Segment Disclosure

6 Months Ended

Apr. 30, 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   April 30,						Six Months Ended   April 30,
	2021			2020			2021			2020
	(in thousands)
Total Segments:
Revenue	$	1,024,323		$	861,327		$	1,994,644		$	1,695,708
Adjusted operating income	317,240			221,404			604,060			408,337
Adjusted operating margin	31		%	26		%	30		%	24		%
Semiconductor & System Design:
Revenue	$	930,427		$	773,065		$	1,808,795		$	1,521,809
Adjusted operating income	308,816			209,692			587,692			388,543
Adjusted operating margin	33		%	27		%	32		%	26		%
Software Integrity:
Revenue	$	93,896		$	88,262		$	185,849		$	173,899
Adjusted operating income	8,424			11,712			16,368			19,794
Adjusted operating margin	9		%	13		%	9		%	11		%

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:

	Three Months Ended   April 30,				Six Months Ended   April 30,
	2021		2020		2021		2020
	(in thousands)
Total segment adjusted operating income	$	317,240	$	221,404	$	604,060	$	408,337
Reconciling items:
Amortization of intangible expense	(19,721)		(24,095)		(39,997)		(46,628)
Stock-based compensation expense	(79,586)		(56,435)		(163,368)		(108,318)
Other	(23,702)		(14,979)		(58,116)		(39,980)
Total operating income	$	194,231	$	125,895	$	342,579	$	213,411

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,
	2021		2020		2021		2020
	(in thousands)
Revenue:
United States	$	471,716	$	404,389	$	940,418	$	812,878
Europe	106,160		89,284		211,335		183,655
China	125,519		81,113		241,287		148,433
Korea	105,388		105,315		203,642		194,830
Other	215,540		181,226		397,962		355,912
Consolidated	$	1,024,323	$	861,327	$	1,994,644	$	1,695,708

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.