021, we had $301.7
million of purchase obligations, with $151.8 million payable within 12 months. Although open purchase orders are
considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, and
adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
Term Loan
Refer to “Other Commitments – 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, 2021, we had $27.9 million of long-term accrued income taxes which represent uncertain tax
benefits. Currently, a reasonably reliable estimate of timing of payments related to uncertain tax benefits in
individual years beyond fiscal 2021 cannot be made due to uncertainties in timing of the commencement and
settlement of potential tax audits.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. 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, 2021, all of our cash, cash equivalents, and debt
were at short-term variable or fixed interest rates. As of October 31, 2021, we had an investment portfolio of fixed
income securities of $147.9 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. 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. The primary objective of our investment activities is to preserve the principal while at the same time
maximizing yields without significantly increasing the risk. To achieve this objective, we maintain our portfolio of
investments in a mix of tax-exempt and taxable instruments that meet high credit quality standards, as specified in
44
Table of Contents
our investment policy. None of these investments are held for trading purposes. Our policy also limits the amount of
credit exposure to any one issue, issuer and type of instrument.
Our cash equivalents and debt by fiscal year of expected maturity and average interest rates as of October 31, 2021
are as follows:
Maturing in Year Ending October 31,
2022
2023
2024
2025
2025
thereafter
Total
Fair Value
(in thousands)
Cash & Cash equivalents
Approx. average interest
rate
Short-term debt (variable rate):
Term Loan
Average interest rate
Credit Facility in China
Average interest rate
$ 1,416,810
0.17 %
$ 75,000
LIBOR +
1.125%
$ 1,416,810 $ 1,416,810
$
75,000 $
75,000
25,094 $
25,094
$ 25,094 $
LPR +
0.74%
of such
rate
Foreign Currency Risk. We operate internationally and are exposed to potentially adverse movements in currency
exchange rates. The functional currency of the majority of our active foreign subsidiaries is the foreign subsidiary’s
local currency. We enter into hedges in the form of foreign currency forward contracts to reduce our exposure to
foreign currency rate changes on non-functional currency denominated forecasted transactions and balance sheet
positions including: (1) certain assets and liabilities, (2) shipments forecasted to occur within approximately one
month, (3) future billings and revenue on previously shipped orders, and (4) certain future intercompany invoices
denominated in foreign currencies. 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
23 months. See Note 2 and Note 6 of 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. To the extent our estimates are correct, gains and losses on
our foreign currency contracts will be offset by corresponding losses and gains on the underlying transactions. For
example, if the Euro were to depreciate by 10% compared to the U.S. dollar prior to the settlement of the Euro
forward contracts listed in the table below providing information as of October 31, 2021, the fair value of the
contracts would decrease by approximately $13.5 million, and we would be required to pay approximately $13.5
million to the counterparty upon contract maturity. At the same time, the U.S. dollar value of our Euro-based
expenses would decline, resulting in positive cash flow of approximately $13.5 million that would offset the loss and
negative cash flow on the maturing forward contracts.
Net unrealized gain of approximately $1.3 million and net unrealized loss of $3.4 million, net of tax, are included in
accumulated other comprehensive income (loss) in our consolidated balance sheets as of October 31, 2021 and
2020, respectively.
If estimates of our balances and transactions prove inaccurate, we will not be completely hedged, and we will record
a gain or loss, depending upon the nature and extent of such inaccuracy.
We do not use foreign currency forward contracts for speculative or trading purposes. 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.
45
Table of Contents
Information about the gross notional values of our foreign currency contracts as of October 31, 2021 was as follows:
Forward Contract Values:
Japanese yen
Indian rupee
Euro
Chinese renminbi
Taiwanese dollar
Canadian dollar
Hungarian forint
Korean won
British pound sterling
Israel shekel
Armenian dram
Singapore dollar
Swiss franc
Gross Notional
Amount in
U.S. Dollars
(in thousands)
Average
Contract
Rate
$
311,030
270,717
135,099
97,860
89,693
68,780
68,462
50,453
29,994
25,502
9,799
9,503
9,260
110.672
79.144
1.182
6.470
27.866
1.265
315.169
1,186.931
1.368
3.217
510.264
1.361
0.923
$ 1,176,152
Equity Risk. We had approximately $17.6 million and $13.2 million of non-marketable equity securities in privately
held companies as of October 31, 2021 and 2020, respectively. The investments that we do not have the ability to
exercise significant influence over are accounted for using the measurement alternative when the fair value of the
investment is not readily determinable. Securities accounted for as equity method investments are recorded at cost
plus the proportional share of the issuers’ income or loss, which is recorded in the other income (expense), net.
Investments are written down to the fair value when an event or circumstance which impacts the fair value of these
investments indicates that the investments are impaired and the fair value of the investments is less than the
carrying value. None of our investments are held for speculation purposes.
46
Table of Contents
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Synopsys, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Synopsys, Inc. and subsidiaries (the Company)
as of October 30, 2021 and October 31, 2020, the related consolidated statements of income, comprehensive
income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October 30, 2021,
and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s
internal control over financial reporting as of October 30, 2021, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of October 30, 2021 and October 31, 2020, and the results of its operations
and its cash flows for each of the years in the three-year period ended October 30, 2021, in conformity with U.S.
generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of October 30, 2021 based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of
accounting for leases as of November 3, 2019 due to the adoption of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 842, Leases (“ASC 842”).
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
47
Table of Contents
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Evaluation of the Company’s analysis of terms and conditions in software and intellectual property license
contracts with customers
As discussed in Notes 2 and 3 to the consolidated financial statements, the Company generates revenue from
the sale of products that include software and intellectual property (IP) licenses, hardware products,
maintenance and services. The Company’s contracts with customers often include promises to transfer multiple
products and services to a customer. Arrangements with customers can involve hundreds of products and
various license rights, and customers negotiate with the Company over many aspects of these arrangements.
The Company’s customers often 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. The Company recognized total revenue of $4,204.2 million for the year ended October 30,
2021, which included revenue related to software and IP licenses.
We identified the evaluation of the Company’s analysis of terms and conditions in significant software and IP
license contracts with customers and their effect on revenue recognition as a critical audit matter. Complex
auditor judgment was required to assess the Company’s judgments made in applying revenue recognition
requirements to certain terms and conditions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the Company’s revenue
recognition process, including controls related to the Company’s analysis of terms and conditions in software
and IP license contracts with customers and their effect on revenue recognition. We tested certain software and
IP license customer contracts by inspecting the underlying customer agreements and evaluating the Company’s
assessment of the contractual terms and conditions in accordance with revenue recognition requirements. For a
selection of software and IP license contracts with customers entered during the year, we inquired of personnel
outside of the accounting function to corroborate our understanding of certain terms and conditions.
/s/ KPMG LLP
We have served as the Company’s auditor since 1992.
48
Table of Contents
Santa Clara, California
December 13, 2021
49
Table of Contents
SYNOPSYS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Total cash, cash equivalents and short-term investments
Accounts receivable, net
Inventories, net
Income taxes receivable and prepaid taxes
Prepaid and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets, net
Goodwill
Intangible assets, net
Deferred income taxes
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Operating lease liabilities, current
Accrued income taxes
Deferred revenue
Short-term debt
Total current liabilities
Operating lease liabilities, non-current
Long-term accrued income taxes
Long-term deferred revenue
Long-term debt
Other long-term liabilities
Total liabilities
Stockholders’ equity:
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding
Common stock, $0.01 par value: 400,000 shares authorized; 153,062 and
152,618 shares outstanding, respectively
Capital in excess of par value
Retained earnings
Treasury stock, at cost: 4,198 and 4,643 shares, respectively
Accumulated other comprehensive income (loss)
Total Synopsys stockholders’ equity
Non-controlling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
October 31,
2021
2020
$ 1,432,840 $ 1,235,653
—
1,235,653
780,709
192,333
32,355
308,167
2,549,217
483,818
465,818
3,365,114
254,322
497,546
414,227
$ 8,752,260 $ 8,030,062
147,949
1,580,789
568,501
229,023
32,411
397,617
2,808,341
472,398
493,251
3,575,785
279,132
612,655
510,698
$
694,748 $
79,678
46,443
1,517,623
74,992
2,413,484
487,003
27,893
136,303
25,094
363,540
3,453,317
623,664
73,173
27,738
1,388,263
27,084
2,139,922
462,411
25,178
104,850
100,823
284,511
3,117,695
—
—
1,531
1,576,363
4,549,713
(782,866)
(49,604)
1,528
1,653,166
3,795,397
(488,613)
(54,074)
4,907,404
4,963
4,912,367
$ 8,752,260 $ 8,030,062
5,295,137
3,806
5,298,943
See accompanying notes to consolidated financial statements.
50
Table of Contents
SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Year Ended October 31,
2021
2020
2019
Revenue:
Time-based products
Upfront products
Maintenance and service
Total revenue
Cost of revenue:
Products
Maintenance and service
Amortization of intangible assets
Total cost of revenue
Gross margin
Operating expenses:
Research and development
Sales and marketing
General and administrative
Amortization of intangible assets
Restructuring charges
Total operating expenses
Operating income
Other income (expense), net
Income before income taxes
Provision (benefit) for income taxes
Net income
Net income (loss) attributed to non-controlling interest
Net income attributed to Synopsys
Net income per share attributed to Synopsys:
Basic
Diluted
Shares used in computing per share amounts:
Basic
Diluted
$ 2,633,763 $ 2,365,199 $ 2,197,965
619,791
542,938
3,360,694
861,063
709,367
4,204,193
735,572
584,510
3,685,281
542,114
271,202
48,461
861,777
3,342,416
1,504,823
712,491
322,988
33,919
33,405
2,607,626
734,790
70,724
805,514
49,155
756,359
487,307
254,931
52,452
794,690
2,890,591
1,279,022
632,010
284,530
38,829
36,059
2,270,450
620,141
18,018
638,159
(25,288)
663,447
(1,157)
757,516 $
(900)
664,347 $
459,127
234,196
59,623
752,946
2,607,748
1,136,932
632,890
229,218
41,291
47,186
2,087,517
520,231
25,275
545,506
13,139
532,367
—
532,367
4.96 $
4.81 $
4.40 $
4.27 $
3.55
3.45
152,698
157,340
151,135
155,706
149,872
154,190
$
$
$
See accompanying notes to consolidated financial statements.
51
Table of Contents
SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net income
Other comprehensive income (loss):
Change in foreign currency translation adjustment
Change in unrealized gains (losses) on available-for-sale
securities, net of tax of $0 for periods presented
Cash flow hedges:
Deferred gains (losses), net of tax of $(1,736), $(3,192),
and $(2,009) for fiscal years 2021, 2020 and 2019,
respectively
Reclassification adjustment on deferred (gains) losses
included in net income, net of tax of $4,593, $176, and
$(3,672) for fiscal years 2021, 2020 and 2019,
respectively
Other comprehensive income (loss), net of tax effects
Comprehensive income
Less: Net income (loss) attributed to non-controlling interest
Year Ended October 31,
2021
2020
2019
$
756,359 $
663,447 $
532,367
9,415
30,466
1,360
(246)
—
—
9,860
7,834
4,733
(14,559)
4,470
760,829
73
38,373
701,820
(1,157)
(900)
14,637
20,730
553,097
—
Comprehensive income attributed to Synopsys
$
761,986 $
702,720 $
553,097
See accompanying notes to consolidated financial statements.
52
Table of Contents
SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
Common Stock
Shares
Amount
Capital in
Excess of
Par
Value
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total
Synopsys
Stockholders’
Equity
Non-
controlling
Interest
Balance at October 31, 2018
Net income
Retained earnings adjustment due to adoption of
accounting standards related to revenue
Retained earnings adjustment due to adoption of
an accounting standard related to income taxes
Other comprehensive income (loss), net of tax
effects
Purchases of treasury stock
Common stock issued, net of shares withheld for
employee taxes
Stock-based compensation
Balance at October 31, 2019
Net income
Other comprehensive income (loss), net of tax
effects
Purchases of treasury stock
Common stock issued, net of shares withheld for
employee taxes
Stock-based compensation
Balance at October 31, 2020
Net income
Retained earnings adjustment due to adoption of
ASC 326
Other comprehensive income (loss), net of tax
effects
Purchases of treasury stock
Equity forward contract
Common stock issued, net of shares withheld for
employee taxes
Stock-based compensation
Balance at October 31, 2021
149,265 $
1,493 $ 1,644,830 $ 2,543,688 $ (597,682) $
(113,177) $
532,367
257,594
(130,544)
(2,732)
3,798
(27)
37
27
(329,185)
(163,198)
153,796
(38,961)
301,225
150,331 $
1,503 $ 1,635,455 $ 3,164,144 $ (625,642) $
(92,447) $
664,347
20,730
(1,585)
3,872
(14)
39
14
(242,078)
(230,887)
248,584
(33,094)
379,107
152,618 $
1,528 $ 1,653,166 $ 3,795,397 $ (488,613) $
(54,074) $
38,373
757,516
(3,200)
4,470
(2,780)
(28)
28
(35,000)
3,224
31
(387,103)
345,272
(753,081)
458,828
153,062 $
1,531 $ 1,576,363 $ 4,549,713 $ (782,866) $
(49,604) $
See accompanying notes to consolidated financial statements.
3,479,152 $
532,367
257,594
(130,544)
20,730
(329,185)
99,103
153,796
4,083,013 $
664,347
38,373
(242,078)
115,165
248,584
4,907,404 $
757,516
(3,200)
4,470
(753,081)
(35,000)
71,756
345,272
5,295,137 $
53
5,863 $
Stockholders'
Equity
3,485,015
532,367
257,594
(130,544)
20,730
(329,185)
99,103
153,796
4,088,876
663,447
38,373
(242,078)
115,165
248,584
4,912,367
756,359
(3,200)
4,470
(753,081)
(35,000)
71,756
345,272
5,298,943
5,863 $
(900)
4,963 $
(1,157)
3,806 $
Table of Contents
SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended October 31,
2021
2020
2019
$
757,516 $
664,347 $
532,367
Cash flow from operating activities:
Net income attributed to Synopsys
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization and depreciation
Reduction of operating lease right-of-use assets
Amortization of capitalized costs to obtain revenue contracts
Stock-based compensation
Allowance for credit losses
Deferred income taxes
Other non-cash
Net changes in operating assets and liabilities, net of acquired assets
and liabilities:
Accounts receivable
Inventories
Prepaid and other current assets
Other long-term assets
Accounts payable and accrued liabilities
Operating lease liabilities
Income taxes
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments
Purchases of short-term investments
Proceeds from sales of long-term investments
Purchases of long-term investments
Purchases of property and equipment
Cash paid for acquisitions, net of cash acquired
Capitalization of software development costs
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from credit facilities
Repayment of debt
Issuances of common stock
Payments for taxes related to net share settlement of equity awards
Purchase of equity forward contract
Purchases of treasury stock
Other
Net cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year
Supplemental disclosure of cash flow information:
Cash paid for income taxes during the year:
Interest payments during the year:
$
$
$
203,676
86,645
64,698
345,272
18,515
(128,583)
14,702
201,706
(48,046)
(102,174)
(153,037)
125,133
(82,581)
28,855
160,325
1,492,622
12,850
(161,732)
—
(7,591)
(93,764)
(296,017)
(1,976)
(800)
(549,030)
—
(28,061)
210,719
(138,950)
(35,000)
(753,081)
(4,375)
(748,748)
209,986
82,895
61,185
248,584
20,875
(111,526)
3,425
(236,806)
(55,024)
(11,298)
(83,367)
113,773
(78,578)
14,120
148,722
991,313
—
—
2,151
(2,762)
(154,717)
(201,045)
(4,045)
—
(360,418)
276,489
(288,879)
197,403
(82,225)
—
(242,078)
(1,316)
(140,606)
2,369
197,213
1,237,970
1,435,183 $
17,154
507,443
730,527
1,237,970 $
201,676
—
62,750
155,001
11,669
(82,620)
(5,045)
(8,575)
(17,396)
(49,779)
(125,749)
(19,280)
—
19,777
125,717
800,513
—
—
6,361
(3,245)
(198,129)
(36,605)
(4,259)
—
(235,877)
192,897
(524,063)
156,364
(57,143)
—
(329,185)
(762)
(561,892)
2,782
5,526
725,001
730,527
149,762 $
3,365 $
70,711 $
5,136 $
75,744
12,363
See accompanying notes to consolidated financial statements.
54
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SYNOPSYS, INC.
Note 1. Description of Business
Synopsys, Inc. ("Synopsys" or "the Company") provides products and services used across the entire silicon to
software spectrum, from engineers creating advanced semiconductors to software developers seeking to ensure the
security and quality of their code. The Company is 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. The Company
also offers 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. The Company provides software
and hardware used to validate the electronic systems that incorporate chips and the software that runs on them. To
complement these offerings, the Company provides technical services and support to help its customers develop
advanced chips and electronic systems. These products and services are part of the Company’s Semiconductor &
System Design segment.
The Company is 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 the Company’s Software Integrity segment.
Note 2. Summary of Significant Accounting Policies
Fiscal Year End. The Company’s fiscal year generally ends on the Saturday nearest to October 31 and consists of
52 weeks, with the exception that approximately every five years, the Company has a 53-week year. When a 53-
week year occurs, the Company includes the additional week in the first quarter to realign fiscal quarters with
calendar quarters. Fiscal 2021, 2020 and 2019 were 52-week years ending on October 30, 2021, October 31, 2020
and November 2, 2019, respectively. For presentation purposes, the consolidated financial statements and
accompanying notes refer to the closest calendar month end. Fiscal 2022 will be a 52-week year.
Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all of
its subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates. To prepare financial statements in conformity with U.S. generally accepted accounting principles
(U.S. GAAP), management must make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from these estimates and
may result in material effects on the Company’s operating results and financial position.
Comparability. Effective beginning of fiscal 2021, the Company adopted Accounting Standards Codification (ASC)
326, Measurement of Credit Losses on Financial Instruments (ASC 326). Prior periods were not retrospectively
recast and accordingly, the consolidated balance sheets as of October 31, 2020 and the consolidated statements of
income for the years ended October 31, 2020 and 2019 were prepared using accounting standards that were
different than those in effect as of and for the year ended October 31, 2021. Effective beginning in fiscal 2020, the
Company adopted ASC 842, Leases (ASC 842). Prior periods were not retrospectively recast, and accordingly the
consolidated statements of income for the year ended October 31, 2019 was prepared using accounting standards
that were different than those in effect for the years ended October 31, 2021 and 2020.
Foreign Currency Translation. The functional currency of the majority of the Company’s active foreign subsidiaries is
the foreign subsidiary’s local currency. Assets and liabilities that are not denominated in the functional currency are
remeasured into the functional currency with any related gain or loss recorded in earnings. The Company translates
assets and liabilities of its non-U.S. dollar functional currency foreign operations into the U.S. dollar reporting
currency at exchange rates in effect at the balance sheet date. The Company translates income and expense items
of such foreign operations into the U.S. dollar reporting currency at average exchange rates for the period.
Accumulated translation adjustments are reported in stockholders’ equity, as a component of accumulated other
comprehensive income (loss).
Foreign Currency Contracts. The Company operates internationally and is exposed to potentially adverse
movements in currency exchange rates. The Company enters into hedges in the form of foreign currency forward
contracts to reduce its exposure to foreign currency rate changes on non-functional currency denominated
forecasted transactions and balance sheet positions. The assets or liabilities associated with the forward contracts
are recorded at fair value in other current assets or accrued liabilities in the consolidated balance sheets.
55
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The accounting for gains and losses resulting from changes in fair value depends on the use of the foreign currency
forward contract and whether it is designated and qualifies for hedge accounting. See Note 6. Financial Assets and
Liabilities.
Fair Values of Financial Instruments. The Company’s cash equivalents, short-term investments and foreign currency
contracts are carried at fair value. The fair value of the Company’s accounts receivable and accounts payable
approximates the carrying amount due to their short duration. Non-marketable equity securities are accounted for
using either the measurement alternative or equity method of accounting, net of impairments. The Company
performs periodic impairment analysis on these non-marketable equity securities. The carrying amount of the short-
term debt approximates the estimated fair value. See Note 7. Fair Value Measures.
Cash and Cash Equivalents and Short-term Investments. The Company classifies investments with original
maturities of three months or less when acquired as cash equivalents. Debt securities and other investments with
stated maturities longer than three months are classified as short-term investments and the Company may convert
these investments into cash at any time to fund general operations. These debt securities and other investments
generally have an effective maturity term of less than three years and are classified as available-for-sale carried at
fair value, with unrealized gains and losses included in the consolidated balance sheets as a component of
accumulated other comprehensive income (loss). For available-for-sale debt securities in an unrealized loss
position, the Company evaluates whether a current expected credit loss exists based on available information
relevant to the credit rating of the security, current economic conditions and reasonable and supportable forecasts.
The allowance for credit loss is recorded to other income (expense), net, on the consolidated statements of income,
not to exceed the amount of the unrealized loss. Any excess unrealized loss other than the credit loss is recognized
in accumulated other comprehensive income or loss in the stockholders' equity section of the consolidated balance
sheets. The cost of securities sold is based on the specific identification method and realized gains and losses are
included in other income (expense), net. See Note 6. Financial Assets and Liabilities. There were no credit losses
on available-for-sale debt securities recognized in the years ended October 31, 2021.
Concentration of Credit Risk. Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash equivalents, marketable securities, foreign currency
contracts, and accounts receivable from trade customers. The Company maintains cash equivalents primarily in
highly rated taxable and tax-exempt money market funds located in the U.S. and in various overseas locations.
The Company sells its products worldwide primarily to customers in the global electronics market. The Company
performs on-going credit evaluations of its customers’ financial condition and does not require collateral. The
Company establishes reserves for potential credit losses and such losses have been within management’s
expectations and have not been material in any year presented.
56
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Accounts Receivable, Net. The balances consist of accounts receivable billed and unbilled. Unbilled accounts
receivable represent amounts recorded as revenue which will be invoiced within one year of the balance sheet date.
The following table represents the components of accounts receivable, net:
Accounts receivable
Unbilled accounts receivable
Total accounts receivable
Less allowance for credit losses
Total accounts receivable, net
October 31,
2021
2020
(in thousands)
$
563,592 $
35,589
599,181
(30,680)
568,501 $
$
758,341
50,932
809,273
(28,564)
780,709
Allowance for Credit Losses. Trade accounts receivable are recorded at the invoiced amount and do not bear
interest. The Company maintains an allowance for credit losses for expected uncollectible accounts receivable,
which is recorded as an offset to accounts receivable and changes in such are classified as general and
administrative expense in the consolidated statements of income. The allowance for current expected credit losses
is based on a review of customer accounts and considers historical credit loss information that is adjusted for
current conditions and reasonable and supportable forecasts. The allowance for credit losses is reviewed on a
quarterly basis to assess the adequacy of the allowance. The following table presents the changes in the allowance
for credit losses:
Fiscal Year
2021
2020
2019
Balance at
Beginning
of Period
Provisions
Write-offs/
Adjustments
(in thousands)
Balance at
End of
Period
$
$
$
28,564 $
9,046 $
5,613 $
18,515 $
20,875 $
11,669 $
(16,399) $
(1,357) $
(8,236) $
30,680
28,564
9,046
Inventories, net. Inventories are computed at standard costs which approximate actual costs, on a first-in, first-out
basis and valued at the lower of cost or net realizable value. Inventories primarily include components and parts
used in emulation and prototyping hardware systems. The valuation process includes a review of the stage of the
product life cycle and forecasts based upon future demand and market conditions. Inventory provisions are
recorded when the costs are determined to be in excess of anticipated demand or considered obsolete. Inventory
provisions are impacted by market and economic conditions, technology changes, new product introductions and
changes in strategic direction, and require estimates that may include uncertain elements.
Income Taxes. The Company accounts for income taxes using the asset and liability method. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring
uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more
likely than not that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50%
likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on
completion of an examination by a taxing authority if certain other conditions are satisfied.
Property and Equipment. Property and equipment is recorded at cost less accumulated depreciation. Assets,
excluding land, are depreciated using the straight-line method over their estimated useful lives. Leasehold
improvements are amortized using the straight-line method over the remaining term of the lease or the economic
useful life of the asset, whichever is shorter. Depreciation expenses were $119.1 million, $119.1 million and $100.4
57
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
million in fiscal 2021, 2020 and 2019, respectively. Repair and maintenance costs are expensed as incurred and
such costs were $62.6 million, $62.1 million and $52.5 million in fiscal 2021, 2020 and 2019, respectively.
A summary of property and equipment, at cost less accumulated depreciation and amortization, as of October 31,
2021 and 2020 is as follows:
Computer and other equipment
Buildings
Furniture and fixtures
Land
Leasehold improvements
Less accumulated depreciation and amortization(1)
Total
October 31,
2021
2020
(in thousands)
$
$
812,161 $
134,931
73,624
19,965
236,064
1,276,745
(804,347)
472,398 $
788,105
129,746
72,702
19,965
242,830
1,253,348
(769,530)
483,818
(1)
Accumulated depreciation and amortization includes write-offs due to retirement of fully amortized fixed
assets.
The useful lives of depreciable assets are as follows:
Computer and other equipment
Buildings
Furniture and fixtures
Leasehold improvements
Useful Life in Years
3 - 8
30
5
Shorter of the lease
term or the estimated
useful life
Investments in Equity Securities. The Company holds equity securities in privately held companies for the promotion
of business and strategic objectives. These investments are initially recorded at cost and included in other long-term
assets in the consolidated balance sheets and are subject to a periodic impairment review . The Company accounts
for these investments using the measurement alternative when the fair value of the investment is not readily
determinable and the Company does not have the ability to exercise significant influence or using the equity method
of accounting when it is determined that the Company has the ability to exercise significant influence. For
investments accounted for using the equity method of accounting, the Company records its proportionate share of
the investee’s income or loss, net of the effects of any basis differences, to other income, in its consolidated
statements of income.
Leases. The Company determines if an arrangement is a lease at inception of the contract, which is the date on
which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. A
contract is or contains a lease when the Company has the right to control the use of an identified asset for a period
of time. The commencement date of the lease is the date that the lessor makes an underlying asset available for
our use. On the commencement date, leases are evaluated for classification and assets and liabilities are
recognized based on the present value of lease payments over the lease term.
The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is
reasonably certain that the option will be exercised. The right of use (ROU) asset is initially measured as the
amount of lease liability, adjusted for any initial lease costs, prepaid lease payments and any lease incentives.
Variable lease payments, consisting primarily of reimbursement of costs incurred by lessors for common area
maintenance, real estate taxes and insurance, are not included in the lease liability and are recognized as they are
incurred.
As most of the Company's leases do not provide an implicit rate, the Company uses the incremental borrowing rate
at lease commencement to measure ROU assets and lease liabilities. The Company uses a benchmark senior
58
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
unsecured yield curve for debt instruments and considers specific credit quality, market conditions, tenor of lease
arrangements, and quality of collateral to determine the incremental borrowing rate.
The Company used the incremental borrowing rate as of the date of adoption for all leases that commenced on or
prior to that date. Operating lease expense is generally recognized on a straight-line basis over the lease term. The
Company has elected the practical expedient to account for the lease and non-lease components as a single lease
component for the majority of the Company's asset classes. For leases with a term of one year or less, the
Company has elected not to record the ROU asset or liability.
Goodwill. Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and
identifiable intangible assets acquired by the Company. The carrying amount of goodwill at each reporting unit is
tested for impairment annually as of October 31, or more frequently if facts and circumstances warrant a review.
The Company performs a qualitative analysis when testing a reporting unit’s goodwill for impairment. A qualitative
goodwill impairment test is performed when the fair value of a reporting unit historically has significantly exceeded
the carrying value of its net assets and based on current operations is expected to continue to do so. Otherwise, the
Company is required to conduct a quantitative impairment test for each reporting unit and estimate the fair value of
each reporting unit using a combination of an income approach based on discounted cash flow analysis and a
market approach based on market multiples. The discount rate used in the income approach is based on the
Company's weighted-average cost of capital and may be adjusted for the relevant risks pertaining to projecting
future cash flows. If the fair value of a reporting unit is less than its carrying value, a goodwill impairment charge is
recorded for the difference. As of October 31, 2021, the Company performed a qualitative impairment test on each
reporting unit and concluded there was no impairment of goodwill.
Intangible Assets. Intangible assets consist of acquired technology, certain contract rights, customer relationships,
trademarks and trade names, capitalized software, and in-process research and development. These intangible
assets are acquired through business combinations, direct purchases, or internally developed capitalized software.
Intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to ten
years, except for in-process research and development (IPR&D) projects not yet completed. IPR&D assets are
amortized over their estimated useful lives upon completion or are written off upon abandonment.
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of
long-lived assets, including property and equipment and intangible assets, may not be recoverable. When such
events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by
determining whether the carrying value of such asset group will be recovered through the undiscounted future cash
flow. If the undiscounted future cash flow is less than the carrying amount of the asset group, the Company
recognizes an impairment loss based on the excess of the carrying amount over the fair value of the asset group.
The Company had no impairment charges for long-lived assets in fiscal 2021, 2020 and 2019.
Restructuring Charges. In the third quarter of fiscal 2021, the Company initiated a restructuring plan for involuntary
and voluntary employee termination and facility closure actions as part of a business reorganization. The total
charges under the 2021 restructuring plan (the 2021 Plan) are expected to be in the range of $42 million to
$53 million and will consist primarily of severance, retirement benefits under the 2021 Voluntary Retirement
Program (VRP) and lease abandonment costs. The 2021 Plan and VRP are expected to be completed in the first
quarter of fiscal 2022.
During fiscal 2021, the Company recorded restructuring charges of $33.4 million and made payments of
$19.2 million under the 2021 Plan. As of October 31, 2021, $14.2 million of payroll and related benefits liabilities
remained outstanding and was recorded in accounts payable and accrued liabilities in the consolidated balance
sheets.
During fiscal 2020, the Company incurred restructuring charges of $36.1 million under the 2019 restructuring plan.
These charges consisted primarily of severance and retirement benefits. $57.4 million was paid in fiscal 2020 which
included payments of remaining balances in fiscal 2019. As of October 31, 2020, $1.3 million remained outstanding
and was recorded in accounts payable and accrued liabilities as payroll and related benefits in the consolidated
balance sheets. The remaining balance was paid in fiscal 2021.
During fiscal 2019, the Company incurred restructuring charges of approximately $47.2 million for involuntary
employee termination actions and the VRP. As of October 31,2020, no amounts remained outstanding.
59
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Accounts Payable and Accrued Liabilities. The balance consisted of:
Payroll and related benefits
Other accrued liabilities
Accounts payable
Total
Other Long-term Liabilities. The balance consisted of:
Deferred compensation liability (See Note 12)
Other long-term liabilities
Total
October 31,
2021
2020
(in thousands)
$
581,687 $
85,648
27,413
$
694,748 $
492,626
101,035
30,003
623,664
October 31,
2021
2020
(in thousands)
$
$
343,820 $
19,720
363,540 $
269,737
14,774
284,511
Other Comprehensive Income (Loss). Other comprehensive income (loss) (OCI) includes all changes in equity
during a period, such as accumulated net translation adjustments, unrealized gain (loss) on certain foreign currency
forward contracts that qualify as cash flow hedges, reclassification adjustments related to cash flow hedges and
unrealized gain (loss) on investments. See Note 10. Accumulated Other Comprehensive Income (Loss).
Revenue Recognition. The Company recognizes revenue for the transfer of services or products to customers in an
amount that reflects the consideration to which the Company expects to be entitled in exchange for those services
or products. The principle is achieved through the following five-step approach:
•
•
•
•
•
Identification of the contract, or contracts, with the customer
Identification of the performance obligation in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the Company satisfies a performance obligation
Nature of Products and Services
The Company generates revenue from the licensing of our EDA software, IP Blocks, and Software Integrity
products, as well as sale of hardware products, and maintenance and services. The various types are set forth
below.
Electronic Design Automation
Software license revenue consists of fees associated with the licensing of the Company's software primarily through
Technology Subscription License (TSL) contracts. TSLs are time-based licenses for a finite term and generally
provide the customer with limited rights to receive, or to exchange certain quantities of licensed software for,
unspecified future technology. The majority of the Company's arrangements are TSLs due to the nature of its
business and customer requirements. In addition to the licenses, the arrangements also include: post-contract
customer support, which includes providing frequent updates and upgrades to maintain the utility of the software
due to rapid changes in technology; other intertwined services such as multiple copies of the tools; assisting the
Company's customers in applying the Company's technology in the customers' development environment; and
rights to remix licenses for other licenses. Payments are generally received in equal or near equal installments over
the term of the arrangement. The Company has concluded that its software licenses in TSL contracts are not
distinct from its obligation to provide unspecified software updates to the licensed software throughout the license
term. Such updates represent inputs to a single, combined performance obligation, commencing upon the later of
the arrangement effective date or transfer of control to the software license. Remix rights are not an additional
60
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
promised good or service in the contract, and where unspecified additional software product rights are part of the
contract with the customer, such rights are accounted for as part of the single performance obligation that includes
the licenses, updates, and technical support because such rights are provided for the same period of time and have
the same pattern of transfer to the customer over the duration of the subscription term.
IP & System Integration
The Company generally licenses IP under nonexclusive license agreements that provide usage rights for specific
applications. Additionally, for certain IP license agreements, royalties are collected as customers sell their own
products that incorporate the Company’s IP. These arrangements generally have two distinct performance
obligations that consist of transferring the licensed IP and the post contract support service. Support services
consist of a stand-ready obligation to provide technical support and software updates over the support term.
Revenue allocated to the IP license is recognized at a point in time upon the later of the delivery date or the
beginning of the license period, and revenue allocated to support services is recognized ratably over the support
term. Royalties are recognized as revenue is earned, generally when the customer sells its products that
incorporate the Company’s IP.
Software Integrity Products
Software Integrity product arrangements provide customers the right to software licenses, software updates and
technical support. Under the term of these arrangements, the customer expects to receive integral updates to the
software licenses that protect the customer’s software from potential security vulnerabilities. The licenses and
software updates together serve to fulfill the Company’s commitment to the customer, as they represent inputs to a
single, combined performance obligation that commences upon the later of the arrangement effective date or
transfer of the software license. Software updates are part of the contract with the customer, and such rights are
accounted for as part of the single performance obligation that includes the licenses, updates, and technical support
because such rights are provided for the same period of time and have the same time-based pattern of transfer to
the customer.
Hardware
The Company generally has two performance obligations in arrangements involving the sale of hardware products.
The first performance obligation is to transfer the hardware product, which includes embedded software integral to
the functionality of the hardware product. The second performance obligation is to provide maintenance on the
hardware and its embedded software, including 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
portion of the transaction price allocated to the hardware product is recognized as revenue at a point in time when
control of the hardware is transferred to the customer. The Company has concluded that control generally transfers
upon shipment because the customer has the ability to direct the use of the asset and an obligation to pay for the
hardware. The portion of the transaction price allocated to maintenance is recognized as revenue that is ratable
over the maintenance term.
Professional Services
The Company's arrangements often include service elements (other than maintenance and support services).
These services include training, design assistance, and consulting. These services are generally performed on a
time and materials basis, and are recognized over time, as the customer simultaneously receives and consumes the
benefit provided. Certain arrangements also include the customization or modification of licensed IP. Revenue from
these contracts is recognized over time as the services are performed, when the development is specific to the
customer’s needs and Synopsys has enforceable rights to payment for performance completed. Inputs such as
costs incurred and hours expended are used in order to measure progress of performance. The Company has a
history of accurately estimating project status and the costs necessary to complete projects. A number of internal
and external factors can affect these estimates, including labor rates, utilization and efficiency variances,
specification and testing requirement changes, and changes in customer delivery priorities. Payments for services
are generally due upon milestones in the contract or upon consumption of the hourly resources.
Flexible Spending Accounts
Our customers frequently enter into non-cancelable Flexible Spending Account arrangements (FSA) whereby the
customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of
61
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Synopsys products or services. These arrangements do not meet the definition of a revenue contract until the
customer executes a separate order (pulldown request) to identify the required products and services that they are
purchasing. The combination of the FSA arrangement and the subsequent order creates enforceable rights and
obligations, thus meeting the definition of a revenue contract. Each separate order under the agreement is treated
as an individual contract and accounted for based on the respective performance obligations included within the
pulldown requests.
Significant Judgments
The Company’s contracts with customers often include promises to transfer multiple products and services to a
customer. Determining whether services and products are considered distinct performance obligations that should
be accounted for separately versus together requires significant judgment. The Company has concluded that (1) its
EDA software licenses in TSL contracts are not distinct from its obligation to provide unspecified software updates to
the licensed software throughout the license term, because those promises represent inputs to a single, combined
performance obligation, and (2) where unspecified additional software product rights are part of the contract with the
customer, such rights are accounted for as part of the single performance obligation that includes the licenses,
updates, and technical support, because such rights are provided for the same period of time and have the same
time-based pattern of transfer to the customer. In reaching this conclusion, the Company considered the nature of
the obligation to customers which is to provide an ongoing right to use the most up to date and relevant software. As
EDA customers operate in a rapidly changing and competitive environment, satisfying the obligation requires
providing critical updates to the existing software products, including ongoing iterative interaction with customers to
make the software relevant to customers’ ability to meet the time to go to market with advanced products.
Similarly, the Company also concluded that in its Software Integrity business, the licenses and maintenance
updates serve together to fulfill the Company’s commitment to the customer as both work together to provide the
functionality to the customer and represent a combined performance obligation because the updates are essential
to the software’s central utility, which is to identify security vulnerabilities and other threats.
The Company’s contracts with customers can involve hundreds of products and various license rights. Customers
often negotiate a broad portfolio of solutions, and favorable terms along with future purchase options to manage
their overall costs. Determining whether the purchase options are considered distinct performance obligations that
should be accounted for separately as material rights versus combined together may require significant judgment.
Judgment is also required to determine the standalone selling price (SSP) for each distinct performance obligation.
For non-software performance obligations (IP, Hardware, and services), SSP is established based on observable
prices of products and services sold separately. SSP for license (and related updates and support) in a contract with
multiple performance obligations is determined by applying a residual approach whereby all other non-software
performance obligations within a contract are first allocated a portion of the transaction price based upon their
respective SSP, using observable prices, with any residual amount of the transaction price allocated to the license
because the Company does not sell the license separately, and the pricing is highly variable.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences
result in receivables (billed or unbilled), contract assets, or contract liabilities (deferred revenue) on the Company’s
consolidated balance sheet. The Company records a contract asset when revenue is recognized prior to the right to
invoice, or deferred revenue when revenue is recognized subsequent to invoicing. For time-based software
agreements, customers are generally invoiced in equal, quarterly amounts, although some customers prefer to be
invoiced in single or annual amounts. The Company records an unbilled receivable when revenue is recognized and
it has an unconditional right to invoice and receive payment.
Warranties and Indemnities. The Company generally warrants its products to be free from defects in media and to
substantially conform to material specifications for a period of 90 days for software products and for up to six
months for hardware systems. In certain cases, the Company also provides its customers with limited
indemnification with respect to claims that their use of the Company’s software products infringes on United States
patents, copyrights, trademarks or trade secrets. The Company is unable to estimate the potential impact of these
commitments on the future results of operations. To date, the Company has not been required to pay any material
warranty claims.
62
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Net Income Per Share. The Company computes basic net income per share by dividing net income available to
common stockholders by the weighted average number of common shares outstanding during the period. Diluted
net income per share reflects the dilution from potential common shares outstanding such as stock options and
unvested restricted stock units and awards during the period using the treasury stock method.
The table below reconciles the weighted average common shares used to calculate basic net income per share with
the weighted average common shares used to calculate diluted net income per share:
Numerator:
Net income attributed to Synopsys
Denominator:
Year Ended October 31,
2021
2020
2019
(in thousands, except per share amounts)
$
757,516 $
664,347 $
532,367
Weighted average common shares for basic net income per
share
Dilutive effect of common share equivalents from equity-based
compensation
Weighted average common shares for diluted net income per
share
Net income per share:
Basic
Diluted
Anti-dilutive employee stock-based awards excluded(1)
152,698
151,135
149,872
4,642
4,571
4,318
157,340
155,706
154,190
$
$
4.96 $
4.81 $
408
4.40 $
4.27 $
97
3.55
3.45
171
(1)
These stock options and unvested restricted stock units were anti-dilutive for the respective periods and are
excluded in calculating diluted net income per share. While such awards were anti-dilutive for the respective
periods, they could be dilutive in the future.
Recently Adopted Accounting Pronouncements
Beginning in fiscal 2021, the Company adopted ASC 326, which was issued by the Financial Accounting Standards
Board (FASB) in June 2016 as Accounting Standards Update (ASU) No. 2016-13 Financial Instruments – Credit
Losses (ASC 326): Measurement of Credit Losses on Financial Instruments. The ASU replaced previous incurred
loss impairment guidance and established a single expected credit losses allowance framework for financial assets
carried at amortized cost. It also eliminated the concept of other-than-temporary impairment and requires credit
losses related to certain available-for-sale debt securities to be recorded through an allowance for credit losses. The
Company adopted ASC 326 using the modified retrospective method, which requires a cumulative-effect adjustment
to the opening balance of retained earnings to be recognized on the date of adoption and, accordingly, recorded a
net decrease of $3.2 million to retained earnings as of beginning of fiscal 2021. Please see the “Allowance for Credit
Losses” accounting policy above.
Recent Accounting Pronouncements Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract
Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and
contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the
acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the
contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the
acquirer at fair value on the acquisition date. The new standard is effective for the Company’s fiscal year beginning
on November 1, 2023. Early adoption is permitted. The standard will not impact acquired contract assets or
liabilities from business combinations occurring prior to the effective date of adoption, and the impact in future
periods will depend on the contract assets and contract liabilities acquired in future business combinations.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting (ASU 2020-04) and also issued subsequent amendments to the
63
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
initial guidance (collectively, Topic 848). Topic 848 provides optional guidance for contract modifications and certain
hedging relationships associated with the transition from reference rates that are expected to be discontinued. The
Company will adopt Topic 848 when the relevant contracts are modified upon transition to alternative reference
rates. The Company does not expect the adoption of Topic 848 will have a material impact on the consolidated
financial statements.
Note 3. Revenue
Disaggregated Revenue
The following table shows the percentage of revenue by product groups:
EDA
IP & System Integration
Software Integrity Products & Services
Other
Total
Contract Balances
2021
2020
2019
55.5 %
34.8 %
9.4 %
0.3 %
100.0 %
57.4 %
32.6 %
9.7 %
0.3 %
100.0 %
58.4 %
31.4 %
10.0 %
0.2 %
100.0 %
The contract assets indicated below are presented as prepaid and other current assets in the consolidated balance
sheets. The contract assets are transferred to receivables when the rights to invoice and receive payment become
unconditional. Unbilled receivables are presented as accounts receivable, net, in the consolidated balance sheets.
Contract balances are as follows:
Contract assets, net
Unbilled receivables
Deferred revenue
As of October 31,
2021
2020
(in thousands)
$
$
$
284,574 $
35,589 $
1,653,926 $
214,583
50,932
1,493,113
During fiscal 2021, the Company recognized $1.2 billion of revenue that was included in the deferred revenue
balance as of October 31, 2020. During fiscal 2020, the Company recognized $1.1 billion of revenue that was
included in the deferred revenue balance as of October 31, 2019.
Contracted but unsatisfied or partially unsatisfied performance obligations were approximately $6.9 billion as of
October 31, 2021, which includes $890.9 million 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.
The Company has elected to exclude future sales-based royalty payments from the remaining performance
obligations. Approximately 40% of the contracted but unsatisfied or partially unsatisfied performance obligations as
of October 31, 2021, excluding non-cancellable FSA, are expected to be recognized over the next 12 months with
the remainder recognized thereafter.
During fiscal 2021, the Company recognized $116.7 million from performance obligations satisfied from sales-based
royalties earned during the periods. During fiscal 2020, the Company recognized $102.4 million from performance
obligations satisfied from sales-based royalties earned during the periods.
Costs of Obtaining a Contract with Customer
The incremental costs of obtaining a contract with a customer, which consist primarily of direct sales commissions
earned upon execution of the contract, are required to be capitalized under ASC 340-40 and amortized over the
estimated period of which the benefit is expected to be received. As direct sales commissions paid for renewals are
commensurate with the amounts paid for initial contracts, the deferred incremental costs will be recognized over the
contract term. Capitalized direct commission costs, net of accumulated amortization, as of October 31, 2021 were
$92.2 million and are included in other assets in the Company’s consolidated balance sheets. Amortization was
64
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
$64.7 million during fiscal 2021 and is included in sales and marketing expense in the Company’s consolidated
statements of income. Capitalized direct commission costs, net of accumulated amortization, as of October 31,
2020 were $81.3 million and are included in other assets in the Company’s consolidated balance sheets.
Amortization was $61.2 million during fiscal 2020 and is included in sales and marketing expense in the Company’s
consolidated statements of income.
Note 4. Business Combinations
Fiscal 2021 Acquisitions
During fiscal 2021, the Company completed several acquisitions for an aggregate consideration of $298.9 million,
net of cash acquired. The Company does not consider these acquisitions to be material, individually or in the
aggregate, to the Company’s consolidated statements of income. The preliminary purchase allocations are
$109.3 million of identifiable intangible assets and $204.5 million in goodwill, of which $158.8 million is attributable
to the Semiconductor & System Design reporting segment and $45.7 million is attributable to the Software Integrity
reporting segment.
Approximately $34.0 million of the goodwill related to the fiscal 2021 acquisitions will be deductible for tax purposes.
Fiscal 2020 Acquisitions
During fiscal 2020, the Company completed several acquisitions for an aggregate consideration of $238.3 million,
net of cash acquired. The Company does not consider these acquisitions to be material, individually or in the
aggregate, to the Company's consolidated statements of income. The preliminary purchase allocations are $65.3
million of identifiable intangible assets, and $173.7 million in goodwill, of which $160.4 million is attributable to the
Semiconductor & System Design reporting segment and $13.3 million is attributable to the Software Integrity
reporting segment.
The preliminary fair value estimates for the assets acquired and liabilities assumed for all acquisitions completed
within 12 months from the applicable acquisition date are not yet finalized and may change as additional information
becomes available during the respective measurement periods. The primary areas of those preliminary estimates
relate to certain tangible assets and liabilities, identifiable intangible assets, and income taxes.
Acquisition-Related Transaction Costs
Transaction costs were $15.4 million and $14.1 million during fiscal 2021 and 2020, respectively. These costs
consist of professional fees and administrative costs and were expensed as incurred in the Company’s consolidated
statements of income.
Note 5. Goodwill and Intangible Assets
The Company has two reporting units and has assigned assets and liabilities to each of the reporting units based on
each unit's operating activities. No impairment of goodwill was identified for any periods presented. Goodwill activity
by reportable segment for the year ended October 31, 2021 consisted of the following:
Balance at October 31, 2020
Additions
Effect of foreign currency translation
Balance at October 31, 2021
Semiconductor
& System
Design
Software
Integrity
(in thousands)
Total
$ 2,939,512 $
158,760
6,202
$ 3,104,474 $
425,602 $ 3,365,114
204,469
6,202
471,311 $ 3,575,785
45,709
—
65
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Goodwill activity by reportable segment for the year ended October 31, 2020 consisted of the following:
Balance at October 31, 2019
Additions
Adjustments
Effect of foreign currency translation
Balance at October 31, 2020
Intangible assets as of October 31, 2021 consisted of the following:
Core/developed technology
Customer relationships
Contract rights intangible
Trademarks and trade names
Capitalized software development costs
Total
Semiconductor
& System
Design
Software
Integrity
(in thousands)
Total
$ 2,758,926 $
160,447
59
20,080
$ 2,939,512 $
412,253 $ 3,171,179
173,732
59
20,144
425,602 $ 3,365,114
13,285
—
64
Gross Assets
Accumulated
Amortization
(in thousands)
Net Assets
$
911,903 $
404,571
193,317
43,095
46,098
748,759 $
308,355
188,231
31,155
43,352
$ 1,598,984 $ 1,319,852 $
163,144
96,216
5,086
11,940
2,746
279,132
Intangible assets as of October 31, 2020 consisted of the following:
Core/developed technology
Customer relationships
Contract rights intangible
Trademarks and trade names
In-process research and development (IPR&D)
Capitalized software development costs
Total
Gross Assets
Accumulated
Amortization
(in thousands)
Net Assets
$
827,232 $
703,009 $
124,223
380,838
192,812
43,096
1,214
44,122
277,219
186,763
28,716
—
39,285
103,619
6,049
14,380
1,214
4,837
$ 1,489,314 $ 1,234,992 $
254,322
Amortization expense related to intangible assets consisted of the following:
Core/developed technology
Customer relationships
Contract rights intangible
Trademarks and trade names
Capitalized software development costs(1)
Total
(1)
Year Ended October 31,
2021
2020
2019
(in thousands)
$
$
46,049 $
31,478
2,413
2,440
4,067
86,447 $
47,890 $
35,075
5,181
3,135
3,723
95,004 $
56,163
37,533
3,581
3,637
2,868
103,782
Amortization of capitalized software development costs is included in cost of products revenue in the
consolidated statements of income.
66
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The following table presents the estimated future amortization of intangible assets as of October 31, 2021:
Fiscal Year
2022
2023
2024
2025
2026
2027 and thereafter
Total
(in thousands)
$
81,778
63,744
52,895
36,793
24,368
19,554
279,132
$
Note 6. Financial Assets and Liabilities
Short-term investments. Gross unrealized gains and losses on our short-term investment portfolio of available-for-
sale debt securities at October 31, 2021 were not significant. The stated maturities of the Company's available-for-
sale debt securities as of October 31, 2021 were as follows:
Due within 1 year
After 1 year through 5 years
After 5 years through 10 years
After 10 years
Total
Cost
Fair Value
(in thousands)
45,562 $
94,591
5,786
2,256
148,195 $
45,533
94,396
5,785
2,235
147,949
$
$
67
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
As of October 31, 2021, the balances of the Company's cash equivalents, short-term investments and non-
marketable equity securities investments were:
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses Less
Than 12
Continuous
Months
Gross
Unrealized
Losses 12
Continuous
Months or
Longer
(in thousands)
Estimated
Fair Value(1)
$ 172,934 $
$ 172,934 $
— $
— $
— $
— $
— $
— $
172,934
172,934
Cash equivalents:
Money market funds
Total:
Short-term investments:
U.S. government agency & T-bills $
6,447 $
— $
(5) $
— $
Municipal bonds
Corporate debt securities
Asset-backed securities
4,588
103,615
33,545
—
7
6
(12)
(170)
(72)
—
—
—
6,442
4,576
103,452
33,479
Total:
$ 148,195 $
13 $
(259) $
— $
147,949
Other long-term assets:
Non-marketable equity securities $
17,638 $
Total:
(1)
See Note 7. Fair Value Measures for further discussion on fair values.
$
17,638 $
— $
— $
— $
— $
— $
— $
17,638
17,638
As of October 31, 2020, the balances of the Company's cash equivalents and non-marketable equity securities
investments were:
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses Less
Than 12
Continuous
Months
Gross
Unrealized
Losses 12
Continuous
Months or
Longer
(in thousands)
Estimated
Fair Value(1)
$ 304,127 $
$ 304,127 $
— $
— $
— $
— $
— $
— $
304,127
304,127
Cash equivalents:
Money market funds
Total:
Other long-term assets:
Non-marketable equity securities $
13,200 $
$
13,200 $
— $
— $
— $
— $
— $
— $
13,200
13,200
See Note 7. Fair Value Measures for further discussion on fair values.
Total:
(1)
Restricted cash. The Company includes amounts generally described as restricted cash and restricted cash
equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts
shown on the consolidated statements of cash flows. All restricted cash is primarily associated with office leases.
68
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The following table provides a reconciliation of cash, cash equivalents and restricted cash included in the
consolidated balance sheets:
October 31,
2021
2020
(in thousands)
Cash and cash equivalents
$
1,432,840 $
1,235,653
Restricted cash included in Prepaid expenses and other current assets
Restricted cash included in Other long-term assets
Total cash, cash equivalents and restricted cash
1,560
783
1,523
794
$
1,435,183 $
1,237,970
Non-marketable equity securities. The Company’s portfolio of non-marketable equity securities consists of strategic
investments in privately held companies. There were no material impairments of non-marketable equity securities in
fiscal 2021, fiscal 2020, or fiscal 2019.
Derivatives.
The Company recognizes derivative instruments as either assets or liabilities in the consolidated balance sheets at
fair value and provides qualitative and quantitative disclosures about such derivatives. The Company operates
internationally and is exposed to potentially adverse movements in foreign currency exchange rates. The Company
enters into hedges in the form of foreign currency forward contracts to reduce its exposure to foreign currency rate
changes on non-functional currency denominated forecasted transactions and balance sheet positions including:
(1) certain assets and liabilities, (2) shipments forecasted to occur within approximately one month, (3) future
billings and revenue on previously shipped orders, and (4) certain future intercompany invoices denominated in
foreign currencies.
The duration of forward contracts ranges from approximately one month to 23 months, the majority of which are
short-term. The Company does not use foreign currency forward contracts for speculative or trading purposes. The
Company enters into foreign exchange forward contracts with high credit quality financial institutions that are rated
‘A’ or above and to date has not experienced nonperformance by counterparties. In addition, the Company mitigates
credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty and
anticipates continued performance by all counterparties to such agreements.
The assets or liabilities associated with the forward contracts are recorded at fair value in other current assets or
accrued liabilities in the consolidated balance sheets. The accounting for gains and losses resulting from changes in
fair value depends on the use of the foreign currency forward contract and whether it is designated and qualifies for
hedge accounting. The cash flow impact upon settlement of the derivative contracts will be included in “Net cash
provided by operating activities” in the consolidated statements of cash flows.
Cash Flow Hedging Activities
Certain foreign exchange forward contracts are designated and qualify as cash flow hedges. These contracts have
durations of approximately 23 months or less. Certain forward contracts are rolled over periodically to capture the
full length of exposure to the Company’s foreign currency risk, which can be up to three years. To receive hedge
accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the
hedges must be highly effective in offsetting changes to future cash flows on the hedged transactions. The related
gains or losses resulting from changes in fair value of these hedges is initially reported, net of tax, as a component
of other comprehensive income (loss) (OCI), in stockholders’ equity and reclassified into revenue or operating
expenses, as appropriate, at the time the hedged transactions affect earnings. The Company expects a majority of
the hedge balance in OCI to be reclassified to the statements of income within the next 12 months.
The Company did not record any gains or losses related to discontinuation of cash flow hedges for fiscal years
2021, 2020 and 2019.
69
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Non-designated Hedging Activities
The Company’s foreign exchange forward contracts that are used to hedge non-functional currency denominated
balance sheet assets and liabilities are not designated as hedging instruments. Accordingly, any gains or losses
from changes in the fair value of the forward contracts are recorded in other income (expense), net. The gains and
losses on these forward contracts generally offset the gains and losses associated with the underlying assets and
liabilities, which are also recorded in other income (expense), net. The duration of the forward contracts for hedging
the Company’s balance sheet exposure is approximately one month.
The Company also has certain foreign exchange forward contracts for hedging certain international revenues and
expenses that are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair
value of the forward contracts are recorded in other income (expense), net. The gains and losses on these forward
contracts generally offset the gains and losses associated with the foreign currency in operating income. The
duration of these forward contracts is usually less than one year. The overall goal of the Company’s hedging
program is to minimize the impact of currency fluctuations on its net income over its fiscal year.
The effects of the non-designated derivative instruments on the Company’s consolidated statements of income for
fiscal years 2021, 2020, and 2019 are summarized as follows:
Gain (loss) recorded in other income (expense), net
$
(855) $
1,957 $
4,538
The notional amounts in the table below for derivative instruments provide one measure of the transaction volume
outstanding:
2021
October 31,
2020
(in thousands)
2019
Total gross notional amount
Net fair value
October 31,
2021
2020
(in thousands)
$
$
1,176,152 $
981,234
13,404 $
6,940
The Company’s exposure to market gain or loss will vary over time as a function of currency exchange rates. The
amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on
the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
The following table represents the consolidated balance sheets location and amount of derivative instrument fair
values segregated between designated and non-designated hedge instruments:
Balance at October 31, 2021
Other current assets
Accrued liabilities
Balance at October 31, 2020
Other current assets
Accrued liabilities
Fair values of
derivative instruments
designated as
hedging instruments
Fair values of
derivative instruments
not designated as
hedging instruments
(in thousands)
$
$
$
$
15,455 $
2,027 $
9,182 $
2,088 $
17
42
138
292
70
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The following table represents the location of the amount of gains and losses on derivative instrument fair values for
designated hedge instruments, net of tax in the consolidated statements of income:
Location of gain (loss)
recognized in OCI on
derivatives
Amount of gain
(loss)
recognized in
OCI on
derivatives
(effective
portion)
Location of gain (loss)
reclassified
from OCI
Amount of
gain (loss)
reclassified
from OCI
(effective
portion)
(in thousands)
Fiscal year ended October 31, 2021
Foreign exchange contracts
Foreign exchange contracts
Revenue
Operating expenses
Total
Fiscal year ended October 31, 2020
Foreign exchange contracts
Foreign exchange contracts
Revenue
Operating expenses
Total
Fiscal year ended October 31, 2019
Foreign exchange contracts
Foreign exchange contracts
Revenue
Operating expenses
Total
$
$
$
$
$
$
Other Commitments — Credit and Term Loan
1,148 Revenue
8,712 Operating expenses
9,860
3,034 Revenue
4,800 Operating expenses
7,834
278 Revenue
4,455 Operating expenses
4,733
$
$
$
$
$
$
4,181
10,378
14,559
530
(603)
(73)
1,436
(16,073)
(14,637)
On January 22, 2021, the Company entered into a Fourth Extension and Amendment Agreement (the Fourth
Amendment), which amends and restates the Company's previous credit agreement, dated as of November 28,
2016 (as amended and restated, the Credit Agreement). The Company's outstanding borrowings under the previous
credit agreement, which as of January 22, 2021 consisted of term loans in the aggregate principal amount of
$97.5 million, are carried over under the Credit Agreement.
The Fourth Amendment extends the termination date of the existing $650.0 million senior unsecured revolving credit
facility from November 28, 2021 to January 22, 2024, which may be further extended at the Company's option. The
outstanding term loans under the Credit Agreement will continue to amortize in quarterly installments with the
balance due at maturity on November 28, 2021. The Credit Agreement also provides an uncommitted incremental
loan facility of up to $150.0 million in the aggregate principal amount. The Credit Agreement contains financial
covenants requiring the Company to maintain a maximum consolidated leverage ratio and a minimum consolidated
interest coverage ratio, as well as other non-financial covenants. As of October 31, 2021, the Company was in
compliance with all financial covenants.
As of October 31, 2021, the Company had $75.0 million outstanding balance, net of debt issuance costs, under the
Term Loan. The remaining outstanding balance of $75.0 million was repaid in full on November 26, 2021.
As of October 31, 2020, the Company had $102.1 million outstanding balance, net of debt issuance costs, under the
Term Loan, of which $75.0 million was classified as long-term liabilities.
There was no outstanding balance under the Revolver as of October 31, 2021 and October 31, 2020. The Company
expects its borrowings under the Revolver will fluctuate from quarter to quarter.
Borrowings bear interest at a floating rate based on a margin over the Company’s choice of market observable base
rates as defined in the Credit Agreement. As of October 31, 2021, borrowings under the Term Loan bore interest at
LIBOR +1.125% and the applicable interest rate for the Revolver was LIBOR +1.000%. In addition, commitment
fees are payable on the Revolver at rates between 0.125% and 0.200% per year based on the Company’s leverage
ratio on the daily amount of the revolving commitment.
In July 2018, the Company entered into a 12-year 220.0 million RMB (approximately $33.0 million) credit agreement
with a lender in China to support its facilities expansion. Borrowings bear interest at a floating rate based on the 5
71
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
year Loan Prime Rate plus 0.74%. As of October 31, 2021, the Company had $25.1 million outstanding under the
agreement.
The carrying amount of the short-term and long-term debt approximates the estimated fair value. These borrowings
under the Credit Agreement have a variable interest rate structure and are classified within Level 2 of the fair value
hierarchy.
Note 7. Fair Value Measurements
Accounting Standards Codification (ASC) 820-10, Fair Value Measurements and Disclosures, defines fair value,
establishes guidelines and enhances disclosure requirements for fair value measurements. The accounting
guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. The accounting guidance also establishes a fair value hierarchy based on the
independence of the source and objective evidence of the inputs used. There are three fair value hierarchies based
upon the level of inputs that are significant to fair value measurement:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical instruments in active markets;
Level 2—Observable inputs other than quoted prices included in Level 1 for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which
all significant inputs and significant value drivers are observable in active markets; and
Level 3—Unobservable inputs to the valuation derived from fair valuation techniques in which one or more
significant inputs or significant value drivers are unobservable.
On a recurring basis, the Company measures the fair value of certain of its assets and liabilities, which include cash
equivalents, non-qualified deferred compensation plan assets, and foreign currency derivative contracts.
The Company’s cash equivalents and short-term investments are classified within Level 1 or Level 2 because they
are valued using quoted market prices in an active market or alternative independent pricing sources and models
utilizing market observable inputs.
The Company’s non-qualified deferred compensation plan assets consist of money market and mutual funds
invested in domestic and international marketable securities that are directly observable in active markets and are
therefore classified within Level 1.
The Company’s foreign currency derivative contracts are classified within Level 2 because these contracts are not
actively traded and the valuation inputs are based on quoted prices and market observable data of similar
instruments.
The Company’s borrowings under its credit and term loan facilities are classified within Level 2 because these
borrowings are not actively traded and have a variable interest rate structure based upon market rates currently
available to the Company for debt with similar terms and maturities. See Note 6. Financial Assets and Liabilities for
more information on these borrowings.
72
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Assets/Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2021:
Fair Value Measurement Using
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Total
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
(in thousands)
Description
Assets
Cash equivalents:
Money market funds
Short-term investments:
$
172,934 $
172,934 $
— $
U.S. government agency & T-bills
Municipal bonds
Corporate debt securities
Asset-backed securities
Prepaid and other current assets:
6,442
4,576
103,452
33,479
Foreign currency derivative contracts
15,472
Other long-term assets:
—
—
—
—
6,442
4,576
103,452
33,479
15,472
Deferred compensation plan assets
343,820
343,820
—
Total assets
Liabilities
Accounts payable and accrued liabilities:
$
680,175 $
516,754 $
163,421 $
Foreign currency derivative contracts $
2,068 $
— $
2,068 $
Other long-term liabilities:
Deferred compensation plan liabilities
$
Total liabilities
343,820
343,820
—
345,888 $
343,820 $
2,068 $
73
—
—
—
—
—
—
—
—
—
—
—
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2020:
Fair Value Measurement Using
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
Total
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
(in thousands)
Description
Assets
Cash equivalents:
Money market funds
Prepaid and other current assets:
$
304,127 $
304,127 $
— $
Foreign currency derivative contracts
9,320
—
9,320
Other long-term assets:
Deferred compensation plan assets
269,737
269,737
—
Total assets
Liabilities
Accounts payable and accrued liabilities:
$
583,184 $
573,864 $
9,320 $
Foreign currency derivative contracts $
2,380 $
— $
2,380 $
Other long-term liabilities:
Deferred compensation plan liabilities
Total liabilities
269,737
269,737
—
$
272,117 $
269,737 $
2,380 $
Assets/Liabilities Measured at Fair Value on a Non-Recurring Basis
Non-Marketable Equity Securities
—
—
—
—
—
—
—
Non-marketable equity securities are classified within Level 3 as they are valued using significant unobservable
inputs or data in an inactive market due to the absence of market price and inherent lack of liquidity.
Note 8. Leases
The Company has operating lease arrangements for office space, data center, equipment and other corporate
assets. These leases have various expiration dates through December 31, 2040, some of which include options to
extend the leases for up to 10 years. Because the Company is not reasonably certain to exercise these renewal
options, the options are not considered in determining the lease term and associated potential option payments are
excluded from lease payments.
The components of the Company’s lease expense during the period presented are as follows:
Operating lease expense (1)
Variable lease expense (2)
Total lease expense
Year Ended October 31,
2021
2020
(in thousands)
$
$
93,848 $
8,231
102,079 $
93,636
5,147
98,783
(1) Operating lease expense includes immaterial amounts of short-term leases, net of sublease income.
(2) Variable lease expense includes payments to lessors that are not fixed or determinable at lease commencement
date. These payments primarily consist of maintenance, property taxes, insurance and variable indexed based
payments.
74
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Supplemental cash flow information during the period presented is as follows:
Year Ended October 31,
2021
2020
(in thousands)
Cash paid for amounts included in the measurement of operating lease
liabilities
ROU assets obtained in exchange for operating lease liabilities
$
$
86,360 $
112,637 $
72,828
69,439
Lease term and discount rate information related to the Company’s operating leases as of the end of the period
presented are as follows:
Weighted-average remaining lease term (in years)
Weighted-average discount rate
October 31, 2021
8.00
2.01 %
October 31, 2020
8.62
2.56 %
The following represents the maturities of the Company’s future lease payments due under operating leases as of
October 31, 2021:
Fiscal year
2022
2023
2024
2025
2026
Thereafter
Total future minimum lease payments
Less: Imputed interest
Total lease liabilities
Lease Payments
(in thousands)
$
$
89,891
83,062
76,762
65,434
55,647
243,891
614,687
48,006
566,681
As of October 31, 2021, the Company has additional operating leases that have not yet commenced with future
undiscounted lease payments of $0.8 million. These operating leases may commence in January 2022, with lease
terms between 3 years and 5 years.
In addition, certain facilities owned by the Company were leased to third parties under non-cancellable operating
lease agreements. These leases have annual escalating payments and have expiration dates through March 31,
2031 in accordance with the terms and conditions of the existing agreement. The lease receipts from owned
facilities, including sublease income from other facilities, due to the Company as of October 31, 2021 are as follows:
Fiscal year
2022
2023
2024
2025
2026
Thereafter
Total
75
Lease Receipts
(in thousands)
$
$
17,131
16,433
13,949
6,375
6,566
31,466
91,920
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Note 9. Contingencies
Legal Proceedings
The Company is subject to routine legal proceedings, as well as demands, claims and threatened litigation that
arise in the normal course of its business. The ultimate outcome of any litigation is often uncertain and unfavorable
outcomes could have a negative impact on the Company’s results of operations and financial condition. The
Company regularly reviews the status of each significant matter and assesses its potential financial exposure. If the
potential loss from any claim or legal proceeding is considered probable and the amount is estimable, the Company
accrues 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.
The Company has determined that, except as set forth below, no disclosure of estimated loss is required for a claim
against the Company because: (1) there is not a reasonable possibility that a loss exceeding amounts already
recognized (if any) may be incurred with respect to such claim; (2) a reasonably possible loss or range of loss
cannot be estimated; or (3) such estimate is immaterial.
Mentor Patent Litigation
Prior to the legal settlement as further described below, the Company was engaged in complex patent litigation with
Mentor Graphics Corporation (Mentor) involving several actions in different forums. The Company succeeded to the
litigation when it acquired Emulation & Verification Engineering S.A. on October 4, 2012.
Legal Settlement
In March 2017, Siemens PLM Software (Siemens) acquired Mentor. On June 29, 2018, the Company, Siemens and
Mentor settled all outstanding patent litigation between the Company and Mentor for a $65.0 million payment made
from the Company to Mentor. As a result of the settlement, the litigation with Mentor was dismissed and the
injunction entered in connection with that litigation was vacated. The settlement included mutual seven-year patent
cross-licenses between the Company and Siemens, and between the Company and Mentor. The Company and
Mentor also amended an existing interoperability agreement to collaborate on a wide range of EDA products for the
benefit of their mutual customers. The amendment includes a one-time termination charge between $0.0 and $25.0
million, payable to Mentor under certain conditions.
Tax Matters
The Company undergoes examination from time to time by U.S. and foreign authorities for non-income based taxes,
such as sales, use and value-added taxes, and is currently under examination by tax authorities in certain
jurisdictions. If the potential loss from such examinations is considered probable and the amount or the range of
loss could be estimated, the Company would accrue a liability for the estimated expense. In addition to the
foregoing, the Company is, from time to time, party to various other claims and legal proceedings in the ordinary
course of its business, including with tax and other governmental authorities. For a description of certain of these
other matters, refer to Note 13. Income Taxes.
76
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Note 10. Accumulated Other Comprehensive Income (Loss)
Components of accumulated other comprehensive income (loss), on an after-tax basis where applicable, were as
follows:
Cumulative currency translation adjustments
Unrealized gain (loss) on derivative instruments, net of taxes
Unrealized gain (loss) on available-for-sale securities, net of taxes
Total accumulated other comprehensive income (loss)
Year Ended October 31,
2021
2020
(in thousands)
$
$
(48,047) $
(1,311)
(246)
(49,604) $
(57,463)
3,389
—
(54,074)
The effect of amounts reclassified out of each component of accumulated other comprehensive income (loss) into
net income was as follows:
Year Ended October 31,
2021
2020
2019
(in thousands)
Reclassifications from accumulated other comprehensive income
(loss) into consolidated statements of income:
Gain (loss) on cash flow hedges, net of taxes
Revenues
Operating expenses
Total reclassifications into net income
$
$
4,181 $
10,378
14,559 $
530 $
(603)
(73) $
1,436
(16,073)
(14,637)
Amounts reclassified in fiscal 2021, 2020, and 2019 primarily consisted of gains (losses) from the Company’s cash
flow hedging activities. See Note 6. Financial Assets and Liabilities.
Note 11. Stock Repurchase Program
The Company’s Board of Directors (the Board) previously approved a stock repurchase program pursuant to which
the Company was authorized to purchase up to $500.0 million of its common stock and has periodically replenished
the stock repurchase program to such amount. The Board approved a replenishment of the stock repurchase
program up to $500.0 million on June 17, 2021. As of October 31, 2021, $110.0 million remained available for future
repurchases under the program. In December 2021, our Board approved a stock repurchase program with
authorization to purchase up to $1.0 billion of our common stock.
In August 2021, the Company entered into an accelerated share repurchase agreement (the August 2021 ASR) to
repurchase an aggregate of $175.0 million of the Company's common stock. Pursuant to the August 2021 ASR, the
Company made a prepayment of $175.0 million to receive initial deliveries of shares valued at $140.0 million. The
remaining balance of $35.0 million was settled in November 2021. Total shares purchased under the August 2021
ASR were approximately 0.5 million shares, at an average purchase price of $325.0 per share.
Stock repurchase activities as well as the reissuance of treasury stock for employee stock-based compensation
purposes are as follows:
Year Ended October 31,
2021
2020
2019
Shares repurchased(1)
Average purchase price per share(1)
Aggregate purchase price(1)
Reissuance of treasury stock
(in thousands, except per share price)
2,780
1,585
$
$
270.84 $
753,081 $
3,224
152.76 $
242,078 $
3,872
2,732
120.49
329,185
3,798
(1)
Excludes 107,701 shares and $35.0 million equity forward contract that was settled in November 2021.
77
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Note 12. Employee Benefit Plans
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (ESPP), participating employees are granted the right to
purchase shares of common stock at a price per share that is 85% of the lesser of the fair market value of the
shares at (1) the beginning of an offering period (generally, a rolling two year period) or (2) the purchase date
(generally occurring at the end of each semi-annual purchase period), subject to the terms of ESPP, including a limit
on the number of shares that may be purchased in a purchase period.
On April 9, 2020, the Company’s stockholders approved an amendment to the ESPP to increase the number of
shares of common stock authorized for issuance under the plan by 5.0 million shares. During fiscal 2021, 2020 and
2019, the Company issued 1.0 million, 1.0 million, and 1.2 million shares, respectively, under the ESPP at average
per share prices of $134.26, $103.41 and $73.18, respectively. As of October 31, 2021, 12.8 million shares of
common stock were reserved for future issuance under the ESPP.
Equity Compensation Plans
2006 Employee Equity Incentive Plan. On April 25, 2006, the Company’s stockholders approved the 2006 Employee
Equity Incentive Plan (2006 Employee Plan), which provides for the grant of incentive stock options, non-statutory
stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other forms of
equity compensation, including performance stock awards and performance cash awards, as determined by the
plan administrator. The terms and conditions of each type of award are set forth in the 2006 Employee Plan and in
the award agreements governing particular awards.
Restricted stock units are granted under the 2006 Employee Plan as part of the Company’s incentive compensation
program. In general, restricted stock units vest over three to four years and are subject to the employee's continuing
service with the Company. Restricted stock units granted with specific performance criteria vest to the extent
performance conditions are met. For each restricted stock unit granted under the 2006 Employee Plan, a share
reserve ratio is applied for the purpose of determining the remaining number of shares reserved for future grants
under the plan. As of October 31, 2021, the share reserve ratio was 1.70. Options granted under this plan generally
have a contractual term of seven years and generally vest over four years.
On April 8, 2021, the Company's stockholders amended the 2006 Employee Plan to, among other things, increase
the number of shares of common stock reserved for future issuance under the plan by 4.7 million shares. As of
October 31, 2021, an aggregate of 3.0 million stock options and 4.2 million restricted stock units were outstanding,
and 13.8 million shares were available for future issuance under the 2006 Employee Plan.
2005 and 2017 Non-Employee Directors Equity Incentive Plans. On April 6, 2017, the Company’s stockholders
approved the 2017 Non-Employee Directors Equity Incentive Plan (2017 Directors Plan). In connection with
stockholder approval of the 2017 Directors Plan, the 2005 Non-Employee Directors Equity Incentive Plan (2005
Directors Plan) was terminated as of April 6, 2017, and no awards could be granted under the 2005 Directors Plan
after that date.
Under the 2005 Directors Plan, the Company granted options, which vest over a period of three to four years to
non-employee directors. As of October 31, 2021, 15,000 stock options were outstanding under the 2005 Directors
Plan.
The 2017 Directors Plan provides for equity awards to non-employee directors in the form of stock options,
restricted stock units, restricted stock or a combination thereof. On April 6, 2017, the Company’s stockholders
approved an aggregate of 0.45 million shares of common stock reserved under the 2017 Directors Plan.
The Company grants restricted stock awards and options under the 2017 Directors Plan. Restricted stock awards
generally vest on an annual basis and options vest over a period of three years. As of October 31, 2021, 4,690
shares of restricted stock awards were unvested and 5,998 stock options were outstanding, and a total of 384,992
shares of common stock were reserved for future issuance under the 2017 Directors Plan.
Other Assumed Stock Plans through Acquisitions. The Company has assumed certain outstanding stock awards of
acquired companies, including restricted stock units and options. If these assumed equity awards are canceled,
forfeited or expire unexercised, the underlying shares do not become available for future grant. As of October 31,
78
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
2021, 0.1 million shares of the Company’s common stock remained subject to such outstanding assumed equity
awards.
Restricted Stock Units. The following table contains information concerning activities related to restricted stock units
granted under the 2006 Employee Plan:
Balance at October 31, 2018
Granted(2)
Vested(3)
Forfeited
Balance at October 31, 2019
Granted(2)
Vested(3)
Forfeited
Balance at October 31, 2020
Granted(2)
Vested(3)
Forfeited
Balance at October 31, 2021
Restricted
Stock Units
Outstanding(1)
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Remaining
Contractual
Life (In Years)
Aggregate
Fair
Value
(in thousands, except per share and life amounts)
3,769 $
1,844 $
(1,508) $
(248) $
3,857 $
2,041 $
(1,480) $
(288) $
4,130 $
1,901 $
(1,565) $
(279) $
4,187 $
72.75
119.27
65.97
79.49
97.21
168.15
88.70
104.67
134.80
258.58
122.01
167.76
193.58
1.46
1.56
1.47
1.39
$
176,659
$
261,563
$
421,034
(1)
No restricted stock units were assumed in connection with acquisitions in the last three fiscal years, but the
balance at fiscal year-end includes certain restricted stock units that were previously assumed in connection
with acquisitions.
(2) Includes restricted stock units granted to senior management with performance-based vesting criteria (in
addition to service-based vesting criteria) (performance-based RSUs) reported at the maximum possible
number of shares that may ultimately be issuable if all applicable performance-based criteria are achieved
at their maximum levels and all applicable service-based criteria are fully satisfied.
(3) The number of vested restricted stock units includes shares that were withheld on behalf of employees to
satisfy the minimum statutory tax withholding requirements.
79
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Stock Options. The following table summarizes stock option activity and includes stock options granted under the
2006 Employee Plan:
Options Outstanding
Balance at October 31, 2018
Granted
Exercised
Canceled/forfeited/expired
Balance at October 31, 2019
Granted
Exercised
Canceled/forfeited/expired
Balance at October 31, 2020
Granted
Exercised
Canceled/forfeited/expired
Balance at October 31, 2021
Vested and expected to vest as of
October 31, 2021
Exercisable at October 31, 2021
Shares Under
Stock Option (1)
Weighted-
Average Exercise
Price per Share
(in thousands, except per share)
6,291 $
799 $
(1,615) $
(185) $
5,290 $
700 $
(1,891) $
(106) $
3,993 $
353 $
(1,203) $
(36) $
3,107 $
3,107
1,990
55.63
113.17
44.29
58.02
65.57
143.44
51.76
84.14
85.26
239.46
66.50
128.49
109.51
109.51
81.88
Weighted-
Average
Remaining
Contractual
Life (In Years)
Aggregate
Intrinsic
Value
4.39 $
214,432
4.08 $
373,112
4.10 $
513,845
3.81 $
694,921
3.81 $
3.08 $
694,921
500,210
(1)
No stock options were assumed in connection with acquisitions in the last three fiscal years, but the balance
at fiscal year-end includes certain stock options that were previously assumed in connection with
acquisitions.
The aggregate intrinsic value in the preceding table represents the pre-tax intrinsic value based on stock options
with an exercise price less than the Company’s closing stock price of $333.18 as of October 31, 2021. The pre-tax
intrinsic value of options exercised and their average exercise prices were:
Intrinsic value
Average exercise price per share
2021
Year Ended October 31,
2020
2019
(in thousands, except per share price)
$
$
254,587 $
66.50 $
218,640 $
51.76 $
110,815
44.29
80
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Restricted Stock Units and Stock Options. The following table contains additional information concerning activities
related to stock options and restricted stock units that were granted under the 2006 Employee Plan and assumed
from acquisitions:
Available for Grant (1)(2) (3)
(in thousands, except per share and life amounts)
Balance at October 31, 2018
Options granted(2)
Options canceled/forfeited/expired(2)
Restricted stock units granted(1)
Restricted stock units forfeited(1)
Additional shares reserved
Balance at October 31, 2019
Options granted(2)
Options canceled/forfeited/expired(2)
Restricted stock units granted(1)
Restricted stock units forfeited(1)
Additional shares reserved
Balance at October 31, 2020
Options granted(2)
Options canceled/forfeited/expired(2)
Restricted stock units granted(1)
Restricted stock units forfeited(1)
Additional shares reserved
Balance at October 31, 2021
12,439
(799)
129
(3,134)
373
3,200
12,208
(694)
102
(3,469)
482
3,500
12,129
(353)
36
(3,232)
471
4,700
13,751
(1)
(2)
(3)
Restricted stock units include awards granted under the 2006 Employee Plan and assumed through
acquisitions. The number of RSUs reflects the application of the award multiplier of 1.70x as described
above.
Options granted by the Company are not subject to the award multiplier ratio described above.
Excluding shares reserved for future issuance under the 2017 Directors Plan.
81
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Restricted Stock Awards. The following table summarizes restricted stock award activities during fiscal 2021 under
the 2005 Directors Plan and 2017 Directors Plan:
Unvested at October 31, 2018
Granted
Vested
Forfeited
Unvested at October 31, 2019
Granted
Vested
Forfeited
Unvested at October 31, 2020
Granted
Vested
Forfeited
Unvested at October 31, 2021
Restricted
Shares
Weighted-
Average
Grant Date Fair
Value
(in thousands, except per share)
20 $
11 $
(20) $
— $
11 $
9 $
(11) $
— $
9 $
5 $
(9) $
— $
5 $
73.95
116.43
73.95
—
116.43
140.97
116.43
—
140.97
261.01
140.97
—
261.01
Valuation and Expense of Stock-Based Compensation. The Company estimates the fair value of stock options and
employee stock purchase rights under the ESPP on the grant date. The value of awards expected to vest is
recognized as expense over the applicable service periods. The Company uses the straight-line attribution method
to recognize stock-based compensation costs over the service period of the award except for performance grants
with specific performance criteria. With respect to such performance grants in each reporting period, the Company
estimates the probability of achievement of applicable performance goals and recognizes related stock-based
compensation expense using the graded-vesting method. The amount of stock-based compensation expense
recognized in any one period can vary based on the attainment or expected attainment of the various performance
goals. If such performance goals are not ultimately met, no compensation expense is recognized and any previously
recognized compensation expense is reversed.
The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options and
employee stock purchase plan rights. The Black-Scholes option-pricing model incorporates various subjective
assumptions including expected volatility, expected term and interest rates. The expected volatility for both stock
options and employee stock purchase rights is estimated by a combination of implied volatility for publicly traded
options of the Company’s common stock with a term of six months or longer and the historical stock price volatility
over the estimated expected term of such awards, which is based on historical experience. Restricted stock units
are valued based on the closing price of the Company’s common stock on the grant date.
The assumptions presented in the following table were used to estimate the fair value of stock options and
employee stock purchase rights granted under the Company’s stock plans or stock plans assumed from
acquisitions:
82
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Stock Options
Expected life (in years)
Risk-free interest rate
Volatility
Weighted average estimated fair value
ESPP
Expected life (in years)
Risk-free interest rate
Volatility
Weighted average estimated fair value
Year Ended October 31,
2021
2020
2019
4.1
0.35%- 1.00%
29.19% -32.28%
$61.58
4.1
0.26% - 1.71%
23.05% - 32.80%
$33.02
4.1
1.28% - 2.73%
23.16%- 24.76%
$22.86
0.5 - 2.0
0.00% - 0.19%
0.5 - 2.0
0.09% - 1.24%
28.02% - 39.68% 25.59% - 43.06% 23.73% - 27.86%
$47.69
0.5 - 2.0
1.54% - 2.60%
$89.82
$35.18
The compensation cost recognized in the consolidated statements of income for the Company's stock
compensation arrangements was as follows:
Cost of products
Cost of maintenance and service
Research and development expense
Sales and marketing expense
General and administrative expense
Stock-based compensation expense before taxes
Income tax benefit
Stock-based compensation expense after taxes
Year Ended October 31,
2021
2020
2019
(in thousands)
$
$
38,345 $
13,817
171,013
61,940
60,157
345,272
(53,483)
291,789 $
27,193 $
9,327
125,814
43,205
43,045
248,584
(39,077)
209,507 $
17,193
6,385
75,853
28,834
26,736
155,001
(26,226)
128,775
As of October 31, 2021, the Company had $680.8 million of total unrecognized stock-based compensation expense
relating to options and restricted stock units and awards, which is expected to be recognized over a weighted
average period of 2.2 years. As of October 31, 2021, the Company had $49.3 million of total unrecognized stock-
based compensation expense relating to the ESPP, which is expected to be recognized over a period of 2.0 years.
Deferred Compensation Plan. The Company maintains the Synopsys Deferred Compensation Plan (Deferred Plan),
which permits eligible employees to defer up to 50% of their annual cash base compensation and up to 100% of
their eligible cash variable compensation. Amounts may be withdrawn from the Deferred Plan pursuant to elections
made by the employees in accordance with the terms of the plan. Since the inception of the Deferred Plan, the
Company has not made any matching or discretionary contributions to the Deferred Plan. There are no Deferred
Plan provisions that provide for any guarantees or minimum return on investments. Undistributed amounts under
the Deferred Plan are subject to the claims of the Company’s creditors. The securities held by the Deferred Plan are
classified as trading securities.
Deferred plan assets and liabilities are as follows:
Plan assets recorded in other long-term assets
Plan liabilities recorded in other long-term liabilities(1)
(1)
Undistributed deferred compensation balances due to participants.
As of October 31,
2021
As of October 31,
2020
(in thousands)
$
$
343,820 $
343,820 $
269,737
269,737
83
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Income or loss from the change in fair value of the Deferred Plan assets is recorded in other income (expense), net.
The increase or decrease in the fair value of the undistributed Deferred Plan obligation is recorded in total cost of
revenue and operating expense. The following table summarizes the impact of the Deferred Plan:
Year Ended October 31,
2021
2020
2019
(in thousands)
Increase (reduction) to cost of revenue and operating expense
Other income (expense), net
Net increase (decrease) to net income
$
$
71,603 $
71,603
— $
21,469 $
21,469
— $
27,759
27,759
—
Other Retirement Plans. The Company sponsors various retirement plans for its eligible U.S. and non-U.S.
employees. Total contributions to these plans were $68.8 million, $54.7 million, and $50.7 million in fiscal 2021,
2020, and 2019, respectively. For employees in the United States and Canada, the Company matches pre-tax
employee contributions up to a maximum of U.S. $3,000 and Canadian $4,000, respectively, per participant per
year.
Note 13. Income Taxes
The domestic and foreign components of the Company’s total income (loss) before provision for income taxes are
as follows:
United States
Foreign
Total income (loss) before provision for income taxes
Year Ended October 31,
2021
2020
2019
(in thousands)
$
$
640,531 $
164,983
805,514 $
544,391 $
93,768
638,159 $
487,430
58,076
545,506
The components of the provision (benefit) for income taxes were as follows:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Year Ended October 31,
2021
2020
2019
(in thousands)
$
85,950 $
29,272 $
11,898
79,890
177,738
1,863
55,103
86,238
(108,530)
1,796
(21,849)
(84,739)
(20,233)
(6,554)
(128,583)
(111,526)
22,821
11,846
61,092
95,759
(41,219)
(7,227)
(34,174)
(82,620)
Provision (benefit) for income taxes
$
49,155 $
(25,288) $
13,139
84
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The provision (benefit) for income taxes differs from the taxes computed with the statutory federal income tax rate
as follows:
Statutory federal tax
State tax (benefit), net of federal effect
Federal Tax credits
Tax on foreign earnings
Foreign-derived intangible income deduction
Tax settlements
Stock-based compensation
Changes in valuation allowance
Undistributed earnings of foreign subsidiaries
Other
Provision (benefit) for income taxes
Year Ended October 31,
2021
2020
2019
(in thousands)
$
168,745 $
133,979 $
114,557
(2,419)
(45,503)
7,988
(31,214)
(7,134)
(62,620)
15,232
—
6,080
(29,096)
(39,206)
(3,980)
(24,282)
(13,167)
(50,047)
(614)
—
1,125
6,529
(34,485)
23,467
(26,615)
(10,953)
(25,356)
(42,144)
6,341
1,798
$
49,155 $
(25,288) $
13,139
The Company has provided for foreign withholding taxes on undistributed earnings of certain of its foreign
subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of
those subsidiaries. Where foreign subsidiaries are considered indefinitely reinvested, and if the tax effect of
undistributed earnings and other outside basis differences were recognized, the nature of taxes expected would be
primarily withholding taxes, taxes in non-conforming states, and taxes on intermediate holding companies outside of
the U.S., net of foreign tax credits where available. As of October 31, the taxes due, after allowable foreign tax
credits, are not expected to be material.
On June 7, 2019, the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) overturned a prior ruling to
exclude stock-based compensation in cost-sharing arrangements. In the third quarter of 2019, as a result of the
Ninth Circuit decision, the Company recorded a tax expense of $18.3 million, which is net of estimated U.S. foreign
tax credits.
85
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The significant components of deferred tax assets and liabilities were as follows:
Net deferred tax assets:
Deferred tax assets:
Deferred revenue
Deferred compensation
Intangible and depreciable assets
Capitalized research and development costs
Stock-based compensation
Tax loss carryovers
Foreign tax credit carryovers
Research and other tax credit carryovers
Operating Lease Liabilities
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Operating lease Right-of-Use-Assets
Accruals and reserves
Undistributed earnings of foreign subsidiaries
Other
Total deferred tax liabilities
Net deferred tax assets
October 31,
2021
2020
(in thousands)
30,113
59,823
117,211
203,052
40,922
30,305
32,498
326,164
94,519
934,607
(174,117)
760,490
61,448
77,877
6,216
7,580
628
153,749
606,741 $
2,367
55,172
115,097
118,857
28,478
35,571
18,645
320,317
101,386
795,890
(158,895)
636,995
45,915
84,716
7,780
3,063
372
141,846
495,149
$
It is more likely than not that the results of future operations will be able to generate sufficient taxable income to
realize the net deferred tax assets. The valuation allowance provided against the Company's deferred tax assets as
of October 31, 2021 is mainly attributable to foreign tax credits available to non-U.S. subsidiaries and the California
research credits. The valuation allowance increased by a net of $15.2 million in fiscal 2021 primarily related to the
net increase of valuation allowance on California research credits.
The Company has the following tax loss and credit carryforwards available to offset future income tax liabilities:
Carryforward
Federal net operating loss carryforward
Federal research credit carryforward
Federal foreign tax credit carryforward
International foreign tax credit carryforward
International net operating loss carryforward
California research credit carryforward
Other state research credit carryforward
State net operating loss carryforward
$
Amount
(in thousands)
43,778
158,143
12,153
17,364
55,342
193,404
17,767
79,621
Expiration
Date
2022-2040
2022-2041
2027-2032
Indefinite
2027-Indefinite
Indefinite
2024-2041
2023-2044
The federal and state net operating loss carryforward is from acquired companies and the annual use of such loss is
subject to significant limitations under Internal Revenue Code Section 382 and certain provisions of the Tax Act.
Foreign tax credits may only be used to offset tax attributable to foreign source income.
86
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
The gross unrecognized tax benefits decreased by approximately $0.8 million during fiscal 2021 resulting in gross
unrecognized tax benefits of $82.4 million as of October 31, 2021. A reconciliation of the beginning and ending
balance of gross unrecognized tax benefits is summarized as follows:
Beginning balance
Increases in unrecognized tax benefits related to prior year tax positions
Decreases in unrecognized tax benefits related to prior year tax positions
Increases in unrecognized tax benefits related to current year tax positions
Decreases in unrecognized tax benefits related to settlements with taxing
authorities
Reductions in unrecognized tax benefits due to lapse of applicable statute of
limitations
Increases in unrecognized tax benefits acquired
Changes in unrecognized tax benefits due to foreign currency translation
As of October 31,
2021
As of October 31,
2020
(in thousands)
$
83,149 $
116,212
794
(7,372)
9,168
5,390
(43,783)
9,226
(1,538)
(1,411)
(1,235)
—
(606)
(2,472)
778
(791)
Ending balance
$
82,360 $
83,149
As of October 31, 2021 and 2020, approximately $82.4 million and $83.1 million, respectively, of the unrecognized
tax benefits would affect the Company's effective tax rate if recognized upon resolution of the uncertain tax
positions.
Interest and penalties related to estimated obligations for tax positions taken in the Company’s tax returns are
recognized as a component of income tax expense (benefit) in the consolidated statements of income and totaled
approximately $0.4 million, $0.2 million and $0.3 million for fiscal years 2021, 2020 and 2019, respectively. As of
October 31, 2021 and 2020, the combined amount of accrued interest and penalties related to tax positions taken
on the Company’s tax returns was approximately $13.5 million and $13.1 million, respectively.
The timing of the resolution of income tax examinations, and the amounts and timing of various tax payments that
are part of the settlement process, are highly uncertain. Variations in such amounts and/or timing could cause large
fluctuations in the balance sheet classification of current and non-current assets and liabilities. The Company
believes that in the coming 12 months, it is reasonably possible that either certain audits and ongoing tax litigation
will conclude or the statute of limitations on certain state and foreign income and withholding taxes will expire, or
both. Given the uncertainty as to ultimate settlement terms, the timing of payment and the impact of such
settlements on other uncertain tax positions, the range of the estimated potential decrease in underlying
unrecognized tax benefits is between $0.0 and $42.5 million.
The Company and/or its subsidiaries remain subject to tax examination in the following jurisdictions:
Jurisdiction
United States
California
Hungary
Ireland
Japan and Taiwan
Korea
Year(s) Subject to Examination
Fiscal 2020
Fiscal years after 2017
Fiscal years after 2018
Fiscal years after 2017
Fiscal years after 2016
Fiscal years after 2016
In addition, the Company has made acquisitions with operations in several of its significant jurisdictions which may
have years subject to examination different from the years indicated in the above table.
Intra-Entity Transfers of Assets
87
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other
Than Inventory.” This ASU requires the immediate recognition of current and deferred income tax effects of intra-
entity transfers of assets other than inventory. This ASU was adopted on the first day of fiscal 2019. As a result of
the adoption, the Company recorded a decrease of approximately $130.5 million in retained earnings as of the
beginning of the period of adoption, with a corresponding decrease in prepaid taxes related to the unamortized tax
expense attributed to intra-entity transfers of assets other than inventory previously deferred. The Company
recognizes the income tax consequences of new intra-entity transfers of assets other than inventory in the
consolidated statements of income in the period when the transaction takes place.
IRS Examinations
In fiscal 2021, the Examination Division of the IRS completed its pre-filing review for fiscal 2020 and as a result the
Company recognized approximately $7.1 million in unrecognized tax benefits, primarily due to the allowance of
research tax credits.
In fiscal 2020, the Company reached partial settlement with the Examination Division of the IRS for fiscal 2019 and
recognized approximately $6.3 million in unrecognized tax benefits, primarily due to the allowance of certain foreign
tax credits and research tax credits.
In fiscal 2019, the Company reached final settlement with the Examination Division of the IRS for fiscal 2018 and
recognized approximately $5.4 million in unrecognized tax benefits and realized $28.1 million of foreign tax credits.
State Examinations
In fiscal 2020, the Company reached final settlement with the California Franchise Tax Board for fiscal 2015, 2016,
and 2017. As a result of the settlement, the Company recognized $20.2 million in unrecognized tax benefits and
increased its valuation allowance by $20.2 million.
Non-U.S. Examinations
Hungarian Tax Authority
In July 2017, the Hungarian Tax Authority (the HTA) issued a final assessment against the Company's Hungarian
subsidiary (Synopsys Hungary) for fiscal years 2011 through 2013. The HTA has applied withholding taxes on
certain payments made to affiliates, resulting in an aggregate tax assessment of approximately $25.0 million and
interest and penalties of $11.0 million. On August 2, 2017, Synopsys Hungary filed a claim contesting the final
assessment with the Hungarian Administrative Court (the Administrative Court). In the first quarter of fiscal 2018,
Synopsys Hungary paid the assessments, penalties and interest as required by law and recorded these amounts as
prepaid taxes on its balance sheet, while continuing its challenge to the assessment through the Hungarian
Administrative Court. On April 30, 2019, the Administrative Court ruled against Synopsys Hungary. The
Administrative Court's opinion was received on May 16, 2019 and the Company filed an appeal with the Hungarian
Supreme Court on July 5, 2019. In the second quarter of 2019, as a result of the Court's decision, the Company
recorded a tax expense due to an unrecognized tax benefit of $17.4 million, which is net of estimated U.S. foreign
tax credits for the tax assessments. The Hungarian Supreme Court heard the Company's appeal on November 12,
2020 and remanded the case to the Administrative Court for further proceedings. The Company received the
Hungarian Supreme Court's written decision in the first quarter of fiscal 2021. On April 27, 2021, the Administrative
Court reheard the case and again ruled against Synopsys Hungary. The Company received the written opinion from
the Administrative Court on May 19, 2021. The Company filed an appeal with the Hungarian Supreme Court on July
19, 2021 and the hearing for the appeal is scheduled for January 27, 2022.
In fiscal 2020, the Company reached final settlement with the HTA for fiscal years 2014 through 2018. As a result of
the settlement, the Company recognized tax expense of $1.4 million, and recognized $6.9 million in unrecognized
tax benefits.
National Taxation Bureau of Taipei
In fiscal 2019, the Company reached final settlement with the National Taxation Bureau of Taipei for fiscal year 2017
and recognized $5.5 million in previously unrecognized tax benefits.
88
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Note 14. Other Income (Expense), Net
The following table presents the components of other income (expense), net:
Interest income
Interest expense
Gain (loss) on assets related to deferred compensation plan
Foreign currency exchange gain (loss)
Other, net
Total
Note 15. Segment Disclosure
Year Ended October 31,
2021
2020
2019
(in thousands)
$
$
2,442 $
(3,365)
71,603
5,292
(5,248)
70,724 $
3,561 $
(5,140)
21,469
5,544
(7,416)
18,018 $
6,859
(11,659)
27,759
3,588
(1,272)
25,275
Segment reporting is based upon the “management approach,” i.e., how management organizes the Company’s
operating segments for which separate financial information is (1) available and (2) evaluated regularly by the Chief
Operating Decision Makers (CODMs) in deciding how to allocate resources and in assessing performance. The
Company's CODMs are its two Co-Chief Executive Officers.
The Company has two reportable segments: (1) Semiconductor & System Design, which includes EDA tools, IP
products, system integration solutions and other associated revenue categories, and (2) Software Integrity, which
includes a comprehensive solution for building integrity—security, quality and compliance testing—into the
customers’ software development lifecycle and supply chain.
The financial information provided to and used by the CODMs to assist in making operational decisions, allocating
resources, and assessing performance reflects consolidated financial information as well as revenue, adjusted
operating income, and adjusted operating margin information for the Semiconductor & System Design and Software
Integrity segments, accompanied by disaggregated information relating to revenue by geographic region.
Information by reportable segment was as follows:
Total Segments:
Revenue
Adjusted operating income
Adjusted operating margin
Semiconductor & System Design:
Revenue
Adjusted operating income
Adjusted operating margin
Software Integrity:
Revenue
Adjusted operating income
Adjusted operating margin
Year Ended October 31,
2021
2020
2019
(in thousands)
$ 4,204,193
$ 3,685,281
$ 3,360,694
1,281,389
1,031,630
838,821
30 %
28 %
25 %
$ 3,810,409
$ 3,327,211
$ 3,026,097
1,243,078
990,837
806,618
33 %
30 %
27 %
$
393,784
$
358,070
$
334,597
38,311
40,793
32,203
10 %
11 %
10 %
Certain operating expenses are not allocated to the segments and are managed at a consolidated level. The
unallocated expenses managed at a consolidated level, including amortization of intangible assets, stock-based
compensation and certain other operating expenses, are presented in the table below to provide a reconciliation of
the total adjusted operating income from segments to the Company's consolidated operating income:
89
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
SYNOPSYS, INC.
Year Ended October 31,
2021
2020
2019
(in thousands)
Total segment adjusted operating income
$
1,281,389 $
1,031,630 $
838,821
Reconciling items:
Amortization of intangible expense
Stock-based compensation expense
Other
Total operating income
(82,380)
(91,281)
(345,272)
(248,584)
(118,947)
(71,624)
(100,914)
(155,001)
(62,675)
$
734,790 $
620,141 $
520,231
The CODMs do not use total assets by segment to evaluate segment performance or allocate resources. As a
result, total assets by segment are not required to be disclosed.
In allocating revenue to particular geographic areas, the CODMs consider where individual “seats” or licenses to the
Company’s products are located. Revenue is defined as revenue from external customers. Revenue and property
and equipment, net, related to operations in the United States and other geographic areas were:
Year Ended October 31,
2021
2020
2019
(in thousands)
Revenue:
United States
Europe
China
Korea
Other
Consolidated
Property and Equipment, net:
United States
Other
Total
$ 1,951,964 $ 1,774,348 $ 1,676,178
349,033
321,777
353,358
660,348
$ 4,204,193 $ 3,685,281 $ 3,360,694
385,287
420,829
389,008
715,809
440,825
562,711
427,471
821,222
As of October 31,
2021
2020
(in thousands)
$
$
283,602 $
188,796
472,398 $
311,350
172,468
483,818
Geographic revenue data for multi-regional, multi-product transactions reflect internal allocations and are therefore
subject to certain assumptions and to the Company’s methodology.
One customer, including its subsidiaries, accounted for 10.6%, 12.4%, and 12.8% of the Company’s consolidated
revenue in fiscal 2021, 2020, and 2019, respectively.
90
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures. As of October 31, 2021, Synopsys carried out an
evaluation under the supervision and with the participation of Synopsys’ management, including the Co-
Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of
Synopsys’ disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act). There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide
reasonable, not absolute, assurance of achieving their control objectives. Our Co-Chief Executive Officers
and Chief Financial Officer have concluded that, as of October 31, 2021, Synopsys’ disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed in the
reports Synopsys files and submits under the Exchange Act is recorded, processed, summarized and
reported as and when required, and that such information is accumulated and communicated to Synopsys’
management, including the Co-Chief Executive Officers and Chief Financial Officer, to allow timely
decisions regarding its required disclosure.
(b)
Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for
establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for Synopsys.
Under the supervision and with the participation of our management, including our Co-Chief Executive
Officers and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting as of October 31, 2021. In assessing the effectiveness of our internal control over
financial reporting, our management used the framework established in Internal Control Integrated
Framework (2013) issued by The Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
Our management has concluded that, as of October 31, 2021, our internal control over financial reporting
was effective based on these criteria. Our independent registered public accounting firm, KPMG LLP, has
issued an auditors’ report on the effectiveness of our internal control over financial reporting, which is
included herein.
(c)
Changes in Internal Control Over Financial Reporting. There were no changes in Synopsys’ internal control
over financial reporting during the fiscal quarter ended October 31, 2021 that have materially affected, or
are reasonably likely to materially affect, Synopsys’ internal control over financial reporting.
Item 9B. Other Information
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensation Arrangements of Certain Officers.
On December 9, 2021, Chi-Foon Chan notified the Company of his decision not to stand for re-election to Synopsys’
Board of Directors at the 2022 Annual Meeting of Stockholders (the 2022 Annual Meeting). Mr. Chan’s decision not
to stand for re-election was not the result of any disagreement with Synopsys on any matter. Mr. Chan will continue
to serve as a director until his term ends at the 2022 Annual Meeting, and the Company is thankful for his dedicated
service.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
91
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance
For information required by this Item relating to our executive officers, see Information about our Executive Officers
in Part I, Item 1 of this Annual Report.
The information required by this Item relating to our directors and nominees is included under the heading “Proposal
1 — Election of Directors,” in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders (the Proxy
Statement) and is incorporated herein by reference. The information required by this Item regarding our Audit
Committee is included under the headings “Audit Committee Report” and “Corporate Governance” in our Proxy
Statement and is incorporated herein by reference. We will provide disclosure of delinquent Section 16(a) reports, if
any, in our Proxy Statement, and such disclosure, if any, is incorporated herein by reference.
The information required by this Item relating to our code of ethics and its applicability to our Principal Executive
Officers, Principal Financial Officer and Principal Accounting Officer is included under the subheading "Code of
Ethics and Business Conduct" under the heading "Corporate Governance" in our Proxy Statement and is
incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item relating to director and executive compensation is included under the
headings “Compensation Discussion and Analysis” (and all subheadings thereunder), "Executive Compensation
Tables" (and all subheadings thereunder), "Director Compensation," “Compensation Committee Interlocks and
Insider Participation,” and “Compensation Committee Report” in our Proxy Statement and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this Item relating to security ownership of certain beneficial owners and management is
included under the heading "Security Ownership of Certain Beneficial Owners and Management" in our Proxy
Statement, and the information required by this Item relating to securities authorized for issuance under equity
compensation plans is included under the heading “Equity Compensation Plan Information” in our Proxy Statement,
and, in each case, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item relating to the review, approval or ratification of transactions with related
persons is included under the heading "Transactions with Related Persons” in our Proxy Statement, and the
information required by this Item relating to director independence is included under the heading "Director
Independence," and, in each case, is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item is included under the subheadings "Fees and Services of Independent
Registered Public Accounting Firm" and "Audit Committee Pre-Approval Policies and Procedures" under the
proposal titled “Ratification of Selection of Independent Registered Public Accounting Firm” in our Proxy Statement
and is incorporated herein by reference.
92
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as part of this Form 10-K:
(1)
Financial Statements
The following documents are included as Part II, Item 8 of this Form 10-K:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules
Page
47
50
51
52
53
54
55
Schedules not listed above have been omitted because the information required to be set forth therein is not
applicable or is shown in the financial statements or notes herein.
(3)
Exhibits
See Item 15(b) below.
(b)
Exhibits
Exhibit
Number
3.1
3.2
4.1
4.2
10.1
Exhibit Description
Amended and Restated
Certificate of Incorporation
Amended and Restated
Bylaws
Specimen Common Stock
Certificate
Description of Synopsys'
Stock
Conformed Credit
Agreement, as amended
and restated pursuant to
that certain Fourth
Extension and Amendment
Agreement, dated January
22, 2021, among Synopsys,
Inc. as Borrower, the
Lenders parties thereto and
JPMorgan Chase Bank,
N.A., as administrative
agent for the lenders
EXHIBIT INDEX
Incorporated By Reference
Form
10-Q
File No.
000-19807
Exhibit
3.1
Filing Date
9/15/2003
Filed or
Furnished
Herewith
10-K
000-19807
S-1
33-45138
3.2
4.3
12/15/2020
2/24/1992
(effective
date)
10-K
000-19807
4.2
12/15/2020
8-K
000-19807
10.1
1/25/2021
93
Table of Contents
Exhibit
Number
10.2
10.2(i)†
10.2(ii)
10.2(iii)
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12
10.13*
10.14*
Exhibit Description
Lease Agreement dated
October 14, 2011 between
Synopsys, Inc. and 690 E.
Middlefield Road Fee, LLC,
(“The October 14, 2011
Lease”)
Notification of Change of
Ownership of Leased
Premises under The
October 14, 2011 Lease—
Effective May 9, 2012
First Amendment to The
October 14, 2011 Lease
Second Amendment to The
October 14, 2011 Lease
2006 Employee Equity
Incentive Plan, as amended
Form of Restricted Stock
Unit Grant Notice and Award
Agreement under 2006
Employee Equity Incentive
Plan
Form of Notice of Grant of
Stock Options and Option
Agreement under 2006
Employee Equity Incentive
Plan
Employee Stock Purchase
Plan, as amended
2017 Non-Employee
Directors Equity Incentive
Plan
Form of Restricted Stock
Grant Notice and Award
Agreement under 2017 Non-
Employee Directors Equity
Incentive Plan
Form of Stock Options
Grant Notice and Option
Agreement under 2017 Non-
Employee Directors Equity
Incentive Plan
Deferred Compensation
Plan as restated effective
August 1, 2002
Synopsys Amended and
Restated Deferred
Compensation Plan II
Form of Indemnification
Agreement for directors and
executive officers
Director’s and Officer’s
Insurance and Company
Reimbursement Policy
Amended and Restated
Employment Agreement,
dated December 15, 2016
between Synopsys, Inc. and
Dr. Aart de Geus
Incorporated By Reference
Form
10-K
File No.
000-19807
Exhibit
10.19
Filing Date
12/16/2011
Filed or
Furnished
Herewith
10-K
000-19807
10.10(i)
12/20/2012
10-Q
000-19807
10.10(ii)
3/4/2013
10-Q
000-19807
10.10(iii)
5/22/2015
8-K
8-K
000-19807
000-19807
10.4
10.5
4/12/2021
4/6/2018
8-K
000-19807
10.6
4/6/2018
8-K
8-K
000-19807
10.7
4/15/2020
000-19807
10.8
4/10/2017
10-K
000-19807
10.9
12/14/2017
10-K
000-19807
10.10
12/14/2017
10-Q
000-19807
10.5
6/10/2004
10-Q
000-19807
10.23
3/9/2009
8-K
000-19807
99.2
7/14/2011
S-1
33-45138
10.2
2/24/1992
(effective
date)
8-K
000-19807
10.16
12/21/2016
94
Table of Contents
Exhibit
Number
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
21.1
23.1
24.1
31.1
31.2
31.3
32.1
Exhibit Description
Amended and Restated
Employment Agreement,
dated December 15, 2016
between Synopsys, Inc. and
Dr. Chi-Foon Chan
Executive Incentive Plan, as
amended
Amended and Restated
Executive Change of
Control Severance Benefit
Plan
Compensation Recovery
Policy
Executive Severance
Benefit and Transition Plan
Relocation Assistance
Agreement, dated April 30,
2021, by and between
Synopsys, Inc. and Sassine
Ghazi
Subsidiaries of Synopsys,
Inc.
Consent of KPMG LLP,
Independent Registered
Public Accounting Firm
Power of Attorney (see
signature page to this
Annual Report on Form 10-
K)
Certification of Co-Chief
Executive Officer pursuant
to Rule 13a-14(a) or
Rule 15d-14(a) of the
Exchange Act
Certification of Co-Chief
Executive Officer pursuant
to Rule 13a-14(a) or
Rule 15d-14(a) of the
Exchange Act
Certification of Chief
Financial Officer pursuant to
Rule 13a-14(a) or
Rule 15d-14(a) of the
Exchange Act
Certification of Co-Chief
Executive Officers and Chief
Financial Officer furnished
pursuant to Rule 13a-14(b)
or Rule 15d-14(b) of the
Exchange Act and
Section 1350 of Chapter 63
of Title 18 of the United
States Code
101.INS
Inline XBRL Instance
Document
101.SCH Inline XBRL Taxonomy
Extension Schema
Document
Incorporated By Reference
Form
8-K
File No.
000-19807
Exhibit
10.17
Filing Date
12/21/2016
Filed or
Furnished
Herewith
8-K
8-K
000-19807
10.1
12/6/2021
000-19807
10.19
12/21/2016
10-K
000-19807
10.46
12/22/2008
8-K
000-19807
10.1
2/9/2021
10-Q
000-19807
10.2
5/21/2021
X
X
X
X
X
X
X
X
X
95
Table of Contents
Exhibit
Number
101.CAL
101.DEF
101.LAB
Exhibit Description
Inline XBRL Taxonomy
Extension Calculation
Linkbase Document
Inline XBRL Taxonomy
Extension Definition
Linkbase Document
Inline XBRL Taxonomy
Extension Label Linkbase
Document
101.PRE Inline XBRL Taxonomy
Extension Presentation
Linkbase Document
104
Cover Page Interactive Data
File (embedded within the
Inline XBRL document)
Incorporated By Reference
Form
File No.
Exhibit
Filing Date
Filed or
Furnished
Herewith
X
X
X
X
*
Indicates a management contract, compensatory plan or arrangement.
We have requested confidential treatment for certain portions of this document pursuant to an application
†
for confidential treatment sent to the SEC. We omitted such portions from this filing and filed them separately with
the SEC.
96
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: December 13, 2021
SYNOPSYS, INC.
By:
/s/ Trac Pham
Trac Pham
Chief Financial Officer
(Principal Financial Officer)
97
Table of Contents
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Aart J. de Geus, Chi-Foon Chan and Trac Pham, and each of them, as his true and lawful attorneys-in-fact
and agents, with full power of substitution and reconstitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name
Title
Date
Co-Chief Executive Officer (Co-
Principal Executive Officer) and Chairman of
the Board of Directors
December 13, 2021
Co-Chief Executive Officer (Co-Principal
Executive Officer) and Director
December 13, 2021
/S/ AART J. DE GEUS
Aart J. de Geus
/S/ CHI-FOON CHAN
Chi-Foon Chan
/S/ TRAC PHAM
Trac Pham
/S/ SUDHINDRA KANKANWADI
Sudhindra Kankanwadi
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
/S/ JANICE D. CHAFFIN
Janice D. Chaffin
/S/ BRUCE R. CHIZEN
Bruce R. Chizen
/S/ MERCEDES JOHNSON
Mercedes Johnson
Director
Director
Director
/S/ CHRYSOSTOMOS L. NIKIAS
Chrysostomos L. Nikias
Director
/s/ JEANNINE SARGENT
Jeannine Sargent
/S/ JOHN G. SCHWARZ
John G. Schwarz
/S/ ROY VALLEE
Roy Vallee
Director
Director
Director
98
December 13, 2021
December 13, 2021
December 13, 2021
December 13, 2021
December 13, 2021
December 13, 2021
December 13, 2021
December 13, 2021
December 13, 2021