Mentor Graphics Reports Fiscal First Quarter Results and Announces Quarterly Dividend

WILSONVILLE, Ore. — (BUSINESS WIRE) — May 22, 2015 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal first quarter ended April 30, 2015. The company reported revenues of $272.1 million, non-GAAP earnings per share of $0.28, and a GAAP loss per share of $0.08.

“The first quarter was strong for Mentor Graphics, substantially exceeding financial guidance,” said Walden C. Rhines, chairman and CEO. “In addition to more than 50% bookings growth in three of our four product categories, our automotive business was very strong, driven by a major win with a leading automotive OEM. We also initiated a strategic and geographic realignment of resources. First quarter results provide a solid start to the year.”

During the quarter the company acquired the business assets of Tanner EDA, providing tools for design, layout and verification of internet of things (IoT) devices plus analog/mixed-signal and MEMS integrated circuits. The company also announced a solution with the Nucleus® real-time operating system designed to meet the power consumption and IoT requirements of wearable devices.

Two important announcements in the printed circuit board (PCB) space occurred during the quarter. Addressing a challenge for the enterprise-level customer, Mentor launched the Xpedition® Package Integrator flow for IC, package and PCB co-design and optimization. Mentor also targeted the advancing needs of the independent engineer: three new PADS® products offer unprecedented price-to-performance value at the entry level and progressively provide affordable access to advanced design solutions. In addition, Mentor released the new Calibre® xACT™ parasitic extraction platform with an architecture purpose-built to address a wide spectrum of analog and digital extraction needs for the next several process generations, including 14nm and beyond, with certification for a TSMC 10nm offering already in place.

“First quarter revenue was 5% greater than guidance, while continued attention to expenses drove non-GAAP earnings per share to exceed guidance by 55%,” said Gregory K. Hinckley, president of Mentor Graphics. “Automotive bookings, particularly services, were very strong in the quarter, accounting for over 15% of total bookings. Cash flow from operations is off to a strong start with $46 million generated in the first quarter.”

Outlook

For the second quarter of fiscal 2016, the company expects revenue of about $250 million, non-GAAP earnings per share of about $0.14 and GAAP earnings per share of approximately $0.03. For the full year fiscal 2016, the company affirms the previous revenue guidance of about $1.282 billion; increases non-GAAP earnings per share guidance from $1.85 to about $1.88; and currently expects GAAP earnings per share of approximately $1.18. The decrease in fiscal 2016 GAAP earnings per share from previous guidance is primarily the result of workforce restructuring expenses announced during the first quarter.

Dividend

The company announced a quarterly dividend of $0.055 per share on outstanding common stock. The dividend is payable on June 30, 2015 to shareholders of record at the close of business on June 10, 2015.

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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