SYNOPSYS INC

Previous wording

This Quarterly Report on Form 10-Q (this Quarterly Report) includes forward-looking statements, which involve risks, uncertainties and other factors that could cause Synopsys, Inc.'s (Synopsys, we, our or us) actual results, time frames or achievements to differ materially from those expressed or implied in such forward-looking statements. Readers are urged to carefully review and consider the various disclosures regarding these risks and uncertainties made in this Quarterly Report, 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 strategies related to our products, technology and services; business and market outlook, opportunities, strategies and technological trends, such as artificial intelligence (AI); planned acquisitions and their expected impact, such as our pending acquisition of ANSYS, Inc. (Ansys), including, among other things, expectations regarding the financing of pending acquisitions; the exploration of strategic alternatives for our Software Integrity segment; the potential impact of the uncertain macroeconomic environment on our financial results, including, but not limited to, the effects of increased global inflationary pressures and interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, including, among others, the unknown impact of current and future U.S. and Chinese trade regulations and regional or global military conflicts, and fluctuations in foreign exchange rates, and associated global economic conditions; the expected impact of U.S. and foreign government actions and regulatory changes, including export control restrictions, on our financial results; customer demand and market expansion; our planned product releases and capabilities; industry growth rates; the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations (backlog); software trends; planned stock repurchases; our expected tax rate; and the impact and result of pending legal, administrative and tax proceedings. 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 f…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q (this Quarterly Report) includes forward-looking statements, which involve risks, uncertainties and other factors that could cause Synopsys, Inc.'s (Synopsys, we, our or us) actual results, time frames or achievements to differ materially from those expressed or implied in such forward-looking statements. Readers are urged to carefully review and consider the various disclosures regarding these risks and uncertainties made in this Quarterly Report, 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 strategies related to our products, technology and services; business and market outlook, opportunities, strategies and technological trends, such as artificial intelligence (AI); planned acquisitions and their expected impact, such as our pending acquisition of ANSYS, Inc. (Ansys), including, among other things, expectations regarding the financing of pending acquisitions; planned dispositions and their expected impact, such as the previously announced divestiture of our Software Integrity business (the Software Integrity Divestiture); the potential impact of the uncertain macroeconomic environment on our financial results, including, but not limited to, the effects of sustained global inflationary pressures and interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, including, among others, the unknown impact of current and future U.S. and Chinese trade regulations and regional or global military conflicts, and fluctuations in foreign exchange rates, and associated global economic conditions; the expected impact of U.S. and foreign government actions and regulatory changes, including export control restrictions, on our financial results; customer demand and market expansion; our planned product releases and capabilities; industry growth rates; the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations (backlog); software trends; planned stock repurchases; our expected tax rate; and the impact and result of pending legal, administrative and tax proceedings. 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…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

First quarter of fiscal 2024 compared to the same period of fiscal 2023 financial performance summary

Current wording

Three months ended April 30, 2024 compared to the same period of fiscal 2023 financial performance summary

Previous wording

•Operating income was $359.6 million, an increase of $103.7 million or 41%.

Current wording

•Operating income was $332.1 million, an increase of $39.7 million or 14%.

Previous wording

•Revenues were $1.6 billion, an increase of $287.9 million or 21%, primarily due to revenue growth across all products and geographies and the impact of the extra week in the first quarter of fiscal 2024.1

Current wording

•Revenues were $3.0 billion, an increase of $469.5 million or 19%, primarily due to revenue growth across all products and geographies and the impact of the extra week in the first quarter of fiscal 2024.1

Previous wording

•Total cost of revenue and operating expenses was $1.3 billion, an increase of $184.2 million or 17%, primarily due to an increaseof $135.9 million in employee-related costs resulting from headcount increases through organic growth and acquisitions, and the impact of the extra week in the first quarter of fiscal 2024.

Current wording

•Total cost of revenue and operating expenses was $2.3 billion, an increase of $333.8 million or 17%, primarily due to an increaseof $178.0 million in employee-related costs resulting from headcount increases through organic growth and acquisitions, and the impact of the extra week in the first quarter of fiscal 2024.

Previous wording

Synopsys 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 energy efficiency, reliability, mobility, security and more. For more information about our business segments and product groups, see Part I, Item 1 Business in our Annual Report.

Current wording

Synopsys 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, our customers trust that our technologies will enable them to meet new requirements for energy efficiency, reliability, mobility, security and more. For more information about our business segments and product groups, see Part I, Item 1, Business in our Annual Report.

Previous wording

On January 15, 2024, we entered into an Agreement and Plan of Merger (the Merger Agreement) to acquire all of the outstanding shares of ANSYS, Inc. (Ansys), a provider of broad engineering simulation and analysis software and services, in a cash-and-stock transaction (the Ansys Merger) that values Ansys at approximately $35.0 billion, based on the closing price of Synopsys common stock on December 21, 2023.

Current wording

On January 15, 2024, we entered into an Agreement and Plan of Merger (the Merger Agreement) to acquire all of the outstanding shares of Ansys, a provider of broad engineering simulation and analysis software and services, in a cash-and-stock transaction (the Ansys Merger) that values Ansys at approximately $35.0 billion, based on the closing price of Synopsys common stock on December 21, 2023.

Previous wording

Pursuant to the Merger Agreement, Synopsys and Ansys will mutually select two members of the board of directors of Ansys to become members of the board of directors of Synopsys at the Effective Time. If the closing occurs less

Current wording

Pursuant to the Merger Agreement, at the Effective Time, two members of the board of directors of Ansys selected by mutual agreement of Synopsys and Ansys will become members of the Board of Directors of Synopsys. If the closing occurs less than six months prior to the next annual meeting of Synopsys’ stockholders, Synopsys will nominate such directors for election at such meeting. On March 19, 2024, Synopsys and Ansys mutually agreed to designate Dr. Ajei Gopal, the current President and Chief Executive Officer of Ansys, to become a member of the Synopsys Board of Directors at the Effective Time, subject to the completion of Synopsys’ director nomination process and satisfaction of all applicable eligibility requirements established by Synopsys’ Corporate Governance and Nominating Committee. Ansys and Synopsys have not yet determined or agreed on the remaining member of the Ansys board of directors to be appointed to the Synopsys Board of Directors.

Previous wording

The Ansys Merger, which is anticipated to close in the first half of calendar year 2025, is subject to the satisfaction or waiver of customary closing conditions, including adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Ansys common stock, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the HSR Act), the clearance of the Ansys Merger under certain other antitrust and foreign investment regimes and the effectiveness of a registration statement on Form S-4 to be filed by us. We and Ansys each have termination rights under the Merger Agreement. A fee of $1.5 billion may be payable by us to Ansys, or a fee of $950.0 million may be payable by Ansys to us, upon termination of the Merger Agreement under specified circumstances, each as more fully described in the Merger Agreement. The receipt of financing by us is not a condition to complete the Ansys Merger.

Current wording

The Ansys Merger was approved by the holders of a majority of the outstanding shares of Ansys common stock on May 22, 2024 and is anticipated to close in the first half of calendar year 2025. The Ansys Merger is subject to the satisfaction or waiver of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the HSR Act), the clearance of the Ansys Merger under certain other antitrust and foreign investment regimes, and the continued effectiveness of the registration statement on Form S-4 (File No. 333-277912) filed by us on March 14, 2024 and declared effective by the SEC on April 17, 2024. We and Ansys each have termination rights under the Merger Agreement. A fee of $1.5 billion may be payable by us to Ansys, or a fee of $950.0 million may be payable by Ansys to us, upon termination of the Merger Agreement under specified circumstances, each as more fully described in the Merger Agreement. The receipt of financing by us is not a condition to complete the Ansys Merger.

Previous wording

In connection with the execution of the Merger Agreement, we entered into a commitment letter on January 15, 2024 (the Bridge Commitment Letter) with certain financial institutions that committed to provide, subject to the satisfaction of customary closing conditions, a senior unsecured bridge facility (the Bridge Commitment) in an aggregate principal amount of up to $16.0 billion (which we subsequently reduced to $11.7 billion in connection with our entry into the Term Loan Agreement as further described below). On February 13, 2024, we entered into a term loan facility credit agreement (the Term Loan Agreement), which provides us with the ability to borrow up to $4.3 billion at the closing of the Ansys Merger, subject to the satisfaction of customary closing conditions for similar facilities, for the purpose of financing a portion of the cash consideration to be paid in the Ansys Merger and paying related fees and expenses in connection with the Ansys Merger and the other transactions contemplated by the Merger Agreement. Effective February 13, 2024, we terminated $4.3 billion of the original $16.0 billion of commitments under the Bridge Commitment, in lieu of which we expect to borrow the committed amounts available under the Term Loan Agreement. See Note 10. Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements for more information on the Bridge Commitment and the Term Loan Agreement.

Current wording

In connection with the execution of the Merger Agreement, we entered into a commitment letter on January 15, 2024 (the Bridge Commitment Letter) with certain financial institutions that committed to provide, subject to the satisfaction of customary closing conditions, a senior unsecured bridge facility (the Bridge Commitment). The Bridge Commitment currently provides for an aggregate principal amount of up to $11.7 billion. On February 13, 2024, we entered into a term loan facility credit agreement (the Term Loan Agreement), which provides us with the ability to borrow up to $4.3 billion at the closing of the Ansys Merger, subject to the satisfaction of customary closing conditions for similar facilities, for the purpose of financing a portion of the cash consideration to be paid in the Ansys Merger and paying related fees and expenses in connection with the Ansys Merger and the other transactions contemplated by the Merger Agreement. See Note 11. Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements for more information on the Bridge Commitment and the Term Loan Agreement.

Previous wording

Uncertainty in the macroeconomic environment, including the effects of, among other things, increased global inflationary pressures and interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, fluctuations in foreign exchange rates, and associated global economic conditions, have resulted in volatility in credit, equity and foreign currency markets. We expect growth across our geographies in fiscal 2024; however, we are expecting a challenging near-term growth environment in China due to macroeconomic factors as well as, to a lesser degree, entity list and trade restrictions as further discussed below and in Part II, Item 1A, Risk Factors of this Quarterly Report.

Current wording

Uncertainty in the macroeconomic environment, including the effects of, among other things, sustained global inflationary pressures and interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, fluctuations in foreign exchange rates, and associated global economic conditions, have resulted in volatility in credit, equity and foreign currency markets. We expect growth across our geographies in fiscal 2024; however, we are expecting a challenging near-term growth environment in China due to macroeconomic factors as well as, to a lesser degree, entity list and trade restrictions as further discussed below and in Part II, Item 1A, Risk Factors of this Quarterly Report.

Previous wording

The current uncertain macroeconomic environment could lead some of our customers to postpone their decision-making, decrease their spending and/or delay their payments to us. For more on risks related to the current macroeconomic and geopolitical environment, see Part II, Item 1A, Risk Factors, “Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition” of this Quarterly Report. For example, we continue to experience an impact from the current macroeconomic environment in our Software Integrity segment as customers have applied elevated levels of scrutiny to purchasing decisions due in part to their own budget uncertainty, which has, in some cases, affected customer order size, pricing and/or contract duration. While the situation is dynamic, we expect customers to continue to scrutinize their budgets and negotiate orders for our Software Integrity segment products and solutions in light of the current macroeconomic environment. Further, following a strategic portfolio review, and in consultation with our Board of Directors, we have decided to explore strategic alternatives for our Software Integrity segment. As a part of this process, our management is considering a full range of strategic opportunities. At this time we cannot predict the impact that such strategic alternatives might have on our business, operations or financial condition.

Current wording

The current uncertain macroeconomic environment could lead some of our customers to postpone their decision-making, decrease their spending and/or delay their payments to us. For more on risks related to the current macroeconomic and geopolitical environment, see Part II, Item 1A, Risk Factors, “Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition” of this Quarterly Report.

Previous wording

We are also actively monitoring geopolitical pressures around the world, including, among others, changes in the China-Taiwan relations, the conflicts in Ukraine, the Middle East and other regional or global military conflicts. Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example,

Current wording

We are also actively monitoring geopolitical pressures around the world, including, among others, changes in China-Taiwan relations, the conflicts in Ukraine, the Middle East and other regional or global military conflicts. Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example, Synopsys has employees, operations, customers and strategic partners in the Middle East and in Armenia, which are each experiencing geopolitical conflicts. While we are actively monitoring these conflicts, at this time, these geopolitical conflicts have not had a material impact on our business, operating results or financial condition.

Previous wording

Our results of operations for the first quarter of fiscal 2024 and 2023 included 14 weeks and 13 weeks, respectively, and ended on February 3, 2024 and January 28, 2023, respectively. The extra week in the first quarter of fiscal 2024 resulted in approximately $70.5 million of additional revenue, and approximately $61.0 million of additional expenses, including approximately $11.0 million in stock-based compensation costs. For presentation purposes, this Form 10-Q refers to the closest calendar month end.

Current wording

Our results of operations for the first six months of fiscal 2024 and 2023 included 27 weeks and 26 weeks, respectively, and ended on May 4, 2024 and April 29, 2023, respectively. The extra week in the first quarter of fiscal 2024 resulted in approximately $70.5 million of additional revenue, and approximately $61.0 million of additional expenses, including approximately $11.0 million in stock-based compensation costs. For presentation purposes, this Form 10-Q refers to the closest calendar month end.

Previous wording

Our revenues are generated from three business segments: the Design Automation segment, the Design IP segment and the Software Integrity segment. See Note 17. Segment Disclosure of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for more information about our reportable segments and revenue by geographic regions.

Current wording

Our revenues are generated from two business segments: the Design Automation segment and the Design IP segment. See Note 18. Segment Disclosure of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for more information about our reportable segments and revenue by geographic regions.

Previous wording

Further disaggregation of the revenues into various products and services within these three segments is summarized as follows:

Current wording

Further disaggregation of the revenues into various products and services within these two segments is summarized as follows:

Previous wording

Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) as of January 31, 2024 were $8.2 billion, which includes $1.3 billion in non-cancellable 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 40% of the backlog as of January 31, 2024, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years.

Current wording

Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) as of April 30, 2024 were $7.9 billion, which includes $1.2 billion in non-cancellable 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 40% of the backlog as of April 30, 2024, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years.

Previous wording

The amount and composition of unsatisfied performance obligations will fluctuate period to period. We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services. For more information regarding our revenue during the three months ended January 31, 2024, including our contract balances as of such date, see Note 5. Revenue of the Notes to Condensed Consolidated Financial Statementsin this Quarterly Report.

Current wording

The amount and composition of unsatisfied performance obligations will fluctuate period to period. We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services. For more information regarding our revenue during the three and six months ended April 30, 2024, including our contract balances as of such date, see Note 6. Revenue of the Notes to Condensed Consolidated Financial Statementsin this Quarterly Report.

Previous wording

The increase in total revenues for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was due principally to the continued organic growth of our business across all product groups and geographies, and the impact of the extra week in the first quarter of fiscal 2024 of approximately $70.5 million.

Current wording

The increase in total revenues for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was due principally to the continued organic growth of our business across all product groups and geographies. The increase for the six-month period also included the impact of the extra week in the first quarter of fiscal 2024 of approximately $70.5 million.

Previous wording

The increase in time-based products revenue for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods, and the impact of the extra week in the first quarter of fiscal 2024.

Current wording

The increase in time-based products revenue for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods. The increase for the six-month period also included the impact of the extra week in the first quarter of fiscal 2024.

Previous wording

The increase in upfront products revenue for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to an increase in the sale of IP products, driven by higher demand from customers.

Current wording

The increase in upfront products revenue for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily due to an increase in the sale of IP and hardware products, driven by higher demand from customers.

Previous wording

The increase in maintenance revenue for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to an increase in the volume of arrangements that include maintenance.

Current wording

The increase in maintenance revenue for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily due to an increase in the volume of arrangements that include maintenance.

Previous wording

The increase in professional service and other revenue for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to the timing of IP customization projects.

Current wording

The increase in professional service and other revenue for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily due to the timing of IP customization projects.

Previous wording

The increase in cost of revenue for the three months ended January 31, 2024 compared to the same period in fiscal 2023, was primarily due to increases of $19.7 million in employee-related costs as a result of headcount increases from hiring, $15.5 million in costs to fulfill IP consulting arrangements, $5.7 million in hardware-related costs including inventory provisions, and $1.9 million in amortization of acquired technology-related intangible assets.

Current wording

The increase in cost of revenue for the three months ended April 30, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $25.1 million in hardware-related costs including inventory provisions, $12.4 million in costs to fulfill IP consulting arrangements, $5.1 million in employee-related costs as a result of headcount increases from hiring, and $3.0 million in amortization of acquired technology-related intangible assets.

Previous wording

The increase in research and development expenses for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $66.7 million in employee-related costs as a result of headcount increases as we continue to expand and enhance our product portfolio, $8.5 million in the change in the fair value of our executive deferred compensation plan assets, $3.3 million in consultant and contractor costs, and $2.5 million in facility costs.

Current wording

The increase in research and development expenses for the three months ended April 30, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $20.3 million in employee-related costs as a result of headcount increases as we continue to expand and enhance our product portfolio, $5.9 million in consultant and contractor costs, $5.0 million in the change in the fair value of our executive deferred compensation plan assets, and $4.0 million in facility costs.

Previous wording

The increase in sales and marketing expenses for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $39.2 million in employee-related costs due to headcount increases, $10.1 million in the change in the fair value of our executive deferred compensation plan assets, and $2.1 million in travel and marketing costs due to an increased number of in-person meetings and events.

Current wording

The increase in sales and marketing expenses for the three months ended April 30, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $17.5 million in employee-related costs due to headcount increases, $2.2 million in travel and marketing costs due to an increased number of in-person meetings and events, and $1.9 million in the change in the fair value of our executive deferred compensation plan assets.

Previous wording

The increase in general and administrative expenses for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $25.9 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger, $10.3 million in employee-related costs due to headcount increases from hiring, and $3.8 million in depreciation and maintenance expense.

Current wording

The increase in general and administrative expenses for the three months ended April 30, 2024 compared to the same period in fiscal 2023 was primarily due to increases of $15.8 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger, $7.4 million in employee-related costs due to headcount increases from hiring, and $6.5 million in depreciation and maintenance expense.

Previous wording

The decrease in amortization of acquired intangible assets for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to certain intangible assets becoming fully amortized, partially offset by amortization expense related to intangible assets acquired during the three months ended January 31, 2024.

Current wording

The increase in amortization of acquired intangible assets for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily due to amortization expense related to intangible assets acquired during the three and six months ended April 30, 2024, partially offset by certain intangible assets becoming fully amortized.

Previous wording

The increase in interest and other income (expense) for the three months ended January 31, 2024 as compared to the same period in fiscal 2023 was primarily due to the change in the fair value of our executive deferred compensation plan assets and the gain recognized from the sale of strategic investments.

Current wording

The increase in interest and other income (expense) for the three and six months ended April 30, 2024 as compared to the same periods in fiscal 2023 was primarily due to the change in the fair value of our executive deferred compensation plan assets. The increase for the six-month period also included the impact of gain recognized from the sale of strategic investments.

Previous wording

The increase in adjusted operating income for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to an increase in revenue from arrangements booked in prior periods.

Current wording

The increase in adjusted operating income for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily due to an increase in revenue from arrangements booked in prior periods.

Previous wording

The increase in adjusted operating income for the three months ended January 31, 2024 compared to the same period in fiscal 2023 was primarily due to an increase in the revenue of IP products driven by timing of customer demands.

Current wording

The increase in adjusted operating income for the three and six months ended April 30, 2024 compared to the same periods in fiscal 2023 was primarily due to an increase in the revenue of IP products driven by timing of customer demands.

Previous wording

Our effective tax rate increased in the three months ended January 31, 2024 as compared to the same period in fiscal 2023, primarily due to a reduced benefit from U.S. federal research tax credits partially offset by increased excess tax benefits from stock-based compensation.

Current wording

Our effective tax rate increased in the three and six months ended April 30, 2024 as compared to the same periods in fiscal 2023, primarily due to a reduced benefit from U.S. federal research tax credits and an increase in foreign tax, and partially offset by increased excess tax benefits from stock-based compensation.

Previous wording

As of January 31, 2024, we held $1.3 billion in cash, cash equivalents and short-term investments. We also held $2.2 million in restricted cash primarily associated with deposits for office leases and employee loan programs. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less. Our short-term investments include U.S. government and municipal obligations, investment-grade available-for-sale debt and asset backed securities with an overall weighted-average credit rating of approximately AA.

Current wording

As of April 30, 2024, we held $1.7 billion in cash, cash equivalents and short-term investments. We also held $2.3 million in restricted cash primarily associated with deposits for office leases and employee loan programs. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less. Our short-term investments include U.S. government and municipal obligations, investment-grade available-for-sale debt and asset backed securities with an overall weighted-average credit rating of approximately AA.

Previous wording

As of January 31, 2024, approximately $678.1 million of our cash and cash equivalents were domiciled in various foreign jurisdictions. We have provided for foreign withholding taxes on the undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries.

Current wording

As of April 30, 2024, approximately $771.6 million of our cash and cash equivalents were domiciled in various foreign jurisdictions. We have provided for foreign withholding taxes on the undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries.

Previous wording

Effective fiscal 2023, our research and development expenditures were required to be capitalized and amortized under the Tax Cuts and Jobs Act instead of being deducted when incurred for US tax purposes, which significantly increases our federal cash tax liability. Additionally, as a result of the IRS tax relief for the California winter storms, the due date for our fiscal 2023 federal tax payment was November 16, 2023 and as such, we deferred our fiscal 2023 federal cash tax payments until the first quarter of fiscal 2024. This results in a significant increase to our cash outflows beginning in fiscal 2024.

Current wording

Effective fiscal 2023, our research and development expenditures were required to be capitalized and amortized under the Tax Cuts and Jobs Act instead of being deducted when incurred for US tax purposes, which significantly increases our federal cash tax liability. Additionally, as a result of the IRS tax relief for the California winter storms, the due date for our fiscal 2023 federal tax payment was November 16, 2023 and as such, we deferred our fiscal 2023 federal cash tax payments until the first quarter of fiscal 2024. This resulted in a significant increase to our cash outflows beginning in fiscal 2024.

Previous wording

In fiscal 2022, our Board of Directors approved a stock repurchase program with authorization to purchase up to $1.5 billion of our common stock. As of January 31, 2024, $194.3 million remained available for future stock repurchases under the Program. The pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions, our debt repayment obligations, our stock price, and economic and market conditions. In connection with the pending Ansys Merger, we are suspending our stock repurchase program until we are able to reduce our expected debt levels.

Current wording

As of April 30, 2024, $194.3 million remained available for future stock repurchases under our stock repurchase program (the Program). We have suspended the Program in connection with the pending Ansys Merger until we are able to reduce our expected debt levels.

Previous wording

During the three months ended January 31, 2024, there were no other significant changes to our material cash requirements, including contractual and other obligations, as presented in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.

Current wording

During the six months ended April 30, 2024, there were no other significant changes to our material cash requirements, including contractual and other obligations, as presented in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report.

Previous wording

We expect that the pending Ansys Merger is likely to result in a material increase in our debt and liquidity needs that will impact our capital needs during as well as beyond the next twelve months. We intend to fund our anticipated $19 billion cash consideration payment through a combination of cash and debt, and have fully-committed debt financing in place for $16.0 billion. See Note 10. Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for further discussion. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, and the timing and extent of our spending to support our research and development efforts.

Current wording

Based on past performance and current expectations, we believe that our existing cash, cash equivalents and short-term investments and sources of liquidity, as well as the committed debt financing related to the pending Ansys Merger, will be sufficient to satisfy our cash requirements over the next twelve-month period and beyond. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of our spending to support our research and development efforts, and our investments in or acquisitions of businesses, applications or technologies.

Previous wording

The following sections discuss changes in our condensed consolidated statements of cash flows and other commitments of our liquidity and capital resources during the three months ended January 31, 2024.

Current wording

The following sections discuss changes in our condensed consolidated statements of cash flows and other commitments of our liquidity and capital resources during the six months ended April 30, 2024.

Previous wording

Cash used in operating activities was $87.8 million for the three months ended January 31, 2024, compared to cash provided by operating activities of $114.8 million for the same period in fiscal 2023. The change was primarily due to higher disbursements for operations, including vendor and tax payments, partially offset by higher net income and higher accounts receivable collections.

Current wording

The decrease in cash provided by operating activitiesfor the six months ended April 30, 2024 compared to the same period in fiscal 2023 was primarily due to higher federal tax payments of $358.0 million, which included $187.0 million of fiscal 2023 federal tax payments that were paid in fiscal 2024 as a result of payment deadline extensions due to IRS tax relief for the California winter storms. This decrease in cash was partially offset by higher net income and higher accounts receivable collections.