SYNOPSYS INC

Non-GAAP Financial Measures and Segment Adjustments

Non-GAAP Financial Performance Measures

Synopsys presents non-GAAP operating margin and non-GAAP earnings per share (EPS) growth in this proxy statement to provide investors with an additional tool to evaluate Synopsys’ operating results. Synopsys’ management also uses non-GAAP operating margin and non-GAAP EPS growth to evaluate its business operations and for internal budgeting and resource allocation processes. Synopsys’ management does not itself, nor does it suggest that investors should, consider non-GAAP operating margin and non-GAAP EPS growth in isolation from, as superior to, or as a substitute for, financial information prepared in accordance with GAAP. Non-GAAP operating margin and non-GAAP EPS growth exclude the following items:

(i)Amortization of acquired intangible assets. Synopsys incurs expenses from amortization of acquired intangible assets, which include, among other things, core/developed technology, customer relationships, contract rights, trademarks and trade names, and other intangibles related to acquisitions. Synopsys amortizes the intangible assets over their estimated useful lives. Synopsys does not enter into acquisitions on a predictable cycle. The amount of an acquisition’s purchase price allocated to intangible assets and their estimated useful lives can vary significantly and are unique to each acquisition. Synopsys believes that the presentation of non-GAAP financial measures that adjust for the amortization of intangible assets provides investors and others with a consistent basis for comparison across accounting periods. Synopsys also excludes this item because such expenses are non-cash in nature and believes the non-GAAP measures excluding this item provide meaningful supplemental information regarding Synopsys’ core operational performance and liquidity, and ability to invest in research and development and fund future acquisitions and capital expenditures.

(ii)Stock-based compensation impact. Stock-based compensation expenses consist primarily of expenses related to restricted stock units, stock options, employee stock purchase rights and other stock awards, including such expenses associated with acquisitions. Synopsys excludes stock-based compensation expense from its non-GAAP measures primarily because it is not an expense that typically requires or will require cash settlement by Synopsys. Further, the expense for the fair value of the stock-based instruments Synopsys utilizes may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards and, therefore, is not used by management to assess the core profitability of Synopsys’ business operations.

(iii)Acquisition-related items. In connection with its business combinations, Synopsys incurs significant expenses that it would not have otherwise incurred as part of its business operations. These expenses include, among other things, compensation expenses, professional fees and other direct expenses, concurrent restructuring activities, including employee severance and other exit costs, changes to the fair value of contingent consideration related to the acquired company, and amortization of the fair value difference of below-market value assets arising from arrangements entered into or acquired in conjunction with an acquisition. Synopsys also recognizes the gains and losses from the mark-up of equity or cost method investments to fair value upon obtaining control through acquisition. Synopsys excludes these items because they are related to acquisitions and have no direct correlation to the core operation of its business. Further, because Synopsys does not acquire or dispose of businesses on a predictable cycle and the terms of each transaction can vary significantly and are unique to each transaction, Synopsys believes it is useful to exclude such expenses when looking for a consistent basis for comparison across accounting periods.

(iv)Restructuring charges. Synopsys initiates restructuring activities to align its costs to its operating plans and business strategies based on then-current economic conditions, and such activities have a specific and defined term. Restructuring costs generally include severance and other termination benefits related to voluntary retirement programs, involuntary headcount reductions and facilities closures. Such restructuring costs include elimination of operational redundancy, permanent reductions in workforce and facilities closures and, therefore, are not considered by Synopsys to be a part of the core operation of its business and are not used by management when assessing the core profitability and performance of its business operations.

(v)Deferred compensation. Synopsys excludes the gains and losses related to its deferred compensation plan investments because management does not use these to assess the core profitability of Synopsys' business operations.

Appendix B

GAAP TO NON-GAAP RECONCILIATION OF OPERATING MARGIN(1)

(UNAUDITED)

(2)The adjustment includes non-GAAP expenses attributable to non-controlling interest and redeemable non-controlling interest.

GAAP TO NON-GAAP RECONCILIATION OF EPS GROWTH(1)

(UNAUDITED)

(1)Synopsys' fiscal year 2023 ended on October 28, 2023 and fiscal year 2022 ended on October 29, 2022. For presentation purposes, we refer to the closest calendar month end.

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Appendix B

Segment Adjustments

BUSINESS SEGMENT REPORTING(1)(2)

(UNAUDITED, IN MILLIONS)

(2)Synopsys manages the business on a long-term, annual basis, and considers quarterly fluctuations of revenue and profitability as normal elements of our business. Amounts may not foot due to rounding.

Certain operating expenses are not allocated to the segments and are managed at a consolidated level. The unallocated expenses managed at a consolidated level, including amortization of intangible assets, stock-based compensation, the gains (losses) related to deferred compensation plan, restructuring charges, and certain acquisition-related items, are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income:

TOTAL ADJUSTED SEGMENT OPERATING INCOME RECONCILIATION(1)(2)(3)

(UNAUDITED, IN MILLIONS)

(2)Synopsys manages the business on a long-term, annual basis, and considers quarterly fluctuations of revenue and profitability as normal elements of our business. Amounts may not foot due to rounding.

(3)These segments results are consistent with the information required by ASC 280, Segment Reporting. Synopsys' chief operating decision maker (CODM) is our Chief Executive Officer. The CODM does not allocate certain operating expenses managed at a consolidated level to our reportable segments and, as a result, the reported operating income and operating margin do not include these unallocated expenses as shown in the table above.

(4)The adjustment includes non-GAAP expenses attributable to non-controlling interest and redeemable non-controlling interest.