Synopsys (SNPS) 10-K risk factor changes: FY2021 vs FY2020

For example, we [added: 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 [removed: novel coronavirus] pandemic, governments and businesses have taken unprecedented actions to contain the virus, including [added: requiring] social distancing, [added: implementing] travel restrictions, [added: instituting] shelter-in-place orders and [added: various other] restrictions on non-essential businesses.

We are [removed: transitioning] [added: 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 [removed: different local] [added: applicable local, state] and national requirements.

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 [removed: pandemic.][added: 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 [removed: economy,] [added: 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 [removed: COVID-19,] [added: 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.

The growth of the [removed: electronic design automation (EDA)] [added: 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 [removed: companies,] [added: companies] and their customers.

The increasing complexity of designs of systems-on-chips, [removed: integrated circuits,] [added: ICs,] electronic systems and customers’ concerns about managing costs have previously led [added: to,] and in the future could lead [removed: to] [added: to,] a decrease in design starts and design activity in [removed: general, with some customers focusing more on one discrete phase of the design process or opting for less advanced, but less risky, manufacturing processes that may not require the most advanced EDA products.][added: general.]

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 [removed: pandemic.][added: pandemic or a sustained global supply chain disruption.]

We work closely with major foundries to ensure that our EDA, [removed: IP,] [added: IP] and [added: 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 [removed: products, which] [added: products work effectively together, as we] may each provide for the design of separate components on the same [removed: chip, work effectively together.][added: chip.]

[removed: If we fail to optimize our EDA and IP solutions for use with major foundries’ manufacturing] processes or [removed: major IP providers’ products, or if our access to such foundry 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.

Consolidation among our customers could lead to fewer customers or the loss of customers, increased customer bargaining [removed: power,] [added: 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 [removed: revenue.][added: revenues.]

If any of our competitors consolidate or acquire businesses and technologies [removed: which] [added: that] we do not offer, they may be able to offer a larger technology portfolio, additional support and service [removed: capability,] [added: capability] or lower prices, which could negatively impact our business and operating results.

Further economic instability could [added: 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.

There is uncertainty regarding how proposed, contemplated or future changes to the [removed: complex] laws and regulations governing our industry, the banking and financial services [removed: industry,] [added: industry] and the economy could affect our business.

[removed: In addition, economic] [added: 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 [removed: of] [added: of, among other things,] the COVID-19 [removed: pandemic] [added: pandemic, a sustained global semiconductor shortage, supply chain disruptions or delays,] and any disruption of international trade relationships such as tariffs, export [removed: licenses,] [added: licenses] or other government trade restrictions.

[removed: In] [added: 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.

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 [added: not be competitive or may] become [removed: uncompetitive and] 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 [added: Siemens EDA (formerly] Mentor Graphics [removed: Corporation (now part of Siemens AG).][added: Corporation).]

In the area of IP products, we compete against [removed: numerous other] [added: a growing number of] IP providers as well as our customers’ internally developed IP.

The [removed: industries in which we operate are highly competitive and 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.

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 [removed: products,] [added: products] and price and payment terms.

[removed: | • |] [added: -] Our ability to anticipate and lead critical development cycles and technological shifts, innovate rapidly and efficiently, improve our existing software and hardware [removed: products,] [added: products] and successfully develop or acquire such new products; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] 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 [removed: products,] [added: products] and the ability to purchase pools of technology; [removed: |]

[removed: | • |] [added: -] Our ability to manage an efficient supply chain to ensure availability of hardware products; [removed: |]

[removed: | • |] [added: -] Our ability to compete on the basis of payment terms; and [removed: |]

[removed: | • |] [added: -] Our ability to provide engineering and design consulting for our products. [removed: |]

[removed: | • |] [added: -] Ineffective or weaker legal protection of intellectual property rights; [removed: |]

[removed: | • |] [added: -] Uncertain economic and political conditions in [removed: countries] [added: regions] where we do [removed: business; |][added: business such as China or Europe;]

[removed: | • |] [added: -] Government trade restrictions, including tariffs, export [removed: licenses,] [added: controls,] or other trade barriers, and changes to existing trade arrangements between various countries such as China; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] Financial risks such as longer payment cycles and difficulty in collecting accounts receivable; [removed: |]

[removed: | • |] [added: -] Inadequate local infrastructure that could result in business disruptions; [removed: |]

[removed: | • |] [added: -] Additional taxes, [removed: interest,] [added: interest] and potential [removed: penalties,] [added: penalties] and uncertainty around changes in tax laws of various countries; and [removed: |]

[removed: | • |] [added: -] Other factors beyond our control such as natural disasters, terrorism, civil unrest, [removed: war,] [added: war] and infectious diseases and pandemics, including COVID-19. [removed: |]

There is inherent risk, based on the complex relationships between certain Asian countries such as [removed: China] [added: China, where we derive a growing percentage of our revenue,] and the United States, that political, [removed: diplomatic,] [added: diplomatic] or military events could result in trade disruptions, including tariffs, trade embargoes, export restrictions and other trade barriers.

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.

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.

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.

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.

Additionally, the banking and financial services industries are subject to complex laws and heavily regulated.

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.

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.

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

The industries in which we operate are highly competitive, with new competitors entering these markets both domestically and internationally.

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.

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.

A significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where

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.

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 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.

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.

- Incurrence of costs and use of additional resources to remedy issues identified prior to or after an acquisition;

If customers reduce or slow the need to upgrade or enhance their product offerings, our revenue and operating results may be adversely affected.

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.

source usage may not be eliminated and may, if not properly addressed, result in unanticipated obligations that harm our business.

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.

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.

We cannot be certain that these measures will be successful.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

manufacturing solutions are compatible with their manufacturing processes.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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In addition, in May 2020, the United States government placed further restrictions on certain entities on the Entity List to prevent them from sharing designs developed using U.S. software or technology with other entities on the Entity List and obtaining semiconductors manufactured with processes that use U.S. software and technology.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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[removed: 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 [added: develop advanced chips and electronic systems.]

We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we [added: generally] recognize our revenue for software licenses over the arrangement period, which typically approximates three years.

As we [added: generally] recognize our revenue for software licenses over the arrangement period, any potential impact related to COVID-19 may be delayed.

Fiscal [added: 2021,] 2020 and 2019 were 52-week years ending on October [added: 30, 2021, October] 31, 2020 and November 2, 2019, respectively.

Fiscal [removed: 2021] [added: 2022] will be a 52-week year.

[removed: Fiscal 2020 Financial] [added: Fiscal 2021 Financial] Performance Summary

[removed: | • |] [added: -] Total cost of revenue and operating expenses were [removed: $3.1 billion,] [added: $3,469.4 million,] an increase of [removed: $224.8] [added: $404.3] million or [removed: 8%,] [added: 13%,] primarily due to increases [added: of $342.2 million] in employee-related costs [removed: of $193.4 million,] resulting from headcount increases through organic growth and [removed: acquisitions, partially offset by a decrease in restructuring costs of $11.1 million; |][added: acquisitions.]

[removed: | • |] [added: -] Revenue recognition; [removed: |]

[removed: | • |] [added: -] Valuation of business combinations; and [removed: |]

[removed: | • |] [added: -] Income taxes. [removed: |]

[removed: Business] [added: Valuation of Business] Combinations

[removed: | • |] [added: -] future expected cash flows from software license sales, subscriptions, support agreements, consulting contracts and acquired developed technologies and patents; [removed: |]

[removed: | • |] [added: -] historical and expected customer attrition rates and anticipated growth in revenue from acquired customers; [removed: |]

[removed: | • |] [added: -] the expected use of the acquired assets; and [removed: |]

See Note [removed: 16] [added: 15] of *Notes to Consolidated Financial [removed: Statements.*][added: Statements* for more information.]

See Note 15 of [removed: the] *Notes to Consolidated Financial Statements* for additional information about our reportable segments and revenue by geographic regions.

[removed: | • | IP & System Integration includes our DesignWare® IP portfolio and system-level products and services. Under ASC 606, these] [added: 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. [removed: 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.” |]

[removed: | • | In the case of arrangements involving the sale of Hardware products, we generally have two performance obligations.] The [removed: 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. [removed: 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. |]

[removed: | • | 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. [removed: |]

[removed: | • | 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. [removed: 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. |]

[removed: Most of our] [added: Our] customer arrangements [added: can] involve [removed: hundreds of] [added: multiple] products and various license rights, and our customers [removed: bargain] [added: negotiate] with us over many aspects of these arrangements.

For example, they [removed: often demand] [added: 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.

| | [added: | |] Year Ended October 31, | | | | | | | | | | | | $ Change | | | | [added: | |] % Change | | | [removed: $ Change] | | | | [removed: % Change] | | [added: | | | | | | | | | | | |]

| | [added: | |] (dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | |]

| Semiconductor & System Design Segment | [added: | |] $ | [removed: 3,327.2] [added: 3,810.4] | | | [added: | |] $ | [removed: 3,026.1] [added: 3,327.2] | | | [removed: $] | [removed: 2,840.6] | | | [added: | | | |] $ | [removed: 301.1] [added: 483.2] | | | [removed: 10] | [added: | 15 | |] % | | [removed: $] | [removed: 185.5] | | | [removed: 7] | [removed: %] | [added: | | | | |]

| Software Integrity Segment | [added: | | 393.8 | | | | | |] 358.1 | | | | [removed: 334.6] | | | | [removed: 280.5] | | | | [removed: 23.5] [added: 35.7] | | | | [removed: 7] | [added: | 10 | |] % | | [removed: 54.1] | | | | [removed: 19] | [removed: %] | [added: | | | | |]

For example, we experience fluctuations in our [removed: revenue] [added: revenues] due to factors such as the timing of IP product sales, consulting projects, Flexible Spending Account (FSA) drawdowns, royalties, and hardware sales.

As [removed: revenue] [added: revenues] from IP products sales and hardware sales are recognized upfront, customer demand and timing requirements for such IP products and hardware [removed: have resulted] [added: could result] in increased variability of our total [removed: revenue.][added: revenues.]

The increase in [removed: total] [added: time-based products] revenue for fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019] [added: 2020] was primarily attributable to [removed: the continued organic growth of the business] [added: an increase] in [removed: time-based and upfront IP] [added: TSL] license [removed: products,] [added: revenue] and higher [removed: maintenance and service revenue.][added: renewals from arrangements booked in prior periods.]

| | [added: | |] Year Ended October 31, | | | | | | | | | | | | $ Change | | | | [added: | |] % Change | | | [removed: $ Change] | | | | [removed: % Change] | | [added: | | | | | | | | | | | |]

| | [added: | |] (dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | |]

| Percentage of total revenue | [removed: 64] | | [added: 63 | |] % | | [removed: 65] | | [added: 64 | |] % | | [removed: 74] | | [removed: %] | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

The increase in [removed: time-based products revenue] [added: adjusted operating income] for fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019] [added: 2020] was primarily [removed: attributable] [added: due] to an increase in [removed: TSL license] revenue from arrangements booked in prior periods.

| | [added: | |] Year Ended October 31, | | | | | | | | | | | | [added: | | |] $ Change | | | | [added: | |] % Change | | | [removed: $ Change] | | | | [removed: % Change] | | [added: | | | | | | | | |]

| | [added: | |] (dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | |]

| Percentage of total revenue | [added: | |] 20 | | % | | [removed: 18] | | [added: 20 | |] % | | [removed: 11] | | [removed: %] | | | | | | | | | | | | | | | [added: | | | | | | | | | | | |]

The increase in upfront products revenue for fiscal [removed: 2020] [added: 2021] compared to fiscal [removed: 2019] [added: 2020] was primarily due to an increase in the sale of IP products [added: and hardware products] driven by higher [removed: demand] [added: demands] from customers.

Such fluctuations will continue to be impacted by the timing of shipments [added: or FSA drawdowns] due to customer requirements.

| | [added: | |] Year Ended October 31, | | | | | | | | | | | | $ Change | | | | [added: | |] % Change | | | [removed: $ Change] | | | | [removed: % Change] | | [added: | | | | | | | | | | | |]

We provide

Our revenue growth from period to period is expected to vary based on the mix of our time based and upfront products.

*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.

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.

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.

- estimated obsolescence rates used in valuing technology related intangible assets;

- 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.

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.

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.

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.

- Operating income was $734.8 million, an increase of $114.6 million or 18%, as revenue growth exceeded the growth of costs and expenses.

- EDA software includes digital, custom and FPGA IC design software, verification products and

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.

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.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

develop advanced chips and electronic systems.

In addition, due to our adoption of Accounting Standard Codification 606 (ASC 606), "Revenue from Contracts with Customers", in the beginning of fiscal 2019, the way in which we are required to account for certain types of arrangements has increased the variability in our total revenue from period to period.

Nevertheless, the accounting impact has not affected the cash generated from our business.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

*Software Integrity.* This segment includes a broad portfolio of products and services such as leading quality testing technologies, automated analysis, and consulting experts.

Beginning in fiscal 2019, we launched the Polaris Software Integrity Platform™, an integrated cloud-based solution that unites key elements to provide an even more valuable way for developers to better develop personalized approaches for open source license compliance and detect and remediate known security vulnerabilities and quality defects early in the development process, thereby minimizing risk and maximizing productivity.

Fiscal 2018 was a 53-week year and ended on November 3, 2018.

In fiscal 2020, compared to fiscal 2019, our financial performance reflects the following:

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| • | Revenues were $3.7 billion, an increase of $324.6 million or 10%, primarily due to our continued organic growth; |

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| • | Operating income of $620.1 million, an increase of $99.9 million or 19%. |

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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Determining whether services and products are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

In reaching this conclusion, we considered the nature of our 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 the customers’ ability to meet the time to go to market with advanced products.

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

Effect of New Accounting Pronouncements Not Yet Adopted

We adopted new revenue guidance, ASC 606, at the beginning of fiscal 2019 under the modified retrospective method which has limited the comparability of prior year results in revenue and commission expense.

The comparative information for periods prior to fiscal 2019 has not been restated.

Our exposure to market risk for changes in interest rates relates to our cash, cash equivalents, [added: short-term investments,] and outstanding debt.

As of October 31, [removed: 2020,] [added: 2021,] all of our cash, cash equivalents, and debt were at short-term variable or fixed interest rates.

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 [removed: our investment policy.]

Our cash equivalents and debt by fiscal year of expected maturity and average interest rates as of October 31, [removed: 2020] [added: 2021] are as follows:

| | [added: | |] Maturing in Year Ending October 31, | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

| | [removed: 2021] | | [added: 2022] | | [removed: 2022] | | | | 2023 | | | [added: | | |] 2024 | | | [added: | | | 2025 | | | | | |] 2025 [removed: and] thereafter | | [added: | | | | | | | | | |] Total | | | | [added: | |] Fair Value | | |

| | [added: | |] (in thousands) | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

| Approx. average interest rate | [removed: 0.13] | | [added: 0.17 | |] % | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

| Short-term debt (variable rate): | | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | | | |]

| Term Loan | [added: | |] $ | [removed: 27,187] [added: 75,000] | | | [removed: $] | [removed: 75,000] | | | [removed: —] | | | [removed: —] | | | | | [added: | | | | | | | | | | | | | | | | | | | |] $ | [removed: 102,187] [added: 75,000] | | | [added: | |] $ | [removed: 102,187] [added: 75,000] | |

| Average interest rate | [added: | |] LIBOR + 1.125% | | | | | | | | | | | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

| Credit Facility in China | [removed: $] | [removed: 25,823] | | | | | | | | | | | | | | | [added: | | | | | | | | | |] $ | [removed: 25,823] [added: 25,094] | | | [added: | | | | | | | |] $ | [removed: 25,823] [added: 25,094] | | [added: | | | $ | 25,094 | |]

| Average interest rate | [added: | | | | | | | | | | | | | | | | | | | | | | | | | |] LPR + 0.74% of such rate | | | | | | | | | | | | | | | | | | | | | [removed: | |]

The duration of forward contracts usually ranges from one month to [removed: 22] [added: 23] months.

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, [removed: 2020,] [added: 2021,] the fair value of the contracts would decrease by approximately [removed: $7.6] [added: $13.5] million, and we would be required to pay approximately [removed: $7.6] [added: $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 [removed: $7.6] [added: $13.5] million that would offset the loss and negative cash flow on the maturing forward contracts.

Net unrealized gain of approximately [removed: $3.4] [added: $1.3] million and net unrealized loss of [removed: $4.5] [added: $3.4] million, net of tax, are included in accumulated other comprehensive income (loss) in our consolidated balance sheets as of October 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] respectively.

Information about the gross notional values of our foreign currency contracts as of October 31, [removed: 2020] [added: 2021] was as follows:

| | [added: | |] Gross [removed: Notional Amount in U.S.] [added: Notional Amount in U.S.] Dollars | | | | [removed: Average Contract Rate] | | [added: Average Contract Rate | | |]

| | [added: | |] (in thousands) | | | | | | [added: | | |]

| Forward Contract Values: | | | | | | | [added: | | | | |]

| British pound sterling | [removed: 21,826] | | [added: 29,994] | | [removed: 1.262] | | [added: | | 1.368 | | |]

*Equity Risk.* We had approximately [removed: $13.2] [added: $17.6] million and [removed: $11.0] [added: $13.2] million of non-marketable equity securities in privately held companies as of October 31, [removed: 2020] [added: 2021] and [removed: 2019,] [added: 2020,] respectively.

The investments that we do not have the ability to exercise significant influence [added: over] are accounted [added: for] using the measurement alternative when the fair value of the investment is not readily determinable.

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.

our investment policy.

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| Cash & Cash equivalents | | | $ | 1,416,810 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 1,416,810 | | | | | $ | 1,416,810 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| Japanese yen | | | $ | 311,030 | | | | | 110.672 | | |

| Indian rupee | | | 270,717 | | | | | | 79.144 | | |

| Euro | | | 135,099 | | | | | | 1.182 | | |

| Chinese renminbi | | | 97,860 | | | | | | 6.470 | | |

| Taiwanese dollar | | | 89,693 | | | | | | 27.866 | | |

| Canadian dollar | | | 68,780 | | | | | | 1.265 | | |

| Hungarian forint | | | 68,462 | | | | | | 315.169 | | |

| Korean won | | | 50,453 | | | | | | 1,186.931 | | |

| Israel shekel | | | 25,502 | | | | | | 3.217 | | |

| Armenian dram | | | 9,799 | | | | | | 510.264 | | |

| Singapore dollar | | | 9,503 | | | | | | 1.361 | | |

| Swiss franc | | | 9,260 | | | | | | 0.923 | | |

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| | | | $ | 1,176,152 | | | | | | | |

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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| Cash & Cash equivalents | $ | 1,097,122 | | | | | | | | | | | | | | | $ | 1,097,122 | | | $ | 1,097,122 | |

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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| Japanese yen | $ | 472,000 | | | 104.706 | |

| Indian rupee | 138,080 | | | | 76.984 | |

| Euro | 76,076 | | | | 1.141 | |

| Hungarian forint | 70,000 | | | | 308.939 | |

| Canadian dollar | 45,658 | | | | 1.339 | |

| Chinese renminbi | 43,130 | | | | 6.725 | |

| Taiwanese dollar | 38,735 | | | | 28.751 | |

| Korean won | 21,547 | | | | 1,183.202 | |

| Armenian dram | 21,243 | | | | 479.960 | |

| Israel shekel | 20,116 | | | | 3.369 | |

| Singapore dollar | 8,277 | | | | 1.359 | |

| Swiss franc | 4,545 | | | | 0.909 | |

| | $ | 981,233 | | | | |

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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We have approximately [removed: 120] [added: 125] offices worldwide.

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 [removed: approaches from designers.][added: approaches.]

Designers have turned to new manufacturing techniques to solve these problems, such as multiple-patterning lithography and [removed: FinFET] [added: FinFET, or 3D] transistors, which in turn have introduced new challenges to design and production.

The [removed: designs] [added: design] of these chips and systems [removed: are] [added: is] extremely complex and [removed: necessitate] [added: necessitates] state-of-the-art [removed: design] solutions.

Over the past several years, market verticals including AI, 5G, automotive and cloud computing infrastructure have contributed to [added: the] ongoing demand for our products and services.

A similar dynamic is at work in the software arena, whether [added: the software is] embedded on a chip or [removed: as a standalone.][added: used in other applications.]

Our wide range of products help [removed: designers] 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 [removed: design] data, adding intelligence to the design process, facilitating reuse of past designs, and reducing errors.

Software developers are responsible for writing code that not only accomplishes [removed: their] [added: 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 [removed: their] 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.

[removed: To the extent that] [added: 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.

[removed: | • |] [added: -] Digital and custom IC design and field programmable gate array (FPGA) design, which includes software tools to design an IC; [removed: |]

[removed: | • |] [added: -] Verification, which includes technology to verify that an IC design behaves as intended; and [removed: |]

[removed: | • |] [added: -] Manufacturing, which includes products that both enable early manufacturing process development and convert IC design layouts into the masks used to manufacture the chips. [removed: |]

With innovative technologies, a common foundation, and flexibility, our Fusion Design Platform helps reduce design times, decrease uncertainties in [removed: the] design steps, and minimize the risks inherent in advanced, complex IC design.

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, [removed: and] IC Validator physical [removed: verification.][added: 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.]

Platform tools include [removed: HSPICE® and FineSim® SPICE circuit simulators, CustomSim™ FastSPICE,] Custom Compiler layout and schematic editor, StarRC parasitic extraction, and IC Validator physical verification.

Our Silicon Lifecycle Management Platform is a new data analytics-driven platform that uses [removed: on-chip monitor] [added: in-chip monitoring] and [removed: sensor data] [added: sensing] to optimize all phases of the silicon lifecycle—from design and manufacturing to in-field deployment and maintenance.

[removed: By providing consistent] 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.

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] VCS® functional verification solution, our comprehensive RTL and gate-level simulation technology, including Fine-Grained [removed: Parallelism (FGP); |][added: Parallelism;]

[removed: | • |] [added: -] Verdi® automated debug system, the industry’s most comprehensive SoC debug; [removed: |]

[removed: | • |] [added: -] VC Formal™, our next-generation formal verification product; [removed: |]

[removed: | • |] [added: -] ZeBu® emulation systems, which use high-performance hardware to emulate SoC designs so that designers can accelerate [added: hardware, software and power] verification of large complex SoCs and perform earlier verification [added: and optimization] of the SoC together with software; and [removed: |]

Our Manufacturing Solutions include Sentaurus™ technology computer-aided design [removed: (TCAD)] device and process simulation products, Proteus™ mask synthesis tools, CATS® mask data preparation software, Yield Explorer® Odyssey, [removed: and] Yield-Manager® yield management [removed: solutions.][added: solutions and QuantumATK atomic-scale modeling software.]

We provide the [removed: largest and broadest] [added: broadest, most comprehensive] portfolio of high-quality, silicon-proven IP solutions for SoCs.

[removed: | • |] [added: -] High-quality solutions for widely used wired and wireless interfaces such as USB, PCI Express, DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth Low Energy; [removed: |]

[removed: | • |] [added: -] Logic libraries and embedded memories, including memory compilers, non-volatile memory, standard cells, and integrated test and repair; [removed: |]

[removed: | • |] [added: -] Processor solutions, including configurable ARC® processor cores, software, Embedded Vision processor cores and application-specific instruction-set processor [removed: (ASIP)] tools for embedded applications; [removed: |]

[removed: | • |] [added: -] IP subsystems for audio, sensor, and data fusion functionality that combine IP blocks, an efficient processor, and software into an integrated, pre-verified subsystem; [removed: |]

[removed: | • |] [added: -] Security IP solutions, including cryptographic cores and software, security subsystems, platform security and content protection IP; [removed: |]

[removed: | • |] [added: -] An industry-leading offering of IP for the automotive market, optimized for strict functional safety and reliability standards such as ISO 26262; [removed: |]

[removed: | • |] [added: -] Analog IP including data converters and audio codecs; and [removed: |]

[removed: | • |] [added: -] SoC infrastructure IP, datapath and building block IP, mathematical and floating-point components, Arm® AMBA® interconnect fabric and peripherals, and verification IP. [removed: |]

[removed: | • |] [added: -] HAPS® FPGA-based prototyping systems, which are integrated and scalable hardware-software solutions for early software development and faster time to market; [removed: |]

[removed: | • |] [added: -] 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 [removed: |]

[removed: | • |] [added: -] Platform Architect solution, which provides for early analysis and optimization of multi-core SoC architectures for performance and power. [removed: |]

[removed: These] [added: The] testing tools, services, and programs enable our customers to manage open source license compliance and [removed: detect] [added: 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 [removed: training.][added: training offered as on-premises and cloud-based delivery.]

[removed: | • |] [added: -] 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; [removed: |]

These devices are manufactured using masks to direct beams of light onto a wafer of silicon.

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

Services, Microsoft Azure, Google Cloud and Alibaba Cloud, to further enhance our EDA-on-cloud products and platforms.

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.

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.

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.

By providing consistent

- Other principal individual verification solutions, including the PrimeSim Continuum solution and the PrimeWave™ design environment.

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 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.

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;

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.

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,

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.

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

While we experienced an increase in employee turnover in 2021, our turnover rate remains notably lower than our competitive benchmarks.

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

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

In 2020, we launched two new solutions to address some of the most pressing challenges facing the industry.

3DIC Compiler is the industry’s first next-generation chip packaging solution, aimed at enabling customers to combine or stack multiple dice on a single chip.

Our new DSO.ai™ solution utilizes artificial intelligence to autonomously learn from the process of IC design and further enable design teams to more efficiently reach design targets (performance, power, and area).

This platform currently includes the PrimeShield™ design robustness solution, the SiliconDash data analytics engine, Yield Explorer® design yield analysis, and process, voltage and temperature sensors, with additional capabilities to be rolled out over time.

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| • | Other principal individual verification solutions, including CustomSim™, FastSPICE and FineSim® SPICE/FastSPICE circuit simulation and analysis products, HSPICE® circuit simulator, and CustomExplorer™ Ultra mixed-signal regression and analysis environment. |

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In July 2017, the HTA issued a final assessment against [removed: Synopsys' Hungarian subsidiary (Synopsys Hungary)] [added: Synopsys Hungary] for fiscal years 2011 through 2013.

On August 2, 2017, Synopsys Hungary filed a claim contesting the final assessment with the [removed: Hungarian] Administrative [removed: Court (the Court).][added: Court.]

On April 30, 2019, the [added: Administrative] Court ruled against Synopsys Hungary.

The [added: Administrative] Court's opinion was received on May 16, 2019.

In the second quarter of 2019, as a result of the [added: 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 [removed: issued a ruling from the bench to remand] [added: remanded] the case to the [removed: Hungarian][added: Administrative Court for further proceedings.]

We [removed: expect to receive] [added: 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.

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

Administrative Court for further proceedings.

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[removed: FORM 10-K][added: FORM 10-K]

| ☒ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

For the fiscal year [removed: ended October] [added: ended October] 31, [removed: 2020][added: 2021]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

Commission File [removed: Number 0-19807][added: Number 0-19807]

[removed: ][added: ]

| Delaware | | | | [added: | | | | | | | |] 56-1546236 | | [added: | | | |]

| (State or other jurisdiction of incorporation or organization) | | | | [added: | | | | | | | |] (I.R.S. Employer Identification No.) | | [added: | | | |]

| 690 East Middlefield Road, | [added: | |] Mountain View, | [added: | |] California | | [added: | | | |] 94043 | | [added: | | | |]

| (Address of principal executive offices) | | | | [added: | | | | | | | |] (Zip Code) | | [added: | | | |]

[removed: (650) 584-5000][added: (650) 584-5000]

| Title of Each Class | [added: | |] Trading Symbol(s) | [added: | |] Name of Each Exchange on Which Registered | [added: | |]

| Common [removed: Stock,] [added: Stock (par value of] $0.01 [removed: par value] [added: per share)] | [added: | |] SNPS | [added: | |] Nasdaq Global Select Market | [added: | |]

| Large accelerated filer | | [added: | | | |] ý | | [added: | | | |] Accelerated Filer | | [added: | | | |] ☐ | [added: | |]

| Non-accelerated filer | | [added: | | | |] ☐ | | [added: | | | |] Smaller reporting company | | [added: | | | |] ☐ | [added: | |]

| | | | | [added: | | | | | | | |] Emerging growth company | | [added: | | | |] ☐ | [added: | |]

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 [removed: $17.7] [added: $27.5] billion.

Aggregate market value excludes an aggregate of approximately [removed: 38.9] [added: 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.

On December [removed: 10, 2020, 153,032,497] [added: 8, 2021, 153,438,336] shares of the registrant’s Common Stock, [removed: $0.01] par [removed: value,] [added: value of $0.01 per share,] were outstanding.

Portions of the registrant’s Proxy Statement relating to the registrant’s [removed: 2021] [added: 2022] Annual Meeting of Stockholders, scheduled to be held on April [removed: 8, 2021,] [added: 12, 2022,] are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.

Fiscal year [removed: ended October] [added: ended October] 31, [removed: 2020][added: 2021]

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| Item 1. | | [removed: [Business](#s1E1C7EFC65F7525CBA86403F62C3771F)] | | [removed: [3](#s1E1C7EFC65F7525CBA86403F62C3771F)] | [added: | [Business](#i8d49c110af324515b9e0fdba8a8d58b7_16) | | | | | | [3](#i8d49c110af324515b9e0fdba8a8d58b7_16) | | |]

| Item 1A. | | [added: | | | |] [Risk [removed: Factors](#s49B801F30F2C508DBB789A0974C84B97)] [added: Factors](#i8d49c110af324515b9e0fdba8a8d58b7_19)] | | [removed: [15](#s49B801F30F2C508DBB789A0974C84B97)] | [added: | | | [15](#i8d49c110af324515b9e0fdba8a8d58b7_19) | | |]

| Item 1B. | | [added: | | | |] [Unresolved Staff [removed: Comments](#s6EEB11343A495F3D8F41E1A2A80276D6)] [added: Comments](#i8d49c110af324515b9e0fdba8a8d58b7_22)] | | [removed: [27](#s6EEB11343A495F3D8F41E1A2A80276D6)] | [added: | | | [29](#i8d49c110af324515b9e0fdba8a8d58b7_22) | | |]

| Item 2. | | [removed: [Properties](#s522A84D8C08E59E7BBB2860CD6666BA7)] | | [removed: [28](#s522A84D8C08E59E7BBB2860CD6666BA7)] | [added: | [Properties](#i8d49c110af324515b9e0fdba8a8d58b7_25) | | | | | | [29](#i8d49c110af324515b9e0fdba8a8d58b7_25) | | |]

| Item 3. | | [added: | | | |] [Legal [removed: Proceedings](#sC8CCA3F36A3B55C29659FD139D03AEBE)] [added: Proceedings](#i8d49c110af324515b9e0fdba8a8d58b7_28)] | | [removed: [28](#sC8CCA3F36A3B55C29659FD139D03AEBE)] | [added: | | | [29](#i8d49c110af324515b9e0fdba8a8d58b7_28) | | |]

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| Item 5. | | [added: | | | |] [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s464EBEB4A9E45D768F308034067ED40E)] [added: Securities](#i8d49c110af324515b9e0fdba8a8d58b7_37)] | | [removed: [30](#s464EBEB4A9E45D768F308034067ED40E)] | [added: | | | [31](#i8d49c110af324515b9e0fdba8a8d58b7_37) | | |]

| Item 7. | | [added: | | | |] [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s436C3D37B3A850AEAE41C7DCEBC0AFF0)] [added: Operations](#i8d49c110af324515b9e0fdba8a8d58b7_43)] | | [removed: [32](#s436C3D37B3A850AEAE41C7DCEBC0AFF0)] | [added: | | | [32](#i8d49c110af324515b9e0fdba8a8d58b7_43) | | |]

| Item 7A. | | [added: | | | |] [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sBB105830C9F65F90B035B9C76FC2322B)] [added: Risk](#i8d49c110af324515b9e0fdba8a8d58b7_76)] | | [removed: [47](#sBB105830C9F65F90B035B9C76FC2322B)] | [added: | | | [44](#i8d49c110af324515b9e0fdba8a8d58b7_76) | | |]

| Item 8. | | [added: | | | |] [Financial Statements and Supplementary [removed: Data](#sBBFA1996982D50CFB405F7A0F83D04A5)] [added: Data](#i8d49c110af324515b9e0fdba8a8d58b7_79)] | | [removed: [50](#sBBFA1996982D50CFB405F7A0F83D04A5)] | [added: | | | [47](#i8d49c110af324515b9e0fdba8a8d58b7_79) | | |]

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| Item 9A. | | [added: | | | |] [Controls and [removed: Procedures](#s258C0D896E9558F99E71EED4532BA2BB)] [added: Procedures](#i8d49c110af324515b9e0fdba8a8d58b7_193)] | | [removed: [92](#s258C0D896E9558F99E71EED4532BA2BB)] | [added: | | | [91](#i8d49c110af324515b9e0fdba8a8d58b7_193) | | |]

| Item 9B. | | [added: | | | |] [Other [removed: Information](#s253E0ACD978D5946804F89F65104D368)] [added: Information](#i8d49c110af324515b9e0fdba8a8d58b7_196)] | | [removed: [92](#s253E0ACD978D5946804F89F65104D368)] | [added: | | | [91](#i8d49c110af324515b9e0fdba8a8d58b7_196) | | |]

| [removed: [PART III](#sE97B5DB48FA55BA7BD9C26D5E91881B9)] [added: [PART III](#i8d49c110af324515b9e0fdba8a8d58b7_199)] | | | | | [added: | | | | | | | | | |]

| Item 10. | | [added: | | | |] [Directors, Executive Officers and Corporate [removed: Governance](#s4CF0FA6943EF564AA554311CE49395DC)] [added: Governance](#i8d49c110af324515b9e0fdba8a8d58b7_202)] | | [removed: [94](#s4CF0FA6943EF564AA554311CE49395DC)] | [added: | | | [92](#i8d49c110af324515b9e0fdba8a8d58b7_202) | | |]

| Item 11. | | [added: | | | |] [Executive [removed: Compensation](#s548D4A2C73FE5DD7B01EE54C279DA394)] [added: Compensation](#i8d49c110af324515b9e0fdba8a8d58b7_205)] | | [removed: [94](#s548D4A2C73FE5DD7B01EE54C279DA394)] | [added: | | | [92](#i8d49c110af324515b9e0fdba8a8d58b7_205) | | |]

| Item 12. | | [added: | | | |] [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s38B9BE27ABDD5B7EB5553F633288A67A)] [added: Matters](#i8d49c110af324515b9e0fdba8a8d58b7_208)] | | [removed: [94](#s38B9BE27ABDD5B7EB5553F633288A67A)] | [added: | | | [92](#i8d49c110af324515b9e0fdba8a8d58b7_208) | | |]

| Item 13. | | [added: | | | |] [Certain Relationships and Related Transactions, and Director [removed: Independence](#sCF4BC6532EAF5759BAC11484B83B7E59)] [added: Independence](#i8d49c110af324515b9e0fdba8a8d58b7_211)] | | [removed: [94](#sCF4BC6532EAF5759BAC11484B83B7E59)] | [added: | | | [92](#i8d49c110af324515b9e0fdba8a8d58b7_211) | | |]

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| [PART I](#i8d49c110af324515b9e0fdba8a8d58b7_13) | | | | | | | | | | | | | | |

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| [PART II](#i8d49c110af324515b9e0fdba8a8d58b7_34) | | | | | | | | | | | | | | |

| Item 6. | | | | | | [\[Reserved\]](#i8d49c110af324515b9e0fdba8a8d58b7_40) | | | | | | [32](#i8d49c110af324515b9e0fdba8a8d58b7_40) | | |

| Item 9C. | | | | | | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i8d49c110af324515b9e0fdba8a8d58b7_8246337210291) | | | | | | [91](#i8d49c110af324515b9e0fdba8a8d58b7_8246337210291) | | |

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| [PART IV](#i8d49c110af324515b9e0fdba8a8d58b7_217) | | | | | | | | | | | | | | |

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| [SIGNATURES](#i8d49c110af324515b9e0fdba8a8d58b7_223) | | | | | | | | | | | | [97](#i8d49c110af324515b9e0fdba8a8d58b7_223) | | |

- the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations;

- our ability to attract and retain senior management and key employees;

- the impact of tax laws and changes in such laws on our business;

- regulatory changes in the United States and other regions in which we operate;

qualified in their entirety by these cautionary statements.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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| [PART I](#sDEC9A972CDC158C28CCFFF5DB3BE128E) | | | | |

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| [PART II](#s2029AAE42EC35737A40518751AFC1BB9) | | | | |

| Item 6. | | [Selected Financial Data](#sF19F9DF120C95CCA8118CDC1C20CB30E) | | [32](#sF19F9DF120C95CCA8118CDC1C20CB30E) |

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| [PART IV](#sED62F76B1A85585BAA403C2DF2910AC8) | | | | |

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| [SIGNATURES](#sC1A3862D9D7051ECBA3EA27E9542D89E) | | | | [99](#sC1A3862D9D7051ECBA3EA27E9542D89E) |

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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[removed: Our principal offices are located in] [added: The leased property consists of] two adjacent [removed: buildings in Mountain View, California,] [added: buildings,] which together provide approximately 341,000 square feet of available space.

[removed: This space is leased through August 2030, and we] [added: 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 currently lease [removed: 29] [added: 31] other offices throughout the United States, and own two office buildings in Oregon, one of which is leased to a third party.

We lease additional space for sales, service, and research and development activities for both of our business segments in [removed: approximately 29] [added: 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.

Our principal offices are in Mountain View, California and are leased through August 2030.

We currently sublease one of the two buildings to a third party under a lease agreement that runs through July 2024.

In March 2021, we leased approximately 161,000 square feet of space in Shanghai, which we relocated to in August 2021.

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Beginning on March 2021, we will lease approximately 181,000 square feet of space in Shanghai with a term of ten years, and plan to vacate our existing lease in Shanghai, China.

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Our common stock trades on the Nasdaq Global Select Market under the symbol “SNPS.” As of December [removed: 10, 2020,] [added: 8, 2021,] we had [removed: 242] [added: 228] stockholders of record.

The graph assumes that $100 was invested in Synopsys common stock on October [removed: 31, 2015] [added: 28, 2016] (the last trading day before the beginning of our fifth preceding fiscal year) and in each of the indexes on October [removed: 31, 2015] [added: 28, 2016] (the closest month end) and that all dividends were reinvested.

[removed: ][added: ]

| *$100 invested on October [removed: 31, 2015] [added: 28, 2016] in stock or index, including reinvestment of dividends. [added: Fiscal year ending October 30.] | [added: | |]

Our Board [removed: replenished] [added: approved a replenishment of] the stock repurchase program up to $500.0 million on June [removed: 19, 2020.][added: 17, 2021.]

As of October 31, [removed: 2020, $457.9] [added: 2021, $110.0] million remained available for future repurchases under the program.

In [removed: December 2019,] [added: August 2021,] we entered [added: into] an accelerated share repurchase agreement (the [removed: December 2019] [added: August 2021] ASR) to repurchase an aggregate of [removed: $100.0] [added: $175.0] million of our common stock.

Pursuant to the [removed: December 2019] [added: August 2021] ASR, we made a prepayment of [removed: $100.0] [added: $175.0] million to receive initial [removed: share] deliveries of shares valued at [removed: $80.0] [added: $140.0] million.

The remaining balance of [removed: $20.0] [added: $35.0] million was settled in [removed: February 2020.][added: November 2021.]

Total shares purchased under the [removed: December 2019] [added: August 2021] ASR were approximately [removed: 0.7] [added: 0.5] million shares, at an average purchase price of [removed: $149.75] [added: $325.00] per share.

The table below sets forth information regarding our repurchases of our common stock during the three months ended October 31, [removed: 2020:][added: 2021:]

| Period | [removed: Total number of shares purchased] [added: | | Total number of shares purchased] (1) | | | [removed: Average price paid per] [added: | | | Average price paid per] share (1) | | | | [removed: Total number of shares purchased as] [added: | | Total number of shares purchased as] part [removed: of publicly announced programs] [added: of publicly announced programs] | | | [added: | | |] Maximum [removed: dollar value] [added: dollar value] of [removed: shares that] [added: shares that] may yet [removed: be purchased under the programs] [added: be purchased under the programs] | | |

| Month #1 | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Month #2 | | | | | | | | | | | | | | [added: | | | | | | | | | |]

| Month #3 | | | | | | | | | | | | | | [added: | | | | | | | | | |]

[removed: |] (1) [removed: |] Amounts are calculated based on the settlement date. [removed: |]

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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.

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| August 1, 2021 through September 4, 2021 | | | 530,329 | | | | | | $ | 329.98 | | | | | 530,329 | | | | | | $ | 150,000,000 | |

| September 5, 2021 through October 2, 2021 | | | — | | | | | | $ | — | | | | | — | | | | | | $ | 150,000,000 | |

| October 3, 2021 through October 30, 2021 | | | 136,152 | | | | | | $ | 293.78 | | | | | — | | | | | | $ | 110,001,399 | |

| Total | | | 666,481 | | | | | | $ | 322.59 | | | | | 530,329 | | | | | | $ | 110,001,399 | |

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[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

The program does not obligate us to acquire any particular amount of common stock, and the program may be suspended or terminated at any time by our Chief Financial Officer or our Board.

We repurchase shares to offset dilution caused by ongoing stock issuances from existing equity plans for equity compensation awards and issuances related to acquisitions, and when management believes it is a good use of cash.

Repurchases are transacted in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the Exchange Act) and may be made through any means including, but not limited to, open market purchases, plans executed under Rule 10b5-1(c) of the Exchange Act and structured transactions.

In February 2020, we entered into an accelerated share repurchase agreement (the February 2020 ASR) to repurchase an aggregate of $100.0 million of our common stock.

Pursuant to the February 2020 ASR, we made a prepayment of $100.0 million to receive initial share deliveries of shares valued at $80.0 million.

The remaining balance of $20.0 million was settled in May 2020.

Total shares purchased under the February 2020 ASR were approximately 0.7 million shares, at an average purchase price of $140.41 per share.

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| August 2, 2020 through September 5, 2020 | 2,178 | | | $ | 229.50 | | | 2,178 | | | $ | 499,500,159 | |

| September 6, 2020 through October 3, 2020 | 178,918 | | | $ | 203.88 | | | 178,918 | | | $ | 463,022,956 | |

| October 4, 2020 through October 31, 2020 | 23,641 | | | $ | 215.75 | | | 23,641 | | | $ | 457,922,451 | |

| Total | 204,737 | | | $ | 205.52 | | | 204,737 | | | $ | 457,922,451 | |

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| | Fiscal Year Ended October 31,(1) | | | | | | | | | | | | | | | | | | |

| | 2020 | | | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | |

| | (in thousands, except per share data) | | | | | | | | | | | | | | | | | | |

| Revenue | $ | 3,685,281 | | | $ | 3,360,694 | | | $ | 3,121,058 | | | $ | 2,724,880 | | | $ | 2,422,532 | |

| Income before provisions for income taxes | 638,159 | | | | 545,506 | | | | 363,543 | | | | 383,098 | | | | 329,548 | | |

| Provision (benefit) for income taxes(2) | (25,288 | | ) | | 13,139 | | | | (68,975 | | ) | | 246,535 | | | | 62,722 | | |

| Net income | 663,447 | | | | 532,367 | | | | 432,518 | | | | 136,563 | | | | 266,826 | | |

| Net income (loss) attributed to non-controlling interest | (900 | | ) | | — | | | | — | | | | — | | | | — | | |

| Net income attributed to Synopsys | 664,347 | | | | 532,367 | | | | 432,518 | | | | 136,563 | | | | 266,826 | | |

| Net income per share: | | | | | | | | | | | | | | | | | | | |

| Basic | 4.40 | | | | 3.55 | | | | 2.90 | | | | 0.91 | | | | 1.76 | | |

| Diluted | 4.27 | | | | 3.45 | | | | 2.82 | | | | 0.88 | | | | 1.73 | | |

| Working capital (deficit) | 409,295 | | | | (13,536 | | ) | | (558,618 | | ) | | 68,484 | | | | 1,992 | | |

| Total assets | 8,030,062 | | | | 6,405,160 | | | | 6,145,974 | | | | 5,396,414 | | | | 5,240,365 | | |

| Long-term debt | 100,823 | | | | 120,093 | | | | 125,535 | | | | 134,063 | | | | — | | |

| Stockholders’ equity | 4,912,367 | | | | 4,088,876 | | | | 3,485,015 | | | | 3,279,724 | | | | 3,195,146 | | |

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| (1) | 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 2018 was a 53-week year and ended on November 3, 2018. Fiscal 2020, 2019, 2017, and 2016 were 52-week years ending on October 31, 2020, November 2, 2019, October 28, 2017 and October 29, 2016, respectively. |

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| (2) | Includes $13.2 million, $10.9 million, $14.7 million, $7.1 million, and $16.5 million in net tax benefits from tax settlements received in fiscal 2020, 2019, 2018, 2017, and 2016, respectively. Fiscal 2018 additionally includes a $57.8 million net benefit from tax reform and tax restructuring. Fiscal 2017 additionally includes a $166.2 million expense from our repatriation of foreign earnings. See Note 13 of *Notes to Consolidated Financial Statements*. |

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We have audited the accompanying consolidated balance sheets of Synopsys, Inc. and subsidiaries (the Company) as of October [removed: 31, 2020] [added: 30, 2021] and [removed: November 2, 2019,] [added: October 31, 2020,] the related consolidated statements of [removed: operations,] [added: income,] comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October [removed: 31, 2020,] [added: 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 [removed: 31, 2020,] [added: 30, 2021,] based on criteria established in [removed: *Internal Control* — *Integrated] [added: Internal Control – Integrated] Framework [removed: (2013)*] [added: (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 [removed: 31, 2020] [added: 30, 2021] and [removed: November 2, 2019,] [added: 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 [removed: 31, 2020,] [added: 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 [removed: 31, 2020] [added: 30, 2021] based on criteria established in [removed: *Internal Control* — *Integrated] [added: Internal Control – Integrated] Framework [removed: (2013)*] [added: (2013)] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in [removed: Notes] [added: Note] 2 [removed: and 3] 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 [removed: Board’s] [added: Board] (FASB) Accounting Standards [removed: Update (ASU) 2016-02, “Leases (Topic 842),” and changed its method of accounting for revenue from contracts with customers and sales commissions as of November 4, 2018 due to the adoption of FASB’s Accounting Standards] Codification (ASC) [removed: Topic 606, “*Revenue from Contracts with Customers* (ASC 606),” and Subtopic 340-40, “Other Assets and Deferred Costs - Contracts with Customers (ASC 340-40).”][added: 842, Leases (“ASC 842”).]

[removed: Basis] [added: *Basis] for [removed: Opinions][added: 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 [removed: Management’s] [added: Management's] Report on Internal Control Over Financial [removed: Reporting appearing under item 9A(b).][added: Reporting.]

| | [added: | |] October 31, | | | | | | | [added: | |]

| | [added: | | 2021 | | | | | |] 2020 | | | | [added: | |] 2019 | | |

| ASSETS | | | | | | | | [added: | | | |]

| Current assets: | | | | | | | | [added: | | | |]

| Cash and cash equivalents | [added: | |] $ | [removed: 1,235,653] [added: 1,432,840] | | | [added: | |] $ | [removed: 728,597] [added: 1,235,653] | |

| Accounts receivable, net | [removed: 780,709] | | [added: 568,501] | | [removed: 553,895] | | | [added: | 780,709 | | |]

| Inventories, net | [removed: 192,333] | | [added: 229,023] | | [removed: 141,518] | | | [added: | 192,333 | | |]

| Income taxes receivable and prepaid taxes | [removed: 32,355] | | [added: 32,411] | | [removed: 24,855] | | | [added: | 32,355 | | |]

| Prepaid and other current assets | [removed: 308,167] | | [added: 397,617] | | [removed: 290,052] | | | [added: | 308,167 | | |]

| Total current assets | [removed: 2,549,217] | | [added: 2,808,341] | | [removed: 1,738,917] | | | [added: | 2,549,217 | | |]

| Property and equipment, net | [removed: 483,818] | | [added: 472,398] | | [removed: 429,532] | | | [added: | 483,818 | | |]

| Operating lease right-of-use assets, net | [removed: 465,818] | | [added: 493,251] | | [removed: —] | | | [added: | 465,818 | | |]

| Goodwill | [removed: 3,365,114] | | [added: 3,575,785] | | [removed: 3,171,179] | | | [added: | 3,365,114 | | |]

| Intangible assets, net | [removed: 254,322] | | [added: 279,132] | | [removed: 279,374] | | | [added: | 254,322 | | |]

| Deferred income taxes | [removed: 497,546] | | [added: 612,655] | | [removed: 390,129] | | | [added: | 497,546 | | |]

| Other long-term [removed: assets] [added: assets:] | [removed: 405,951] | | | | [removed: 380,526] | | | [added: | | | | | | | | | | | | | | | | | | | | | |]

| Total assets | [added: | |] $ | [removed: 8,030,062] [added: 8,752,260] | | | [added: | |] $ | [removed: 6,405,160] [added: 8,030,062] | |

| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | [added: | | | |]

| Current liabilities: | | | | | | | | [added: | | | |]

| Accounts payable and accrued liabilities | [added: | |] $ | [removed: 623,664] [added: 694,748] | | | [added: | |] $ | [removed: 506,459] [added: 623,664] | |

| Operating lease liabilities, current | [removed: 73,173] | | [added: 79,678] | | [removed: —] | | | [added: | 73,173 | | |]

| Accrued income taxes | [removed: 27,738] | | [added: 46,443] | | [removed: 15,904] | | | [added: | 27,738 | | |]

| Deferred revenue | [removed: 1,388,263] | | [added: 1,517,623] | | [removed: 1,212,476] | | | [added: | 1,388,263 | | |]

| Short-term debt | [removed: 27,084] | | [added: 74,992] | | [removed: 17,614] | | | [added: | 27,084 | | |]

| Total current liabilities | [removed: 2,139,922] | | [added: 2,413,484] | | [removed: 1,752,453] | | | [added: | 2,139,922 | | |]

| Operating lease liabilities, non-current | [removed: 462,411] | | [added: 487,003] | | [removed: —] | | | [added: | 462,411 | | |]

| Long-term accrued income taxes | [removed: 25,178] | | [added: 27,893] | | [removed: 29,911] | | | [added: | 25,178 | | |]

| Long-term deferred revenue | [removed: 104,850] | | [added: 136,303] | | [removed: 90,102] | | | [added: | 104,850 | | |]

| Long-term debt | [removed: 100,823] | | [added: 25,094] | | [removed: 120,093] | | | [added: | 100,823 | | |]

| Other long-term liabilities | [removed: 284,511] | | [added: 363,540] | | [removed: 323,725] | | | [added: | 284,511 | | |]

| Total liabilities | [removed: 3,117,695] | | [added: 3,453,317] | | [removed: 2,316,284] | | | [added: | 3,117,695 | | |]

| Stockholders’ equity: | | | | | | | | [added: | | | |]

| Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding | [added: | |] — | | | | [added: | |] — | | |

*Evaluation of the Company’s analysis of terms and conditions in software and intellectual property license contracts with customers*

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.

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.

December 13, 2021

| Short-term investments | | | 147,949 | | | | | | — | | |

| Total cash, cash equivalents and short-term investments | | | 1,580,789 | | | | | | 1,235,653 | | |

| Other long-term assets | | | 510,698 | | | | | | 414,227 | | |

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| Change in unrealized gains (losses) on available-for-sale securities, net of tax of $0 for periods presented | | | (246) | | | | | | — | | | | | | — | | |

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| Net income | | | | | | | | | | | | | | | | | | | | | 757,516 | | | | | | | | | | | | | | | | | | 757,516 | | | | | | (1,157) | | | | | | 756,359 | | |

| Retained earnings adjustment due to adoption of ASC 326 | | | | | | | | | | | | | | | | | | | | | (3,200) | | | | | | | | | | | | | | | | | | (3,200) | | | | | | | | | | | | (3,200) | | |

| Purchases of treasury stock | | | (2,780) | | | | | | (28) | | | | | | 28 | | | | | | | | | | | | (753,081) | | | | | | | | | | | | (753,081) | | | | | | | | | | | | (753,081) | | |

| Stock-based compensation | | | | | | | | | | | | | | | 345,272 | | | | | | | | | | | | | | | | | | | | | | | | 345,272 | | | | | | | | | | | | 345,272 | | |

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| Balance at October 31, 2021 | | | 153,062 | | | | | | $ | 1,531 | | | | | $ | 1,576,363 | | | | | $ | 4,549,713 | | | | | $ | (782,866) | | | | | $ | (49,604) | | | | | $ | 5,295,137 | | | | | $ | 3,806 | | | | | $ | 5,298,943 | |

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| Other non-cash | | | 14,702 | | | | | | 3,425 | | | | | | (5,045) | | |

| Purchases of short-term investments | | | (161,732) | | | | | | — | | | | | | — | | |

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

*Assessment of recognition of uncertain tax provisions*

As discussed in Notes 2 and 13 to the consolidated financial statements, as of October 31, 2020 the Company recognized uncertain tax positions.

The Company recognizes tax benefits from uncertain tax positions when it is determined that it is more likely than not that the position will be sustained on audit.

As of October 31, 2020, the Company recorded a liability for gross unrecognized tax benefits, excluding associated interest and penalties, of $83.1 million.

We identified the assessment of the recognition of uncertain tax positions within the U.S. federal jurisdiction as a critical audit matter.

Complex auditor judgment, including the involvement of tax professionals with specialized skills and knowledge, was required to evaluate the Company’s interpretation and application of U.S. federal tax law.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s accounting process for uncertain tax positions, including controls related to the interpretation of U.S. federal tax law and its application in the liability recognition process.

Since U.S. federal tax law is complex and often subject to interpretation, we involved tax professionals with specialized skills and knowledge, who assisted in:

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| • | Obtaining an understanding of the Company’s overall tax structure and assessing the Company’s compliance with U.S. federal tax laws, |

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| • | Evaluating U.S. federal tax law and assessing the Company’s interpretation of the tax law, and |

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| • | Inspecting correspondence, assessments, and settlements from taxing authorities to assess the Company’s determination of its tax positions having more than a 50% likelihood to be sustained upon examination. |

December 14, 2020

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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| Long-term prepaid taxes | 8,276 | | | | 15,503 | | |

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

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| Balance at October 31, 2017 | 150,445 | | | $ | 1,505 | | | $ | 1,622,429 | | | $ | 2,143,873 | | | $ | (426,208 | ) | | $ | (65,979 | ) | | $ | 3,275,620 | | | $ | 4,104 | | | $ | 3,279,724 | |

| Net income | | | | | | | | | | | | 432,518 | | | | | | | | | | | | 432,518 | | | | | | | | 432,518 | | |

| Retained earnings adjustment due to adoption of an accounting standard in reclassification of certain tax effects from accumulated other comprehensive income (loss) | | | | | | | | | | | | (293 | | ) | | | | | | | | | | (293 | | ) | | | | | | (293 | | ) |

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[removed: | (a) | *Evaluation of Disclosure Controls and Procedures.* As of October 31, 2020, 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, [removed: 2020,] [added: 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. [removed: |]

[removed: | (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. [removed: |]

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, [removed: 2020.][added: 2021.]

Our management has concluded that, as of October 31, [removed: 2020,] [added: 2021,] our internal control over financial reporting was effective based on these criteria.

[removed: | (c) | *Changes] [added: (c)*Changes] in Internal Control Over Financial Reporting.* [removed: On November 3, 2019, Synopsys implemented new and modified existing internal controls for the adoption of the new lease accounting standard, ASC 842.] There were no [removed: additional] changes in Synopsys’ internal control over financial reporting during the fiscal quarter ended October 31, [removed: 2020] [added: 2021] that have materially affected, or are reasonably likely to materially affect, Synopsys’ internal control over financial reporting. [removed: |]

(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.

(b)*Management’s Report on Internal Control Over Financial Reporting*.

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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; [removed: Compensatory] [added: Compensation] Arrangements of Certain Officers.

[removed: Walske] [added: 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 [removed: its 2021] [added: the 2022] Annual Meeting of Stockholders (the [removed: 2021] [added: 2022] Annual Meeting).

Mr. [removed: Walske’s] [added: Chan’s] decision not to stand for re-election was not the result of any disagreement with Synopsys on any matter.

Mr. [removed: Walske] [added: Chan] will continue to serve as a director [removed: and audit committee member] until his term ends at the [removed: 2021] [added: 2022] Annual Meeting, and the Company is thankful for his dedicated service.

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On December 10, 2020, Steven C.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On December 10, 2020, the Board of Directors amended and restated the bylaws of the Company (as so amended, the Amended and Restated Bylaws), effective immediately.

The Amended and Restated Bylaws, among other things: (i) add the ability for stockholders holding not less than 20% of all outstanding shares of capital stock of the Company, which shares are held for not less than one (1) year prior to the date of the request, to request a

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

special meeting of the stockholders; and (ii) provide that directors shall be elected by a majority of the votes cast by stockholders with respect to his or her election at a meeting for the election of directors, except that, if the number of nominees for election at any such meeting exceeds the number of directors to be elected at such meeting, each director to be so elected shall be elected by a plurality of votes cast by stockholders.

The foregoing summary of the Amended and Restated Bylaws does not purport to be complete and is qualified in its entirety by reference to the complete text of the Amended and Restated Bylaws, which are attached hereto as Exhibit 3.2 and are incorporated herein by reference.

[Table of Contents](#sDE27B510A17E5235B5B0169C7DCCEA1A)

PART III

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None.

PART III

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For information [removed: with respect] [added: required by this Item relating] to our executive officers, see [removed: *Executive Officers of the Registrant*] [added: *Information about our Executive Officers*] in Part I, Item 1 of this Annual Report.

[removed: All other] [added: The] information required by this Item [added: relating to our directors and nominees] is [removed: incorporated herein by reference from] [added: included under the heading “Proposal 1 — Election of Directors,” in] our definitive Proxy Statement for the [removed: 2021] [added: 2022] Annual Meeting [added: of Stockholders] (the Proxy Statement) [removed: scheduled to be held on April 8, 2021, as provided under the headings “Proposal 1: Election of Directors,” “Audit Committee Report,”] and [removed: “Corporate Governance.”][added: 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.

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The information required by this Item [added: relating to director and executive compensation] is [removed: incorporated herein by reference from the Proxy Statement, as provided] [added: 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 [removed: Report.”][added: Report” in our Proxy Statement and is incorporated herein by reference.]

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The information required by this Item [added: relating to security ownership of certain beneficial owners and management] is [removed: incorporated herein by reference from] [added: included under] the [added: heading "Security Ownership of Certain Beneficial Owners and Management" in our] Proxy Statement, [removed: as provided] [added: and the information required by this Item relating to securities authorized for issuance] under [added: equity compensation plans is included under] the [removed: headings] [added: heading] “Equity Compensation Plan Information” [removed: and “Security Ownership of Certain Beneficial Owners and Management.”][added: in our Proxy Statement, and, in each case, is incorporated herein by reference.]