Segment Disclosure

6 Months Ended

Apr. 30, 2020

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. Synopsys’ 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:



	Three Months Ended April 30,						Six Months Ended April 30,
	2020			2019			2020			2019
	(in thousands)
Total Segments:
Revenue	$	861,327		$	836,242		$	1,695,708		$	1,656,643
Adjusted operating income	221,404			209,836			408,337			410,788
Adjusted operating margin	26		%	25		%	24		%	25		%
Semiconductor & System Design:
Revenue	$	773,065		$	753,055		$	1,521,809		$	1,490,961
Adjusted operating income	209,692			201,406			388,543			396,724
Adjusted operating margin	27		%	27		%	26		%	27		%
Software Integrity:
Revenue	$	88,262		$	83,187		$	173,899		$	165,682
Adjusted operating income	11,712			8,430			19,794			14,064
Adjusted operating margin	13		%	10		%	11		%	8		%

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 compensation and 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:



	Three Months Ended April 30,						Six Months Ended April 30,
	2020			2019			2020			2019
	(in thousands)
Total segment adjusted operating income	$	221,404		$	209,836		$	408,337		$	410,788
Reconciling items:
Amortization of intangible expense	(24,095		)	(25,197		)	(46,628		)	(53,424		)
Stock-based compensation expense	(56,435		)	(36,914		)	(108,318		)	(75,374		)
Other	(14,979		)	(32,223		)	(39,980		)	(19,074		)
Total operating income	$	125,895		$	115,502		$	213,411		$	262,916

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 related to operations in the United States and other geographic areas were:



	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
	(in thousands)
Revenue:
United States	$	404,389	$	416,744	$	812,878	$	824,543
Europe	89,284		83,542		183,655		167,428
Korea	105,315		84,850		194,830		187,518
Japan	80,540		72,703		152,768		137,776
Asia Pacific and Other	181,799		178,403		351,577		339,378
Consolidated	$	861,327	$	836,242	$	1,695,708	$	1,656,643

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 greater than 10% of the Company's total revenue for the three and six months ended April 30, 2020 and for the three and six months ended April 30, 2019, respectively.