Segment Disclosure

12 Months Ended

Oct. 31, 2023

Segment Reporting [Abstract]

Segment Disclosure

Segment Disclosure

Segment reporting is based upon the “management approach,” i.e., how management organizes our operating segments for which separate financial information is (1) available and (2) evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. Our CODM is our CEO.

As described in Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements, effective in the first quarter of fiscal 2023, we realigned our organizational structure to evaluate the results of our Design IP business separately. Our CODM now regularly reviews disaggregated segment information, assesses performance against our key growth strategies and allocates resources based on this new organizational structure.

As a result, effective in the first quarter of fiscal 2023, we changed our reportable segments from two reportable segments to the following three reportable segments: (1) Design Automation, which includes our advanced silicon design, verification products and services, system integration products and services, digital, custom and FPGA IC design software, verification software and hardware products, manufacturing software products and other; (2) Design IP, which includes our Design IP products; and (3) Software Integrity, which includes solutions that test software code for security vulnerabilities and quality defects, as well as professional and managed services. As such, prior period reportable segment results and related disclosures have been reclassified to reflect our current reportable segments.

The financial information provided to and used by the CODM to assist in making operational decisions, allocating resources, and assessing performance includes consolidated financial information as well as revenue, adjusted operating income, and adjusted operating margin information for the Design Automation, Design IP and Software Integrity segments, accompanied by disaggregated information relating to revenue by geographic region.

Information by reportable segment is as follows:

	Year Ended October 31,
	2023			2022			2021
	(in thousands)
Total Segments:
Revenue	$	5,842,619		$	5,081,542		$	4,204,193
Adjusted operating income	2,048,045			1,675,102			1,281,389
Adjusted operating margin	35		%	33		%	30		%
Design Automation:
Revenue	$	3,775,287		$	3,300,173		$	2,754,737
Adjusted operating income	1,439,666			1,206,561			924,605
Adjusted operating margin	38		%	37		%	34		%
Design IP:
Revenue	$	1,542,726		$	1,315,541		$	1,055,672
Adjusted operating income	532,055			421,547			318,473
Adjusted operating margin	34		%	32		%	30		%
Software Integrity:
Revenue	$	524,606		$	465,828		$	393,784
Adjusted operating income	76,324			46,994			38,311
Adjusted operating margin	15		%	10		%	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, changes in the fair value of deferred compensation plan, restructuring charges, and certain other operating expenses, are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income:

	Year Ended October 31,
	2023		2022		2021
	(in thousands)
Total segment adjusted operating income	$	2,048,045	$	1,675,102	$	1,281,389
Reconciling items:
Amortization of intangible assets	(102,889)		(96,690)		(82,380)
Stock-based compensation expense	(563,292)		(459,029)		(345,272)
Deferred compensation plan	(20,488)		68,778		(71,603)
Restructuring charges	(77,002)		(12,057)		(33,405)
Other	(15,115)		(14,066)		(13,939)
Total operating income	$	1,269,259	$	1,162,038	$	734,790

The CODM does not use total assets by segment to evaluate segment performance or allocate resources. As a result, total assets by segment are not disclosed.

In allocating revenue to particular geographic areas, the CODM considers where individual “seats” or licenses to our 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 are:

	Year Ended October 31,
	2023		2022		2021
	(in thousands)
Revenue:
United States	$	2,786,064	$	2,349,766	$	1,951,964
Europe	595,634		493,430		440,825
China	886,256		795,405		562,711
Korea	634,802		531,542		427,471
Other	939,863		911,399		821,222
Consolidated	$	5,842,619	$	5,081,542	$	4,204,193

	As of October 31,
	2023		2022
	(in thousands)
Property and Equipment, net:
United States	$	338,260	$	297,780
Other	219,001		185,520
Total	$	557,261	$	483,300

Geographic revenue data for multi-regional, multi-product transactions reflect internal allocations and are therefore subject to certain assumptions and to our allocation methodology.

One customer, including its subsidiaries, accounted for 12.4%, 11.7%, and 10.6% of our consolidated revenue in fiscal 2023, 2022, and 2021, respectively. One customer accounted for 10.9% of our accounts receivable as of October 31, 2023. No customer accounted for over 10% of our accounts receivable as of October 31, 2022.