Mentor Graphics Reports Fiscal Fourth Quarter Results and Announces Board Has Increased Share Buyback Authorization

WILSONVILLE, Ore. — (BUSINESS WIRE) — February 28, 2012 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal fourth quarter and year ended January 31, 2012. The company reported revenues of $320.4 million, non-GAAP earnings per share of $.58, and GAAP earnings per share of $.52. For the full fiscal year, revenues were $1,014.6 million, non-GAAP earnings per share were $1.13, and GAAP earnings per share were $.74.

“It was a quarter and a year of records for the company, including the significant milestone of crossing one billion dollars in revenues,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “We exited the year with very strong momentum as our strategy of diversification has driven growth in non-traditional EDA applications like manufacturing, thermal analysis and embedded software, all of which grew bookings faster than the overall company. Additionally, the growing complexity of chips and the challenges of the 28nm and 20nm process nodes have generated substantial demand for both our functional verification and our design-to-silicon products.”

For the full fiscal year, the company grew staffing 1.4%, including acquisitions, while growing revenues 10.9%. Non-GAAP operating margins for the year reached 16.5% and 11.1% on a GAAP basis. For the fourth quarter, operating expense was flat year-on-year on a non-GAAP basis, and up 2.3% on a GAAP basis. For the full fiscal year, non-GAAP operating expense was up 3.0%, and 3.3% on a GAAP basis.

During the quarter, the company announced the Hyperlynx® 8.2 product which now offers three-dimensional full-wave field solving and thermal/power co-simulation capability. The company also announced a partnership with Freescale Semiconductor to deliver high-speed simulation and virtual prototyping environments for next-generation Freescale multi-core embedded processors. In December, Mentor acquired Flowmaster, a world leader in one-dimensional computational fluid dynamics simulation software used to analyze complex fluid flow network systems. Also in the quarter, the company announced a new version of its three-dimensional computational fluid dynamics simulation software that offers new analytic capabilities for radiation, combustion and hypersonic flows. The company introduced the first solution that addresses the challenges of light emitting diode (LED) and semiconductor packaging thermal characterization, combining the FloTHERM® and T3ster® products. In manufacturing, the company announced Capital Harness MPM, a product that helps wire harness manufacturers cut production costs.

“The company has delivered significant improvements in our SG&A to revenues ratio over the year, driven by both strong cost controls and improvements in the business,” said Gregory K. Hinckley, president of Mentor Graphics. “We made great strides this year toward the company’s goal of achieving 20% operating margins, and with incremental improvements, expect to achieve that target in FY2014. With continued discipline in the business, we expect to grow earnings per share at twice the rate of revenue growth in the coming fiscal year. Our past investments in a multi-tiered sales channel allow us to address the universe of tens of thousands of systems companies versus the hundreds of semiconductor companies which gives us, uniquely among our competitors, the reach to penetrate traditionally under-served adjacent design markets.”


For the full fiscal year 2013, the company expects revenues of about $1.1 billion, non-GAAP earnings per share of about $1.32, and GAAP earnings per share of approximately $1.13. For the first quarter of fiscal 2013, the company expects revenues of about $255 million, non-GAAP earnings per share of about $.25, and GAAP earnings per share of approximately $.19.

Share Repurchase Authorization

The company’s board has increased the share repurchase authorization to $200 million from the original $150 million. During fiscal year 2012 the company repurchased 6.8 million shares for $90 million at an average cost of $13.22 per share. Under this increased authorization, $110 million is available for share repurchase over the next two years.

Fiscal Year Definition

Mentor Graphics’ 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 margin, operating margin, net income (loss), and earnings (loss) per share which we refer to as non-GAAP gross margin, operating margin, net income (loss), and earnings (loss) 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 attributable to net retirement premiums or discounts on the early retirement of debt and associated debt issuance costs, interest expense associated with the amortization of debt discount and premium on convertible debt, and the equity in income (loss) of unconsolidated entities (except Frontline PCB Solutions Limited Partnership (Frontline)), which management does not consider reflective of our core operating business.

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