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, 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

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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock (par value of $0.01 per share)	SNPS	Nasdaq 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 17, 2023, there were 152,159,561 shares of the registrant’s common stock outstanding.

SYNOPSYS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCAL QUARTER ENDED APRIL 30, 2023

TABLE OF CONTENTS

		Page
PART I.	Financial Information	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41
PART II.	Other Information	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 6.	Exhibits	59
Signatures		61

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SYNOPSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value amounts)

	April 30, 2023		October 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,544,592	$	1,417,608
Short-term investments	150,846		147,913
Total cash, cash equivalents and short-term investments	1,695,438		1,565,521
Accounts receivable, net	779,892		796,091
Inventories	256,426		211,927
Prepaid and other current assets	429,179		439,130
Total current assets	3,160,935		3,012,669
Property and equipment, net	546,439		483,300
Operating lease right-of-use assets, net	576,727		559,090
Goodwill	3,888,249		3,842,234
Intangible assets, net	357,113		386,446
Deferred income taxes	774,391		670,653
Other long-term assets	486,878		463,695
Total assets	$	9,790,732	$	9,418,087
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	701,816	$	809,403
Operating lease liabilities	78,056		54,274
Deferred revenue	1,968,808		1,910,822
Total current liabilities	2,748,680		2,774,499
Long-term operating lease liabilities	591,667		581,273
Long-term deferred revenue	191,413		154,472
Long-term debt	20,201		20,824
Other long-term liabilities	365,949		327,829
Total liabilities	3,917,910		3,858,897
Redeemable non-controlling interest	35,877		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; 152,251 and 152,375 shares outstanding, respectively	1,523		1,524
Capital in excess of par value	1,330,072		1,487,126
Retained earnings	6,075,009		5,534,307
Treasury stock, at cost: 5,010 and 4,886 shares, respectively	(1,428,748)		(1,272,955)
Accumulated other comprehensive income (loss)	(145,997)		(234,277)
Total Synopsys stockholders’ equity	5,831,859		5,515,725
Non-controlling interest	5,086		4,801
Total stockholders’ equity	5,836,945		5,520,526
Total liabilities, redeemable non-controlling interest and stockholders’ equity	$	9,790,732	$	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   April 30,				Six Months Ended   April 30,
	2023		2022		2023		2022
Revenue:
Time-based products	$	808,196	$	723,821	$	1,590,509	$	1,431,304
Upfront products	345,524		336,625		682,182		704,899
Total products revenue	1,153,720		1,060,446		2,272,691		2,136,203
Maintenance and service	241,143		218,783		483,512		413,281
Total revenue	1,394,863		1,279,229		2,756,203		2,549,484
Cost of revenue:
Products	184,732		150,690		359,099		316,089
Maintenance and service	95,410		87,666		186,757		165,891
Amortization of intangible assets	17,872		14,455		36,512		27,815
Total cost of revenue	298,014		252,811		582,368		509,795
Gross margin	1,096,849		1,026,418		2,173,835		2,039,689
Operating expenses:
Research and development	485,597		389,964		950,926		773,935
Sales and marketing	222,115		191,573		432,900		372,083
General and administrative	91,083		73,957		188,447		154,965
Amortization of intangible assets	6,582		6,912		13,299		15,912
Restructuring charges	4,140		311		44,999		12,057
Total operating expenses	809,517		662,717		1,630,571		1,328,952
Operating income	287,332		363,701		543,264		710,737
Other income (expense), net	4,253		(23,913)		27,545		(43,706)
Income before income taxes	291,585		339,788		570,809		667,031
Provision (benefit) for income taxes	21,637		45,896		32,234		59,798
Net income	$	269,948	$	293,892	$	538,575	$	607,233
Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest	(2,962)		(889)		(5,871)		(1,235)
Net income attributed to Synopsys	$	272,910	$	294,781	$	544,446	$	608,468
Net income per share attributed to Synopsys:
Basic	$	1.79	$	1.93	$	3.57	$	3.97
Diluted	$	1.76	$	1.89	$	3.51	$	3.88
Shares used in computing per share amounts:
Basic	152,187		153,090		152,294		153,154
Diluted	154,730		156,167		155,044		156,815

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   April 30,				Six Months Ended   April 30,
	2023		2022		2023		2022
Net income	$	269,948	$	293,892	$	538,575	$	607,233
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(8,788)		(39,999)		31,529		(40,612)
Changes in unrealized gains (losses) on available-for-sale securities, net of tax of $0 for periods presented	380		(1,173)		1,538		(1,673)
Cash flow hedges:
Deferred gains (losses), net of tax $1,959 and $(12,848) for the three and six months ended April 30, 2023, respectively, and of $9,181 and $9,411 for each of the same periods in fiscal 2022, respectively.	(4,530)		(21,132)		37,582		(22,717)
Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $(3,497) and $(6,596), for each of the three and six months ended April 30, 2023, and of $(170) and $(472) for each of the same periods in fiscal 2022, respectively.	9,274		662		17,631		1,507
Other comprehensive income (loss), net of tax effects	(3,664)		(61,642)		88,280		(63,495)
Comprehensive income	266,284		232,250		626,855		543,738
Less: net income (loss) attributed to non-controlling interest and redeemable non-controlling interest	(2,962)		(889)		(5,871)		(1,235)
Comprehensive income attributed to Synopsys	$	269,246	$	233,139	$	632,726	$	544,973

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
	Shares	Amount
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
Net income						272,910						272,910		(366)		272,544
Other comprehensive income (loss), net of tax effects										(3,664)		(3,664)				(3,664)
Purchases of treasury stock	(825)	(8)		8				(300,000)				(300,000)				(300,000)
Common stock issued, net of shares withheld for employee taxes	696	7		(106,258)		(312)		192,432				85,869				85,869
Stock-based compensation				142,293								142,293		965		143,258
Adjustments to redeemable non-controlling interest						(3,432)						(3,432)				(3,432)
Recognition of non-controlling interest upon issuance of subsidiary stock				1,129								1,129		(1,461)		(332)
Balance at April 30, 2023	152,251	$	1,523	$	1,330,072	$	6,075,009	$	(1,428,748)	$	(145,997)	$	5,831,859	$	5,086	$	5,836,945
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 income						544,446						544,446		(660)		543,786
Other comprehensive income (loss), net of tax effects										88,280		88,280				88,280
Purchases of treasury stock	(1,631)	(16)		16				(560,724)				(560,724)				(560,724)
Equity forward contract, net				(45,000)								(45,000)				(45,000)
Common stock issued, net of shares withheld for employee taxes	1,507	15		(388,278)		(312)		404,931				16,356				16,356
Stock-based compensation				275,079								275,079		2,406		277,485
Adjustments to redeemable non-controlling interest						(3,432)						(3,432)				(3,432)
Recognition of non-controlling interest upon issuance of subsidiary stock				1,129								1,129		(1,461)		(332)
Balance at April 30, 2023	152,251	$	1,523	$	1,330,072	$	6,075,009	$	(1,428,748)	$	(145,997)	$	5,831,859	$	5,086	$	5,836,945
				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
	Shares	Amount
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
Net income						294,781						294,781		(341)		294,440
Other comprehensive income (loss), net of tax effects										(61,642)		(61,642)				(61,642)
Purchases of treasury stock	(984)	(9)		9				(290,000)				(290,000)				(290,000)
Equity forward contract, net				40,000								40,000				40,000
Common stock issued, net of shares withheld for employee taxes	683	6		(62,815)				147,695				84,886				84,886
Stock-based compensation				110,061								110,061				110,061
Adjustments to redeemable non-controlling interest						(548)						(548)				(548)
Balance at April 30, 2022	152,955	$	1,530	$	1,517,481	$	5,157,633	$	(999,234)	$	(113,099)	$	5,564,311	$	3,119	$	5,567,430
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 income						608,468						608,468		(687)		607,781
Other comprehensive income (loss), net of tax effects										(63,495)		(63,495)				(63,495)
Purchases of treasury stock	(1,685)	(16)		16				(535,000)				(535,000)				(535,000)
Equity forward contract, net				35,000								35,000				35,000
Common stock issued, net of shares withheld for employee taxes	1,578	15		(299,730)				318,632				18,917				18,917
Stock-based compensation				205,832								205,832				205,832
Adjustments to redeemable non-controlling interest						(548)						(548)				(548)
Balance at April 30, 2022	152,955	$	1,530	$	1,517,481	$	5,157,633	$	(999,234)	$	(113,099)	$	5,564,311	$	3,119	$	5,567,430

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

4

SYNOPSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Six Months Ended   April 30,
	2023		2022
Cash flows from operating activities:
Net income	$	538,575	$	607,233
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation	116,922		111,962
Reduction of operating lease right-of-use assets	48,073		42,412
Amortization of capitalized costs to obtain revenue contracts	39,588		34,574
Stock-based compensation	277,485		205,832
Allowance for credit losses	6,134		(4,516)
Deferred income taxes	(125,090)		8,944
Other non-cash	4,972		7,479
Net changes in operating assets and liabilities, net of acquired assets and liabilities:
Accounts receivable	9,289		(169,785)
Inventories	(48,648)		7,725
Prepaid and other current assets	49,437		(2,417)
Other long-term assets	(75,324)		(8,701)
Accounts payable and accrued liabilities	(162,840)		(181,008)
Operating lease liabilities	(31,634)		(43,963)
Income taxes	94,587		(34,246)
Deferred revenue	76,165		324,176
Net cash provided by operating activities	817,691		905,701
Cash flows from investing activities:
Proceeds from sales and maturities of short-term investments	67,717		43,653
Purchases of short-term investments	(68,738)		(45,158)
Proceeds from sales of long-term investments	7,248		582
Purchases of long-term investments	—		(7,000)
Purchases of property and equipment	(91,368)		(67,367)
Acquisitions, net of cash acquired	(41,324)		(109,060)
Capitalization of software development costs	(1,247)		(1,065)
Other	—		(600)
Net cash used in investing activities	(127,712)		(186,015)
Cash flows from financing activities:
Repayment of debt	(1,294)		(75,938)
Issuances of common stock	132,808		120,710
Payments for taxes related to net share settlement of equity awards	(116,838)		(101,126)
Purchase of equity forward contract	(45,000)		—
Purchases of treasury stock	(560,724)		(500,000)
Other	(122)		(2,709)
Net cash used in financing activities	(591,170)		(559,063)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	27,708		(19,955)
Net change in cash, cash equivalents and restricted cash	126,517		140,668
Cash, cash equivalents and restricted cash, beginning of year	1,419,864		1,435,183
Cash, cash equivalents and restricted cash, end of period	$	1,546,381	$	1,575,851

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. Our Chief Operating Decision Maker (CODM), our Chief

6

Executive Officer (CEO), now regularly reviews disaggregated segment information, assesses performance against our key growth strategies and allocates resources based on this new organizational structure. As a result, effective in the first quarter of fiscal 2023, we changed our reportable segments from two reportable segments to 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 and geopolitical uncertainties, 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 Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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   April 30,				Six Months Ended   April 30,
	2023		2022		2023		2022
EDA	64.6	%	61.6	%	64.4	%	61.5	%
Design IP	24.0	%	27.2	%	24.6	%	27.7	%
Software Integrity	9.5	%	8.8	%	9.4	%	8.6	%
Other	1.9	%	2.4	%	1.6	%	2.2	%
Total	100.0	%	100.0	%	100.0	%	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
	April 30, 2023		October 31, 2022
	(in thousands)
Contract assets, net	$	249,195	$	260,498
Unbilled receivables	$	44,265	$	46,254
Deferred revenue	$	2,160,221	$	2,065,294

During the three and six months ended April 30, 2023, we recognized revenue of $425.2 million and $1.2 billion, respectively, that was included in the deferred revenue balance as of October 31, 2022.

Contracted but unsatisfied or partially unsatisfied performance obligations were approximately $7.3 billion as of April 30, 2023, which includes $1.4 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 42% of the contracted but unsatisfied or partially unsatisfied performance obligations as of April 30, 2023, 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, 2023, we recognized $26.9 million and $51.6 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods. During the three and six months ended April 30, 2022, we recognized $37.7 million and $69.7 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 April 30, 2023 were $97.9 million and included in other long-term assets in our condensed consolidated balance sheets. Amortization of these assets was $20.7 million and $39.6 million during the three and six months ended April 30, 2023, respectively, and included in sales and marketing expense in the condensed consolidated statements of income. Amortization of these assets was $17.8 million and $34.6 million during the three and six months ended April 30, 2022, respectively, and included in sales and marketing expense in the condensed consolidated statements of income.

Note 4. Business Combination

During the six months ended April 30, 2023, we completed one acquisition for aggregate purchase consideration of $38.6 million, net of cash acquired. The purchase consideration was allocated as follows: $20.3 million to identifiable intangible assets and $23.0 million to goodwill. The total purchase consideration is preliminary, and as additional information becomes available, we may further revise it during the remainder of the measurement period, which will not exceed 12 months from the closing of the acquisition. The goodwill recognized was assigned to the Design Automation reporting unit, and was not deductible for income tax purposes.

We have included the financial results of this acquisition in our condensed consolidated financial statements from the date of acquisition. These results were not material to our condensed consolidated financial statements.

Transaction costs were $2.7 million and $5.3 million during the three and six months ended April 30, 2023, respectively. Transaction costs were $4.0 million and $6.1 million during the three and six months ended April 30, 2022, respectively. These costs mainly consisted of professional fees and administrative costs and were expensed as incurred in our condensed consolidated statements of income.

Note 5. 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

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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 six months ended April 30, 2023 were as follows:

	(in thousands)
Balance at October 31, 2022	$	3,842,234
Additions	23,029
Adjustments	3,054
Effect of foreign currency translation	19,932
Balance at April 30, 2023	$	3,888,249

During the six months ended April 30, 2023, we finalized certain estimates impacting total preliminary purchase consideration for certain acquisitions and recorded the resulting measurement period adjustments which increased goodwill.

Intangible Assets

Intangible assets as of April 30, 2023 consisted of the following:

	Gross Carrying Amount		Accumulated Amortization		Net Amount
	(in thousands)
Core/developed technology	$	1,097,217	$	848,890	$	248,327
Customer relationships	431,303		345,857		85,446
Contract rights intangible	193,594		189,953		3,641
Trademarks and trade names	52,795		35,840		16,955
Capitalized software development costs	49,838		47,094		2,744
Total	$	1,824,747	$	1,467,634	$	357,113

Intangible assets as of October 31, 2022 consisted of the following:

	Gross Carrying Amount		Accumulated Amortization		Net Amount
	(in thousands)
Core/developed technology	$	1,083,703	$	813,226	$	270,477
Customer relationships	426,242		333,984		92,258
Contract rights intangible	190,666		188,262		2,404
Trademarks and trade names	52,795		34,054		18,741
Capitalized software development costs	48,591		46,025		2,566
Total	$	1,801,997	$	1,415,551	$	386,446

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Amortization expense related to intangible assets consisted of the following:

	Three Months Ended   April 30,				Six Months Ended   April 30,
	2023		2022		2023		2022
	(in thousands)
Core/developed technology	$	17,481	$	13,728	$	35,750	$	26,576
Customer relationships	5,689		6,312		11,513		14,497
Contract rights intangible	391