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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, 2023
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-20230131_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 15, 2023, there were 152,301,677 shares of the registrant’s common stock outstanding.


SYNOPSYS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED JANUARY 31, 2023
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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value amounts)
January 31,
2023		 October 31,
2022
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$1,154,873 $1,417,608 
Short-term investments147,050 147,913 
      Total cash, cash equivalents and short-term investments1,301,923 1,565,521 
Accounts receivable, net1,035,323 796,091 
Inventories220,881 211,927 
Prepaid and other current assets470,272 439,130 
Total current assets3,028,399 3,012,669 
Property and equipment, net516,925 483,300 
Operating lease right-of-use assets, net586,892 559,090 
Goodwill3,864,833 3,842,234 
Intangible assets, net361,154 386,446 
Deferred income taxes719,082 670,653 
Other long-term assets488,339 463,695 
Total assets$9,565,624 $9,418,087 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$663,594 $809,403 
Operating lease liabilities66,326 54,274 
Deferred revenue1,995,077 1,910,822 
Total current liabilities2,724,997 2,774,499 
Long-term operating lease liabilities603,538 581,273 
Long-term deferred revenue172,794 154,472 
Long-term debt20,569 20,824 
Other long-term liabilities364,975 327,829 
Total liabilities3,886,873 3,858,897 
Redeemable non-controlling interest36,049 38,664 
Stockholders’ equity:
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding
— — 
Common stock, $0.01 par value: 400,000 shares authorized; 152,380 and 152,375 shares outstanding, respectively
1,524 1,524 
Capital in excess of par value1,292,900 1,487,126 
Retained earnings5,805,843 5,534,307 
Treasury stock, at cost: 4,881 and 4,886 shares, respectively
(1,321,180)(1,272,955)
Accumulated other comprehensive income (loss)(142,333)(234,277)
Total Synopsys stockholders’ equity5,636,754 5,515,725 
Non-controlling interest5,948 4,801 
Total stockholders’ equity5,642,702 5,520,526 
Total liabilities, redeemable non-controlling interest and stockholders’ equity$9,565,624 $9,418,087 

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
1

SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
 Three Months Ended 
 January 31,
 20232022
Revenue:
Time-based products$782,313 $707,483 
Upfront products336,658 368,274 
Total products revenue1,118,971 1,075,757 
Maintenance and service242,369 194,498 
Total revenue1,361,340 1,270,255 
Cost of revenue:
Products174,367 165,399 
Maintenance and service91,347 78,225 
Amortization of intangible assets18,640 13,360 
Total cost of revenue284,354 256,984 
Gross margin1,076,986 1,013,271 
Operating expenses:
Research and development465,329 383,971 
Sales and marketing210,785 180,510 
General and administrative97,364 81,008 
Amortization of intangible assets6,717 9,000 
Restructuring charges40,859 11,746 
Total operating expenses821,054 666,235 
Operating income255,932 347,036 
Other income (expense), net23,292 (19,793)
Income before income taxes279,224 327,243 
Provision (benefit) for income taxes10,597 13,902 
Net income$268,627 $313,341 
Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest(2,909)(346)
Net income attributed to Synopsys$271,536 $313,687 
Net income per share attributed to Synopsys:
Basic$1.78 $2.05 
Diluted$1.75 $1.99 
Shares used in computing per share amounts:
Basic152,401 153,218 
Diluted155,076 157,273 
See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

2

SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 Three Months Ended 
 January 31,
 20232022
Net income$268,627 $313,341 
Other comprehensive income (loss):
Change in foreign currency translation adjustment40,317 (613)
Changes in unrealized gains (losses) on available-for-sale securities, net of tax of $0 for periods presented1,158 (500)
Cash flow hedges:
Deferred gains (losses), net of tax $(14,807) and $230, respectively.
42,112 (1,585)
Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $(3,099) and $(302), respectively.
8,357 845 
Other comprehensive income (loss), net of tax effects91,944 (1,853)
Comprehensive income360,571 311,488 
Less: net income (loss) attributed to non-controlling interest and redeemable non-controlling interest(2,909)(346)
Comprehensive income attributed to Synopsys$363,480 $311,834 
See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

3

SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, 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, 2022
152,375 $1,524 $1,487,126 $5,534,307 $(1,272,955)$(234,277)$5,515,725 $4,801 $5,520,526 
Net income271,536 271,536 (294)271,242 
Other comprehensive income (loss), net of tax effects91,944 91,944 91,944 
Purchases of treasury stock(806)(8)8 (260,724)(260,724)(260,724)
Equity forward contract, net(45,000)(45,000)(45,000)
Common stock issued, net of shares withheld for employee taxes811 8 (282,020)212,499 (69,513)(69,513)
Stock-based compensation132,786 132,786 1,441 134,227 
Balance at January 31, 2023
152,380 $1,524 $1,292,900 $5,805,843 $(1,321,180)$(142,333)$5,636,754 $5,948 $5,642,702 
 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 

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
4

SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Three Months Ended 
 January 31,
 20232022
Cash flows from operating activities:
Net income$268,627 $313,341 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation57,294 61,685 
Reduction of operating lease right-of-use assets23,903 21,010 
Amortization of capitalized costs to obtain revenue contracts18,850 16,737 
Stock-based compensation134,227 95,771 
Allowance for credit losses3,700 5,278 
Deferred income taxes(65,495)(11,952)
Other non-cash4,535 4,832 
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable(237,360)(466,684)
Inventories(8,610)9,155 
Prepaid and other current assets(355)(303)
Other long-term assets(54,196)(11,969)
Accounts payable and accrued liabilities(144,258)(223,223)
Operating lease liabilities(17,629)(19,477)
Income taxes50,416 6,555 
Deferred revenue81,102 354,988 
Net cash provided by operating activities114,751 155,744 
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments30,971 16,437 
Purchases of short-term investments(28,829)(17,210)
Proceeds from sales of long-term investments5,735 582 
Purchases of long-term investments— (5,000)
Purchases of property and equipment(43,500)(41,751)
Acquisitions, net of cash acquired— (19,989)
Capitalization of software development costs(624)(494)
Other— (600)
Net cash used in investing activities(36,247)(68,025)
Cash flows from financing activities:
Repayment of debt(1,294)(75,938)
Issuances of common stock22,338 30,835 
Payments for taxes related to net share settlement of equity awards(92,095)(96,785)
Purchase of equity forward contract(45,000)(40,000)
Purchases of treasury stock(260,724)(210,000)
Other— (2,709)
Net cash used in financing activities(376,775)(394,597)
Effect of exchange rate changes on cash, cash equivalents and restricted cash35,675 (1,720)
Net change in cash, cash equivalents and restricted cash (262,596)(308,598)
Cash, cash equivalents and restricted cash, beginning of year1,419,864 1,435,183 
Cash, cash equivalents and restricted cash, end of period$1,157,268 $1,126,585 
See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
5

SYNOPSYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Description of Business
Synopsys, Inc. (Synopsys, 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 electronic design automation (EDA) software that engineers use to design and test integrated circuits (ICs), also known as chips. We provide software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them. We also provide technical services and support to help our customers develop advanced chips and electronic systems. These products and services are part of our Design Automation segment.
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. These products and services are part of our Design IP 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 and Basis of Presentation
We have prepared the accompanying 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). The condensed consolidated financial statements are unaudited but, in management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our quarterly results. 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, 2022 as filed with the SEC on December 12, 2022 (our Annual Report).
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 condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and could have a material impact on our operating results and financial position.
Principles of Consolidation. The condensed consolidated financial statements include our accounts and the accounts of our wholly and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
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 2023 and 2022 are both 52-week years. Fiscal 2023 will end on October 28, 2023. Fiscal 2022 ended on October 29, 2022. For presentation purposes, the condensed consolidated financial statements and accompanying notes refer to the closest calendar month end.
Comparability. Certain reclassifications have been made to the prior period's condensed consolidated financial statements to conform to the current year presentation. The reclassifications did not have a material impact on the prior period's condensed consolidated balance sheets, statements of income, statements of comprehensive income and statements of cash flows.
Segment Reporting. Effective in the first quarter of fiscal 2023, we realigned our organizational structure to evaluate the results of our Design IP business separately, and our Chief Operating Decision Maker (CODM), our Chief
6

Executive Officer (CEO), now allocates resources and assesses performance against our key growth strategies based on this new organizational structure. As a result, we changed our reportable segments from two reportable segments to three reportable segments. The CODM now regularly reviews disaggregated information for the following three reportable segments: (1) Design Automation, which includes EDA tools, system integration solutions and other associated revenue categories, (2) Design IP, which includes IP products, and (3) Software Integrity, which includes a comprehensive solution for building integrity - security, quality and compliance testing - into the customers' software development lifecycle and supply chain. As such, prior period reportable segment results and related disclosures have been reclassified to reflect our current reportable segments.
Goodwill. As a result of the change to our reportable segments, we reassessed our reporting units for the evaluation of goodwill during the first quarter of fiscal 2023. Prior to this change, our reporting units were determined to be the same as reportable segments for the purpose of goodwill impairment assessment. Our reassessment determined that we now have three reporting units, which are the same as our reportable segments.
Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and identifiable intangible assets acquired by us. The carrying amount of goodwill at each reporting unit is tested for impairment annually on the first day of the fourth fiscal quarter, or more frequently if facts and circumstances warrant a review. We perform either a qualitative or quantitative assessment for goodwill impairment test. When a quantitative goodwill impairment assessment is performed, we use an income approach based on discounted cash flow analysis, a market approach based on market multiples, or a combination of both. If the fair value of a reporting unit is less than its carrying value, a goodwill impairment loss is recorded for the difference.
The change in reporting units was considered a triggering event, indicating a test for goodwill impairment was required before and after the change in reporting units. We performed those impairment tests, which did not result in the identification of an impairment loss as of January 31, 2023.
If assumptions or estimates with respect to our future performance vary from what is expected, including but not limited to those assumptions relating to inflationary pressure on costs, geopolitical uncertainties and the threat of additional COVID-19 variants, this may impact the impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.
Significant Accounting Policies. There have been no material changes to our significant accounting policies included in our Annual Report.
Recently Issued Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (ASU 2022-03), which applies to all equity securities measured at fair value that are subject to contractual sale restrictions. This change prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. The standard will become effective for us beginning on November 1, 2024 and will be applied prospectively. Early adoption is permitted. Any future impact from the adoption of this guidance will depend on the facts and circumstances of future transactions.
Note 3. Revenue
Disaggregated Revenue
The following table showed the percentage of revenue by product groups:
Three Months Ended 
 January 31,
20232022
EDA64.3 %61.3 %
Design IP25.2 %28.2 %
Software Integrity9.4 %8.5 %
Other1.1 %2.0 %
Total100.0 %100.0 %
Contract Balances
7

The contract assets indicated below are presented as prepaid and other current assets in the 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 condensed consolidated balance sheets.
Contract balances were as follows:
As of
January 31, 2023October 31, 2022
 (in thousands)
Contract assets, net$259,146 $260,498 
Unbilled receivables$45,814 $46,254 
Deferred revenue$2,167,871 $2,065,294 
During the three months ended January 31, 2023, we recognized revenue of $793.5 million that was included in the deferred revenue balance as of October 31, 2022.
Contracted but unsatisfied or partially unsatisfied performance obligations were approximately $6.9 billion as of January 31, 2023, which includes $1.0 billion 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 44% of the contracted but unsatisfied or partially unsatisfied performance obligations as of January 31, 2023, 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, 2023 and 2022, we recognized $24.7 million and $32.0 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, 2023 were $95.4 million and included in other long-term assets in our condensed consolidated balance sheets. Amortization of these assets was $18.9 million and $16.7 million during the three months ended January 31, 2023 and 2022, respectively, and included in sales and marketing expense in the condensed consolidated statements of income.
Note 4. Goodwill and Intangible Assets
Goodwill
As a result of the change in reporting units effective in the first quarter of fiscal 2023, we estimated the fair value of our new reporting units and reallocated goodwill to the reporting units using a relative fair value method. No impairment of goodwill was identified for any period presented.
The changes in the carrying amount of goodwill during the three months ended January 31, 2023 were as follows:
 (in thousands)
Balance at October 31, 2022
$3,842,234 
Adjustments335 
Effect of foreign currency translation22,264 
Balance at January 31, 2023
$3,864,833 
Intangible Assets
Intangible assets as of January 31, 2023 consisted of the following:
8

Gross Carrying AmountAccumulated
Amortization		Net Amount
 (in thousands)
Core/developed technology$1,083,703 $831,495 $252,208 
Customer relationships426,705 340,271 86,434 
Contract rights intangible191,859 189,826 2,033 
Trademarks and trade names52,795 34,947 17,848 
Capitalized software development costs49,215 46,584 2,631 
Total$1,804,277 $1,443,123 $361,154 
Intangible assets as of October 31, 2022 consisted of the following:
Gross Carrying AmountAccumulated
Amortization		Net Amount
 (in thousands)
Core/developed technology$1,083,703 $813,226 $270,477 
Customer relationships426,242 333,984 92,258 
Contract rights intangible190,666 188,262 2,404 
Trademarks and trade names52,795 34,054 18,741 
Capitalized software development costs48,591 46,025 2,566 
Total$1,801,997 $1,415,551 $386,446 
Amortization expense related to intangible assets consisted of the following:
 Three Months Ended 
 January 31,
 20232022
 (in thousands)
Core/developed technology$18,269 $12,848 
Customer relationships5,824 8,185 
Contract rights intangible371 727 
Trademarks and trade names893 600 
Capitalized software development costs(1)
559 752 
Total$25,916 $23,112 
(1) Amortization of capitalized software development costs is included in cost of products revenue in the condensed consolidated statements of income.
The following table presented the estimated future amortization of intangible assets as of January 31, 2023:
Fiscal year(in thousands)
Remainder of fiscal 2023$73,629 
202488,333 
202571,191 
202658,688 
202738,487 
2028 and thereafter30,826 
Total$361,154 
Note 5. Balance Sheets Components
9

As of
January 31, 2023October 31, 2022
(in thousands)
Other long-term assets:
Deferred compensation plan assets$313,844 $279,096 
Capitalized commission, net95,373 96,509 
Other79,122 88,090 
Total$488,339 $463,695 
Accounts payable and accrued liabilities:
Payroll and related benefits$381,889 $559,886 
Other accrued liabilities211,460 211,937 
Accounts payable70,245 37,580 
Total$663,594 $809,403 
Other long-term liabilities:
Deferred compensation plan liabilities$313,844 $279,096 
Other51,131 48,733 
Total$364,975 $327,829 
Note 6. Financial Assets and Liabilities
Cash Equivalents and Short-term Investments.
As of January 31, 2023, 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$45,367 $— $— $— $45,367 
Total:$45,367 $— $— $— $45,367 
Short-term investments:
U.S. government agency & T-bills$24,851 $5 $(108)$— $24,748 
Municipal bonds2,695 — — (56)2,639 
Corporate debt securities93,437 103 (304)(852)92,384 
Asset-backed securities27,507 19 (64)(183)27,279 
Total:$148,490 $127 $(476)$(1,091)$147,050 
(1)See Note 7. Fair Value Measurements for further discussion on fair values.
The contractual maturities of our available-for-sale debt securities as of January 31, 2023 were as follows:

10

Amortized CostFair Value
(in thousands)
less than 1 year$69,730 $69,137 
1-5 years73,891 73,155 
5-10 years2,547 2,519 
>10 years2,322 2,239 
Total$148,490 $147,050 

As of October 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$77,683 $— $— $— $77,683 
Total:$77,683 $— $— $— $77,683 
Short-term investments:
U.S. government agency & T-bills$25,816 $— $(174)$(39)$25,603 
Municipal bonds2,970 — (12)(80)2,878 
Corporate debt securities95,899 7 (747)(1,135)94,024 
Asset-backed securities25,826 — (149)(269)25,408 
Total:$150,511 $7 $(1,082)$(1,523)$147,913 
(1)See Note 7. Fair Value Measurements for further discussion on fair values.
Restricted cash. We include amounts generally described as restricted cash in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the condensed consolidated statements of cash flows. Restricted cash is primarily associated with office leases.
The following table provided a reconciliation of cash, cash equivalents and restricted cash included in the condensed consolidated balance sheets:
As of
January 31, 2023October 31, 2022
(in thousands)
Cash and cash equivalents$1,154,873 $1,417,608 
Restricted cash included in prepaid and other current assets1,658 1,566 
Restricted cash included in other long-term assets737 690 
Total cash, cash equivalents and restricted cash$1,157,268 $1,419,864 

Non-marketable equity securities. Our portfolio of non-marketable equity securities consists of strategic investments in privately held companies. There was an immaterial impairment of a non-marketable equity security during the three months ended January 31, 2023. There was no impairment of non-marketable equity securities during the three months ended January 31, 2022.
Derivatives
We recognize derivative instruments as either assets or liabilities in the 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
11

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, the majority of which are short-term, ranges from approximately 1 month to 27 months at inception. 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 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 is included in net cash provided by operating activities in the 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 27 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, 2023 and 2022.
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.    
The effects of the non-designated derivative instruments on the condensed consolidated statements of income were summarized as follows:
 Three Months Ended 
 January 31,
 20232022
 (in thousands)
Gains (losses) recorded in other income (expense), net$8,221 $446 
12

The notional amounts in the table below for derivative instruments provided one measure of the transaction volume outstanding:
As of
January 31, 2023October 31, 2022
 (in thousands)
Total gross notional amounts$1,317,911 $1,386,140 
Net fair value$(3,737)$(50,080)
Our exposure to market gains or losses 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 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, 2023
Other current assets$12,840 $57 
Accrued liabilities$16,433 $201 
Balance at October 31, 2022
Other current assets$2,315 $223 
Accrued liabilities$52,171 $447 

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 condensed consolidated statements of income:

Location of 
gains (losses) recognized in OCI on derivatives		Amount of 
gains (losses) recognized in OCI on
derivatives
(effective portion)		Location of
gains (losses)
reclassified from OCI		Amount of
gains (losses)
reclassified from
OCI
(effective portion)
 (in thousands)
Three months ended 
 January 31, 2023
Foreign exchange contractsRevenue$5,267 Revenue$(3,967)
Foreign exchange contractsOperating expenses36,845 Operating expenses(4,390)
Total$42,112 $(8,357)
Three months ended 
 January 31, 2022
Foreign exchange contractsRevenue$(816)Revenue$(571)
Foreign exchange contractsOperating expenses(769)Operating expenses(274)
Total$(1,585)$(845)

Note 7. 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;
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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, short-term investments, 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 to us for debt with similar terms and maturities. See Note 9. Credit and Term Loan Facilities for more information on these borrowings.
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, 2023:
  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$45,367 45,367 $— $— 
Short-term investments:
U.S. government agency & T-bills24,748 — 24,748 — 
Municipal bonds2,639 — 2,639 —