Mentor Graphics Reports Fiscal Fourth Quarter Results and Announces 11% Dividend Increase

WILSONVILLE, Ore. — (BUSINESS WIRE) — February 27, 2014 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal fourth quarter ended January 31, 2014. The company reported revenues of $401.0 million, non-GAAP earnings per share of $0.92, and GAAP earnings per share of $0.89. For the full fiscal year, revenues were $1.156 billion and non-GAAP earnings per share were $1.62, and GAAP earnings per share were $1.29.

“The fourth quarter and full year achieved multiple all-time records for Mentor Graphics,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “Record annual bookings, record fourth quarter and annual revenues, record fourth quarter and annual levels of profitability and earnings per share, all evidence the value of Mentor’s technology, products and the merits of our strategy. Mentor’s board is raising the quarterly dividend to $0.05 per share. Aside from weakness within the Japanese semiconductor industry, core EDA demand remains solid for Mentor and we are very pleased with the traction our investments in emulation and new markets including transportation are achieving.”

During the quarter the company announced the acquisition of assets of Oasys Design Systems, which brings the Oasys RealTime™ RTL physical synthesis platform to the Mentor® digital implementation flow. This enables faster turnaround time for complex systems-on-chip, ASICs and IP blocks. The company also purchased the AUTOSAR assets of Mecel AB, complementing existing Mentor automotive software solutions which enable a wide range of automotive sub-systems. Mentor also announced the latest release of its Capital® software, which addresses vehicle electrical system design, manufacture and service. The Capital and Volcano™ tool suites were recently deployed in both passenger and commercial vehicle projects at Chinese automaker Jianghuai Automobile Co. Ltd. (JAC).

During the fourth quarter the company also announced a new version of the Mentor® Embedded Sourcery™ CodeBench embedded software development platform, and the latest release of the Mentor® Embedded automotive technology platform for Linux-based in-vehicle infotainment system development. Mentor also released the next-generation FloTHERM® product, its flagship offering for computational fluid dynamics, targeting today’s most advanced electronics designs. FloTHERM XT was named as one of EDN Magazine’s Hot 100 Electronics Products for 2013; the product also received an EDN China Innovation Award for Best Product, development tool and software category.

“The fourth quarter and fiscal 2014 were periods of solid execution for our company,” said Gregory K. Hinckley, president of Mentor Graphics. “Fourth quarter revenue was up over 20% and non-GAAP earnings per share were up 59% year on year. Continued attention to expenses enabled the company to comfortably achieve our multi-year commitment to reach 20% non-GAAP operating margins in fiscal 2014. I am also pleased to note that on a GAAP operating margin basis Mentor is the most profitable company among the big three EDA vendors.”


For the full year fiscal 2015, the company expects revenues of about $1.237 billion, non-GAAP earnings per share of about $1.75, and GAAP earnings per share of approximately $1.50. For the first quarter of fiscal 2015, the company expects revenues of about $245 million, non-GAAP earnings per share of about $0.06 and GAAP earnings per share of approximately break-even.

Dividend Increase

The company announced an 11% increase in the quarterly dividend to $0.05 per share on outstanding common stock. The dividend is payable on March 31, 2014 to shareholders of record as of the close of business on March 10, 2014.

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, 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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