Mentor Graphics Reports Fiscal Second Quarter Results
[ Back ]   [ More News ]   [ Home ]
Mentor Graphics Reports Fiscal Second Quarter Results

WILSONVILLE, Ore. — (BUSINESS WIRE) — August 21, 2014 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal second quarter ended July 31, 2014. The company reported revenues of $260.2 million, non-GAAP earnings per share of $0.23, and GAAP earnings per share of $0.13.

“System design strength, particularly with automotive customers, drove the second quarter with earnings solidly beating guidance,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “The automotive industry is in transition from mechanical to electronic differentiation and the rate of change is accelerating. Electronic content in vehicles is about 40 percent of the cost of a car. This is yielding considerable opportunities for Mentor. Second quarter automotive strength was broad, with orders for wire harness, embedded software and AUTOSAR tools and products.”

During the quarter the company announced two acquisitions: XS Embedded, which has automotive-grade software and hardware to accelerate the start of production, and positions Mentor well to address integration of advanced driver assistance systems, driver information and infotainment; and Nimbic, Inc., whose leading 3D electromagnetic simulation technology enhances the Mentor® IC packaging design portfolio.

During the quarter Mentor also launched the MicRed® Industrial Power Tester 1500A. This new hardware product tests the reliability of power electronic components used in automobiles, trains, power generators and converters, and renewable energy applications such as wind turbines. In addition, the company announced the Questa® PropGen formal-based automated verification solution; and the Xpedition® Data Management product suite, the newest addition to the Xpedition Enterprise platform for PCB systems design. Other announcements covered several emulation solutions that accelerate the verification of high-performance memory products used in mobile multimedia devices and networking infrastructure; and an embedded software solution for multi-core system-on-chip architectures which combine two or more different types of microprocessors or microcontrollers.

“The second quarter was strong for Mentor and as a result we exceeded non-GAAP earnings guidance,” said Gregory K. Hinckley, president of Mentor Graphics. “A four percent revenue upside to guidance, along with continued attention to expense control, drove an over 50 percent beat in earnings per share. Automotive had an exceptional quarter, with record quarterly bookings three times the level of last year and year-to-date bookings already equal to all of fiscal 2014.”

Outlook

For the third quarter of fiscal 2015, the company expects revenues of about $275 million, non- GAAP earnings per share of about $0.21 and GAAP earnings per share of approximately $0.07. For the full year fiscal 2015, the company expects revenues of about $1.237 billion, non-GAAP earnings per share of about $1.75, and GAAP earnings per share of approximately $1.37.

Dividend and Share Repurchase

The company announced a quarterly dividend of $0.05 per share. The dividend is payable on September 30, 2014 to shareholders of record as of the close of business on September 10, 2014.

During the quarter the company repurchased approximately 1.2 million shares for $25 million. Year to date the company has repurchased 3.2 million shares for $70 million.

Fiscal Year Definition

Mentor Graphics Corporation’s fiscal year runs from February 1 to January 31. The fiscal year is dated by the calendar year in which the fiscal year ends. As a result, the first three fiscal quarters of any fiscal year will be dated with the next calendar year, rather than the current calendar year.

Discussion of Non-GAAP Financial Measures

Mentor Graphics’ management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted gross profit, operating income, operating margin, net income, and earnings per share which we refer to as non-GAAP gross profit, operating income, operating margin, net income, and earnings per share, respectively. These non-GAAP measures are derived from the revenues of our product, maintenance, and services business operations and the costs directly related to the generation of those revenues, such as cost of revenue, research and development, sales and marketing, and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. These non-GAAP measures exclude amortization of intangible assets, special charges, equity plan-related compensation expenses, interest expense associated with the amortization of original issuance debt discount on convertible debt, the equity in earnings or losses of unconsolidated entities (except Frontline PCB Solutions Limited Partnership (Frontline)), and the impact on basic and diluted earnings per share of changes in the calculated redemption value of noncontrolling interests, which management does not consider reflective of our core operating business.

Management excludes from our non-GAAP measures certain recurring items to facilitate its review of the comparability of our core operating performance on a period-to-period basis because such items are not related to our ongoing core operating performance as viewed by management. Management considers our core operating performance to be that which can be affected by our managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Management uses this view of our operating performance for purposes of comparison with our business plan and individual operating budgets and allocation of resources. Additionally, when evaluating potential acquisitions, management excludes the items described above from its consideration of target performance and valuation. More specifically, management adjusts for the excluded items for the following reasons:

In certain instances our GAAP results of operations may not be profitable when our corresponding non-GAAP results are profitable or vice versa. The number of shares on which our non-GAAP earnings per share is calculated may therefore differ from the GAAP presentation due to the anti-dilutive effect of stock options, restricted stock units, and employee stock purchase plan shares in a loss situation.

Non-GAAP gross profit, operating income, operating margin, net income, and earnings per share are supplemental measures of our performance that are not presented in accordance with GAAP. Moreover, they should not be considered as an alternative to any performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. We present non-GAAP gross profit, operating income, operating margin, net income, and earnings per share because we consider them to be important supplemental measures of our operating performance and profitability trends, and because we believe they give investors useful information on period-to-period performance as evaluated by management. Non-GAAP net income also facilitates comparison with other companies in our industry, which use similar financial measures to supplement their GAAP results. Non-GAAP net income has limitations as an analytical tool, and therefore should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In the future, we expect to continue to incur expenses similar to the non-GAAP adjustments described above and exclusion of these items in our non-GAAP presentation should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Some of the limitations in relying on non-GAAP net income are:

About Mentor Graphics

Mentor Graphics Corporation is a world leader in electronic hardware and software design solutions, providing products, consulting services and award-winning support for the world’s most successful electronic, semiconductor and systems companies. Established in 1981, the company reported revenues in the last fiscal year in excess of $1.15 billion. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777. World Wide Web site: http://www.mentor.com/.

(Mentor Graphics, Mentor, MicRed, Questa, and Xpedition are registered trademarks of Mentor Graphics Corporation. All other company and/or product names are the trademarks and/or registered trademarks of their respective owners.)

Statements in this press release regarding the company’s guidance for future periods constitute “forward-looking” statements based on current expectations within the meaning of the Securities Exchange Act of 1934. Such forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company or industry results to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: (i) weakness in the United States, the European Union, China or other international economies, and the potential adverse impact on the semiconductor and electronics industries; (ii) the company’s ability to successfully offer products and services that compete in the highly competitive EDA industry, including the risk of obsolescence for our hardware products; (iii) product bundling or discounting of products and services by competitors, which could force the company to lower its prices or offer other more favorable terms to customers;(iv) effects of the volatility of foreign currency fluctuations on the company’s business and operating results; (v) litigation; (vi) changes in accounting or reporting rules or interpretations; (vii) the impact of tax audits by the IRS or other taxing authorities, or changes in applicable tax laws, regulations or enforcement practices; (viii) effects of unanticipated shifts in product mix on gross margin; and (ix) effects of customer mergers or divestitures, customer seasonal purchasing patterns and the timing of significant orders which may negatively or positively impact the company’s quarterly results of operations; all as may be discussed in more detail under the heading “Risk Factors” in the company’s most recent Form 10-K or Form 10-Q. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. In addition, statements regarding guidance do not reflect potential impacts of mergers or acquisitions that have not been announced or closed as of the time the statements are made. Mentor Graphics disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements to reflect future events or developments.

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except earnings per share data)
     
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
Revenues:
System and software $ 149,480 $ 150,203 $ 297,709 $ 273,487
Service and support   110,753     103,013     214,675     206,244  
Total revenues   260,233     253,216     512,384     479,731  
Cost of revenues: (1)
System and software 16,185 15,236 43,156 24,135
Service and support 30,903 28,909 60,014 58,984
Amortization of purchased technology   1,841     712     3,202     1,919  
Total cost of revenues   48,929     44,857     106,372     85,038  
Gross profit   211,304     208,359     406,012     394,693  
Operating expenses:
Research and development (2) 87,542 80,307 171,993 160,024
Marketing and selling (3) 82,305 79,811 166,939 158,918
General and administration (4) 19,473 17,198 37,155 33,535
Equity in earnings of Frontline (5) (2,062 ) (950 ) (3,441 ) (1,347 )
Amortization of intangible assets (6) 2,026 1,556 3,776 3,210
Special charges (7)   5,108     3,859     11,034     7,882  
Total operating expenses   194,392     181,781     387,456     362,222  
Operating income 16,912 26,578 18,556 32,471
Other income (expense), net (8) (104 ) (272 ) (362 ) (1,231 )
Interest expense (9)   (4,807 )   (4,897 )   (9,392 )   (9,682 )
Income before income tax 12,001 21,409 8,802 21,558
Income tax benefit (10)   (1,768 )   (2,338 )   (1,942 )   (1,770 )
Net income 13,769 23,747 10,744 23,328
Less: Loss attributable to noncontrolling interest (11)   (403 )   (235 )   (877 )   (859 )
Net income attributable to Mentor Graphics
shareholders $ 14,172   $ 23,982   $ 11,621   $ 24,187  
Net income per share attributable to Mentor Graphics
shareholders:
Basica $ 0.13   $ 0.19   $ 0.12   $ 0.20  
Diluteda $ 0.13   $ 0.19   $ 0.11   $ 0.19  
Weighted average number of shares outstanding:
Basic   113,868     112,988     114,396     112,851  
Diluted   116,551     116,295     116,960     116,014  
 
aWe have increased (decreased) the numerator of our basic and diluted earnings per share calculation for the adjustment of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings, as follows:
 
 
$ 895   $ (2,349 ) $ 1,562   $ (1,881 )
 

 

MENTOR GRAPHICS CORPORATION

FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands)
   
 

Listed below are the items included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. Items are further described under "Discussion of Non-GAAP Financial Measures."

 
 
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
(1) Cost of revenues:
Equity plan-related compensation $ 544 $ 458 $ 1,079 $ 918
Amortization of purchased technology   1,841     712     3,202     1,919  
$ 2,385   $ 1,170   $ 4,281   $ 2,837  
 
(2) Research and development:
Equity plan-related compensation $ 3,311   $ 2,543   $ 6,552   $ 5,153  
 
(3) Marketing and selling:
Equity plan-related compensation $ 2,143   $ 1,771   $ 4,321   $ 3,653  
 
(4) General and administration:
Equity plan-related compensation $ 3,162   $ 2,505   $ 5,337   $ 4,119  
 
(5) Equity in earnings of Frontline:
Amortization of purchased technology and other identified intangible assets
$ -   $ 231   $ 116   $ 968  
 
(6) Amortization of intangible assets:
Amortization of other identified intangible assets $ 2,026   $ 1,556   $ 3,776   $ 3,210  
 
(7) Special charges:
Rebalance, restructuring, certain litigation, and other costs $ 5,108   $ 3,859   $ 11,034   $ 7,882  
 
(8) Other income (expense), net:
Net income (loss) of unconsolidated entities $ 55   $ (42 ) $ 68   $ (93 )
 
(9) Interest expense:
Amortization of original issuance debt discount $ 1,521   $ 1,416   $ 3,015   $ 2,807  
 
(10) Income tax benefit:
Non-GAAP income tax effects $ (7,158 ) $ (8,529 ) $ (9,983 ) $ (10,626 )
 
(11) Loss attributable to noncontrolling interest:
Amortization of intangible assets, equity-plan related compensation, and income tax effects $ (204 ) $ (169 ) $ (404 ) $ (562 )
 

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(In thousands, except earnings per share data)
         
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP net income attributable to Mentor Graphics shareholders $ 14,172 $ 23,982 $ 11,621 $ 24,187
Non-GAAP adjustments:
Equity plan-related compensation: (1)
Cost of revenues 544 458 1,079 918
Research and development 3,311 2,543 6,552 5,153
Marketing and selling 2,143 1,771 4,321 3,653
General and administration 3,162 2,505 5,337 4,119
Acquisition - related items:
Amortization of purchased assets
Cost of revenues (2) 1,841 712 3,202 1,919
Frontline purchased technology and intangible assets (3) - 231 116 968
Amortization of intangible assets (4) 2,026 1,556 3,776 3,210
Special charges (5) 5,108 3,859 11,034 7,882
Other income (expense), net (6) 55 (42 ) 68 (93 )
Interest expense (7) 1,521 1,416 3,015 2,807
Non-GAAP income tax effects (8) (7,158 ) (8,529 ) (9,983 ) (10,626 )
Noncontrolling interest (9)   (204 )   (169 )   (404 )   (562 )
Total of non-GAAP adjustments   12,349     6,311     28,113     19,348  
Non-GAAP net income attributable to Mentor Graphics shareholders $ 26,521   $ 30,293   $ 39,734   $ 43,535  
 
GAAP and non-GAAP weighted average shares (diluted)   116,551     116,295     116,960     116,014  
 
Net income per share attributable to Mentor Graphics shareholders:
GAAP (diluted) $ 0.13 $ 0.19 $ 0.11 $ 0.19
Noncontrolling interest adjustment (10) (0.01 ) 0.02 (0.01 ) 0.02
Non-GAAP adjustments detailed above   0.11     0.05     0.24     0.17  
Non-GAAP (diluted) $ 0.23   $ 0.26   $ 0.34   $ 0.38  
 
                       
(1) Equity plan-related compensation expense is the fair value of all share-based payments to employees for stock options and restricted stock units, and purchases made as a result of the employee stock purchase plans.
(2) Amount represents amortization of purchased technology resulting from acquisitions. Purchased technology is amortized over two to five years.
(3) Amount represents amortization of purchased technology and other identified intangible assets identified as part of the fair value of the Frontline P.C.B. Solutions Limited Partnership (Frontline) joint venture investment. Mentor Graphics has a 50% interest in Frontline. The purchased technology was amortized over three years from the March 2010 acquisition date, other identified intangible assets were amortized over three to four years, and are reflected in the income statement in the equity in earnings of Frontline. This expense is the same type as being adjusted for in note (2) above and (4) below.
(4) Other identified intangible assets are amortized to operating expense over two to five years. Other identified intangible assets include trade names, customer relationships, and backlog which are the result of acquisition transactions.
(5) Three months ended July 31, 2014: Special charges consist of (i) $4,231 for EVE litigation costs, (ii) $575 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, and (iii) $302 in other adjustments.
Three months ended July 31, 2013: Special charges consist of (i) $3,231 of EVE litigation costs, (ii) $631 of costs incurred for employee rebalances which

severance benefits, notice pay, and outplacement services, and (iii) $(3) in other adjustments.

Six months ended July 31, 2014: Special charges consist of (i) $8,189 for EVE litigation costs, (ii) $1,700 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, and (iii) $1,145 in other adjustments.
Six months ended July 31, 2013: Special charges consist of (i) $5,171 for EVE litigation costs, (ii) $2,710 of costs incurred for employee rebalances which includes severance benefits, notice pay, and outplacement services, and (iii) $1 in other adjustments.
(6) Amount represents income (loss) on investment accounted for under the equity method of accounting.
(7) Amount represents the amortization of original issuance debt discount.
(8) Non-GAAP income tax expense adjustment reflects the application of our assumed normalized effective 17% tax rate, instead of our GAAP tax rate, to our non-GAAP pre-tax income.
(9) Adjustment for the impact of amortization of intangible assets, equity plan-related compensation, and income tax expense on noncontrolling interest.
(10) Non-GAAP EPS excludes from the numerator of our earnings per share calculation the adjustment of the noncontrolling interest to the calculated redemption value, recorded directly to retained earnings.
 

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(In thousands, except percentages)
         
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP gross profit $ 211,304 $ 208,359 $ 406,012 $ 394,693
Reconciling items to non-GAAP gross profit:
Equity plan-related compensation 544 458 1,079 918
Amortization of purchased technology   1,841     712     3,202     1,919  
Non-GAAP gross profit $ 213,689   $ 209,529   $ 410,293   $ 397,530  
 
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP gross profit as a percent of total revenues 81.2 % 82.3 % 79.2 % 82.3 %
Non-GAAP adjustments detailed above   0.9 %   0.4 %   0.9 %   0.6 %
Non-GAAP gross profit as a percent of total revenues   82.1 %   82.7 %   80.1 %   82.9 %
 
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP operating expenses $ 194,392 $ 181,781 $ 387,456 $ 362,222
Reconciling items to non-GAAP operating expenses:
Equity plan-related compensation (8,616 ) (6,819 ) (16,210 ) (12,925 )
Amortization of Frontline purchased technology and other
identified intangible assets - (231 ) (116 ) (968 )
Amortization of other identified intangible assets (2,026 ) (1,556 ) (3,776 ) (3,210 )
Special charges   (5,108 )   (3,859 )   (11,034 )   (7,882 )
Non-GAAP operating expenses $ 178,642   $ 169,316   $ 356,320   $ 337,237  
 
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP operating income $ 16,912 $ 26,578 $ 18,556 $ 32,471
Reconciling items to non-GAAP operating income:
Equity plan-related compensation $ 9,160 $ 7,277 $ 17,289 $ 13,843
Amortization of purchased technology 1,841 712 3,202 1,919
Amortization of Frontline purchased technology and other
identified intangible assets - 231 116 968
Amortization of other identified intangible assets 2,026 1,556 3,776 3,210
Special charges   5,108     3,859       11,034       7,882  
Non-GAAP operating income $ 35,047   $ 40,213   $ 53,973   $ 60,293  
 
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP operating income as a percent of total revenues 6.5 % 10.5 % 3.6 % 6.8 %
Non-GAAP adjustments detailed above   7.0 %   5.4 %   6.9 %   5.8 %
Non-GAAP operating income as a percent of total revenues   13.5 %   15.9 %   10.5 %   12.6 %
 
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
GAAP other income (expense), net and interest expense $ (4,911 ) $ (5,169 ) $ (9,754 ) $ (10,913 )
Reconciling items to non-GAAP other income (expense), net
and interest expense:
Equity in earnings of unconsolidated entities 55 (42 ) 68 (93 )
Amortization of original issuance debt discount   1,521     1,416     3,015     2,807  
Non-GAAP other income (expense), net and interest expense $ (3,335 ) $ (3,795 ) $ (6,671 ) $ (8,199 )
 

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
     
 
July 31, January 31,
  2014   2014
 
Assets
Current assets:
Cash, cash equivalents and short-term investments $ 174,361 $ 297,312
Trade accounts receivable, net 112,530 179,830
Term receivables, short-term 311,169 274,653
Prepaid expenses and other 65,570 64,658
Deferred income taxes   10,107   13,656
 
Total current assets 673,737 830,109
Property, plant, and equipment, net 158,474 160,165
Term receivables, long-term 236,743 270,365
Goodwill and intangible assets, net 650,879 571,843
Other assets   73,397   71,627
 
Total assets $ 1,793,230 $ 1,904,109
 
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 3,640 $ 9,590
Accounts payable 11,360 21,548
Income taxes payable 372 3,365
Accrued payroll and related liabilities 51,548 102,848
Accrued and other liabilities 40,455 42,457
Deferred revenue   223,610   231,179
 
Total current liabilities 330,985 410,987
Long-term notes payable 227,276 224,261
Deferred revenue, long-term 22,266 17,398
Other long-term liabilities   49,566     50,690
Total current liabilities   630,093     703,336
 
Noncontrolling interest with redemption feature 13,296 15,479
 
Stockholders' equity:
Common Stock 802,352 838,939
Retained Earnings 329,264 327,552
Accumulated other comprehensive income 18,025 18,803
Noncontrolling Interest   200   -
Total Stockholder's equity 1,149,841 1,185,294
 
Total liabilities and stockholders' equity $ 1,793,230 $ 1,904,109
 

       

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL INFORMATION

(In thousands, except days sales outstanding)
   
 
Three Months Ended July 31, Six Months Ended July 31,
  2014     2013     2014     2013  
Operating activities
Net income $ 13,769 $ 23,747 $ 10,744 $ 23,328
Depreciation and amortization 14,512 12,784 28,249 26,128
Other adjustments to reconcile:
Operating cash 11,298 6,594 17,820 17,404
Changes in working capital   9,944     (20,093 )   (18,251 )   (31,701 )
 
Net cash provided by operating activities 49,523 23,032 38,562 35,159
 
Investing activities
Net cash used in investing activities (37,511 ) (6,299 ) (85,091 ) (21,457 )
 
Financing activities
Net cash used in financing activities (13,443 ) (4,545 ) (72,736 ) (25,953 )
 
Effect of exchange rate changes on cash and cash equivalents   (33 )   (1,004 )   304     (1,968 )
 
Net change in cash and cash equivalents (1,464 ) 11,184 (118,961 ) (14,219 )
Cash and cash equivalents at beginning of perioda   175,825     198,380     293,322     223,783  
 
Cash and cash equivalents at end of period $ 174,361   $ 209,564   $ 174,361   $ 209,564  
 
 
 
Other data:
Capital expenditures $ 7,145   $ 9,411   $ 13,315   $ 13,821  
Days sales outstanding   147     130  
 
 
aThe condensed consolidated balance sheet at January 31, 2014 includes $3,990 of short-term investments in the "Cash, cash equivalents, and short-term investments" line item. $3,990 should be deducted from that line item to reconcile to the amount of "Cash and cash equivalents at beginning of period" presented in this statement for the six months ended July 31, 2014.
 

   

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP

EARNINGS PER SHARE

 
The following table reconciles management's estimates of the specific items excluded from GAAP in the calculation of estimated non-GAAP net income per share for Q3'15 and fiscal year 2015.
 
 
 
Estimated Estimated
Q3'15 FY'15
Diluted GAAP net income per share $ 0.07 $ 1.37
Non-GAAP Adjustments:
Amortization of purchased technology (1) 0.02 0.06
Amortization of other identified intangible assets (2) 0.02 0.07
Equity plan-related compensation (3) 0.08 0.31
Special Charges (4) - 0.09
Other income (expense), net and interest expense (5) 0.01 0.05
Non-GAAP income tax effects (6) 0.01 (0.18 )
Noncontrolling interest (7) - (0.01 )
Other (8) - (0.01 )
   
Diluted non-GAAP net income per share $ 0.21 $ 1.75  
             
 
(1) Excludes amortization of purchased technology resulting from acquisitions. Purchased technology is amortized over two to five years.
(2) Excludes amortization of other identified intangible assets including trade names, customer relationships, and backlog resulting from acquisition transactions. Other identified intangible assets are amortized over two to five years.
(3) Excludes equity plan-related compensation expense for the fair value of all share-based payments to employees for stock options and restricted stock units, and purchases made as a result of the employee stock purchase plans.
(4) Excludes special charges consisting primarily of costs incurred for certain litigation costs, and employee rebalances, which includes severance benefits, notice pay and outplacement services. Full year adjustment represents the impact of actual special charges for the six months ended July 31, 2014 as we do not provide guidance for special charges.
(5) Excludes income (loss) from an investment accounted for under the equity method of accounting, and amortization of original issuance debt discount.
(6) Non-GAAP income tax expense adjustment reflects the application of our assumed normalized effective 17% tax rate, instead of our GAAP tax rate, to our non-GAAP pre-tax income.
(7) Adjustment for the impact of amortization of intangible assets, equity plan-related compensation, and income tax expense on noncontrolling interest. Full year adjustment represents the impact of the adjustment for the six months ended July 31, 2014, as we do not provide guidance for this adjustment.
(8) Excludes the adjustment to the calculated redemption value of the noncontrolling interest, recorded directly to retained earnings. Full year adjustment represents the impact of the adjustment to the redemption value as of July 31, 2014, as we do not provide guidance for this adjustment.
 

MENTOR GRAPHICS CORPORATION

UNAUDITED SUPPLEMENTAL BOOKINGS AND REVENUE INFORMATION

(Rounded to nearest 5%)
         
2015 2014 2013
Product Category Bookings (a) Q1 Q2 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
IC DESIGN TO SILICON 20% 25% 20% 60% 35% 40% 30% 40% 35% 25% 30% 35% 30%
SCALABLE VERIFICATION 25% 25% 25% 15% 45% 25% 30% 30% 15% 30% 20% 25% 25%
INTEGRATED SYSTEMS DESIGN 30% 25% 30% 10% 10% 20% 30% 20% 25% 25% 25% 25% 25%
NEW & EMERGING MARKETS 10% 15% 10% 5% 5% 5% 5% 5% 5% 10% 15% 5% 10%
SERVICES / OTHER 15% 10% 15% 10% 5% 10% 5% 5% 20% 10% 10% 10% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2015 2014 2013
Product Category Revenue (b) Q1 Q2 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
IC DESIGN TO SILICON 25% 30% 25% 35% 50% 35% 35% 40% 40% 35% 25% 35% 35%
SCALABLE VERIFICATION 35% 25% 30% 20% 20% 25% 30% 25% 25% 25% 30% 30% 25%
INTEGRATED SYSTEMS DESIGN 25% 25% 25% 30% 20% 25% 25% 20% 20% 25% 25% 20% 25%
NEW & EMERGING MARKETS 5% 10% 10% 5% 5% 5% 5% 5% 5% 5% 10% 5% 5%
SERVICES / OTHER 10% 10% 10% 10% 5% 10% 5% 10% 10% 10% 10% 10% 10%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
 
2015 2014 2013
Bookings by Geography Q1 Q2 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
North America 50% 40% 45% 35% 55% 60% 40% 50% 35% 40% 50% 35% 40%
Europe 15% 25% 20% 10% 15% 15% 30% 20% 20% 35% 20% 30% 25%
Japan 15% 5% 10% 10% 5% 5% 10% 5% 10% 5% 5% 10% 10%
Pac Rim 20% 30% 25% 45% 25% 20% 20% 25% 35% 20% 25% 25% 25%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
2015 2014 2013
Revenue by Geography Q1 Q2 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
North America 50% 45% 45% 45% 40% 50% 45% 45% 50% 45% 50% 40% 45%
Europe 25% 20% 25% 20% 20% 20% 20% 20% 20% 20% 20% 30% 25%
Japan 10% 10% 10% 10% 5% 10% 15% 10% 10% 15% 10% 10% 10%
Pac Rim 15% 25% 20% 25% 35% 20% 20% 25% 20% 20% 20% 20% 20%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
2015 2014 2013
Bookings by Business Model (c) Q1 Q2 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Perpetual 35% 20% 25% 15% 50% 20% 10% 25% 25% 20% 20% 15% 20%
Term Ratable 20% 10% 15% 10% 5% 5% 5% 5% 25% 15% 10% 5% 10%
Term Up Front 45% 70% 60% 75% 45% 75% 85% 70% 50% 65% 70% 80% 70%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
2015 2014 2013
Revenue by Business Model (c) Q1 Q2 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year
Perpetual 35% 30% 30% 20% 25% 20% 20% 20% 20% 25% 25% 15% 20%
Term Ratable 10% 10% 10% 10% 10% 5% 5% 10% 10% 10% 10% 5% 10%
Term Up Front 55% 60% 60% 70% 65% 75% 75% 70% 70% 65% 65% 80% 70%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
 
 
(a) Product Category Bookings excludes support bookings for all sub-flow categories.
(b) Product Category Revenue includes support revenue for each sub-flow category as appropriate.
(c) Bookings and Revenue by Business Model are System and Software only (excludes finance fee).



Contact:

Mentor Graphics Corporation
Joe Reinhart, 503-685-1462
Email Contact