[May 19, 2016] |
|
Mentor Graphics Reports Fiscal First Quarter Results
Mentor Graphics Corporation (NASDAQ:MENT) today announced financial
results for the company's fiscal first quarter ended April 30, 2016. The
company reported revenues of $228 million, non-GAAP earnings per share
of $0.02, and a GAAP loss per share of $0.12.
"Mentor modestly exceeded guidance for first quarter, although weakness
in semiconductor-related activity continued," said Walden C. Rhines,
chairman and CEO of Mentor Graphics. "Bookings and revenue from
automotive customers set a first quarter all-time record. Mentor's
customer breadth and our range of system design products and services
continue to be an advantage."
Mentor announced three new software applications for the Veloce®
emulation platform to overcome critical challenges in complex
system-on-chip (SoC) and system designs. In other news, several Mentor
tools and flows have been certified and optimized for Samsung's 10 nm
FinFET process, and for TSMC's 7 nm design starts and 10 nm production.
Mentor also announced a design, layout and verification solution,
targeting mobile and consumer products, to support TSMC's Integrated
Fan-Out (InFO) wafer-level packaging technology.
During the quarter the company announced the Open Manufacturing Language
(OML) for printed circuit board assembly and the Valor® Internet of
Manufacturing solution, a hardware device with embedded software for
live data collection from shop-floor machines and processes. The company
also launched its newest HyperLynx® product release, which integrates
signal and power integrity analysis, 3D-electromagnetic solving, and
fast rule checking into a single unified environment.
"We have a strong portfolio of system companies renewing in fiscal
2017," said Gregory K. Hinckley, president of Mentor Graphics. "We are
increasing our second quarter revenue guidance and continue our rigorous
attention to expense control."
Outlook
For the second quarter of fiscal 2017, the company expects revenues of
about $245 million, non-GAAP earnings per share of about $0.09 and GAAP
earnings per share of approximately break-even. For the full year fiscal
2017, the company affirms revenues of about $1.215 billion, non-GAAP
earnings per share of about $1.68, and GAAP earnings per share of
approximately $1.19. Cash flow from operations in fiscal 2017 is
expected to be approximately $200 million.
Dividend
The company announced a quarterly dividend of $0.055 per share. The
dividend is payable on June 30, 2016, to shareholders of record at the
close of business on June 10, 2016.
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 revenues, 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 amount 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 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 GAAP tax
rate for the three months ended April 30, 2016 is 12% after
consideration of period specific items. Without period specific items
of $0.9 million, our GAAP tax rate is 18%. Our full fiscal year 2017
GAAP tax rate, inclusive of period specific items recognized through
April 30, 2016, is projected to be 19%.
-
Our agreement with the former owners of noncontrolling interests in
one of our subsidiaries gave 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. The amount for
the three months ended April 30, 2015 reflects our adjustment to
redemption value for this time period. In September 2015 we acquired
the remaining noncontrolling interest in the subsidiary. 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,
employee stock purchase plan shares, and convertible debt 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, advances, 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 of approximately $1.18 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, Valor, and HyperLynx 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) continued economic weakness in
the European Union, China, Japan or other countries, and the adverse
impact of such weakness on the company's customers in those regions;
(ii) the company's ability to successfully update existing hardware and
software products and offer new products and services that compete in
the highly competitive EDA industry, including the risk of obsolescence
for our hardware products; (iii) effects of customer mergers,
divestitures or shutdowns of business units or divisions, customer
seasonal purchasing patterns and the timing of significant orders which
may negatively or positively impact the company's quarterly results of
operations; (iv) effects of the volatility of foreign currency
fluctuations on the company's business and operating results; (v)
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, or result in loss of business; (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 OPERATIONS (In
thousands, except earnings per share data)
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
|
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
System and software
|
|
|
|
$
|
106,704
|
|
|
$
|
155,931
|
|
Service and support
|
|
|
|
|
120,935
|
|
|
|
116,212
|
|
Total revenues
|
|
|
|
|
227,639
|
|
|
|
272,143
|
|
Cost of revenues: (1)
|
|
|
|
|
|
|
System and software
|
|
|
|
|
8,332
|
|
|
|
13,624
|
|
Service and support
|
|
|
|
|
32,748
|
|
|
|
33,569
|
|
Amortization of purchased technology
|
|
|
|
|
1,785
|
|
|
|
1,858
|
|
Total cost of revenues
|
|
|
|
|
42,865
|
|
|
|
49,051
|
|
Gross profit
|
|
|
|
|
184,774
|
|
|
|
223,092
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development (2)
|
|
|
|
|
91,136
|
|
|
|
89,515
|
|
Marketing and selling (3)
|
|
|
|
|
84,259
|
|
|
|
84,951
|
|
General and administration (4)
|
|
|
|
|
17,535
|
|
|
|
17,963
|
|
Equity in earnings of Frontline
|
|
|
|
|
(636
|
)
|
|
|
(870
|
)
|
Amortization of intangible assets (5)
|
|
|
|
|
1,554
|
|
|
|
2,219
|
|
Special charges (6)
|
|
|
|
|
2,991
|
|
|
|
36,977
|
|
Total operating expenses
|
|
|
|
|
196,839
|
|
|
|
230,755
|
|
Operating loss:
|
|
|
|
|
(12,065
|
)
|
|
|
(7,663
|
)
|
Other income, net (7)
|
|
|
|
|
889
|
|
|
|
342
|
|
Interest expense (8)
|
|
|
|
|
(4,138
|
)
|
|
|
(4,694
|
)
|
Loss before income tax
|
|
|
|
|
(15,314
|
)
|
|
|
(12,015
|
)
|
Income tax benefit (9)
|
|
|
|
|
(1,878
|
)
|
|
|
(1,512
|
)
|
Net loss
|
|
|
|
|
(13,436
|
)
|
|
|
(10,503
|
)
|
Less: Loss attributable to noncontrolling interest (10)
|
|
|
|
|
-
|
|
|
|
(618
|
)
|
Net loss attributable to Mentor Graphics shareholders
|
|
|
|
$
|
(13,436
|
)
|
|
$
|
(9,885
|
)
|
Net loss per share attributable to Mentor Graphics shareholders:
|
|
|
|
|
|
|
Basica
|
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.08
|
)
|
Diluteda
|
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.08
|
)
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
|
|
109,085
|
|
|
|
116,003
|
|
Diluted
|
|
|
|
|
109,085
|
|
|
|
116,003
|
|
|
a We increased the numerator of our basic and diluted
earnings per share calculation by $269 for the adjustment of the
noncontrolling interest with redemption feature to its calculated
redemption value, recorded directly to retained earnings, for the
quarter ended April 30, 2015.
|
|
|
Refer to following table for a description of footnotes.
|
|
|
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,
|
|
|
|
|
2016
|
|
2015
|
(1) Cost of revenues:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
$
|
711
|
|
|
$
|
708
|
|
Amortization of purchased technology
|
|
|
|
|
1,785
|
|
|
|
1,858
|
|
|
|
|
|
$
|
2,496
|
|
|
$
|
2,566
|
|
|
|
|
|
|
|
|
(2) Research and development:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
$
|
4,323
|
|
|
$
|
4,318
|
|
|
|
|
|
|
|
|
(3) Marketing and selling:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
$
|
2,855
|
|
|
$
|
2,480
|
|
|
|
|
|
|
|
|
(4) General and administration:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
$
|
2,612
|
|
|
$
|
2,772
|
|
|
|
|
|
|
|
|
(5) Amortization of intangible assets:
|
|
|
|
|
|
|
Amortization of other identified intangible assets
|
|
|
|
$
|
1,554
|
|
|
$
|
2,219
|
|
|
|
|
|
|
|
|
(6) Special charges:
|
|
|
|
|
|
|
Rebalance, restructuring, certain litigation, and other costs
|
|
|
|
$
|
2,991
|
|
|
$
|
36,977
|
|
|
|
|
|
|
|
|
(7) Other income, net:
|
|
|
|
|
|
|
Net (income) loss of unconsolidated entities
|
|
|
|
$
|
2
|
|
|
$
|
(25
|
)
|
|
|
|
|
|
|
|
(8) Interest expense:
|
|
|
|
|
|
|
Amortization of original issuance debt discount
|
|
|
|
$
|
1,723
|
|
|
$
|
1,604
|
|
|
|
|
|
|
|
|
(9) Income tax benefit:
|
|
|
|
|
|
|
Non-GAAP income tax effects
|
|
|
|
$
|
(2,494
|
)
|
|
$
|
(9,282
|
)
|
|
|
|
|
|
|
|
(10) Loss attributable to noncontrolling interest:
|
|
|
|
|
|
|
Amortization of intangible assets, equity-plan related
compensation, and income tax effects
|
|
|
|
$
|
-
|
|
|
$
|
(200
|
)
|
|
|
MENTOR GRAPHICS CORPORATION UNAUDITED
RECONCILIATION OF NON-GAAP ADJUSTMENTS (In
thousands, except earnings per share data)
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP net loss attributable to Mentor Graphics shareholders
|
|
|
|
$
|
(13,436
|
)
|
|
$
|
(9,885
|
)
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
Equity plan-related compensation: (1)
|
|
|
|
|
|
|
Cost of revenues
|
|
|
|
|
711
|
|
|
|
708
|
|
Research and development
|
|
|
|
|
4,323
|
|
|
|
4,318
|
|
Marketing and selling
|
|
|
|
|
2,855
|
|
|
|
2,480
|
|
General and administration
|
|
|
|
|
2,612
|
|
|
|
2,772
|
|
Acquisition - related items:
|
|
|
|
|
|
|
Amortization of purchased assets
|
|
|
|
|
|
|
Cost of revenues (2)
|
|
|
|
|
1,785
|
|
|
|
1,858
|
|
Amortization of intangible assets (3)
|
|
|
|
|
1,554
|
|
|
|
2,219
|
|
Special charges (4)
|
|
|
|
|
2,991
|
|
|
|
36,977
|
|
Other income, net (5)
|
|
|
|
|
2
|
|
|
|
(25
|
)
|
Interest expense (6)
|
|
|
|
|
1,723
|
|
|
|
1,604
|
|
Non-GAAP income tax effects (7)
|
|
|
|
|
(2,494
|
)
|
|
|
(9,282
|
)
|
Noncontrolling interest (8)
|
|
|
|
|
-
|
|
|
|
(200
|
)
|
Total of non-GAAP adjustments
|
|
|
|
|
16,062
|
|
|
|
43,429
|
|
Non-GAAP net income attributable to Mentor Graphics shareholders
|
|
|
|
$
|
2,626
|
|
|
$
|
33,544
|
|
|
|
|
|
|
|
|
GAAP weighted average shares (diluted)
|
|
|
|
|
109,085
|
|
|
|
116,003
|
|
Non-GAAP adjustment
|
|
|
|
|
1,950
|
|
|
|
4,753
|
|
Non-GAAP weighted average shares (diluted)
|
|
|
|
|
111,035
|
|
|
|
120,756
|
|
|
|
|
|
|
|
|
Net loss per share attributable to Mentor Graphics shareholders:
|
|
|
|
|
|
|
GAAP (diluted)
|
|
|
|
$
|
(0.12
|
)
|
|
$
|
(0.08
|
)
|
Non-GAAP adjustments detailed above
|
|
|
|
|
0.14
|
|
|
|
0.36
|
|
Non-GAAP (diluted)
|
|
|
|
$
|
0.02
|
|
|
$
|
0.28
|
|
|
|
(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.
|
(4) Three months ended April 30, 2016: Special
charges consist of (i) $2,088 of costs incurred for employee
rebalances which include severance benefits and notice pay, (ii)
$807 for EVE litigation costs, and (iii) $96 in other adjustments.
|
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 and notice pay, (iii)
$1,575 for EVE litigation costs, and (iv) $104 in other
adjustments.
|
(5) Amount represents (income) loss for 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.
|
(8) Adjustment for the impact of amortization of intangible
assets, equity plan-related compensation, and income tax expense
on noncontrolling interest.
|
|
|
MENTOR GRAPHICS CORPORATION UNAUDITED
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES (In thousands, except percentages)
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP gross profit
|
|
|
|
$
|
184,774
|
|
|
$
|
223,092
|
|
Reconciling items to non-GAAP gross profit:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
|
711
|
|
|
|
708
|
|
Amortization of purchased technology
|
|
|
|
|
1,785
|
|
|
|
1,858
|
|
Non-GAAP gross profit
|
|
|
|
$
|
187,270
|
|
|
$
|
225,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP gross profit as a percent of total revenues
|
|
|
|
|
81.2
|
%
|
|
|
82.0
|
%
|
Non-GAAP adjustments detailed above
|
|
|
|
|
1.1
|
%
|
|
|
0.9
|
%
|
Non-GAAP gross profit as a percent of total revenues
|
|
|
|
|
82.3
|
%
|
|
|
82.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP operating expenses
|
|
|
|
$
|
196,839
|
|
|
$
|
230,755
|
|
Reconciling items to non-GAAP operating expenses:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
|
(9,790
|
)
|
|
|
(9,570
|
)
|
Amortization of other identified intangible assets
|
|
|
|
|
(1,554
|
)
|
|
|
(2,219
|
)
|
Special charges
|
|
|
|
|
(2,991
|
)
|
|
|
(36,977
|
)
|
Non-GAAP operating expenses
|
|
|
|
$
|
182,504
|
|
|
$
|
181,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP operating loss
|
|
|
|
$
|
(12,065
|
)
|
|
$
|
(7,663
|
)
|
Reconciling items to non-GAAP operating income:
|
|
|
|
|
|
|
Equity plan-related compensation
|
|
|
|
|
10,501
|
|
|
|
10,278
|
|
Amortization of purchased technology
|
|
|
|
|
1,785
|
|
|
|
1,858
|
|
Amortization of other identified intangible assets
|
|
|
|
|
1,554
|
|
|
|
2,219
|
|
Special charges
|
|
|
|
|
2,991
|
|
|
|
36,977
|
|
Non-GAAP operating income
|
|
|
|
$
|
4,766
|
|
|
$
|
43,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP operating loss as a percent of total revenues
|
|
|
|
|
(5.3
|
%)
|
|
|
(2.8
|
%)
|
Non-GAAP adjustments detailed above
|
|
|
|
|
7.4
|
%
|
|
|
18.8
|
%
|
Non-GAAP operating income as a percent of total revenues
|
|
|
|
|
2.1
|
%
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
|
|
2016
|
|
2015
|
GAAP other income, net and interest expense
|
|
|
|
$
|
(3,249
|
)
|
|
$
|
(4,352
|
)
|
Reconciling items to non-GAAP other income (expense), net and
interest expense:
|
|
|
|
|
|
|
Equity in earnings of unconsolidated entities
|
|
|
|
|
2
|
|
|
|
(25
|
)
|
Amortization of original issuance debt discount
|
|
|
|
|
1,723
|
|
|
|
1,604
|
|
Non-GAAP other income, net and interest expense
|
|
|
|
$
|
(1,524
|
)
|
|
$
|
(2,773
|
)
|
|
|
MENTOR GRAPHICS CORPORATION UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands)
|
|
|
|
|
|
|
April 30, 2016
|
|
January 31, 2016
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
216,325
|
|
|
$
|
334,826
|
|
Trade accounts receivable, net
|
|
|
|
|
87,423
|
|
|
|
176,021
|
|
Term receivables, short-term
|
|
|
|
|
323,755
|
|
|
|
317,188
|
|
Prepaid expenses and other
|
|
|
|
|
81,143
|
|
|
|
70,432
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
708,646
|
|
|
|
898,467
|
|
Property, plant, and equipment, net
|
|
|
|
|
184,045
|
|
|
|
182,092
|
|
Term receivables, long-term
|
|
|
|
|
253,636
|
|
|
|
268,657
|
|
Goodwill and intangible assets, net
|
|
|
|
|
642,313
|
|
|
|
644,288
|
|
Other assets
|
|
|
|
|
72,827
|
|
|
|
70,860
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
$
|
1,861,467
|
|
|
$
|
2,064,364
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
|
$
|
30,686
|
|
|
$
|
33,449
|
|
Accounts payable
|
|
|
|
|
8,117
|
|
|
|
16,740
|
|
Income taxes payable
|
|
|
|
|
1,578
|
|
|
|
3,966
|
|
Accrued payroll and related liabilities
|
|
|
|
|
50,766
|
|
|
|
73,371
|
|
Accrued and other liabilities
|
|
|
|
|
34,413
|
|
|
|
37,059
|
|
Deferred revenue
|
|
|
|
|
241,957
|
|
|
|
258,725
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
367,517
|
|
|
|
423,310
|
|
Long-term notes payable
|
|
|
|
|
242,037
|
|
|
|
240,076
|
|
Deferred revenue, long-term
|
|
|
|
|
16,922
|
|
|
|
18,303
|
|
Other long-term liabilities
|
|
|
|
|
50,460
|
|
|
|
62,246
|
|
Total liabilities
|
|
|
|
|
676,936
|
|
|
|
743,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
Common stock
|
|
|
|
|
683,402
|
|
|
|
818,683
|
|
Retained earnings
|
|
|
|
|
513,710
|
|
|
|
522,846
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(12,581
|
)
|
|
|
(21,100
|
)
|
Total stockholders' equity
|
|
|
|
|
1,184,531
|
|
|
|
1,320,429
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
1,861,467
|
|
|
$
|
2,064,364
|
|
|
|
MENTOR GRAPHICS CORPORATION UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND SUPPLEMENTAL
INFORMATION (In thousands, except days sales
outstanding)
|
|
|
|
|
|
|
Three Months Ended April 30,
|
|
|
|
|
2016
|
|
2015
|
Operating activities
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(13,436
|
)
|
|
$
|
(10,503
|
)
|
Depreciation and amortization
|
|
|
|
|
14,794
|
|
|
|
15,041
|
|
Other adjustments to reconcile:
|
|
|
|
|
|
|
Operating cash
|
|
|
|
|
7,910
|
|
|
|
8,136
|
|
Changes in working capital
|
|
|
|
|
35,562
|
|
|
|
33,277
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
|
44,830
|
|
|
|
45,951
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(10,202
|
)
|
|
|
(11,928
|
)
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
|
|
(155,980
|
)
|
|
|
(14,778
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
|
2,851
|
|
|
|
247
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
|
|
(118,501
|
)
|
|
|
19,492
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
334,826
|
|
|
|
230,281
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
216,325
|
|
|
$
|
249,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other data:
|
|
|
|
|
|
|
Capital expenditures, net
|
|
|
|
$
|
10,202
|
|
|
$
|
4,728
|
|
Days sales outstanding
|
|
|
|
|
163
|
|
|
|
145
|
|
|
|
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 Q2'17 and fiscal year 2017.
|
|
|
|
|
|
|
Estimated Q2'17
|
|
Estimated FY'17
|
Diluted GAAP net income (loss) per share
|
|
|
|
$
|
-
|
|
|
$
|
1.19
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
Amortization of purchased technology (1)
|
|
|
|
|
0.02
|
|
|
|
0.06
|
|
Amortization of other identified intangible assets (2)
|
|
|
|
|
0.01
|
|
|
|
0.05
|
|
Equity plan-related compensation (3)
|
|
|
|
|
0.10
|
|
|
|
0.38
|
|
Special charges (4)
|
|
|
|
|
-
|
|
|
|
0.03
|
|
Other income (expense), net and interest expense (5)
|
|
|
|
|
0.02
|
|
|
|
0.06
|
|
Non-GAAP income tax effects (6)
|
|
|
|
|
(0.06
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
Diluted non-GAAP net income per share
|
|
|
|
$
|
0.09
|
|
|
$
|
1.68
|
|
|
|
(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 primarily consisting of costs
incurred for employee rebalances, which includes severance
benefits and notice pay, and certain litigation costs. Full year
adjustment represents the impact of actual special charges for the
three months ended April 30, 2016 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.
|
|
|
|
|
MENTOR GRAPHICS CORPORATION UNAUDITED
SUPPLEMENTAL BOOKINGS AND REVENUE INFORMATION (Rounded
to nearest 5%)
|
|
|
|
2017
|
|
2016
|
|
2015
|
Product Category Bookings (a)
|
|
Q1
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
IC DESIGN TO SILICON
|
|
30%
|
|
30%
|
|
40%
|
|
40%
|
|
50%
|
|
45%
|
|
20%
|
|
25%
|
|
45%
|
|
55%
|
|
45%
|
SCALABLE VERIFICATION
|
|
15%
|
|
25%
|
|
30%
|
|
15%
|
|
15%
|
|
20%
|
|
25%
|
|
25%
|
|
20%
|
|
20%
|
|
20%
|
INTEGRATED SYSTEMS DESIGN
|
|
25%
|
|
15%
|
|
15%
|
|
20%
|
|
15%
|
|
15%
|
|
30%
|
|
25%
|
|
15%
|
|
10%
|
|
15%
|
NEW & EMERGING MARKETS
|
|
5%
|
|
10%
|
|
5%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
15%
|
|
10%
|
|
5%
|
|
10%
|
SERVICES / OTHER
|
|
25%
|
|
20%
|
|
10%
|
|
15%
|
|
10%
|
|
10%
|
|
15%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
Total
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
Product Category Revenue (b)
|
|
Q1
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
IC DESIGN TO SILICON
|
|
30%
|
|
35%
|
|
40%
|
|
40%
|
|
50%
|
|
40%
|
|
25%
|
|
30%
|
|
35%
|
|
55%
|
|
40%
|
SCALABLE VERIFICATION
|
|
20%
|
|
30%
|
|
25%
|
|
25%
|
|
15%
|
|
25%
|
|
35%
|
|
25%
|
|
20%
|
|
20%
|
|
25%
|
INTEGRATED SYSTEMS DESIGN
|
|
25%
|
|
20%
|
|
20%
|
|
20%
|
|
20%
|
|
20%
|
|
25%
|
|
25%
|
|
25%
|
|
15%
|
|
20%
|
NEW & EMERGING MARKETS
|
|
10%
|
|
5%
|
|
5%
|
|
5%
|
|
5%
|
|
5%
|
|
5%
|
|
10%
|
|
10%
|
|
5%
|
|
5%
|
SERVICES / OTHER
|
|
15%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
5%
|
|
10%
|
Total
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
Bookings by Geography
|
|
Q1
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
North America
|
|
30%
|
|
35%
|
|
35%
|
|
45%
|
|
40%
|
|
40%
|
|
50%
|
|
40%
|
|
50%
|
|
40%
|
|
45%
|
Europe
|
|
25%
|
|
25%
|
|
30%
|
|
20%
|
|
20%
|
|
25%
|
|
15%
|
|
25%
|
|
15%
|
|
15%
|
|
15%
|
Japan
|
|
30%
|
|
15%
|
|
5%
|
|
10%
|
|
5%
|
|
5%
|
|
15%
|
|
5%
|
|
10%
|
|
5%
|
|
5%
|
Pac Rim
|
|
15%
|
|
25%
|
|
30%
|
|
25%
|
|
35%
|
|
30%
|
|
20%
|
|
30%
|
|
25%
|
|
40%
|
|
35%
|
Total
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
Revenue by Geography
|
|
Q1
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
North America
|
|
40%
|
|
50%
|
|
40%
|
|
40%
|
|
40%
|
|
45%
|
|
50%
|
|
45%
|
|
50%
|
|
40%
|
|
45%
|
Europe
|
|
25%
|
|
15%
|
|
25%
|
|
25%
|
|
20%
|
|
20%
|
|
25%
|
|
20%
|
|
20%
|
|
15%
|
|
20%
|
Japan
|
|
15%
|
|
10%
|
|
5%
|
|
10%
|
|
5%
|
|
5%
|
|
10%
|
|
10%
|
|
10%
|
|
5%
|
|
5%
|
Pac Rim
|
|
20%
|
|
25%
|
|
30%
|
|
25%
|
|
35%
|
|
30%
|
|
15%
|
|
25%
|
|
20%
|
|
40%
|
|
30%
|
Total
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
Bookings by Business Model (c)
|
|
Q1
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
Perpetual
|
|
20%
|
|
20%
|
|
15%
|
|
15%
|
|
10%
|
|
15%
|
|
35%
|
|
20%
|
|
15%
|
|
10%
|
|
15%
|
Term Ratable
|
|
15%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
20%
|
|
10%
|
|
5%
|
|
5%
|
|
10%
|
Term Up Front
|
|
65%
|
|
70%
|
|
75%
|
|
75%
|
|
80%
|
|
75%
|
|
45%
|
|
70%
|
|
80%
|
|
85%
|
|
75%
|
Total
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
Revenue by Business Model (c)
|
|
Q1
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Year
|
Perpetual
|
|
20%
|
|
15%
|
|
15%
|
|
10%
|
|
15%
|
|
15%
|
|
35%
|
|
30%
|
|
15%
|
|
10%
|
|
20%
|
Term Ratable
|
|
15%
|
|
10%
|
|
10%
|
|
10%
|
|
5%
|
|
10%
|
|
10%
|
|
10%
|
|
10%
|
|
5%
|
|
5%
|
Term Up Front
|
|
65%
|
|
75%
|
|
75%
|
|
80%
|
|
80%
|
|
75%
|
|
55%
|
|
60%
|
|
75%
|
|
85%
|
|
75%
|
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/20160519006529/en/
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|