Mentor Graphics Reports Fiscal Fourth Quarter Results

WILSONVILLE, Ore. — (BUSINESS WIRE) — March 2, 2017 — Mentor Graphics Corporation (NASDAQ: MENT) today announced financial results for the company’s fiscal fourth quarter ended January 31, 2017. The company reported record revenues of $478.0 million, GAAP earnings per share of $1.05 and non-GAAP earnings per share of $1.21. For the full fiscal year, revenues were up nine percent to $1.282 billion, GAAP earnings per share were $1.37 and non-GAAP earnings per share were $1.92.

Record Fiscal Fourth Quarter and 2017 Performance Highlights

  • Fiscal year 2017 bookings were a record and up 15 percent from fiscal 2016.
  • Eight of the top ten transactions in the fourth quarter were with systems customers and growth in annualized fees in the top ten renewals was 15 percent.
  • Average term length for renewals in the top ten transactions was 3.2 years in the quarter.
  • Fourth quarter emulation product bookings and revenue were up 60 and 70 percent year over year and New and Emerging bookings for the quarter were up 50 percent year over year.
  • Fourth quarter GAAP gross margin was 89.4 percent. Non-GAAP gross margin of 90.0 percent is an all-time record.
  • Fiscal 2017 GAAP operating margin was 15.8 percent and included special charges of approximately $16 million. Non-GAAP operating margin was a record at 21.8 percent.
  • Fourth quarter and fiscal 2017 cash flow from operations were all-time records at $178 million and $322 million, respectively.

“Mentor achieved all-time record fourth quarter and full year revenues, non-GAAP operating margins and non-GAAP earnings per share,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “Customer and shareholder reaction to the agreement of Siemens to acquire Mentor Graphics, announced in the fourth quarter, has been favorable. On February 2, at a special meeting of shareholders, 99.8 percent of the votes cast approved the transaction.”

In the fourth quarter Mentor introduced its new Tessent® DefectSim™ product that automates the defect coverage of any test applied to an analog or mixed-signal circuit. The winner of a Product of the Year award from Electronics Products magazine, Tessent DefectSim satisfies the growing defect-coverage measurement requirement for integrated circuits set by Tier One automotive suppliers. During the quarter the company announced that Toyota Motor Corporation has approved Mentor’s Volcano® VSTAR AUTOSAR basic software stack for use in all Toyota vehicles. The company also introduced Mentor Safe - one of the industry’s broadest and most comprehensive ISO 26262 qualification programs, which enables customers to integrate Mentor tools and software into their safety-critical designs and verification flows at all criticality levels.

“Fourth quarter bookings were up 20 percent over the same quarter a year ago,” said Gregory K. Hinckley, president of Mentor Graphics. “Scalable Verification, Integrated System Design and New and Emerging product categories drove fourth quarter bookings strength. Revenue of $478 million is a record for a fourth quarter and up over 42 percent from the same period a year ago. Non-GAAP earnings per share of $1.21 were up 92 percent year over year.”

Outlook and Acquisition Update

On November 14, 2016, the company announced that it had entered into a merger agreement under which Siemens will acquire Mentor Graphics. As a result of the acquisition announcement, the company will not provide an outlook for future financial results and is withdrawing all previously issued financial guidance.

The company has received several regulatory approvals of the transaction and several approvals remain outstanding. As previously announced, the transaction is expected to be completed by June 30, 2017.

Dividend

The company announced a quarterly dividend of $0.055 per share. The dividend is payable on March 30, 2017 to shareholders of record at the close of business on March 14, 2017.

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.

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