SYNOPSYS : Management’s Discussion and Analysis of Financial Condition and Results of


This Quarterly Report on Form 10-Q includes forward-looking statements, which
involve risks, uncertainties and other factors that could cause our actual
results, time frames or achievements to differ materially from those expressed
or implied in our forward-looking statements. Readers are urged to carefully
review and consider the various disclosures regarding these risks and
uncertainties made in this Quarterly Report on Form 10-Q, including those
identified below in Part II, Item 1A. Risk Factors, and in other documents we
file from time to time with the Securities and Exchange Commission (SEC).
Forward-looking statements include any statements that are not statements of
historical fact and include, but are not limited to, statements concerning
business outlook, opportunities and strategies; customer demand and market
expansion; strategies related to our products and technology; our planned
product releases and capabilities; industry growth rates; software trends;
planned acquisitions and buybacks; the expected impact of U.S. and foreign
government actions on our financial results; and the expected impact and
duration of the COVID-19 pandemic. Forward-looking statements may be identified
by words including, but not limited to, "may," "will," "could," "would," "can,"
"should," "anticipate," "expect," "intend," "believe," "estimate," "project,"
"continue," "forecast," "likely," "potential," "seek," or the negatives of such
terms and similar expressions. The information included herein represents our
estimates and assumptions as of the date of this filing. Unless required by law,
we undertake no obligation to update publicly any forward-looking statements, or
to update the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new information becomes
available in the future. All subsequent written or oral forward-looking
statements attributable to Synopsys or persons acting on our behalf are
expressly qualified in their entirety by these cautionary statements.

The following summary of our financial condition and results of operations
should be read together with our unaudited condensed consolidated financial
statements and the related notes thereto contained in Part I, Item 1 of this
report and with our audited consolidated financial statements and the related
notes thereto contained in our Annual Report on Form 10-K for the fiscal year
ended October 31, 2020, as filed with the SEC on December 15, 2020.
Business Summary
Synopsys, Inc. provides products and services used across the entire Silicon to
Software spectrum to bring Smart Everything to life. From engineers creating
advanced semiconductors to product teams developing advanced electronic systems
to software developers seeking to ensure the security and quality of their code,
our customers trust that our technologies will enable them to meet new
requirements for low power as well as reliability, mobility and security. 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
Our EDA and IP customers are generally semiconductor and electronics systems
companies. Our solutions help these companies overcome the challenges of
developing increasingly advanced electronics products while also helping them
reduce their design and manufacturing costs. While our products are an important
part of our customers' development process, our sales could be affected based on
their research and development budgets, and our customers' spending decisions
may be affected by their business outlook and willingness to invest in new and
increasingly complex chip designs.
Our Software Integrity business delivers products and services that enable
software developers to test their code-while it is being written-for known
security vulnerabilities and quality defects, as well as testing for open source
security vulnerabilities and license compliance. Our Software Integrity
customers are software developers across many industries, including, but also
well beyond, the semiconductor and systems industries. Our Software Integrity
products and services form a platform that helps our customers build security
into the software development

lifecycle and across the entire cyber supply chain.
We have consistently grown our revenue since 2005, despite periods of global
economic uncertainty. We achieved these results because of our solid execution,
leading technologies and strong customer relationships, and because we recognize
our revenue for software licenses over the arrangement period, which typically
approximates three years. See Note 2 of the Notes to Consolidated Financial
Statements in our Annual Report for a discussion on our revenue recognition
policy. The revenue we recognize in a particular period generally results from
selling efforts in prior periods rather than the current period. As a result,
decreases as well as increases in customer spending do not immediately affect
our revenues in a significant way, but may affect our revenues and financial
performance in future periods.
Our growth strategy is based on maintaining and building on our leadership in
our EDA products, expanding and proliferating our IP offerings, driving growth
in the software security and quality market and continuing to expand our product
portfolio and our total addressable market. In addition, due to our adoption of
ASC 606 in the beginning of fiscal 2019, the way in which we are required to
account for certain types of arrangements has increased the variability in our
total revenue from period to period. Nevertheless, the accounting impact has not
affected the cash generated from our business. Based on our leading
technologies, customer relationships, business model, diligent expense
management and acquisition strategy, we believe that we will continue to execute
our strategies successfully.
COVID-19 Pandemic
While the COVID-19 pandemic changed the physical working environment of the
majority of our workforce to working from home, it otherwise caused only minor
disruptions to our business operations, with a limited impact on our operating
results thus far. Given the unpredictable nature of the COVID-19 pandemic's
continuing impact on the global economy, our historical results may not be an
indication of future performance. We have reopened certain of our non-U.S.
offices, subject to operating restrictions to protect public health and the
health and safety of our employees. We are preparing plans to open additional
offices, including our headquarters in Mountain View, California, in a phased
approach in compliance with applicable guidelines, with a focus on employee
safety and optimal work environment.
The extent to which the COVID-19 pandemic impacts our business operations in
future periods will depend on multiple uncertain factors, including the duration
and scope of the pandemic, its overall negative impact on the global economy
generally and the semiconductor and electronics industries specifically, and
continued responses by governments and businesses to COVID-19. We have not
identified trends that we expect will materially impact our future operating
results at this time. As we recognize our revenue for software licenses over the
arrangement period, any potential impact related to COVID-19 may be delayed. We
have not observed any changes in the design activity of customers, but in prior
quarters we did experience some slowdowns in customer commitments in our
Software Integrity segment. We have not received any significant requests from
our customers to either delay payments or modify arrangements due to COVID-19.
However, this situation could change in future periods, and the extent that
these requests affect our business is uncertain. We have also experienced minor
disruptions in our hardware supply chain, which we have been able to address
with minimal impact to our business operations to date.
We will continue to consider the potential impact of the COVID-19 pandemic on
our business operations. Although no material impairment or other effects have
been identified to date related to the COVID-19 pandemic, there is substantial
uncertainty in the nature and degree of its continued effects over time. That
uncertainty affects management's accounting estimates and assumptions, which
could result in greater variability in a variety of areas that depend on these
estimates and assumptions as additional events and information become known.
See Part II, Item 1A, Risk Factors for further discussion of the possible impact
of the COVID-19 pandemic on our business, operations and financial condition.
Business Segments
Semiconductor & System Design. This segment includes our advanced silicon
design, verification products and services and semiconductor IP portfolio, which
encompasses products and services that serve companies primarily in...


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