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Mentor Graphics Reports Fiscal Second Quarter Results and Announces Quarterly Dividend

WILSONVILLE, Ore. — (BUSINESS WIRE) — August 20, 2015 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal second quarter ended July 31, 2015. The company reported revenues of $281.1 million, non-GAAP earnings per share of $0.36, and GAAP earnings per share of $0.26.

“Revenue was an all-time second quarter record and Mentor exceeded non-GAAP earnings per share guidance for the 26th consecutive quarter,” said Walden C. Rhines, chairman and CEO. “Customer need for increased amounts of software drove early renewal activity and the upside in the quarter. Demand was strongest in both Design to Silicon and Scalable Verification. During the quarter we added five new emulation customers, including both a Top Ten chip company and a start-up.”

During the quarter, the company announced Veloce® Power Application software, which captures real power consumption during emulation and passes the information efficiently to power analysis tools. Mentor also announced its next-generation MicReD® Industrial Power Tester, which now provides 1500 amp electronic component power cycling and thermal testing for up to 12 devices simultaneously, to benefit automotive, railway, power generation and renewable energy industries. The quarter also had a major new release of the Mentor® Enterprise Verification Platform, with new levels of Questa® performance and productivity in areas including simulation, debug, and low-power verification.

In the second quarter the company also announced the newest version of the FloTHERM® XT product, with EDA connectivity for advanced thermal management of electronic systems, printed circuit boards and packages of any geometric complexity. In addition Mentor introduced the latest release of the Flowmaster® computational fluid dynamics software targeting network systems in automotive, aerospace and power generation. The company also announced a new release of the Mentor® Embedded Nucleus® Real-Time Operating System targeting connected embedded devices for high-performance Internet of Things applications.

“Second quarter results highlight both our continued rigorous attention to cost control and the operating leverage in our business,” said Gregory K. Hinckley, president of Mentor Graphics. “On an 8% increase in revenue, GAAP and non-GAAP operating expenses grew less than 1.5% year on year. Second quarter revenue exceeded guidance by 12% while non-GAAP EPS was up over 150% versus guidance. Cash flow, another important metric, was strong with cash flow from operations of $49 million in the second quarter and $95 million in the first half of fiscal 2016.”

Outlook

For the third quarter of fiscal 2016, the company expects revenue of about $290 million, non-GAAP earnings per share of about $0.27 and GAAP earnings per share of approximately $0.17. For the full year fiscal 2016, the company is raising revenue guidance to about $1.285 billion; is increasing non-GAAP earnings per share guidance from $1.88 to about $1.90; and currently expects GAAP earnings per share of approximately $1.25.

Dividend

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

 

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:

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, Veloce, MicReD,Questa, FloTHERM, Flowmaster and Nucleus are registered trademarks 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) 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; (vi) changes in accounting or reporting rules or interpretations, including new rules affecting revenue recognition; (vii) the impact of 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) litigation; 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 INCOME

(In thousands, except earnings per share data)
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
Revenues:                        
System and software     $ 162,201       $ 149,480       $ 318,132       $ 297,709  
Service and support       118,861         110,753         235,073         214,675  
Total revenues       281,062         260,233         553,205         512,384  
Cost of revenues: (1)                        
System and software       13,049         16,185         26,673         43,156  
Service and support       31,420         30,903         64,989         60,014  
Amortization of purchased technology       1,794         1,841         3,652         3,202  
Total cost of revenues       46,263         48,929         95,314         106,372  
Gross profit       234,799         211,304         457,891         406,012  
Operating expenses:                        
Research and development (2)       89,053         87,542         178,568         171,993  
Marketing and selling (3)       84,741         82,305         169,692         166,939  
General and administration (4)       18,670         19,473         36,633         37,155  
Equity in earnings of Frontline (5)       (1,351 )       (2,062 )       (2,221 )       (3,441 )
Amortization of intangible assets (6)       2,234         2,026         4,453         3,776  
Special charges (7)       2,186         5,108         39,163         11,034  
Total operating expenses       195,533         194,392         426,288         387,456  
Operating income:       39,266         16,912         31,603         18,556  
Other income (expense), net (8)       187         (104 )       529         (362 )
Interest expense (9)       (4,772 )       (4,807 )       (9,466 )       (9,392 )
Income before income tax       34,681         12,001         22,666         8,802  
Income tax expense (benefit) (10)       4,071         (1,768 )       2,559         (1,942 )
Net income       30,610         13,769         20,107         10,744  
Less: Loss attributable to noncontrolling interest (11)       (602 )       (403 )       (1,220 )       (877 )

Net income attributable to Mentor Graphics shareholders

    $ 31,212       $ 14,172       $ 21,327       $ 11,621  

Net income per share attributable to Mentor Graphics shareholders:

                       
Basica     $ 0.27       $ 0.13       $ 0.18       $ 0.12  
Diluteda     $ 0.26       $ 0.13       $ 0.18       $ 0.11  
Weighted average number of shares outstanding:                        
Basic       116,584         113,868         116,296         114,396  
Diluted       119,368         116,551         118,986         116,960  
                         
aWe have (decreased) 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:
                         
      $ (144 )     $ 895       $ 125       $ 1,562  
                         

Refer to description of footnotes below.

 

 

 

MENTOR GRAPHICS CORPORATION

FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(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 July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
(1) Cost of revenues:                        
Equity plan-related compensation     $ 608       $ 544       $ 1,316       $ 1,079  
Amortization of purchased technology       1,794         1,841         3,652         3,202  
      $ 2,402       $ 2,385       $ 4,968       $ 4,281  
                         
(2) Research and development:                        
Equity plan-related compensation     $ 3,800       $ 3,311       $ 8,118       $ 6,552  
                         
(3) Marketing and selling:                        
Equity plan-related compensation     $ 2,366       $ 2,143       $ 4,846       $ 4,321  
                         
(4) General and administration:                        
Equity plan-related compensation     $ 3,812       $ 3,162       $ 6,584       $ 5,337  
                         
(5) Equity in earnings of Frontline:                        
Amortization of other identified intangible assets     $ -       $ -       $ -       $ 116  
                         
(6) Amortization of intangible assets:                        
Amortization of other identified intangible assets     $ 2,234       $ 2,026       $ 4,453       $ 3,776  
                         
(7) Special charges:                        
Rebalance, restructuring, certain litigation, and other costs     $ 2,186       $ 5,108       $ 39,163       $ 11,034  
                         
(8) Other income (expense), net:                        
Net (income) loss of unconsolidated entities     $ (14 )     $ 55       $ (39 )     $ 68  
                         
(9) Interest expense:                        
Amortization of original issuance debt discount     $ 1,633       $ 1,521       $ 3,237       $ 3,015  
                         
(10) Income tax expense (benefit):                        
Non-GAAP income tax effects     $ (6,018 )     $ (7,158 )     $ (15,300 )     $ (9,983 )
                         
(11) Loss attributable to noncontrolling interest:                        

Amortization of intangible assets, equity-plan related compensation, and income tax effects

    $ (200 )     $ (204 )     $ (400 )     $ (404 )
                         

 

 

MENTOR GRAPHICS CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(In thousands, except earnings per share data)
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP net income attributable to Mentor Graphics shareholders     $ 31,212       $ 14,172       $ 21,327       $ 11,621  
Non-GAAP adjustments:                        
Equity plan-related compensation: (1)                        
Cost of revenues       608         544         1,316         1,079  
Research and development       3,800         3,311         8,118         6,552  
Marketing and selling       2,366         2,143         4,846         4,321  
General and administration       3,812         3,162         6,584         5,337  
Acquisition - related items:                        
Amortization of purchased assets                        
Cost of revenues (2)       1,794         1,841         3,652         3,202  
Amortization of intangible assets (3)       2,234         2,026         4,453         3,892  
Special charges (4)       2,186         5,108         39,163         11,034  
Other income (expense), net (5)       (14 )       55         (39 )       68  
Interest expense (6)       1,633         1,521         3,237         3,015  
Non-GAAP income tax effects (7)       (6,018 )       (7,158 )       (15,300 )       (9,983 )
Noncontrolling interest (8)       (200 )       (204 )       (400 )       (404 )
Total of non-GAAP adjustments       12,201         12,349         55,630         28,113  
Non-GAAP net income attributable to Mentor Graphics shareholders     $ 43,413       $ 26,521       $ 76,957       $ 39,734  
                         
GAAP and Non-GAAP weighted average shares (diluted)       119,368         116,551         118,986         116,960  
                         
Net income per share attributable to Mentor Graphics shareholders:                        
GAAP (diluted)     $ 0.26       $ 0.13       $ 0.18       $ 0.11  
Noncontrolling interest adjustment (9)       -         (0.01 )       -         (0.01 )
Non-GAAP adjustments detailed above       0.10         0.11         0.47         0.24  
Non-GAAP (diluted)     $ 0.36       $ 0.23       $ 0.65       $ 0.34  
                         
       
(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 generally amortized over two to five years.
(3)     Other identified intangible assets are generally amortized to operating expense over two to five years. Other identified intangible assets include trade names, customer relationships, and backlog resulting from acquisition transactions. The amount presented for the six months ended July 31, 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 July 31, 2015: Special charges consist of (i) $944 for EVE litigation costs, (ii) $840 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, and (iii) $402 in other adjustments.
      Three months ended July 31, 2014: Special charges consist of (i) $4,231 for EVE litigation costs, (ii) $575 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, and (iii) $302 in other adjustments.
      Six months ended July 31, 2015: Special charges consist of (i) $25,435 for severance costs incurred for the voluntary early retirement program, (ii) $10,703 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, (iii) $2,519 for EVE litigation costs, and (iv) $506 in other adjustments.
      Six months ended July 31, 2014: Special charges consist of (i) $8,189 for EVE litigation costs, (ii) $1,700 of costs incurred for employee rebalances which include severance benefits, notice pay, and outplacement services, and (iii) $1,145 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 and six months ended July 31, 2015 and a 17% tax rate for the three and six months ended July 31, 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 July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP gross profit     $ 234,799       $ 211,304       $ 457,891       $ 406,012  
Reconciling items to non-GAAP gross profit:                        
Equity plan-related compensation       608         544         1,316         1,079  
Amortization of purchased technology       1,794         1,841         3,652         3,202  
Non-GAAP gross profit     $ 237,201       $ 213,689       $ 462,859       $ 410,293  
                         
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP gross profit as a percent of total revenues       83.5 %       81.2 %       82.8 %       79.2 %
Non-GAAP adjustments detailed above       0.9 %       0.9 %       0.9 %       0.9 %
Non-GAAP gross profit as a percent of total revenues       84.4 %       82.1 %       83.7 %       80.1 %
                         
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP operating expenses     $ 195,533       $ 194,392       $ 426,288       $ 387,456  
Reconciling items to non-GAAP operating expenses:                        
Equity plan-related compensation       (9,978 )       (8,616 )       (19,548 )       (16,210 )
Amortization of other identified intangible assets       (2,234 )       (2,026 )       (4,453 )       (3,892 )
Special charges       (2,186 )       (5,108 )       (39,163 )       (11,034 )
Non-GAAP operating expenses     $ 181,135       $ 178,642       $ 363,124       $ 356,320  
                         
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP operating income     $ 39,266       $ 16,912       $ 31,603       $ 18,556  
Reconciling items to non-GAAP operating income:                        
Equity plan-related compensation       10,586         9,160         20,864         17,289  
Amortization of purchased technology       1,794         1,841         3,652         3,202  
Amortization of other identified intangible assets       2,234         2,026         4,453         3,892  
Special charges       2,186         5,108         39,163         11,034  
Non-GAAP operating income     $ 56,066       $ 35,047       $ 99,735       $ 53,973  
                         
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP operating income as a percent of total revenues       14.0 %       6.5 %       5.7 %       3.6 %
Non-GAAP adjustments detailed above       5.9 %       7.0 %       12.3 %       6.9 %
Non-GAAP operating income as a percent of total revenues       19.9 %       13.5 %       18.0 %       10.5 %
                         
                         
      Three Months Ended July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
GAAP other income (expense), net and interest expense     $ (4,585 )     $ (4,911 )     $ (8,937 )     $ (9,754 )

Reconciling items to non-GAAP other income (expense), net and interest expense:

                       
Equity in (income) loss of unconsolidated entities       (14 )       55         (39 )       68  
Amortization of original issuance debt discount       1,633         1,521         3,237         3,015  
Non-GAAP other income (expense), net and interest expense     $ (2,966 )     $ (3,335 )     $ (5,739 )     $ (6,671 )
                         

 

 

MENTOR GRAPHICS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)
             
      July 31,     January 31,
      2015     2015
             
Assets            
Current assets:            
Cash and cash equivalents     $ 295,447       $ 230,281  
Trade accounts receivable, net       97,839         208,996  
Term receivables, short-term       345,958         337,626  
Prepaid expenses and other       67,726         65,853  
Deferred income taxes       24,390         23,490  
             
Total current assets       831,360         866,246  
Property, plant, and equipment, net       170,898         170,737  
Term receivables, long-term       266,092         301,862  
Goodwill and intangible assets, net       646,064         645,506  
Other assets       64,516         64,671  
             
Total assets     $ 1,978,930       $ 2,049,022  
             
Liabilities and Stockholders' Equity            
Current liabilities:            
Short-term borrowings     $ 1,844       $ 7,228  
Notes payable, current portion       233,637         -  
Accounts payable       10,682         12,687  
Income taxes payable       223         5,994  
Accrued payroll and related liabilities       48,738         108,553  
Accrued and other liabilities       35,678         47,728  
Deferred revenue       226,098         259,340  
             
Total current liabilities       556,900         441,530  
Long-term notes payable       3,188         230,400  
Deferred revenue, long-term       18,674         21,251  
Other long-term liabilities       70,206         69,615  
Total liabilities       648,968         762,796  
             
Convertible notes       19,363         -  
Noncontrolling interest with redemption feature       12,020         13,372  
             
Stockholders' equity:            
Common stock       853,455         832,612  
Retained earnings       460,581         451,901  
Accumulated other comprehensive loss       (15,734 )       (11,887 )
Noncontrolling interest       277         228  
Total stockholders' equity       1,298,579         1,272,854  
             

Total liabilities and stockholders' equity

    $ 1,978,930       $ 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 July 31,     Six Months Ended July 31,
      2015     2014     2015     2014
Operating activities                        
Net income     $ 30,610       $ 13,769       $ 20,107       $ 10,744  
Depreciation and amortization       15,119         14,512         30,160         28,249  
Other adjustments to reconcile:                        
Operating cash       13,231         11,298         21,367         17,820  
Changes in working capital       (10,104 )       9,944         23,173         (18,251 )
                         
Net cash provided by operating activities       48,856         49,523         94,807         38,562  
                         
Investing activities                        
Net cash used in investing activities       (10,240 )       (37,511 )       (22,168 )       (85,091 )
                         
Financing activities                        
Net cash provided by (used in) financing activities       8,196         (13,443 )       (6,582 )       (72,736 )
                         
Effect of exchange rate changes on cash and cash equivalents       (1,138 )       (33 )       (891 )       304  
                         
Net change in cash and cash equivalents       45,674         (1,464 )       65,166         (118,961 )
Cash and cash equivalents at beginning of period       249,773         175,825         230,281         293,322  
                         
Cash and cash equivalents at end of period     $ 295,447       $ 174,361       $ 295,447       $ 174,361  
                         
                         
                         
Other data:                        
Capital expenditures, net     $ 10,240       $ 7,145       $ 14,968       $ 13,315  
Days sales outstanding       142         147              
                         

 

 

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 Q3'16 and fiscal year 2016.
             
      Estimated     Estimated
      Q3'16     FY'16
Diluted GAAP net income per share     $ 0.17       $ 1.25  
Non-GAAP adjustments:            
Amortization of purchased technology (1)       0.01         0.06  
Amortization of other identified intangible assets (2)       0.02         0.07  
Equity plan-related compensation (3)       0.08         0.34  
Special charges (4)       -         0.33  
Other income (expense), net and interest expense (5)       0.01         0.05  
Non-GAAP income tax effects (6)       (0.02 )       (0.19 )
Noncontrolling interest (7)       -         (0.01 )
             
Diluted non-GAAP net income per share     $ 0.27       $ 1.90  
             
       
(1)     Excludes amortization of purchased technology resulting from acquisitions. Purchased technology is generally 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 generally amortized 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 six months ended July 31, 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     Q2     Year     Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year
IC DESIGN TO SILICON     30%     40%     35%     20%     25%     45%     55%     45%     60%     35%     40%     30%     40%
SCALABLE VERIFICATION     25%     30%     30%     25%     25%     20%     20%     20%     15%     45%     25%     30%     30%
INTEGRATED SYSTEMS DESIGN     15%     15%     15%     30%     25%     15%     10%     15%     10%     10%     20%     30%     20%
NEW & EMERGING MARKETS     10%     5%     5%     10%     15%     10%     5%     10%     5%     5%     5%     5%     5%
SERVICES / OTHER     20%     10%     15%     15%     10%     10%     10%     10%     10%     5%     10%     5%     5%
Total     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
                                                                               
                                                                               
      2016     2015     2014
Product Category Revenue (b)     Q1     Q2     Year     Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year
IC DESIGN TO SILICON     35%     40%     40%     25%     30%     35%     55%     40%     35%     50%     35%     35%     40%
SCALABLE VERIFICATION     30%     25%     25%     35%     25%     20%     20%     25%     20%     20%     25%     30%     25%
INTEGRATED SYSTEMS DESIGN     20%     20%     20%     25%     25%     25%     15%     20%     30%     20%     25%     25%     20%
NEW & EMERGING MARKETS     5%     5%     5%     5%     10%     10%     5%     5%     5%     5%     5%     5%     5%
SERVICES / OTHER     10%     10%     10%     10%     10%     10%     5%     10%     10%     5%     10%     5%     10%
Total     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
                                                                               
                                                                               
      2016     2015     2014
Bookings by Geography     Q1     Q2     Year     Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year
North America     35%     35%     35%     50%     40%     50%     40%     45%     35%     55%     60%     40%     50%
Europe     25%     30%     30%     15%     25%     15%     15%     15%     10%     15%     15%     30%     20%
Japan     15%     5%     5%     15%     5%     10%     5%     5%     10%     5%     5%     10%     5%
Pac Rim     25%     30%     30%     20%     30%     25%     40%     35%     45%     25%     20%     20%     25%
Total     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
                                                                               
                                                                               
      2016     2015     2014
Revenue by Geography     Q1     Q2     Year     Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year
North America     50%     40%     45%     50%     45%     50%     40%     45%     45%     40%     50%     45%     45%
Europe     15%     25%     20%     25%     20%     20%     15%     20%     20%     20%     20%     20%     20%
Japan     10%     5%     5%     10%     10%     10%     5%     5%     10%     5%     10%     15%     10%
Pac Rim     25%     30%     30%     15%     25%     20%     40%     30%     25%     35%     20%     20%     25%
Total     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
                                                                               
                                                                               
      2016     2015     2014
Bookings by Business Model (c)     Q1     Q2     Year     Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year
Perpetual     20%     15%     15%     35%     20%     15%     10%     15%     15%     50%     20%     10%     25%
Term Ratable     10%     10%     10%     20%     10%     5%     5%     10%     10%     5%     5%     5%     5%
Term Up Front     70%     75%     75%     45%     70%     80%     85%     75%     75%     45%     75%     85%     70%
Total     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%
                                                                               
                                                                               
      2016     2015     2014
Revenue by Business Model (c)     Q1     Q2     Year     Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year
Perpetual     15%     15%     15%     35%     30%     15%     10%     20%     20%     25%     20%     20%     20%
Term Ratable     10%     10%     10%     10%     10%     10%     5%     5%     10%     10%     5%     5%     10%
Term Up Front     75%     75%     75%     55%     60%     75%     85%     75%     70%     65%     75%     75%     70%
Total     100%     100%     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).

 



Contact:

Mentor Graphics Corporation
Joe Reinhart, 503-685-1462
Email Contact