Mentor Graphics Reports Fiscal Second Quarter Results, Announces Dividend and Increases Share Repurchase Authorization

WILSONVILLE, Ore. — (BUSINESS WIRE) — August 22, 2013 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal second quarter ended July 31, 2013. The company reported revenues of $253.2 million, non-GAAP earnings per share of $0.26, and GAAP earnings per share of $0.19.

“Revenue, bookings and operating income were all-time records for a second quarter,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “New capabilities for 20, 14 and 10 nanometer technologies, and the performance enhancements these advanced nodes enable, were the principal forces driving strength in the Calibre products and Veloce emulation. Record first- half bookings, book to bill and backlog reinforce our confidence for fiscal 2014 and beyond.”

In support of the many innovations emerging in integrated circuits manufactured at 20, 14 and 10 nanometers, such as FinFETs and multi-patterning, the company in second quarter announced several new milestones in the Calibre® ecosystem of strategic partnerships with TSMC, Samsung, GLOBALFOUNDRIES and Freescale. The company also announced that its Questa® and Veloce® functional verification platforms were chosen by ARM to allow licensees to test compliance with the specifications of the ARM AMBA 5 and AMBA 4 interconnects.

In addition, the company announced the Capital® Harness™ TVM software serving the automotive, aerospace and defense industries. The product automatically generates detailed harness manufacturing process and cost data that is specific to each customer’s harness design, factory and cost models.

“Scalable verification, in particular emulation, highlighted an excellent quarter. Strong renewal activity and emulation drove a 70% year-on-year increase in bookings,” said Gregory K. Hinckley, president of Mentor Graphics. “Exceeding non-GAAP guidance by 50% and last year’s results by nearly 20% is evidence of our continuous attention to operating expenses. Third quarter guidance reflects the successful ramp of emulation production and customer demand for this enabling technology.”


For the third quarter of fiscal 2014, the company expects revenues of about $260 million, non-GAAP earnings per share of about $0.19, and GAAP earnings per share that are approximately $0.11. For the full fiscal year 2014, the company is maintaining revenue expectations of about $1.155 billion and is increasing its forecast of non-GAAP earnings per share to about $1.59. It now forecasts GAAP earnings per share of approximately $1.31.

Share Repurchase

In the second quarter of fiscal year 2014, the company used $20 million to repurchase 1.0 million shares at an average price of $19.95 per share. The company has repurchased $164 million of Mentor Graphics stock since March 2011. On August 21, 2013, the company’s Board of Directors increased the share repurchase authorization. Under the increased authorization, $100 million is currently available for share repurchase.


The company announces a quarterly dividend of $0.045 per share on outstanding common stock. The dividend is payable on September 30, 2013 to shareholders of record as of the close of business on September 10, 2013.

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 profit, operating income, net income, and earnings per share which we refer to as non-GAAP gross profit, operating income, 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:

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