Mentor Graphics Corporation Earnings: Higher Expenses Shrinks Margins

Mentor Graphics Corporation’s (NASDAQ:MENT) first quarter loss narrowed due mainly to positive revenue growth. Mentor Graphics Corporation supplies electronic design automation systems – computer software & emulation systems used to automate the design, analysis & testing of electronic hardware & embedded systems software in electronic systems & components.

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Mentor Graphics Earnings Cheat Sheet for the First Quarter

Results: Loss narrowed to $2.4 million (loss of 2 cents/diluted share) from $23 million (loss of 22 cents/share) in the same quarter a year earlier.

Revenue: Rose 27.4% to $230 million YoY.

Actual vs. Wall St. Expectations: MENT reported adjusted net income of of 20 cents/share. By that measure, the company beat the mean estimate of 18 cents/share. Estimates ranged from 15 cents per share to 20 cents per share. Analysts were expecting revenue of $227 million.

Quoting Management: “Our strategy of leveraging our strength in design automation into adjacent markets is working,” said Walden C. Rhines, chairman and CEO of Mentor Graphics. “The company reported record revenues for a first quarter as our New and Emerging product category delivered strong growth. In addition, our Integrated Systems Design product category continued to strengthen with year-on-year bookings up 45%. Leading indicators of the business remain strong with services and new customers both up sharply.”

Key Stats:

The company’s cost of sales rose 35.8% from a year earlier. Last quarter, cost of sales was 17.6% of revenue versus 16.5% a year earlier.

Revenue has risen the past four quarters. Revenue increased 29.6% to $307.3 million in fourth quarter of the last fiscal year. The figure rose 26.3% in third quarter of the last fiscal year from the year earlier and climbed 2.9% in second quarter of the last fiscal year from the year-ago quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by 8 cents in fourth quarter of the last fiscal year and by 6 cents in third quarter of the last fiscal year.

MENT’s loss in the latest quarter follows profits in the previous two quarters. The company reported a profit of $50.6 million in the fourth quarter of the last fiscal year and a profit of $15.3 million in the third quarter of the last fiscal year.

Competitors to Watch: Synopsys, Inc. (NASDAQ:SNPS), Cadence Design Systems, Inc. (NASDAQ:CDNS), Magma Design Automation, Inc. (NASDAQ:LAVA), ANSYS, Inc. (NASDAQ:ANSS), PDF Solutions, Inc. (NASDAQ:PDFS), Autodesk, Inc. (NASDAQ:ADSK), National Instruments Corp (NASDAQ:NATI), Parametric Technology (NASDAQ:PMTC), Tessera Technologies, Inc. (NASDAQ:TSRA), and Intl. Business Machines Corp. (NYSE:IBM).

Stock Performance: Shares of MENT are currently priced at $13.70, down nearly 7% in trading on the day.

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(Sources: YahooFinance, Xignite Financials)