Mentor Graphics Q1 Results Top View, But Provides Weak Outlook

(RTTNews) - PCB design software provider Mentor Graphics Corp. (MENT) reported Thursday a net loss for the first quarter compared to a profit last year, despite revenue growth and lower expenses, reflecting higher charges and lower gross margins.

Both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also provided earnings and revenue guidance for the second quarter, below Street view, but maintained its outlook for the full-year 2015.

"Mentor's business performed well in the first quarter. Strict attention to cost control enabled the company to exceed our non-GAAP operating income target by over $7 million and beat non-GAAP EPS guidance by $0.05 on a $7 million hardware-driven revenue upside," President Gregory Hinckley said in a statement.

The Wilsonville, Oregon-based electronic design automation systems supplier reported a net loss of $2.55 million or $0.02 per share for the first quarter, compared to net income of $0.21 million or $0.01 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $13.21 million or $0.11 per share, compared to $13.24 million or $0.11 per share in the year-ago quarter.

On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.06 per share for the quarter. Analysts' estimate typically excludes one-time items.

Total revenues for the quarter grew to $252.15 million from $226.52 million in the same quarter last year, and topped eight Wall Street analysts' consensus estimate of $245.90 million.

System and software revenue totaled $148.23 million, higher than last year's $123.28 million, and service and support revenues edged up $103.92 million from $103.23 million in the year-ago quarter.

Operating margins for the quarter contracted 190 basis points to 0.7 percent from last year as gross margin declined 510 basis points, partially offset by lower operating expenses as a percentage of total revenues.

The company also announced a quarterly dividend of $0.05 per share on outstanding common stock, payable on June 30 to shareholders of record as of the close of business on June 10, 2014.

Looking ahead to the second quarter, the company expects adjusted earnings of about $0.15 per share on projected quarterly revenues of about $250 million. Analysts project earnings of $0.20 per share for the quarter, on revenues of $257.71 million.

For fiscal 2015, Mentor Graphics continues to project adjusted earnings of about $1.75 per share on annual revenues of about $1.237 billion. Street is currently looking for full-year 2015 earnings of $1.76 per share on revenues of $1.24 billion.

"The company is executing well and we expect strength in transportation applications and core EDA demand as the year progresses," Hinckley added.

MENT closed Thursday's regular trading session at $21.56, up $0.13 or 0.61% on a volume of 0.44 million shares. However, the stock lost $0.54 or 2.50% in after-hours trading.