Discontinued Operations

12 Months Ended

Oct. 31, 2024

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

On September 30, 2024, we completed the sale of Software Integrity business to entities controlled by funds affiliated with Clearlake Capital Group, L.P. and Francisco Partners. The aggregate consideration for the sale was $1.65 billion, comprised of (i) cash of $1.48 billion received upon closing; (ii) $121.5 million reflecting the present value of $125 million deferred consideration receivable in equal installments over five fiscal quarters beginning on January 17, 2025, subject to acceleration at our option prior to the closing of our pending acquisition of ANSYS Inc. (Ansys); (iii) $22.2 million reflecting fair value of contingent consideration of up to $475 million receivable upon the Sponsors achieving a specified rate of return in the event of one or more potential liquidity transactions; and (iv) additional consideration receivable of $27.1 million as a result of net working capital adjustments. The fair value of the contingent consideration receivable was estimated using an option pricing model to derive the likelihood of achieving the performance-based metrics. The valuation methodology includes assumptions and judgments regarding volatility, discount rates, and the expected timing of payments. As of October 31, 2024, the deferred consideration receivable and the contingent consideration receivables were recorded within the prepaid and other current assets in the consolidated balance sheets. As a result of the Software Integrity Divestiture, we derecognized net assets of $720.5 million and incurred transaction costs of $61.7 million, resulting in a pre-tax gain of $868.8 million within income from discontinued operations in the consolidated statements of income, subject to certain post-closing adjustments that are expected to be finalized in the first quarter of fiscal 2025.

The financial results of the Software Integrity business are presented as income from discontinued operations, net of income taxes in our consolidated statements of income. The financial results for fiscal 2024 include the period from the beginning of year through the date of sale. The following table presents the major components of financial results of our Software Integrity business for the periods presented:

	Year Ended October 31,
	2024		2023		2022
	(in thousands)
Revenue	$	468,720	$	524,605	$	465,828
Cost of revenue	153,081		191,350		165,684
Operating expenses	265,029		337,235		286,820
Interest and other income (expense), net	2,003		292		(1,262)
Income (loss) from discontinued operations	52,613		(3,688)		12,062
Gain on Software Integrity Divestiture	868,830		—		—
Income (loss) from discontinued operations before income taxes	921,443		(3,688)		12,062
Income tax provision (benefit)	99,773		(6,531)		(2,307)
Income from discontinued operations, net of income taxes	$	821,670	$	2,843	$	14,369

The following table represents the aggregated carrying amounts of classes of assets and liabilities that are classified as discontinued operations in the consolidated balance sheets for the periods presented:

	As of October 31, 2023
	(in thousands)
Assets:
Cash and cash equivalents	$	4,947
Accounts receivable, net	90,307
Prepaid and other current assets	19,400
Total current assets of discontinued operations	$	114,654
Property and equipment, net	$	7,424
Operating lease right-of use assets, net	8,906
Goodwill	724,271
Intangible assets, net	134,617
Deferred income taxes	7,388
Other long-term assets	26,153
Total long-term assets of discontinued operations	$	908,759
Liabilities:
Accounts payable and accrued liabilities	$	63,847
Operating lease liabilities	5,858
Deferred revenue	216,539
Total current liabilities of discontinued operations	$	286,244
Long-term operating lease liabilities	$	4,349
Long-term deferred revenue	24,301
Other long-term liabilities	4,607
Total long-term liabilities of discontinued operations	$	33,257

The following table presents significant non-cash items and capital expenditures of discontinued operations for the periods presented:

	Year Ended October 31,
	2024		2023		2022
	( in thousands)
Amortization and depreciation	$	16,317	$	51,971	$	44,173
Reduction of operating lease right-of-use assets	$	2,162	$	5,120	$	4,898
Amortization of capitalized costs to obtain revenue contracts	$	25,051	$	30,071	$	23,090
Stock-based compensation	$	34,381	$	50,198	$	37,280
Deferred income taxes	$	(31,679)	$	(3,136)	$	(599)
Purchases of property and equipment	$	1,487	$	3,232	$	3,610