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; planned dispositions and their expected impact; 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 elevated 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 foreign trade regulations, government actions and regulatory changes, such as export control restrictions and tariffs, and regional or global military conflicts, and fluctuations in foreign exchange rates, and associated global economic conditions; 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 future. All subsequent written or oral forward-looking statements attributabl…

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); planned dispositions and their expected impact; 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 elevated 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 foreign trade regulations, government actions and regulatory changes, such as export control restrictions and tariffs, and regional or global military conflicts, and fluctuations in foreign exchange rates, and associated global economic conditions; 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 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 th…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Unless otherwise noted, this Management’s Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of our former Software Integrity business. See “Software Integrity Divestiture” below and Note 3. Discontinued Operations of the Notes to Condensed Consolidated Financial Statementsfor additional information about the Software Integrity Divestiture.

Current wording

Unless otherwise noted, this Management’s Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of our former Software Integrity business. See Note 3. Discontinued Operations of the Notes to Condensed Consolidated Financial Statementsfor additional information about the Software Integrity Divestiture.

Previous wording

For the first quarter of fiscal 2025, our results reflect continued strong execution, with our revenue and operating income reflecting a challenging comparison against the strength of our results and the impact of the extra week in the first quarter of fiscal 2024, as well as the timing of customer spending for hardware and IP and lower revenue in China in the first quarter of fiscal 2025. The following table sets forth some of our key quarterly unaudited financial information:

Current wording

For the second quarter of fiscal 2025, our results reflect our consistent execution and resilient business model, with our revenue and operating income reflecting the effects of the timing of customer spending for hardware and IP, and changes in our revenue mix in the second quarter of fiscal 2025. The following table sets forth some of our key quarterly unaudited financial information:

Previous wording

•Total cost of revenue and operating expenses was $1.2 billion, an increase of $45.1 million or 4%, primarily due to an increaseof $34.4 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger, and $27.1 million in employee-related costs resulting from headcount increases through organic growth and acquisitions.

Current wording

•Total cost of revenue and operating expenses was $2.4 billion, an increase of $150.3 million or 7% primarily due to increases of $133.4 million in employee-related costs resulting from headcount increases through organic growth, and $55.5 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger.

Previous wording

•Operating income was $251.8 million, a decrease of $100.8 million or 29%.

Current wording

•Operating income was $628.3 million, a decrease of $56.4 million or 8%.

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). On October 3, 2024, we reduced the Bridge Commitment by $1.1 billion to $10.6 billion following the closing of the Software Integrity Divestiture (as defined below). The Bridge Commitment currently provides for an aggregate principal amount of up to $10.6 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 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 approximately $690 million, after reduction following the closing of the sale of our Software Integrity business to entities controlled by funds affiliated with Clearlake Capital Group, L.P. and Francisco Partners (such sale, the Software Integrity Divestiture) and the issuance of the Senior Notes (as defined 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. On March 17, 2025, we issued $1 billion aggregate principal amount of 4.550% Senior Notes due April 1, 2027 (the 2027 Senior Notes), $1 billion aggregate principal amount of 4.650% Senior Notes due April 1, 2028 (the 2028 Senior Notes), $2 billion aggregate principal amount of 4.850% Senior Notes due April 1, 2030 (the 2030 Senior Notes), $1.5 billion aggregate principal amount of 5.000% Senior Notes due April 1, 2032 (the 2032 Senior Notes), $2.4 billion aggregate principal amount of 5.150% Senior Notes due April 1, 2035 (the 2035 Senior Notes) and $2.1 billion aggregate principal amount of 5.700% Senior Notes due April 1, 2055 (the 2055 Senior Notes and together with the 2027 Senior Notes, 2028 Senior Notes, 2030 Senior Notes, 2032 Senior Notes and 2035 Senior Notes, the Senior Notes) in connection with the Ansys Merger. The net proceeds of the issuance of the Senior Notes and the borrowings under the Term Loan Agreement are intended to be used to fund a portion of the cash consideration to be paid in the Ansys Merger, to pay related transaction fees and expenses and to repay Ansys’ outstanding indebtedness. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements for more information on the Senior Notes, Bridge Commitment and the Term Loan Agreement.

Previous wording

Uncertainty in the macroeconomic environment, including the effects of, among other things, sustained global inflationary pressures and elevated 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. While we have seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics have recovered more slowly from recent macroeconomic uncertainty. The current uncertain macroeconomic environment has led some of our customers to postpone their decision-making, delay their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to us. We expect growth across our geographies in fiscal 2025; however, we are expecting a challenging near-term growth environment in China due to macroeconomic factors as well as global trade restrictions. See the discussion below and in Part II, Item 1A, Risk Factors, "We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets" of this Quarterly Report for further discussion of the impact of export control regulations on Synopsys.

Current wording

Uncertainty in the macroeconomic environment, including the effects of, among other things, changes in U.S. and global trade policy, including the recently proposed and enacted tariffs by the U.S. and other governments, sustained global inflationary pressures and elevated 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. While we have seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics have recovered more slowly from recent macroeconomic uncertainty. The current uncertain macroeconomic environment has led some of our customers to postpone their decision-making, delay their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to us.

Previous wording

We are also actively monitoring geopolitical pressures around the world, including, among others, changes in China-Taiwan relations, the conflicts in Ukraine and 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. While we are actively monitoring the conflicts in the Middle East, at this time they have not had a material impact on our business, operating results or financial condition to date.

Current wording

We are also monitoring other geopolitical pressures around the world, including, among others, changes in China-Taiwan and U.S.-China relations, the conflicts in Ukraine and 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. While we are actively monitoring the conflicts in the Middle East, at this time they have not had a material impact on our business, operating results or financial condition to date.

Previous wording

Historically, our fiscal years had been 52- or 53-week periods ending on the Saturday nearest to October 31. Fiscal 2024 was a 53-week year ending on November 2, 2024, which impacted our revenue, expenses and operating results.

Current wording

Historically, our fiscal years had been 52- or 53-week periods ending on the Saturday nearest to October 31. Fiscal 2024 was a 53-week year ending on November 2, 2024.

Previous wording

The first quarter of fiscal 2025 and 2024 ended on January 31, 2025 and February 3, 2024, respectively. Our results of operations for the first quarter of fiscal 2024 included 14 weeks. The extra week in the first quarter of fiscal 2024 resulted in approximately $63.2 million of additional revenue, and approximately $52.5 million of additional expenses, including approximately $10.6 million in stock-based compensation costs from continuing operations.

Current wording

The second quarter of fiscal 2025 and 2024 ended on April 30, 2025 and May 4, 2024, respectively. Our results of operations for the first six months of fiscal 2025 and fiscal 2024 included 179 days and 189 days, respectively. The extra week in the first quarter of fiscal 2024 resulted in approximately $63.2 million of additional revenue, and approximately $52.5 million of additional expenses, including approximately $10.6 million in stock-based compensation costs from continuing operations.

Previous wording

For presentation purposes, this Quarterly Report refers to the closest calendar month end for the first quarter of fiscal 2024.

Current wording

For presentation purposes, this Quarterly Report refers to the closest calendar month end for the second quarter of fiscal 2024.

Previous wording

There have been no material changes in our critical accounting estimates during the three months ended January 31, 2025 since our Annual Report for fiscal 2024. Refer to Item 7A, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II of our Annual Report for a complete description of our critical accounting estimates.

Current wording

There have been no material changes in our critical accounting estimates during the six months ended April 30, 2025 since our Annual Report for fiscal 2024. Refer to Item 7A, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II of our Annual Report for a complete description of our critical accounting estimates.

Previous wording

License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally three years, though it may vary for specific arrangements. We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses. We recognize revenue for the combined performance obligation under TSL contracts ratably over the term of the license.

Current wording

•EDA solutions include digital, custom and FPGA IC design software, verification software and hardware products, system integration products and services, and obligations to provide unspecified updates and support services. EDA products and services are typically sold through Technology Subscription License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally three years, though it may vary for specific arrangements. We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses. We recognize revenue for the combined performance obligation under TSL contracts ratably over the term of the license.

Previous wording

Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) as of January 31, 2025 were $7.7 billion, which includes $1.1 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 42% of the backlog as of January 31, 2025, 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, 2025 were $8.1 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 42% of the backlog as of April 30, 2025, 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, 2025, 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, 2025, including our contract balances as of such date, see Note 5. Revenue of the Notes to Condensed Consolidated Financial Statementsin this Quarterly Report.

Previous wording

The decrease in total revenues for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due tothe impact of the extra week in the first quarter of fiscal 2024 of approximately $63.2 million, as well as a decrease in the revenue of IP and hardware products of approximately $74.0 million driven by the timing of customer spending and strong IP revenue in the first quarter of fiscal 2024.

Current wording

The increase in total revenues for the three and six months ended April 30, 2025 compared to the same periods in fiscal 2024 was primarily due to revenue growth of our business across a majority of product groups and geographies. The increase for the six-month period was partially offset bythe impact of the extra week in the first quarter of fiscal 2024 of approximately $63.2 million.

Previous wording

The increase in time-based products revenue for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods, partially offset by 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 andsix months ended April 30, 2025 compared to the same periods in fiscal 2024 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods. The increase for the six-month period was partially offset by the impact of the extra week in the first quarter of fiscal 2024.

Previous wording

The decrease in upfront products revenue for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to a decrease in the sale of IP and hardware products, driven by the timing of customer spending.

Current wording

The increase in upfront products revenue for thethree andsix months ended April 30, 2025 compared to the same periods in fiscal 2024 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, 2025 compared to the same period in fiscal 2024 was primarily due to an increase in the volume of arrangements that include maintenance.

Current wording

The increase in maintenance revenue for the threeandsix months ended April 30, 2025 compared to the same periods in fiscal 2024 was primarily due to an increase in the volume of arrangements that include maintenance.

Previous wording

The decrease in professional service and other revenue for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to the timing of IP customization projects.

Current wording

The decrease in professional service and other revenue for the three and six months ended April 30, 2025 compared to the same periods in fiscal 2024 was primarily due to the timing of IP customization projects.

Previous wording

The decrease in cost of revenue for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to decreases of $5.2 million in hardware-related costs including inventory provisions, $4.6 million in amortization of acquired technology-related intangible assets, $3.0 millionin facility costs, and$2.4 million in costs to fulfill IP consulting arrangements, partially offset by an increase of $6.5 million in employee-related costs as a result of headcount increases from hiring.

Current wording

The increase in cost of revenue for the three months ended April 30, 2025 compared to the same period in fiscal 2024 was primarily due to increases of $23.2 million in employee-related costs as a result of headcount increases from hiring, and $9.0 million in hardware-related costs including inventory provisions, partially offset by a decrease of $5.8 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, 2025 compared to the same period in fiscal 2024 was primarily due to increases of $19.4 million in employee-related costs as a result of headcount increases as we continue to expand and enhance our product portfolio, $10.3 million in consultant and contractor costs, and $7.4 million in facility costs, partially offset by a decrease of $7.9 million in the change in the fair value of our executive deferred compensation plan assets.

Current wording

The increase in research and development expenses for the three months ended April 30, 2025 compared to the same period in fiscal 2024 was primarily due to increases of $63.2 million in employee-related costs as a result of headcount increases as we continue to expand and enhance our product portfolio, $9.5 million in IT and facility costs, and $5.3 million in consultant and contractor costs, partially offset by a decrease of $19.7 million in the change in the fair value of our executive deferred compensation plan assets.

Previous wording

The decrease in sales and marketing expenses for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to a decrease of $9.4 million in the change in the fair value of our executive deferred compensation plan assets.

Current wording

The increase in sales and marketing expenses for the three months ended April 30, 2025 compared to the same period in fiscal 2024 was primarily due to an increase of $13.9 million in employee-related costs due to headcount increases, partially offset by a decrease of $6.0 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, 2025 compared to the same period in fiscal 2024 was primarily due to an increase of $34.4 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger.

Current wording

The increase in general and administrative expenses for the three months ended April 30, 2025 compared to the same period in fiscal 2024 was primarily due to increases of $21.1 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger, and $6.1 million in employee-related costs due to headcount increases from hiring, partially offset by a decrease of $3.7 million in the change in the fair value of our executive deferred compensation plan assets.

Previous wording

Amortization of acquired intangible assets for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was relatively flat primarily due to additions of acquired intangible assets in fiscal 2024, offset by acquired intangible assets that were fully amortized. See Note 6. Goodwill and Intangible Assetsof the Notes to Condensed Consolidated Financial Statements for a schedule of future amortization amounts.

Current wording

Amortization of acquired intangible assets for the three and six months ended April 30, 2025 compared to the same periods in fiscal 2024 was relatively flat primarily due to acquired intangible assets that were fully amortized, offset by additions of acquired intangible assets in fiscal 2024. See Note 6. Goodwill and Intangible Assetsof the Notes to Condensed Consolidated Financial Statements for a schedule of future amortization amounts.

Previous wording

Interest and Other Income (Expense), Net

Current wording

Other Income (Expense), Net

Previous wording

The decrease in interest and other income (expense) for the three months ended January 31, 2025 as compared to the same period in fiscal 2024 was primarily due tothe impact of gain recognized from the sale of strategic investments in the first quarter of fiscal 2024 and a decrease in the change in fair value of our executive deferred compensation plan assets.

Current wording

The increase in other income (expense) for the three and six months ended April 30, 2025 as compared to the same periods in fiscal 2024 was primarily due to higher interest income as a result of higher cash balance and the gain recognized from the sale of an office building, partially offset by a decrease in the change in fair value of our executive deferred compensation plan assets. The increase for the six-month period was also partially offset by the impact of gain recognized from the sale of strategic investments in the first quarter of fiscal 2024.

Previous wording

The increase in adjusted operating income for the three months ended January 31, 2025 compared to the same period in fiscal 2024 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, 2025 compared to the same periods in fiscal 2024 was primarily due to an increase in revenue from arrangements booked in prior periods.

Previous wording

The decrease in adjusted operating income for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to a decrease in the revenue of IP products driven by timing of customer spending.

Current wording

The increase in adjusted operating income for the three months ended April 30, 2025 compared to the same period in fiscal 2024 was primarily due to an increase in the revenue of IP products driven by timing of customer demands.

Previous wording

Our effective tax rate decreased in the three months ended January 31, 2025, as compared to the same period in fiscal 2024, primarily due to capital loss on the sale of our ownership in OpenLight in the first quarter of 2025.

Current wording

Our effective tax rate decreased in the three and six months ended April 30, 2025, as compared to the same periods in fiscal 2024, primarily due to capital loss on the sale of our ownership in OpenLight in the first quarter of 2025.

Previous wording

As of January 31, 2025, we held $3.8 billion in cash, cash equivalents and short-term investments. We also held $3.9 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, 2025, we held $14.3 billion in cash, cash equivalents and short-term investments. We also held $4.3 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, 2025, approximately $800.8 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, 2025, approximately $717.1 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.

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 the next twelve months and beyond. We intend to fund our anticipated $19 billion cash consideration payment through a combination of cash and debt, and have a fully-committed debt financing in place for $14.9 billion (including$10.6 billion under the Bridge Commitment). Net cash proceeds received from certain debt and equity issuances or the sale of certain businesses and assets, including the Software Integrity Divestiture, as well as term loan commitments under certain qualifying term loan facilities, will result in mandatory commitment reductions under the Bridge Commitment. On October 3, 2024, we reduced the Bridge Commitment by $1.1 billion to$10.6 billion following the closing of the Software Integrity Divestiture. 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.

Current wording

The pending Ansys Merger will continue to result in a material increase in our debt and liquidity needs impacting our capital needs during the next twelve months and beyond. We intend to fund our anticipated $19 billion cash consideration payment through a combination of cash on hand, including net proceeds from the issuance of the Senior Notes and the Software Integrity Divestiture, the fully-committed debt financing in place for approximately $4.99 billion (which includes approximately$690 million under the Bridge Commitment), and any net cash proceeds to be received from the sale of certain businesses and assets, including the Optical Solutions Divestiture. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for further discussion.

Previous wording

During the three months ended January 31, 2025, 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, 2025, we entered into a deferred payment agreement to defer the cash settlement of the 2025 Rate Lock Agreements over a period of 5.5 years. There were no other significant changes to our material cash requirements, including contractual and other obligations, as presented in Part II, Item 7,

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, 2025.

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, 2025.

Previous wording

The decrease in cash used in operating activitiesfor the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to the impact of $187.0 million of fiscal 2023 federal tax payments that were paid in the first quarter of fiscal 2024 as a result of payment deadline extensions due to IRS tax relief for the California winter storms, partially offset by lower accounts receivable collections and lower net income of $148.8 million.

Current wording

The decrease in cash provided by operating activitiesfor the six months ended April 30, 2025 compared to the same period in fiscal 2024 was primarily due to the unrealized loss from settlement of the interest rate treasury lock of $121.6 million in the second quarter of fiscal 2025, lower accounts receivable collections and lower net income of $92.8 million.

Previous wording

Cash Used in Investing Activities

Current wording

Cash Provided by (Used in) Investing Activities

Previous wording

The decrease in cash used in investing activities for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily driven by lower cash paid for acquisitions of $67.8 million and net cash proceeds of $23.8 million mainly from deferred consideration received in connection with the Software Integrity Divestiture in the first quarter of fiscal 2025, partially offset by higher proceeds from the sales and maturities of investments of $44.2 million and higher purchases of investments of $14.1 million.

Current wording

Net cash provided by investing activities was $54.0 million for the six months ended April 30, 2025 compared to net cash used in investing activities of $166.2 million for the same period in fiscal 2024. The increase in cash provided by investing activities was primarily driven by lower cash paid for acquisitions of $139.6 million, proceeds from the sale of an office building of $74.3 million in the second quarter of fiscal year 2025, proceeds of $70.1 million from the first two deferred consideration installment payments and final working capital adjustment payment received in connection with the Software Integrity Divestiture, partially offset by lower proceeds from the sales and maturities of investments of $61.4 million.

Previous wording

Cash Used in Financing Activities

Current wording

Cash Provided by (Used in) Financing Activities

Previous wording

The decrease in cash used in financing activities for the three months ended January 31, 2025 compared to the same period in fiscal 2024 was primarily due to the payment of bridge financing costs of $48.0 million in connection with the Ansys Merger in the first quarter of fiscal 2024 and taxes paid for net share settlements which were $22.4 million lower than the first quarter of fiscal 2024, partially offset by the redemption of redeemable non-controlling interest of $30.0 million in the first quarter of fiscal 2025.

Current wording

Net cash provided by financing activities was $10.0 billion for the six months ended April 30, 2025 compared to net cash used in financing activities of $154.6 million for the same period in fiscal 2024. The increase in cash provided by financing activities was primarily driven by net proceeds of $10.0 billion from debt in the second quarter of fiscal 2025, the payment of bridge financing costs of $54.7 million in connection with the Ansys Merger during the six months ended April 30, 2024, and lower taxes paid for net share settlements of $45.7 million, partially offset by the redemption of redeemable non-controlling interest of $30.0 million in the first quarter of fiscal 2025.