Segment Disclosure

12 Months Ended

Oct. 31, 2019

Segment reporting is based upon the “management approach,” i.e., how management organizes the Company’s operating segments for which separate financial information is (1) available and (2) evaluated regularly by the CODMs in deciding how to allocate resources and in assessing performance. Synopsys’ CODMs are its two co-Chief Executive Officers.

In prior periods, the Company operated in a single segment. Effective in fiscal 2019, the Company realigned its business to evaluate the results of its Software Integrity business separately from the Company’s traditional EDA and semiconductor IP business. The CODMs now regularly review disaggregated information for the following two reportable segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and other revenue categories, and (2) Software Integrity, which includes a comprehensive solution for building integrity—security, quality and compliance testing—into the customers’ software development lifecycle and supply chain. The Company’s historical results have been recast to retrospectively reflect the change from one to two reportable segments.

As a result of the change in reporting structure, financial information provided to and used by the CODMs to assist in making operational decisions, allocating resources, and assessing performance reflects consolidated financial information as well as revenue, adjusted operating income, and adjusted operating margin information for the Semiconductor & System Design and Software Integrity segments, accompanied by disaggregated information relating to revenues by geographic region.

Information by reportable segment was as follows:



	Year Ended October 31,
	2019			2018			2017
	(in thousands)
Total Segments:
Revenues	$	3,360,694		$	3,121,058		$	2,724,880
Adjusted operating income	838,821			690,681			647,255
Adjusted operating margin	25		%	22		%	24		%
Semiconductor & System Design:
Revenues	$	3,026,097		$	2,840,589		$	2,551,130
Adjusted operating income	806,618			701,283			667,164
Adjusted operating margin	27		%	25		%	26		%
Software Integrity:
Revenues	$	334,597		$	280,469		$	173,750
Adjusted operating income	32,203			(10,602		)	(19,909		)
Adjusted operating margin	10		%	(4		)%	(11		)%

Certain operating expenses are not allocated to the segments and are managed at a consolidated level. The unallocated expenses managed at a consolidated level, including amortization of intangible assets, stock compensation and other operating expenses, are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to the Company's consolidated operating income:



	Year Ended October 31,
	2019			2018			2017
	(in thousands)
Total segment adjusted operating income	$	838,821		$	690,681		$	647,255
Reconciling items:
Amortization of intangible expense	(100,914		)	(125,664		)	(107,723		)
Stock-based compensation expense	(155,001		)	(140,032		)	(108,294		)
Other	(62,675		)	(64,760		)	(83,675		)
Total operating income	$	520,231		$	360,225		$	347,563

The CODMs do not use total assets by segment to evaluate segment performance or allocate resources. As a result, total assets by segment are not required to be disclosed.

In allocating revenue to particular geographic areas, the CODMs consider where individual “seats” or licenses to the Company’s products are located. Revenue is defined as revenues from external customers. Revenues and property and equipment, net, related to operations in the United States and other geographic areas were:



	Year Ended October 31,
	2019		2018		2017
	(in thousands)
Revenue:
United States	$	1,676,178	$	1,508,224	$	1,357,364
Europe	349,033		369,125		308,419
Korea	353,358		307,974		291,103
Japan	272,677		283,337		247,631
Asia Pacific and Other	709,448		652,398		520,363
Consolidated	$	3,360,694	$	3,121,058	$	2,724,880



	As of October 31,
	2019		2018
	(in thousands)
Property and Equipment, net:
United States	$	293,725	$	210,914
Other countries	135,807		98,396
Total	$	429,532	$	309,310

Geographic revenue data for multi-regional, multi-product transactions reflect internal allocations and are therefore subject to certain assumptions and to the Company’s methodology.

One customer, including its subsidiaries, accounted for 12.8%, 15.4%, and 17.9% of the Company’s consolidated revenue in fiscal 2019, 2018, and 2017, respectively.