Segment Disclosure

3 Months Ended

Jan. 31, 2020

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

The Company has two reportable segments: (1) Semiconductor & System Design, which includes EDA tools, IP products, system integration solutions and other associated revenue categories, and (2) Software Integrity, which includes a comprehensive solution for building integrity—security, quality and compliance testing—into the customers’ software development lifecycle and supply chain.

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

Information by reportable segment was as follows:



	Three Months Ended January 31,
	2020			2019
	(in thousands)
Total Segments:
Revenue	$	834,381		$	820,401
Adjusted operating income	186,933			200,952
Adjusted operating margin	22		%	24		%
Semiconductor & System Design:
Revenue	$	748,744		$	737,906
Adjusted operating income	178,851			195,317
Adjusted operating margin	24		%	26		%
Software Integrity:
Revenue	$	85,637		$	82,495
Adjusted operating income	8,082			5,635
Adjusted operating margin	9		%	7		%

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



	Three Months Ended January 31,
	2020			2019
	(in thousands)
Total segment adjusted operating income	$	186,933		$	200,952
Reconciling items:
Amortization of intangible expense	(22,533		)	(28,227		)
Stock-based compensation expense	(51,883		)	(38,460		)
Other	(25,001		)	13,149
Total operating income	$	87,516		$	147,414

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

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



	Three Months Ended January 31,
	2020		2019
	(in thousands)
Revenue:
United States	$	408,489	$	407,799
Europe	94,370		83,886
Korea	89,515		102,668
Japan	72,228		65,073
Asia Pacific and Other	169,779		160,975
Consolidated	$	834,381	$	820,401

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.

No customer, including its subsidiaries, accounted for greater than 10% of the Company's total revenue for the three months ended January 31, 2020. One customer, including its subsidiaries, accounted for greater than 10% of the Company's total revenue for the three months ended January 31, 2019.