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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO
COMMISSION FILE NUMBER: 000-19807
snps-20210430_g1.jpg
SYNOPSYS, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1546236
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
690 EAST MIDDLEFIELD ROAD
MOUNTAIN VIEW, CA 94043
(Address of principal executive offices, including zip code)
(650) 584-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock
(par value of $0.01 per share)
SNPSNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý  Accelerated Filer 
Non-accelerated filer 
¨  
  Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
As of May 19, 2021, there were 152,574,904 shares of the registrant’s common stock outstanding.



SYNOPSYS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED APRIL 30, 2021
TABLE OF CONTENTS
  Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 6.




PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value amounts)
April 30,
2021
 October 31,
2020*
ASSETS
Current assets:
Cash and cash equivalents$1,457,918 $1,235,653 
Accounts receivable, net612,285 780,709 
Inventories, net230,068 192,333 
Income taxes receivable and prepaid taxes32,657 32,355 
Prepaid and other current assets356,872 308,167 
Total current assets2,689,800 2,549,217 
Property and equipment, net478,975 483,818 
Operating lease right-of-use assets, net505,225 465,818 
Goodwill3,432,577 3,365,114 
Intangible assets, net233,809 254,322 
Long-term prepaid taxes10,416 8,276 
Deferred income taxes514,064 497,546 
Other long-term assets474,699 405,951 
Total assets$8,339,565 $8,030,062 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$480,831 $623,664 
Operating lease liabilities, current77,610 73,173 
Accrued income taxes25,473 27,738 
Deferred revenue1,581,841 1,388,263 
Short-term debt89,945 27,084 
Total current liabilities2,255,700 2,139,922 
Operating lease liabilities, non-current498,953 462,411 
Long-term accrued income taxes24,658 25,178 
Long-term deferred revenue98,470 104,850 
Long-term debt25,620 100,823 
Other long-term liabilities343,659 284,511 
Total liabilities3,247,060 3,117,695 
Stockholders’ equity:
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding
  
Common stock, $0.01 par value: 400,000 shares authorized; 152,554 and 152,618 shares outstanding, respectively
1,526 1,528 
Capital in excess of par value1,679,801 1,653,166 
Retained earnings4,149,620 3,795,397 
Treasury stock, at cost: 4,706 and 4,643 shares, respectively
(701,457)(488,613)
Accumulated other comprehensive income (loss)(41,355)(54,074)
Total Synopsys stockholders’ equity5,088,135 4,907,404 
Non-controlling interest4,370 4,963 
Total stockholders’ equity5,092,505 4,912,367 
Total liabilities and stockholders’ equity$8,339,565 $8,030,062 
*    Derived from audited financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
1


SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 Three Months Ended 
 April 30,
Six Months Ended 
 April 30,
 2021202020212020
Revenue:
Time-based products$648,794 $590,097 $1,280,084 $1,146,536 
Upfront products209,116 129,765 383,497 280,486 
Maintenance and service166,413 141,465 331,063 268,686 
Total revenue1,024,323 861,327 1,994,644 1,695,708 
Cost of revenue:
Products134,738 108,207 262,085 225,991 
Maintenance and service67,840 62,213 136,606 124,128 
Amortization of intangible assets11,408 13,845 23,294 27,014 
Total cost of revenue213,986 184,265 421,985 377,133 
Gross margin810,337 677,062 1,572,659 1,318,575 
Operating expenses:
Research and development362,345 302,571 719,813 616,854 
Sales and marketing172,754 146,200 343,382 299,055 
General and administrative72,694 62,474 150,182 131,218 
Amortization of intangible assets8,313 10,250 16,703 19,614 
Restructuring charges 29,672  38,423 
Total operating expenses616,106 551,167 1,230,080 1,105,164 
Operating income194,231 125,895 342,579 213,411 
Other income (expense), net21,764 (15,729)50,520 (3,672)
Income before income taxes215,995 110,166 393,099 209,739 
Provision (benefit) for income taxes21,193 246 36,269 (4,242)
Net income$194,802 $109,920 $356,830 $213,981 
Net income (loss) attributed to non-controlling interest(276) (593) 
Net income attributed to Synopsys$195,078 $109,920 $357,423 $213,981 
Net income per share attributed to Synopsys:
Basic$1.28 $0.73 $2.34 $1.42 
Diluted$1.24 $0.71 $2.27 $1.39 
Shares used in computing per share amounts:
Basic152,725 150,597 152,612 150,421 
Diluted157,077 154,379 157,226 154,471 
See accompanying notes to unaudited condensed consolidated financial statements.

2


SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
 Three Months Ended 
 April 30,
Six Months Ended 
 April 30,
 2021202020212020
Net income$194,802 $109,920 $356,830 $213,981 
Other comprehensive income (loss):
Change in foreign currency translation adjustment(3,171)(10,965)14,762 (4,003)
Cash flow hedges:
Deferred gains (losses), net of tax of $438 and $(967), for the three and six months ended April 30, 2021, respectively, and of $2,763 and $2,346 for each of the same periods in fiscal 2020, respectively.
1,214 (10,085)5,307 (8,434)
Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $1,463 and $2,348, respectively, for the three and six months ended April 30, 2021, respectively, and of $(32) and $(128) for each of the same periods in fiscal 2020, respectively.
(4,623)331 (7,350)854 
Other comprehensive income (loss), net of tax effects(6,580)(20,719)12,719 (11,583)
Comprehensive income188,222 89,201 369,549 202,398 
Less: net income (loss) attributed to non-controlling interest(276) (593) 
Comprehensive income attributed to Synopsys$188,498 $89,201 $370,142 $202,398 
See accompanying notes to unaudited condensed consolidated financial statements.

3


SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
 Capital in
Excess of
Par
Value
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total 
Synopsys
Stockholders’
Equity
Non-controlling
Interest
Stockholders’
Equity
Common Stock
 SharesAmount
Balance at January 31, 2021152,364 $1,526 $1,589,175 $3,954,542 $(628,216)$(34,775)$4,882,252 $4,646 $4,886,898 
Net income195,078 195,078 (276)194,802 
Other comprehensive income (loss), net of tax effects(6,580)(6,580)(6,580)
Purchases of treasury stock(756)(8)8 (195,211)(195,211)(195,211)
Equity forward contract50,000 50,000 50,000 
Common stock issued, net of shares withheld for employee taxes946 8 (38,968)121,970 83,010 83,010 
Stock-based compensation79,586 79,586 79,586 
Balance at April 30, 2021
152,554 $1,526 $1,679,801 $4,149,620 $(701,457)$(41,355)$5,088,135 $4,370 $5,092,505 
Balance at October 31, 2020152,618 $1,528 $1,653,166 $3,795,397 $(488,613)$(54,074)$4,907,404 $4,963 $4,912,367 
Net income357,423 357,423 (593)356,830 
Retained earnings adjustment due to adoption of ASC 326(1)
(3,200)(3,200)(3,200)
Other comprehensive income (loss), net of tax effects12,719 12,719 12,719 
Purchases of treasury stock(1,593)(16)16 (398,082)(398,082)(398,082)
Common stock issued, net of shares withheld for employee taxes1,529 14 (136,749)185,238 48,503 48,503 
Stock-based compensation163,368 163,368 163,368 
Balance at April 30, 2021
152,554 $1,526 $1,679,801 $4,149,620 $(701,457)$(41,355)$5,088,135 $4,370 $5,092,505 
 Capital in
Excess of
Par
Value
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total 
Synopsys
Stockholders’
Equity
Non-controlling
Interest
Stockholders’
Equity
Common Stock
 SharesAmount
Balance at January 31, 2020150,202 $1,502 $1,626,783 $3,268,205 $(664,352)$(83,311)$4,148,827 $5,863 $4,154,690 
Net income109,920 109,920 109,920 
Other comprehensive income (loss), net of tax effects(20,719)(20,719)(20,719)
Purchases of treasury stock(652)(7)7 (100,000)(100,000)(100,000)
Common stock issued, net of shares withheld for employee taxes1,358 14 (27,438)(21,636)129,683 80,623 80,623 
Stock-based compensation56,435 56,435 56,435 
Balance at April 30, 2020
150,908 $1,509 $1,655,787 $3,356,489 $(634,669)$(104,030)$4,275,086 $5,863 $4,280,949 
Balance at October 31, 2019150,331 $1,503 $1,635,455 $3,164,144 $(625,642)$(92,447)$4,083,013 $5,863 $4,088,876 
Net income213,981 213,981 213,981 
Other comprehensive income (loss), net of tax effects(11,583)(11,583)(11,583)
Purchases of treasury stock(1,231)(12)12 (180,000)(180,000)(180,000)
Equity forward contract(20,000)(20,000)(20,000)
Common stock issued, net of shares withheld for employee taxes1,808 18 (67,998)(21,636)170,973 81,357 81,357 
Stock-based compensation108,318 108,318 108,318 
Balance at April 30, 2020
150,908 $1,509 $1,655,787 $3,356,489 $(634,669)$(104,030)$4,275,086 $5,863 $4,280,949 
(1)In June 2016, the Financial Accounting Standards Board (FASB) issued ASC 326, "Measurement of Credit Losses on Financial Instruments", which replaces the incurred loss methodology with an expected loss methodology. The Company adopted the new standard at the beginning of fiscal 2021.
See accompanying notes to unaudited condensed consolidated financial statements.
4


SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Six Months Ended 
 April 30,
 20212020
Cash flows from operating activities:
Net income attributed to Synopsys$357,423 $213,981 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation100,066 105,078 
Reduction of operating lease right-of-use assets42,711 39,513 
Amortization of capitalized costs to obtain revenue contracts30,475 28,279 
Stock-based compensation163,368 108,318 
Allowance for doubtful accounts10,051 9,982 
Deferred income taxes(16,461)(37,681)
Other non-cash(401)97 
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable157,637 (84,533)
Inventories(38,305)(25,237)
Prepaid and other current assets(45,972)(5,889)
Other long-term assets(97,519)(38,378)
Accounts payable and accrued liabilities(96,798)(78,989)
Operating lease liabilities(41,105)(32,432)
Income taxes(8,386)1,270 
Deferred revenue183,512 186,360 
Net cash provided by operating activities700,296 389,739 
Cash flows from investing activities:
Purchases of long-term investments (2,762)
Purchases of property and equipment(44,060)(80,663)
Cash paid for acquisitions, net of cash acquired(74,626)(151,178)
Capitalization of software development costs(1,264)(2,130)
Other(800) 
Net cash used in investing activities(120,750)(236,733)
Cash flows from financing activities:
Proceeds from credit facilities  276,490 
Repayment of debt(13,194)(178,437)
Issuances of common stock103,203 98,361 
Payments for taxes related to net share settlement of equity awards(54,664)(17,105)
Purchase of equity forward contract (20,000)
Purchases of treasury stock(398,082)(180,000)
Other(1,000) 
Net cash used in financing activities(363,737)(20,691)
Effect of exchange rate changes on cash, cash equivalents and restricted cash6,457 (4,424)
Net change in cash, cash equivalents and restricted cash 222,266 127,891 
Cash, cash equivalents and restricted cash, beginning of year1,237,970 730,527 
Cash, cash equivalents and restricted cash, end of period$1,460,236 $858,418 
See accompanying notes to unaudited condensed consolidated financial statements.
5


SYNOPSYS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business
Synopsys, Inc. (Synopsys or the Company) provides products and services used across the entire silicon to software spectrum, from engineers creating advanced semiconductors to software developers seeking to ensure the security and quality of their code. The Company is a global leader in supplying the electronic design automation (EDA) software that engineers use to design and test integrated circuits (ICs), also known as chips. The Company also offers semiconductor intellectual property (IP) products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. The Company provides software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them. To complement these offerings, the Company provides technical services and support to help its customers develop advanced chips and electronic systems. These products and services are part of the Company’s Semiconductor & System Design segment.
The Company is also a leading provider of software tools and services that improve the security, quality and compliance of software in a wide variety of industries, including electronics, financial services, automotive, medicine, energy and industrials. These tools and services are part of the Company’s Software Integrity segment.
Note 2. Summary of Significant Accounting Policies
The Company has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). In management’s opinion, the Company has made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present its unaudited condensed consolidated balance sheets, results of operations, comprehensive income, stockholders’ equity and cash flows. The Company’s interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2020 as filed with the SEC on December 15, 2020.
Use of Estimates. To prepare financial statements in conformity with U.S. GAAP, management must make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and may result in material effects on the Company’s operating results and financial position. In addition, the Company has considered the impact of the COVID-19 pandemic on the business operations and no impairments or other effects have been identified to date. Although the impact related to the COVID-19 pandemic has been limited in operating results thus far, there is substantial uncertainty in the nature and degree of its continued effects over time. This uncertainty affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional events and information are known.
Principles of Consolidation. The unaudited condensed consolidated financial statements include the accounts of the Company and all of its subsidiaries. All intercompany accounts and transactions have been eliminated.
Fiscal Year End. The Company’s fiscal year generally ends on the Saturday nearest to October 31 and consists of 52 weeks, with the exception that approximately every five years, the Company has a 53-week year. When a 53-week year occurs, the Company includes the additional week in the first quarter to realign fiscal quarters with calendar quarters. Fiscal 2021 and 2020 are both 52-week years. Fiscal 2021 will end on October 30, 2021. Fiscal 2020 ended on October 31, 2020. For presentation purposes, the unaudited condensed consolidated financial statements and accompanying notes refer to the closest calendar month end.
There have been no recent accounting pronouncements or changes in accounting pronouncements that are of significance or potential significance to the Company as of April 30, 2021.
Note 3. Revenue
Disaggregated Revenue
6


The following table shows the percentage of revenue by product groups:
Three Months Ended 
 April 30,
Six Months Ended 
 April 30,
2021202020212020
EDA57.4 %59.4 %56.3 %59.2 %
IP & System Integration33.1 %30.2 %34.0 %30.4 %
Software Integrity Products & Services9.2 %10.2 %9.3 %10.3 %
Other0.3 %0.2 %0.4 %0.1 %
Total100.0 %100.0 %100.0 %100.0 %
Contract Balances
The contract assets indicated below are presented as prepaid and other current assets in the unaudited condensed consolidated balance sheets. The contract assets are transferred to receivables when the rights to invoice and receive payment become unconditional. Unbilled receivables are presented as accounts receivable, net, in the unaudited condensed consolidated balance sheets.
Contract balances are as follows:
As of
April 30, 2021October 31, 2020
 (in thousands)
Contract assets$242,929 $214,583 
Unbilled receivables$48,487 $50,932 
Deferred revenue$1,680,311 $1,493,113 
During the three and six months ended April 30, 2021, the Company recognized $318.9 million and $892.9 million, respectively, of revenue that was included in the deferred revenue balance as of October 31, 2020.
Contracted but unsatisfied or partially unsatisfied performance obligations were approximately $4.8 billion as of April 30, 2021, which includes $825.8 million in non-cancellable Flexible Spending Account (FSA) commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. The Company has elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 49% of the contracted but unsatisfied or partially unsatisfied performance obligations as of April 30, 2021, excluding non-cancellable FSA, are expected to be recognized over the next 12 months, with the remainder recognized thereafter.
During the three and six months ended April 30, 2021, the Company recognized $34.5 million and $60.8 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods. During the three and six months ended April 30, 2020, the Company recognized $34.2 million and $52.1 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods.
Costs of Obtaining a Contract with Customer
The incremental costs of obtaining a contract with a customer, which consist primarily of direct sales commissions earned upon execution of the contract, are required to be capitalized under ASC 340-40 and amortized over the estimated period of which the benefit is expected to be received. As direct sales commissions paid for renewals are commensurate with the amounts paid for initial contracts, the deferred incremental costs will be recognized over the contract term. Total capitalized direct commission costs as of April 30, 2021 were $85.8 million and included in other assets in the Company’s unaudited condensed consolidated balance sheets. Amortization of these assets was $15.5 million and $30.5 million during the three and six months ended April 30, 2021, respectively, and included in sales and marketing expense in the Company’s unaudited condensed consolidated statements of operations. Amortization of these assets was $14.5 million and $28.3 million during the three and six months ended April 30, 2020, respectively, and included in sales and marketing expense in the Company’s unaudited condensed consolidated statements of operations.
7


Note 4. Business Combinations
During the six months ended April 30, 2021, the Company completed two acquisitions for an aggregate consideration of $77.5 million, net of cash acquired. The Company does not consider these acquisitions to be material, individually or in the aggregate, to the Company’s unaudited condensed consolidated statements of operations. The preliminary purchase allocations are $20.3 million of identifiable intangible assets and $59.2 million in goodwill, which is attributable to the Semiconductor & System Design reporting segment. The fair value of these intangible assets and goodwill are estimated using the income method.
The preliminary fair value estimates for the assets acquired and liabilities assumed for all acquisitions completed within 12 months from the applicable acquisition date are not yet finalized and may change as additional information becomes available during the respective measurement periods. The primary areas of those preliminary estimates relate to certain tangible assets and liabilities, identifiable intangible assets, and income taxes.
Note 5. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill during the six months ended April 30, 2021 were as follows:
 (in thousands)
Balance at October 31, 2020$3,365,114 
Additions59,196 
Effect of foreign currency translation8,267 
Balance at April 30, 2021
$3,432,577 
Intangible Assets
In-process research and development (IPR&D) as of April 30, 2021 consisted of acquired projects that, if completed, will be reclassified to core/developed technology upon completion, or if abandoned, will be written off. Intangible assets as of April 30, 2021 consisted of the following:
Gross AssetsAccumulated
Amortization
Net Assets
 (in thousands)
Core/developed technology$846,611 $724,695 $121,916 
Customer relationships381,495 292,556 88,939 
Contract rights intangible192,595 187,705 4,890 
Trademarks and trade names43,095 29,935 13,160 
In-process research and development (IPR&D)914  914 
Capitalized software development costs45,386 41,396 3,990 
Total$1,510,096 $1,276,287 $233,809 
Intangible assets as of October 31, 2020 consisted of the following:
Gross AssetsAccumulated
Amortization
Net Assets
 (in thousands)
Core/developed technology$827,232 $703,009 $124,223 
Customer relationships380,838 277,219 103,619 
Contract rights intangible192,812 186,763 6,049 
Trademarks and trade names43,096 28,716 14,380 
In-process research and development (IPR&D)1,214  1,214 
Capitalized software development costs44,122 39,285 4,837 
Total$1,489,314 $1,234,992 $254,322 
8


Amortization expense related to intangible assets consisted of the following:
 Three Months Ended 
 April 30,
Six Months Ended 
 April 30,
 2021202020212020
 (in thousands)
Core/developed technology$10,969 $12,724 $21,986 $25,042 
Customer relationships7,703 8,912 15,482 17,474 
Contract rights intangible439 1,681 1,309 2,557 
Trademarks and trade names610 778 1,220 1,555 
Capitalized software development costs(1)
1,072 933 2,110 1,834 
Total$20,793 $25,028 $42,107 $48,462 
(1) Amortization of capitalized software development costs is included in cost of products revenue in the unaudited condensed consolidated statements of operations.
The following table presents the estimated future amortization of intangible assets as of April 30, 2021:
Fiscal year(in thousands)
Remainder of fiscal 2021$38,878 
202265,879 
202348,932 
202438,407 
202522,304 
2026 and thereafter18,495 
IPR&D914 
Total$233,809 
Note 6. Financial Assets and Liabilities
Cash equivalents. The Company classifies time deposits and other investments with original maturities less than three months as cash equivalents.
As of April 30, 2021, the balances of the Company’s cash equivalents were:
CostGross
Unrealized
Gains
Gross
Unrealized
Losses Less Than 12 Continuous Months
Gross
Unrealized
Losses 12 Continuous Months or Longer
Estimated
Fair Value
(1)
 (in thousands)
Cash equivalents:
Money market funds$234,243 $ $ $ $234,243 
Total:$234,243 $ $ $ $234,243 
(1)See Note 7. Fair Value Measures for further discussion on fair values of cash equivalents.
As of October 31, 2020, the balances of the Company’s cash equivalents were:
CostGross
Unrealized
Gains
Gross
Unrealized
Losses Less Than 12 Continuous Months
Gross
Unrealized
Losses 12 Continuous Months or Longer
Estimated
Fair Value
(1)
 (in thousands)
Cash equivalents:
Money market funds$304,127 $ $ $ $304,127 
Total:$304,127 $ $ $ $304,127 
(1)See Note 7. Fair Value Measures for further discussion on fair values of cash equivalents.
9


Restricted cash. The Company includes amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the consolidated statements of cash flows. All restricted cash is primarily associated with office leases.
The following table provides a reconciliation of cash, cash equivalents and restricted cash included in the unaudited condensed consolidated balance sheets:
As of
April 30, 2021October 31, 2020
(in thousands)
Cash and cash equivalents$1,457,918 $1,235,653 
Restricted cash included in Prepaid expenses and other current assets1,521 1,523 
Restricted cash included in Other long-term assets797 794 
Total cash, cash equivalents and restricted cash$1,460,236 $1,237,970 
Non-marketable equity securities. The Company’s strategic investment portfolio consists of non-marketable equity securities in privately held companies. When the Company does not have the ability to exercise significant influence over the investments, these securities are accounted for using the measurement alternative when the fair value of the investment is not readily determinable. Securities accounted for as equity method investments are recorded at cost plus the proportional share of the issuers’ income or loss, which is recorded in the Company’s other income (expense), net. The cost basis of securities sold is based on the specific identification method. See Note 7. Fair Value Measures.
Derivatives
The Company recognizes derivative instruments as either assets or liabilities in the unaudited condensed consolidated balance sheets at fair value and provides qualitative and quantitative disclosures about such derivatives. The Company operates internationally and is exposed to potentially adverse movements in foreign currency exchange rates. The Company enters into hedges in the form of foreign currency forward contracts to reduce its exposure to foreign currency rate changes on non-functional currency denominated forecasted transactions and balance sheet positions including: (1) certain assets and liabilities, (2) shipments forecasted to occur within approximately one month, (3) future billings and revenue on previously shipped orders, and (4) certain future intercompany invoices denominated in foreign currencies.
The duration of forward contracts ranges from approximately one month to 23 months, the majority of which are short-term. The Company does not use foreign currency forward contracts for speculative or trading purposes. The Company enters into foreign exchange forward contracts with high credit quality financial institutions that are rated ‘A’ or above and to date has not experienced nonperformance by counterparties. In addition, the Company mitigates credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty and anticipates continued performance by all counterparties to such agreements.
The assets or liabilities associated with the forward contracts are recorded at fair value in other current assets or accrued liabilities in the unaudited condensed consolidated balance sheets. The accounting for gains and losses resulting from changes in fair value depends on the use of the foreign currency forward contract and whether it is designated and qualifies for hedge accounting. The cash flow impact upon settlement of the derivative contracts will be included in “Net cash provided by operating activities” in the unaudited condensed consolidated statements of cash flows.
Cash Flow Hedging Activities
Certain foreign exchange forward contracts are designated and qualify as cash flow hedges. These contracts have durations of approximately 23 months or less. Certain forward contracts are rolled over periodically to capture the full length of exposure to the Company’s foreign currency risk, which can be up to three years. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on the hedged transactions. The related gains or losses resulting from changes in fair value of these hedges is initially reported, net of tax, as a component of other comprehensive income (loss) (OCI) in stockholders’ equity and reclassified into revenue or operating expenses, as appropriate, at the time the hedged transactions affect earnings. The Company expects a majority of the hedge balance in OCI to be reclassified to the statements of operations within the next 12 months.

10


The Company did not have any gains or losses related to discontinuation of cash flow hedges during the three and six months ended April 30, 2021 and 2020.
Non-designated Hedging Activities
The Company’s foreign exchange forward contracts that are used to hedge non-functional currency denominated balance sheet assets and liabilities are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair value of the forward contracts are recorded in other income (expense), net. The gains and losses on these forward contracts generally offset the gains and losses associated with the underlying assets and liabilities, which are also recorded in other income (expense), net. The duration of the forward contracts for hedging the Company’s balance sheet exposure is approximately one month.
The Company also has certain foreign exchange forward contracts for hedging certain international revenues and expenses that are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair value of the forward contracts are recorded in other income (expense), net. The gains and losses on these forward contracts generally offset the gains and losses associated with the foreign currency in operating income. The duration of these forward contracts is usually less than one year. The overall goal of the Company’s hedging program is to minimize the impact of currency fluctuations on its net income over its fiscal year.
The effects of the non-designated derivative instruments on the Company’s unaudited condensed consolidated statements of operations is summarized as follows: