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:
- Identified intangible assets consist
primarily of purchased technology, backlog, trade names, and
customer relationships. Amortization charges for our intangible
assets can vary in frequency and amount due to the timing and
magnitude of acquisition transactions. We consider our operating
results without these charges when evaluating our core performance
due to the variability. Generally, the most significant impact to
inter-period comparability of our net income is in the first twelve
months following an acquisition.
- Special charges may include expenses
related to employee severance, certain litigation costs,
acquisitions, excess facility costs, and other asset related
charges. Special charges are incurred based on particular facts and
circumstances and can vary in size and frequency. Restructuring
costs included in special charges include costs incurred for
employee terminations, including severance and benefits, driven by
modification of business strategy or business emphasis. Litigation
costs classified as special charges consist of professional service
fees related to patent litigation involving us, EVE S.A., and
Synopsys, Inc. These costs are included in special charges because
of their unusual nature due to the significance in variability of
timing and amount. Special charges are not ordinarily included in
our annual operating plan and related budget due to
unpredictability, driven in part by rapidly changing technology and
the competitive environment in our industry. We therefore exclude
them when evaluating our managers’ performance internally.
- Equity plan-related compensation
expenses represent the fair value of all share-based payments to
employees, including grants of employee stock options and
restricted stock units, and purchases made as a result of our
employee stock purchase plans. We do not consider equity
plan-related compensation expense in evaluating our managers’
performance internally or our core operations in any given
period.
- Interest expense attributable to
amortization of the original issuance debt discount on convertible
debt is excluded. Management does not consider this charge as a
part of our core operating performance. We do not consider the
amortization of the original issuance debt discount on convertible
debt to be a direct cost of operations.
- Equity in earnings or losses of
unconsolidated entities represents our equity in the net income
(loss) of common stock investments accounted for under the equity
method. The carrying amounts of our investments are adjusted for
our share of earnings or losses of the investee. We report our
equity in the earnings or losses of investments in other income
(expense), net (with the exception of our investment in Frontline
as discussed below). The amounts are excluded from our non-GAAP
results as we do not control the results of operations for the
investments and we do not participate in regular and periodic
operating activities; therefore, management does not consider these
investments as a part of our core operating performance.
- The Company maintains a 50% interest in
Frontline, a joint venture. We report our equity in the earnings or
losses of Frontline within operating income. Although we do not
exert control, we actively participate in regular and periodic
activities such as budgeting, business planning, marketing and
direction of research and development projects. Accordingly, we do
not exclude our share of Frontline’s earnings or losses from our
non-GAAP results as management considers the joint venture to be
core to our operating performance.
- Income tax expense is adjusted by the
amount of additional tax expense or benefit that we would accrue if
we used non-GAAP results instead of GAAP results in the calculation
of our tax liability, utilizing a normalized effective tax rate.
The normalized non-GAAP effective tax rate of 19% considers our
global tax posture, including the weighted average tax rates
applicable in the various jurisdictions in which we operate;
eliminates the effects of non-recurring and period specific items
which are often attributable to acquisition decisions and can vary
in size and frequency; and considers our U.S. tax loss
carryforwards and tax credits that were not previously recorded as
a benefit in our financial statements. Our non-GAAP effective tax
rate is subject to change over time for various reasons, including
changes in geographic business mix, statutory tax rates, foreign
re-investment expectations, and availability of U.S. tax loss
carryforwards and tax credits that were not previously recorded as
a benefit. Our normalized effective non-GAAP tax rate increased
from 17% for the year ended January 31, 2015 to 19% for the year
ended January 31, 2016. The increase in the normalized non-GAAP
effective tax rate reflects the reduced availability of U.S. tax
loss carryforwards that were not previously recorded as a benefit
in our financial statements. Our GAAP tax rate for the three months
ended April 30, 2015 is 13% after consideration of period specific
items. Without period specific items of $0.2 million, our GAAP tax
rate is 15%. Our full fiscal year 2016 GAAP tax rate, inclusive of
period specific items recognized through April 30, 2015, is
projected to be 17%.
- Our agreement with the owners of
noncontrolling interests in one of our subsidiaries gives them a
right to require us to purchase their interests for a price based
on a formula defined in the agreement. Under GAAP, increases (or
decreases to the extent they offset previous increases) in the
calculated redemption value of the noncontrolling interests are
recorded directly to retained earnings and therefore do not affect
net income. However, as required by GAAP, these amounts are applied
to increase or decrease the numerator in the calculation of basic
and diluted earnings per share. Management does not consider
fluctuations in the calculated redemption value of noncontrolling
interests to be relevant to our core operating performance.
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:
- Amortization of intangible assets
represents the loss in value as the technology in our industry
evolves, is advanced, or is replaced over time. The expense
associated with this loss in value is not included in the non-GAAP
net income presentation and therefore does not reflect the full
economic effect of the ongoing cost of maintaining our current
technological position in our competitive industry, which is
addressed through our research and development program.
- We regularly evaluate our business to
determine whether any operations should be eliminated or curtailed.
Additionally, as part of our ongoing business, we engage in
acquisition and assimilation activities and patent litigation. We
therefore will continue to experience special charges on a regular
basis. These costs also directly impact our available funds.
- Our stock incentive and stock purchase
plans are important components of our incentive compensation
arrangements and will be reflected as expenses in our GAAP
results.
- Our income tax expense will be
ultimately based on our GAAP taxable income and actual tax rates in
effect, which often differ significantly from the rate assumed in
our non-GAAP presentation. In addition, if we have a GAAP loss and
non-GAAP net income, our non-GAAP results will not reflect any
projected GAAP tax benefits.
- Other companies, including other
companies in our industry, calculate non-GAAP net income
differently than we do, limiting its usefulness as a comparative
measure.
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 $1.24 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, Nucleus, Calibre, Xpedition and PADS
are registered trademarks and xACT is a trademark 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) economic weakness in the European Union, China,
Japan or other countries, and the potential adverse impact of such
weakness 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, including the company’s ongoing patent
litigation with Synopsys, Inc.; (vi) changes in accounting or
reporting rules or interpretations, including new rules affecting
revenue recognition; (vii) the impact of tax audits by 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 OPERATIONS
(In thousands, except earnings per share data)
Three Months Ended April 30, 2015
2014 Revenues: System and software $ 155,931 $
148,229 Service and support 116,212 103,922
Total revenues 272,143 252,151
Cost of revenues: (1) System and software 13,624 26,971
Service and support 33,569 29,111 Amortization of purchased
technology 1,858 1,361 Total cost of
revenues 49,051 57,443 Gross profit
223,092 194,708
Operating
expenses: Research and development (2) 89,515 84,451 Marketing
and selling (3) 84,951 84,634 General and administration (4) 17,963
17,682 Equity in earnings of Frontline (5) (870 ) (1,379 )
Amortization of intangible assets (6) 2,219 1,750 Special charges
(7) 36,977 5,926 Total operating
expenses 230,755 193,064
Operating
income (loss) (7,663 ) 1,644 Other income (expense), net (8)
342 (258 ) Interest expense (9) (4,694 ) (4,585 )
Loss before income tax (12,015 ) (3,199 ) Income tax benefit (10)
(1,512 ) (174 ) Net loss (10,503 ) (3,025 ) Less:
Loss attributable to noncontrolling interest (11) (618 )
(474 )
Net loss attributable to Mentor Graphics
shareholders
$ (9,885 ) $ (2,551 )
Net loss per share attributable to Mentor
Graphics shareholders:
Basica $ (0.08 ) $ (0.02 ) Diluteda $ (0.08 ) $ (0.02 ) Weighted
average number of shares outstanding: Basic 116,003
114,935 Diluted 116,003 114,935
aWe have increased 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: $ 269 $ 667
Refer to description of footnotes
below.
MENTOR GRAPHICS
CORPORATION
FOOTNOTES TO
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands) Listed below are
the items included in net loss 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 April 30, 2015 2014 (1)
Cost of revenues: Equity plan-related compensation $ 708 $ 535
Amortization of purchased technology 1,858
1,361 $ 2,566 $ 1,896
(2) Research
and development: Equity plan-related compensation $ 4,318
$ 3,241
(3) Marketing and selling:
Equity plan-related compensation $ 2,480 $ 2,178
(4) General and administration: Equity plan-related
compensation $ 2,772 $ 2,175
(5) Equity in
earnings of Frontline: Amortization of other identified
intangible assets $ - $ 116
(6)
Amortization of intangible assets: Amortization of other
identified intangible assets $ 2,219 $ 1,750
(7) Special charges: Rebalance, restructuring, certain
litigation, and other costs $ 36,977 $ 5,926
(8) Other income (expense), net: Net (income) loss of
unconsolidated entities $ (25 ) $ 13
(9) Interest
expense: Amortization of original issuance debt discount $
1,604 $ 1,494
(10) Income tax benefit:
Non-GAAP income tax effects $ (9,282 ) $ (2,825 )
(11)
Loss attributable to noncontrolling interest: Amortization of
intangible assets, equity-plan related compensation, and income tax
effects $ (200 ) $ (200 )
MENTOR GRAPHICS
CORPORATION
UNAUDITED
RECONCILIATION OF NON-GAAP ADJUSTMENTS
(In thousands, except earnings per share data)
Three Months Ended April 30, 2015
2014 GAAP net loss attributable to Mentor Graphics
shareholders $ (9,885 ) $ (2,551 ) Non-GAAP adjustments: Equity
plan-related compensation: (1) Cost of revenues 708 535 Research
and development 4,318 3,241 Marketing and selling 2,480 2,178
General and administration 2,772 2,175 Acquisition - related items:
Amortization of purchased assets Cost of revenues (2) 1,858 1,361
Amortization of intangible assets (3) 2,219 1,866 Special charges
(4) 36,977 5,926 Other income (expense), net (5) (25 ) 13 Interest
expense (6) 1,604 1,494 Non-GAAP income tax effects (7) (9,282 )
(2,825 ) Noncontrolling interest (8) (200 ) (200 )
Total of non-GAAP adjustments 43,429 15,764
Non-GAAP net income attributable to Mentor Graphics
shareholders $ 33,544 $ 13,213 GAAP weighted
average shares 116,003 114,935 Non-GAAP adjustment 4,753
2,479 Non-GAAP weighted average shares
(diluted) 120,756 117,414 Net
income (loss) per share attributable to Mentor Graphics
shareholders: GAAP $ (0.08 ) $ (0.02 ) Noncontrolling interest
adjustment (9) - (0.01 ) Non-GAAP adjustments detailed above
0.36 0.14 Non-GAAP (diluted) $ 0.28 $
0.11
(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) Other identified intangible assets are amortized to
operating expense generally over two to five years. Other
identified intangible assets include trade names, customer
relationships, and backlog which are the result of acquisition
transactions. The amount presented for the three months ended April
30, 2014 also includes $116 of amortization of other identified
intangible assets for Frontline, which were fully amortized in the
first quarter of fiscal 2015.
(4) Three months ended April
30, 2015: Special charges consist of (i) $25,435 of severance costs
incurred for the voluntary early retirement program, (ii) $9,863 of
costs incurred for employee rebalances which include severance
benefits, notice pay, and outplacement services, (iii) $1,575 for
EVE litigation costs, and (iv) $104 in other adjustments. Three
months ended April 30, 2014: Special charges consist of (i) $3,958
for EVE litigation costs, (ii) $1,125 of costs incurred for
employee rebalances which include severance benefits, notice pay,
and outplacement services, and (iii) $843 in other adjustments.
(5) Amount represents (income) loss on an investment
accounted for under the equity method of accounting.
(6)
Amount represents the amortization of original issuance debt
discount.
(7) Non-GAAP income tax expense adjustment
reflects the application of our assumed normalized effective 19%
tax rate, instead of our GAAP tax rate, to our non-GAAP pre-tax
income for the three months ended April 30, 2015 and a 17% tax rate
for the three months ended April 30, 2014.
(8) Adjustment
for the impact of amortization of intangible assets, equity
plan-related compensation, and income tax expense on noncontrolling
interest.
(9) 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 April 30, 2015 2014
GAAP gross profit $ 223,092 $ 194,708 Reconciling items to non-GAAP
gross profit: Equity plan-related compensation 708 535 Amortization
of purchased technology 1,858 1,361
Non-GAAP gross profit $ 225,658 $ 196,604
Three Months Ended April 30, 2015 2014
GAAP gross profit as a percent of total revenues 82.0 % 77.2 %
Non-GAAP adjustments detailed above 0.9 % 0.8 %
Non-GAAP gross profit as a percent of total revenues 82.9 %
78.0 %
Three Months Ended April 30,
2015 2014 GAAP operating expenses $ 230,755 $ 193,064
Reconciling items to non-GAAP operating expenses: Equity
plan-related compensation (9,570 ) (7,594 ) Amortization of other
identified intangible assets (2,219 ) (1,866 ) Special charges
(36,977 ) (5,926 ) Non-GAAP operating expenses $
181,989 $ 177,678
Three Months Ended
April 30, 2015 2014 GAAP operating income (loss)
$ (7,663 ) $ 1,644 Reconciling items to non-GAAP operating income:
Equity plan-related compensation 10,278 8,129 Amortization of
purchased technology 1,858 1,361 Amortization of other identified
intangible assets 2,219 1,866 Special charges 36,977
5,926 Non-GAAP operating income $ 43,669 $
18,926
Three Months Ended April 30,
2015 2014 GAAP operating income (loss) as a percent
of total revenues (2.8 %) 0.7 % Non-GAAP adjustments detailed above
18.8 % 6.8 % Non-GAAP operating income as a percent
of total revenues 16.0 % 7.5 %
Three
Months Ended April 30, 2015 2014 GAAP other
income (expense), net and interest expense $ (4,352 ) $ (4,843 )
Reconciling items to non-GAAP other income
(expense), net and interest expense:
Equity in (income) loss of unconsolidated entities (25 ) 13
Amortization of original issuance debt discount 1,604
1,494 Non-GAAP other income (expense), net and
interest expense $ (2,773 ) $ (3,336 )
MENTOR GRAPHICS
CORPORATION
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
April 30,
January 31, 2015 2015 Assets
Current assets: Cash and cash equivalents $ 249,773 $
230,281 Trade accounts receivable, net 90,050 208,996 Term
receivables, short-term 347,880 337,626 Prepaid expenses and other
75,051 65,853 Deferred income taxes 22,860
23,490 Total current assets 785,614 866,246
Property, plant, and equipment, net 167,088 170,737
Term
receivables, long-term 282,343 301,862
Goodwill and
intangible assets, net 650,902 645,506
Other assets
64,456 64,671 Total assets $
1,950,403 $ 2,049,022
Liabilities and
Stockholders' Equity Current liabilities: Short-term
borrowings $ 2,065 $ 7,228 Accounts payable 9,645 12,687 Income
taxes payable 223 5,994 Accrued payroll and related liabilities
53,596 108,553 Accrued and other liabilities 46,804 47,728 Deferred
revenue 233,475 259,340 Total
current liabilities 345,808 441,530
Long-term notes payable
235,604 230,400
Deferred revenue, long-term 19,117 21,251
Other long-term liabilities 66,828
69,615 Total liabilities 667,357
762,796
Noncontrolling interest with redemption
feature 12,535 13,372
Stockholders' equity:
Common stock 845,764 832,612 Retained earnings 435,902 451,901
Accumulated other comprehensive income (loss) (11,383 ) (11,887 )
Noncontrolling interest 228 228 Total
stockholders' equity 1,270,511 1,272,854
Total liabilities and stockholders' equity $
1,950,403 $ 2,049,022
MENTOR GRAPHICS
CORPORATION
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL
INFORMATION
(In thousands, except days sales outstanding)
Three Months Ended April 30, 2015
2014 Operating activities Net loss $ (10,503 ) $
(3,025 ) Depreciation and amortization 15,041 13,737 Other
adjustments to reconcile: Operating cash 8,136 6,522 Changes in
working capital 33,277 (28,195 ) Net
cash provided by (used in) operating activities 45,951 (10,961 )
Investing activities Net cash used in investing
activities (11,928 ) (47,580 )
Financing activities
Net cash used in financing activities (14,778 ) (59,293 )
Effect of exchange rate changes on cash and cash equivalents
247 337 Net change in cash and cash
equivalents 19,492 (117,497 ) Cash and cash equivalents at
beginning of period 230,281 293,322
Cash and cash equivalents at end of period $ 249,773
$ 175,825
Other data: Capital
expenditures, net $ 4,728 $ 6,170 Days sales
outstanding 145 150
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
Q2'16 and fiscal year 2016.
Estimated
Estimated Q2'16 FY'16 Diluted GAAP net income
per share $ 0.03 $ 1.18 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) 0.09 0.35 Special Charges (4) 0.00 0.31 Other income (expense),
net and interest expense (5) 0.01 0.06 Non-GAAP income tax effects
(6) (0.03 ) (0.14 ) Noncontrolling interest (7) 0.00 (0.01 )
Diluted non-GAAP net income per share $ 0.14 $ 1.88
(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 generally 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 the
voluntary early retirement program, employee rebalances, which
includes severance benefits, notice pay, and outplacement services,
and certain litigation costs. Full year adjustment represents the
impact of actual special charges for the three months ended April
30, 2015 as we do not provide guidance for special charges.
(5) Excludes amortization of original issuance debt
discount, and income (loss) from an investment accounted for under
the equity method of accounting.
(6) Non-GAAP income tax
expense adjustment reflects the application of our assumed
normalized effective 19% 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.
MENTOR GRAPHICS
CORPORATION
UNAUDITED
SUPPLEMENTAL BOOKINGS AND REVENUE INFORMATION
(Rounded to
nearest 5%)
2016 2015 2014 Product
Category Bookings (a) Q1 Q1 Q2
Q3 Q4 Year Q1
Q2 Q3 Q4
Year IC DESIGN TO SILICON 30% 20% 25% 45% 55% 45% 60% 35%
40% 30% 40% SCALABLE VERIFICATION 25% 25% 25% 20% 20% 20% 15% 45%
25% 30% 30% INTEGRATED SYSTEMS DESIGN 15% 30% 25% 15% 10% 15% 10%
10% 20% 30% 20% NEW & EMERGING MARKETS 10% 10% 15% 10% 5% 10%
5% 5% 5% 5% 5% SERVICES / OTHER 20% 15% 10% 10%
10% 10% 10% 5% 10% 5% 5%
Total 100% 100% 100% 100% 100%
100% 100% 100% 100% 100% 100%
2016 2015 2014 Product Category
Revenue (b) Q1 Q1 Q2
Q3 Q4 Year Q1
Q2 Q3 Q4 Year IC
DESIGN TO SILICON 35% 25% 30% 35% 55% 40% 35% 50% 35% 35% 40%
SCALABLE VERIFICATION 30% 35% 25% 20% 20% 25% 20% 20% 25% 30% 25%
INTEGRATED SYSTEMS DESIGN 20% 25% 25% 25% 15% 20% 30% 20% 25% 25%
20% NEW & EMERGING MARKETS 5% 5% 10% 10% 5% 5% 5% 5% 5% 5% 5%
SERVICES / OTHER 10% 10% 10% 10% 5% 10%
10% 5% 10% 5% 10%
Total 100%
100% 100% 100% 100% 100% 100%
100% 100% 100% 100%
2016
2015 2014 Bookings by Geography Q1
Q1 Q2 Q3 Q4
Year Q1 Q2 Q3
Q4 Year North America 35% 50% 40% 50% 40% 45%
35% 55% 60% 40% 50% Europe 25% 15% 25% 15% 15% 15% 10% 15% 15% 30%
20% Japan 15% 15% 5% 10% 5% 5% 10% 5% 5% 10% 5% Pac Rim 25% 20%
30% 25% 40% 35% 45% 25%
20% 20% 25%
Total 100% 100% 100%
100% 100% 100% 100% 100% 100%
100% 100%
2016 2015 2014
Revenue by Geography Q1 Q1 Q2
Q3 Q4 Year Q1
Q2 Q3 Q4
Year North America 50% 50% 45% 50% 40% 45% 45% 40% 50% 45%
45% Europe 15% 25% 20% 20% 15% 20% 20% 20% 20% 20% 20% Japan 10%
10% 10% 10% 5% 5% 10% 5% 10% 15% 10% Pac Rim 25% 15% 25%
20% 40% 30% 25% 35% 20%
20% 25%
Total 100% 100% 100% 100%
100% 100% 100% 100% 100% 100%
100%
2016 2015 2014
Bookings by Business Model (c) Q1 Q1
Q2 Q3 Q4 Year
Q1 Q2 Q3 Q4
Year Perpetual 20% 35% 20% 15% 10% 15% 15% 50% 20% 10% 25%
Term Ratable 10% 20% 10% 5% 5% 10% 10% 5% 5% 5% 5% Term Up Front
70% 45% 70% 80% 85% 75% 75% 45%
75% 85% 70%
Total 100% 100% 100%
100% 100% 100% 100% 100% 100%
100% 100%
2016 2015
2014 Revenue by Business Model (c) Q1
Q1 Q2 Q3 Q4
Year Q1 Q2 Q3
Q4 Year Perpetual 15% 35% 30% 15% 10% 20% 20%
25% 20% 20% 20% Term Ratable 10% 10% 10% 10% 5% 5% 10% 10% 5% 5%
10% Term Up Front 75% 55% 60% 75% 85%
75% 70% 65% 75% 75% 70%
Total
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).
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150522005148/en/
Mentor Graphics CorporationJoe Reinhart,
503-685-1462joe_reinhart@mentor.com
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