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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 JANUARY 31, 2022
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-20220131_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 February 16, 2022, there were 153,098,717 shares of the registrant’s common stock outstanding.



SYNOPSYS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED JANUARY 31, 2022
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)
January 31,
2022
 October 31,
2021*
ASSETS
Current assets:
Cash and cash equivalents$1,124,299 $1,432,840 
Short-term investments147,748 147,949 
      Total cash, cash equivalents and short-term investments1,272,047 1,580,789 
Accounts receivable, net1,038,749 568,501 
Inventories, net212,919 229,023 
Prepaid and other current assets423,782 430,028 
Total current assets2,947,497 2,808,341 
Property and equipment, net477,521 472,398 
Operating lease right-of-use assets, net481,526 493,251 
Goodwill3,592,788 3,575,785 
Intangible assets, net260,810 279,132 
Deferred income taxes628,879 612,655 
Other long-term assets512,325 510,698 
Total assets$8,901,346 $8,752,260 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$540,733 $741,191 
Operating lease liabilities, current78,748 79,678 
Deferred revenue1,852,175 1,517,623 
Short-term debt 74,992 
Total current liabilities2,471,656 2,413,484 
Operating lease liabilities, non-current477,487 487,003 
Long-term deferred revenue157,465 136,303 
Long-term debt24,370 25,094 
Other long-term liabilities380,135 391,433 
Total liabilities3,511,113 3,453,317 
Stockholders’ equity:
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding
  
Common stock, $0.01 par value: 400,000 shares authorized; 153,256 and 153,062 shares outstanding, respectively
1,533 1,531 
Capital in excess of par value1,430,226 1,576,363 
Retained earnings4,863,400 4,549,713 
Treasury stock, at cost: 4,005 and 4,198 shares, respectively
(856,929)(782,866)
Accumulated other comprehensive income (loss)(51,457)(49,604)
Total Synopsys stockholders’ equity5,386,773 5,295,137 
Non-controlling interest3,460 3,806 
Total stockholders’ equity5,390,233 5,298,943 
Total liabilities and stockholders’ equity$8,901,346 $8,752,260 
*Derived from audited financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
1


SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
 Three Months Ended 
 January 31,
 20222021
Revenue:
Time-based products$707,483 $631,290 
Upfront products368,274 174,381 
Maintenance and service194,498 164,650 
Total revenue1,270,255 970,321 
Cost of revenue:
Products165,399 127,347 
Maintenance and service78,225 68,766 
Amortization of intangible assets13,360 11,886 
Total cost of revenue256,984 207,999 
Gross margin1,013,271 762,322 
Operating expenses:
Research and development383,971 357,468 
Sales and marketing180,510 170,628 
General and administrative81,008 77,488 
Amortization of intangible assets9,000 8,390 
Restructuring charges11,746  
Total operating expenses666,235 613,974 
Operating income347,036 148,348 
Other income (expense), net(19,793)28,756 
Income before income taxes327,243 177,104 
Provision for income taxes13,902 15,076 
Net income$313,341 $162,028 
Net income (loss) attributed to non-controlling interest(346)(317)
Net income attributed to Synopsys$313,687 $162,345 
Net income per share attributed to Synopsys:
Basic$2.05 $1.06 
Diluted$1.99 $1.03 
Shares used in computing per share amounts:
Basic153,218 152,498 
Diluted157,273 157,277 
See accompanying notes to unaudited condensed consolidated financial statements.

2


SYNOPSYS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
 Three Months Ended 
 January 31,
 20222021
Net income$313,341 $162,028 
Other comprehensive income (loss):
Change in foreign currency translation adjustment(613)17,932 
Changes in unrealized gains (losses) on available-for-sale securities, net of tax of $0 for periods presented(500) 
Cash flow hedges:
Deferred gains (losses), net of tax $230 and $(1,405), respectively.
(1,585)4,093 
Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $(302) and $885, respectively.
845 (2,726)
Other comprehensive income (loss), net of tax effects(1,853)19,299 
Comprehensive income311,488 181,327 
Less: net income (loss) attributed to non-controlling interest(346)(317)
Comprehensive income attributed to Synopsys$311,834 $181,644 
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 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 
Net income313,687 313,687 (346)313,341 
Other comprehensive income (loss), net of tax effects(1,853)(1,853)(1,853)
Purchases of treasury stock(701)(7)7 (245,000)(245,000)(245,000)
Equity forward contract, net(5,000)(5,000)(5,000)
Common stock issued, net of shares withheld for employee taxes895 9 (236,915)170,937 (65,969)(65,969)
Stock-based compensation95,771 95,771 95,771 
Balance at January 31, 2022
153,256 $1,533 $1,430,226 $4,863,400 $(856,929)$(51,457)$5,386,773 $3,460 $5,390,233 
 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 October 31, 2020
152,618 $1,528 $1,653,166 $3,795,397 $(488,613)$(54,074)$4,907,404 $4,963 $4,912,367 
Net income162,345 162,345 (317)162,028 
Retained earnings adjustment due to adoption of ASC 326(1)
(3,200)(3,200)(3,200)
Other comprehensive income (loss), net of tax effects19,299 19,299 19,299 
Purchases of treasury stock(837)(8)8 (202,871)(202,871)(202,871)
Equity forward contract, net(50,000)(50,000)(50,000)
Common stock issued, net of shares withheld for employee taxes583 6 (97,781)63,268 (34,507)(34,507)
Stock-based compensation83,782 83,782 83,782 
Balance at January 31, 2021
152,364 $1,526 $1,589,175 $3,954,542 $(628,216)$(34,775)$4,882,252 $4,646 $4,886,898 
(1)In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Codification (ASC) 326, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology. We 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)
 Three Months Ended 
 January 31,
 20222021
Cash flows from operating activities:
Net income attributed to Synopsys$313,687 $162,345 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation61,685 50,628 
Reduction of operating lease right-of-use assets21,010 20,974 
Amortization of capitalized costs to obtain revenue contracts16,737 15,008 
Stock-based compensation95,771 83,782 
Allowance for credit losses5,278 7,477 
Deferred income taxes(11,952)(20,222)
Other non-cash4,486 (3,359)
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable(466,684)(14,910)
Inventories9,155 (37,764)
Prepaid and other current assets(303)(12,289)
Other long-term assets(11,969)(50,385)
Accounts payable and accrued liabilities(223,223)(171,137)
Operating lease liabilities(19,477)(20,707)
Income taxes6,555 12,226 
Deferred revenue354,988 152,291 
Net cash provided by operating activities155,744 173,958 
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments16,437  
Purchases of short-term investments(17,210) 
Proceeds from sales of long-term investments582  
Purchases of long-term investments(5,000) 
Purchases of property and equipment(41,751)(27,779)
Cash paid for acquisitions, net of cash acquired(19,989)(74,670)
Capitalization of software development costs(494)(1,011)
Other(600) 
Net cash used in investing activities(68,025)(103,460)
Cash flows from financing activities:
Repayment of debt(75,938)(5,694)
Issuances of common stock30,835 15,092 
Payments for taxes related to net share settlement of equity awards(96,785)(49,591)
Purchase of equity forward contract(40,000)(50,000)
Purchases of treasury stock(210,000)(202,871)
Other(2,709) 
Net cash used in financing activities(394,597)(293,064)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,720)10,001 
Net change in cash, cash equivalents and restricted cash (308,598)(212,565)
Cash, cash equivalents and restricted cash, beginning of year1,435,183 1,237,970 
Cash, cash equivalents and restricted cash, end of period$1,126,585 $1,025,405 
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. (we, our or us) 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. We are 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. We also offer 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. 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 develop advanced chips and electronic systems. These products and services are part of our Semiconductor & System Design segment.
We are 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 our Software Integrity segment.
Note 2. Summary of Significant Accounting Policies
We have 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, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated balance sheets, results of operations, comprehensive income, stockholders’ equity and cash flows. Our 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 our Annual Report on Form 10-K for the fiscal year ended October 31, 2021 as filed with the SEC on December 13, 2021.
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 our operating results and financial position.
Principles of Consolidation. The unaudited condensed consolidated financial statements include our accounts and the accounts of our subsidiaries. All intercompany accounts and transactions have been eliminated.
Fiscal Year End. Our fiscal year generally 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 2022 and 2021 are both 52-week years. Fiscal 2022 will end on October 29, 2022. Fiscal 2021 ended on October 30, 2021. For presentation purposes, the unaudited condensed consolidated financial statements and accompanying notes refer to the closest calendar month end.
Significant Accounting Policies. There have been no material changes to our significant accounting policies summarized in Note 2. Summary of Significant Accounting Policies to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021.
Recently Adopted Accounting Pronouncements
In December 2019, FASB issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. We adopted the standard as of the beginning of fiscal 2022 on a prospective basis and the adoption of this standard did not have a material impact on our unaudited condensed consolidated financial statements.
6


Recent Accounting Pronouncements Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The new guidance requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. The new standard is effective for our fiscal year beginning on November 1, 2023. Early adoption is permitted. We are currently in the process of evaluating the impact of adoption on our unaudited condensed consolidated financial statements.
Note 3. Revenue
Disaggregated Revenue
The following table showed the percentage of revenue by product groups:
Three Months Ended 
 January 31,
20222021
EDA49.8 %55.2 %
IP & System Integration41.5 %35.0 %
Software Integrity Products & Services8.5 %9.5 %
Other0.2 %0.3 %
Total100.0 %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 were as follows:
As of
January 31, 2022October 31, 2021
 (in thousands)
Contract assets, net$274,009 $284,574 
Unbilled receivables$36,324 $35,589 
Deferred revenue$2,009,640 $1,653,926 
During the three months ended January 31, 2022, we recognized revenue of $609.5 million that was included in the deferred revenue balance as of October 31, 2021.
Contracted but unsatisfied or partially unsatisfied performance obligations were approximately $6.9 billion as of January 31, 2022, which includes $866.9 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. We have elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 41% of the contracted but unsatisfied or partially unsatisfied performance obligations as of January 31, 2022, excluding non-cancellable FSA, are expected to be recognized over the next 12 months, with the remainder recognized thereafter.
During the three months ended January 31, 2022 and 2021, we recognized $32.0 million and $26.3 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods.
Costs of Obtaining a Contract with Customer
Capitalized commission costs, net of accumulated amortization, as of January 31, 2022 were $96.8 million and included in other long-term assets in our unaudited condensed consolidated balance sheets. Amortization of these
7


assets was $16.7 million and $15.0 million during the three months ended January 31, 2022 and 2021, respectively, and included in sales and marketing expense in our unaudited condensed consolidated statements of income.
Note 4. Business Combinations
During the three months ended January 31, 2022, we completed one acquisition for an aggregate consideration of $20.0 million, net of cash acquired. We do not consider this acquisition to be material to our unaudited condensed consolidated statements of income. The preliminary purchase allocations are $4.3 million of identifiable intangible assets and $15.7 million in goodwill, which are attributable to the Semiconductor & System Design reporting segment. There was no tax deductible goodwill related to the acquisition.
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.
Acquisition-Related Transaction Costs
Transaction costs were $2.1 million and $3.5 million during the three months ended January 31, 2022 and January 31, 2021, respectively. These costs mainly consist of professional fees and administrative costs and were expensed as incurred in our unaudited condensed consolidated statements of income.
Note 5. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill during the three months ended January 31, 2022 were as follows:
 (in thousands)
Balance at October 31, 2021
$3,575,785 
Additions15,720 
Adjustments1,285 
Effect of foreign currency translation(2)
Balance at January 31, 2022
$3,592,788 
During the three months ended January 31, 2022, we finalized certain estimates impacting total purchase consideration for certain acquisitions and recorded the resulting measurement period adjustments which increased goodwill.
Intangible Assets
Intangible assets as of January 31, 2022 consisted of the following:
Gross Carrying AmountAccumulated
Amortization
Intangible Assets, Net
 (in thousands)
Core/developed technology$916,202 $761,605 $154,597 
Customer relationships404,571 316,544 88,027 
Contract rights intangible193,317 188,958 4,359 
Trademarks and trade names43,095 31,755 11,340 
Capitalized software development costs46,592 44,105 2,487 
Total$1,603,777 $1,342,967 $260,810 
8


Intangible assets as of October 31, 2021 consisted of the following:
Gross Carrying AmountAccumulated
Amortization
Intangible Assets, Net
 (in thousands)
Core/developed technology$911,903 $748,759 $163,144 
Customer relationships404,571 308,355 96,216 
Contract rights intangible193,317 188,231 5,086 
Trademarks and trade names43,095 31,155 11,940 
Capitalized software development costs46,098 43,352 2,746 
Total$1,598,984 $1,319,852 $279,132 
Amortization expense related to intangible assets consisted of the following:
 Three Months Ended 
 January 31,
 20222021
 (in thousands)
Core/developed technology$12,848 $11,016 
Customer relationships8,185 7,780 
Contract rights intangible727 870 
Trademarks and trade names600 610 
Capitalized software development costs(1)
752 1,038 
Total$23,112 $21,314 
(1) Amortization of capitalized software development costs is included in cost of products revenue in the unaudited condensed consolidated statements of income.
The following table presented the estimated future amortization of intangible assets as of January 31, 2022:
Fiscal year(in thousands)
Remainder of fiscal 2022$59,707 
202364,851 
202453,817 
202537,653 
202625,228 
2027 and thereafter19,554 
Total$260,810 
Note 6. Balance Sheets Components
9


As of
January 31, 2022October 31, 2021
(in thousands)
Other long-term assets:
Deferred compensation plan assets$328,763 $343,820 
Capitalized commission, net96,848 92,249 
Other long-term assets86,714 74,629 
Total$512,325 $510,698 
Accounts payable and accrued liabilities:
Payroll and related benefits$364,123 $581,687 
Other accrued liabilities147,407 132,091 
Accounts payable29,203 27,413 
Total$540,733 $741,191 
Other long-term liabilities:
Deferred compensation plan liabilities$328,765 $343,820 
Other long-term liabilities51,370 47,613 
Total$380,135 $391,433 

Note 7. Financial Assets and Liabilities
Short-term investments. Gross unrealized gains and losses on our available-for-sale debt securities as of January 31, 2022 were not significant. The stated maturities of our available-for-sale debt securities as of January 31, 2022 were as follows:

Amortized CostFair Value
(in thousands)
less than 1 year$53,374 $53,269 
1-5 years88,847 88,261 
5-10 years4,268 4,249 
>10 years2,005 1,969 
Total$148,494 $147,748 
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As of January 31, 2022, the balances of our cash equivalents and short-term investments were as follows:
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$75,680 $75,680 
Total:$75,680 $ $ $ $75,680 
Short-term investments:
U.S. government agency & T-bills$8,095 $(31)$8,064 
Municipal bonds3,946 (34)3,912 
Corporate debt securities103,946 5 (537)103,414 
Asset-backed securities32,507 2 (151)32,358 
Total:$148,494 $7 $(753)$ $147,748 
(1)See Note 8. Fair Value Measurements for further discussion on fair values of cash equivalents and short-term investments.
As of October 31, 2021, the balances of our cash equivalents and short-term investments were as follows:
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$172,934 $ $ $ $172,934 
Total:$172,934 $ $ $ $172,934 
Short-term investments:
U.S. government agency & T-bills$6,447 $ $(5)$6,442 
Municipal bonds4,588  (12)4,576 
Corporate debt securities103,615 7 (170)103,452 
Asset-backed securities33,545 6 (72)33,479 
Total:$148,195 $13 $(259)$ $147,949 
(1)See Note 8. Fair Value Measurements for further discussion on fair values of cash equivalents and short-term investments.
Restricted cash. We include 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 unaudited condensed consolidated statements of cash flows. All restricted cash is primarily associated with office leases.
The following table provided a reconciliation of cash, cash equivalents and restricted cash included in the unaudited condensed consolidated balance sheets:
As of
January 31, 2022October 31, 2021
(in thousands)
Cash and cash equivalents$1,124,299 $1,432,840 
Restricted cash included in prepaid expenses and other current assets1,537 1,560 
Restricted cash included in other long-term assets749 783 
Total cash, cash equivalents and restricted cash$1,126,585 $1,435,183 

11


Non-marketable equity securities. Our portfolio of non-marketable equity securities consists of strategic investments in privately held companies. There were no impairments of non-marketable equity securities during the three months ended January 31, 2022 and January 31, 2021.
Derivatives
We recognize derivative instruments as either assets or liabilities in the unaudited condensed consolidated balance sheets at fair value and provide qualitative and quantitative disclosures about such derivatives. We operate internationally and are exposed to potentially adverse movements in foreign currency exchange rates. We enter into hedges in the form of foreign currency forward contracts to reduce our 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 24 months, the majority of which are short-term. We do not use foreign currency forward contracts for speculative or trading purposes. We enter into foreign exchange forward contracts with high credit quality financial institutions that are rated ‘A’ or above and to date have not experienced nonperformance by counterparties. In addition, we mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty and anticipate 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 24 months or less. Certain forward contracts are rolled over periodically to capture the full length of exposure to our 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. We expect a majority of the hedge balance in OCI to be reclassified to the statements of income within the next 12 months.
We did not record any gains or losses related to discontinuation of cash flow hedges during the three months ended January 31, 2022 and 2021.
Non-designated Hedging Activities
Our 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 our balance sheet exposure is approximately one month.
We also have 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 our hedging program is to minimize the impact of currency fluctuations on the net income over the fiscal year.
12


The effects of the non-designated derivative instruments on our unaudited condensed consolidated statements of income were summarized as follows:
 Three Months Ended 
 January 31,
 20222021
 (in thousands)
Gain (loss) recorded in other income (expense), net$446 $1,129 
The notional amounts in the table below for derivative instruments provided one measure of the transaction volume outstanding:
As of
January 31, 2022October 31, 2021
 (in thousands)
Total gross notional amount$1,179,091 $1,176,152 
Net fair value$11,991 $13,404 
Our exposure to market gain or loss will vary over time as a function of currency exchange rates. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.
The following table represented the unaudited condensed consolidated balance sheets location and amount of derivative instrument fair values segregated between designated and non-designated hedge instruments:
Fair values of
derivative instruments
designated as hedging
instruments
Fair values of
derivative instruments
not designated as
hedging instruments
 (in thousands)
Balance at January 31, 2022
Other current assets$17,498 $57 
Accrued liabilities$5,556 $8 
Balance at October 31, 2021
Other current assets$15,455 $17 
Accrued liabilities$2,027 $42 
The following table represented the location of the amount of gains and losses on derivative instrument fair values for designated hedge instruments, net of tax in the unaudited condensed consolidated statements of income:

Location of gain (loss)
recognized in OCI on
derivatives
Amount of gain (loss)
recognized in OCI on
derivatives
(effective portion)
Location of
gain (loss)
reclassified from OCI
Amount of
gain (loss)
reclassified from
OCI
(effective portion)
 (in thousands)
Three months ended 
 January 31, 2022
Foreign exchange contractsRevenue$(816)Revenue$(571)
Foreign exchange contractsOperating expenses(769)Operating expenses(274)
Total$(1,585)$(845)
Three months ended 
 January 31, 2021
Foreign exchange contractsRevenue$(163)Revenue$113 
Foreign exchange contractsOperating expenses4,256 Operating expenses2,613 
Total$4,093 $2,726 

13


Note 8. Fair Value Measurements
ASC 820-10, Fair Value Measurements and Disclosures, defines fair value, establishes guidelines and enhances disclosure requirements for fair value measurements. The accounting guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance also establishes a fair value hierarchy based on the independence of the source and objective evidence of the inputs used. There are three fair value hierarchies based upon the level of inputs that are significant to fair value measurement:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical instruments in active markets;
Level 2—Observable inputs other than quoted prices included in Level 1 for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-driven valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3—Unobservable inputs to the valuation derived from fair valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
On a recurring basis, we measure the fair value of certain of our assets and liabilities, which include cash equivalents, non-qualified deferred compensation plan assets, and foreign currency derivative contracts.
Our cash equivalents and short-term investments are classified within Level 1 or Level 2 because they are valued using quoted market prices in an active market or alternative independent pricing sources and models utilizing market observable inputs.
Our non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets and are therefore classified within Level 1.
Our foreign currency derivative contracts are classified within Level 2 because these contracts are not actively traded, and the valuation inputs are based on quoted prices and market observable data of similar instruments.
Our borrowings under the credit and term loan facilities are classified within Level 2 because these borrowings are not actively traded and have a variable interest rate structure based upon market rates currently available for our debt with similar terms and maturities. See Note 10. Credit and Term Loan Facilities for more information on these borrowings.
14


Assets/Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis were summarized below as of January 31, 2022:
  Fair Value Measurement Using
DescriptionTotalQuoted Prices in 
Active Markets
for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
 Inputs
(Level 3)
 (in thousands)
Assets
Cash equivalents:
Money market funds$75,680 75,680 
Short-term investments:
U.S. government agency & T-bills8,064 8,064 
Municipal bonds3,912 3,912 
Corporate debt securities103,414 103,414 
Asset-backed securities32,358 32,358