Segment Disclosure

3 Months Ended

Jan. 31, 2021

Segment Reporting [Abstract]

Segment Disclosure

Segment Disclosure

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:

	Three Months Ended   January 31,
	2021			2020
	(in thousands)
Total Segments:
Revenue	$	970,321		$	834,381
Adjusted operating income	286,820			186,933
Adjusted operating margin	30		%	22		%
Semiconductor & System Design:
Revenue	$	878,368		$	748,744
Adjusted operating income	278,876			178,851
Adjusted operating margin	32		%	24		%
Software Integrity:
Revenue	$	91,953		$	85,637
Adjusted operating income	7,944			8,082
Adjusted operating margin	9		%	9		%

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   January 31,
	2021		2020
	(in thousands)
Total segment adjusted operating income	$	286,820	$	186,933
Reconciling items:
Amortization of intangible expense	(20,276)		(22,533)
Stock-based compensation expense	(83,782)		(51,883)
Other	(34,414)		(25,001)
Total operating income	$	148,348	$	87,516

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   January 31,
	2021		2020
	(in thousands)
Revenue:
United States	$	468,701	$	408,489
Europe	105,175		94,370
China	115,768		67,320
Korea	98,254		89,515
Other	182,423		174,687
Consolidated	$	970,321	$	834,381

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.