Mentor Graphics Q2 Revenues Increase by 16% to $157.5 Million

7/25/2003 - Mentor Graphics Corporation (Nasdaq: MENT) reported second quarter earnings-per-share of $.12, before amortization of acquired intangibles and special charges, on record second quarter revenues of $157.5 million. First Call® analyst consensus estimate for the quarter was $.09. GAAP earnings-per-share were $.06. Bookings were up 25 percent over the year ago quarter, while revenues climbed 16 percent.

"Mentor continues to execute well in a slowly improving environment and saw strength in almost all product lines. Our system design products performed very well with bookings climbing nearly 30 percent year on year. Our Calibre® design-to-silicon platform bookings were up over 25 percent on broad strength including the Calibre DRCTM/LVS, Calibre InteractiveTM, Calibre xRCTM, Calibre MDPTM, and Calibre RETTM. We continue to gain momentum for resolution enhancement technology (RET) as we strengthened our customer engagements on the 90nm and 65nm process nodes," said Walden C. Rhines, chairman and CEO of Mentor Graphics. "Additionally, based on Electronic Design Automation Consortium data, we gained four points of market share in the first quarter over the prior first quarter. This marks the third consecutive quarter of year-over-year gains, and we believe, with our continued growth in the second quarter, we have extended those gains."

Mentor's analog/mixed-signal and custom IC design flows continued to show strong growth with bookings up nearly 70 percent in the quarter, year on year. Embedded software bookings more than doubled with many new design wins. With the general availability of PrecisionTM Synthesis this quarter, Mentor took its sales direct, lapsing a major OEM contract. With the discontinuation of the OEM contract, FPGA bookings were flat, but Mentor now owns the installed base of over 20,000 companies that it will encourage to upgrade to Precision Synthesis.

"Europe led bookings growth with a nearly 30 percent increase, while North America and the Pacific Rim were up about 25 percent. While we are expecting a strong second half of 2003 for Japan, second quarter there was essentially flat," said Gregory K. Hinckley, president of Mentor Graphics. "The tone of the business continued to improve as we began to see the arrival of significant unforecasted orders that closed during the quarter, something we have not seen since late 2000. Book-to-bill was greater than 1.0. Also, we have renewed our $100 million credit facility through second quarter of 2006."

Mentor continues to invest significantly in technology leadership, launching a full FPGA design flow, as well as new versions of its Calibre, FastScanTM ATPG, PADS®, HyperLynx® signal integrity, Capital HarnessTM, analog/mixed-signal IC flow, InventraTM IP, NucleusTM, Seamless® HW/SW co-verification, and Modelsim® products. Additionally, Mentor support launched its web-based KnowledgeBaseSM support product. Mentor Graphics support, with a total average customer response time of five minutes, continues to win industry awards including the Association of Support Professionals Top Ten Best Web Support Site award, as well as its fourth Support Center Practices (SCP) certification.

During the quarter, Mentor acquired its Italian distributor, the Alcatel Ethernet IP business, and DDE-EDA, a leading provider of PCB design software for advanced packaging. All acquired products will continue to be supported and will be integrated into Mentor's product offerings.

Revenue by region was 50 percent North America, 30 percent Europe, 10 percent Japan, 10 percent Pacific Rim. During the quarter, Mentor acquired 161 new customers. Gross margin excluding amortization of intangibles was 84 percent.

Special charges were acquisition related.

About Mentor Graphics
Mentor Graphics Corporation (Nasdaq: MENT) 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 electronics and semiconductor companies. Established in 1981, the company reported revenues over the last 12 months of about $650 million and employs approximately 3,500 people worldwide. Corporate headquarters are located at 8005 S.W. Boeckman Road, Wilsonville, Oregon 97070-7777; Silicon Valley headquarters are located at 1001 Ridder Park Drive, San Jose, California 95131-2314. World Wide Web site:

In the calculation of earnings, gross margin and operating expenses before amortization of acquired intangibles and special charges, Mentor Graphics excludes amortization of acquired intangibles and write-offs of in-process R&D from acquisitions. Also excluded are non-operating and non-recurring items classified as special charges such as restructure expenses and asset impairments. These excluded items are generally infrequent, less predictable and are often non-cash in nature. Mentor Graphics believes that excluding these items provides investors with a representation of its core performance, and a pro forma base line for assessing the future earnings potential of Mentor Graphics.

These pro forma measures should be assessed in conjunction with GAAP earnings measures for a more complete understanding of the Company's results. Since pro forma measures exclude certain items, differences in earnings from GAAP can be significant; Mentor Graphics management evaluates its performance under both measures for a complete understanding of its results. Investors are encouraged to review both measures for their evaluations and consider the GAAP earnings measures as the most complete measure of Mentor Graphics overall performance.

Mentor Graphics, Calibre, PADS, HyperLynx, Seamless and ModelSim are registered trademarks of Mentor Graphics Corporation. Calibre xRC, Calibre DRC, Calibre Interactive, Calibre MDP, Calibre RET FastScan, Capital Harness, Inventra, Precision and Nucleus are trademarks of Mentor Graphics Corporation. KnowledgeBase is a service mark of Mentor Graphics Corporation.

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