Mentor Graphics Reports Fiscal Fourth Quarter Results

WILSONVILLE, Ore. — (BUSINESS WIRE) — March 3, 2016 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal fourth quarter ended January 31, 2016. The company reported revenues of $337.3 million, non-GAAP earnings per share of $0.63, and GAAP earnings per share of $0.51. For the full fiscal year, revenues were $1.181 billion, non-GAAP earnings per share were $1.55 and GAAP earnings per share were $0.81.

“Mentor achieved revised fourth quarter and full year revenue guidance and exceeded earnings per share guidance,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “Fiscal 2016 was our most challenging year since the financial crisis of 2009. Although the semiconductor industry is going through a period of weakness that impacts the EDA industry, Mentor is benefiting from its leading position in design of electronics for the automotive and aerospace industries. Bookings in the automotive part of Mentor’s business grew 20% in the fourth quarter, continuing the 20% compound growth rate of the past five years.”

During the quarter the company announced the embedded industry’s first end-to-end internet of things (IoT) solution that includes customizable gateway hardware and software, cloud services, and edge devices. Mentor’s Veloce® Power application, introduced earlier in the year, was named by EDN Magazine one of the year’s “100 Hot Products”. The company also introduced new versions of three products: the market-leading FloTHERM® and general-purpose FloEFD™ software for computational fluid dynamics, and the Valor® Process Preparation software for electronics manufacturing.

The company made several announcements in the transportation space. A trio of new Capital Systems™ tools enable cost and weight optimization in the automotive and aerospace markets. The Mentor Automotive A2B Analyzer™ is the industry’s first third-party development platform supporting the Analog Devices, Inc. Automotive Audio Bus A2B technology. The combination reduces development time, cost and complexity of in-vehicle audio networks. In other automotive news, electrical systems for all new General Motors vehicle platforms are now being designed using Capital® tools, with design data for existing vehicle platforms also being converted to Capital software.

“Through rigorous attention to expenses we reduced fourth quarter operating costs by $20 million and exceeded non-GAAP earnings per share by $0.16 compared to guidance,” said Gregory K. Hinckley, president of Mentor Graphics. “Full-year non-GAAP operating margins exceeded 20% and cash flow from operations increased 65% to a record of nearly $230 million. Since reporting third quarter results Mentor has repurchased over 12 million shares and reduced our shares outstanding by approximately 10%.”


For the first quarter of fiscal 2017, the company expects revenues of about $220 million, a non-GAAP earnings per share of break-even and a GAAP loss per share of approximately $0.12. For the full year fiscal 2017, the company expects revenues of about $1.215 billion, non-GAAP earnings per share of about $1.68, and GAAP earnings per share of approximately $1.22. Cash flow from operations in fiscal 2017 is expected to be approximately $200 million.


The company announced a quarterly dividend of $0.055 per share. The dividend is payable on March 31, 2016 to shareholders of record at the close of business on March 10, 2016.

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, marketing and sales, 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:

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