Mentor’s results came out last week. They were good. Wally opened the call:Thanks. Once again results for Mentor Graphics in the quarter exceeded our guidance. Revenue of $260.2 million and non-GAAP earnings per share of $0.23, were ahead of our guidance of $250 million and $0.15 earnings per share. Strength in bookings for the quarter was almost all system design-related, particularly automotive customers.
Automotive seems to be an area where Mentor is doing very well. In my experience Auto is a difficult market. You walk in and they tell you they are working on the 2023 model year. Or their R&D people say that the tools they are evaluating will be adopted in another four years. Of course EDA has a long sales-cycle, 9 months or so, whatever, but automotive makes that seem fast.
But Mentor seems to have cracked the nut. 90% of Japanese bookings come from automotive OEMs (that’s the buzzword for people who actually build cars like Honda and Toyota) and their suppliers. Overall bookings from automotive companies were 3X what they were last year. That is a huge increase. Not 30% but 300%. Two of the top 10 bookings for the quarter were tier-1 Japanese automotive suppliers. Because of the sales-cycle it has been a long time coming but now Mentor is riding the wave and the competitors are out looking at the incoming swell.
Last quarter Mentor also acquired XS Embedded, a leader in embedded solutions for automotive driver information, infotainment and advanced driver assistance systems. They also acquired Nimbic, a cloud-solution for electromagnetic simulation, probably most famous for Raul Camapasno, exe-CTO of Synopsys, being the CEO.
Let’s hear Wally, Mentor’s CEO, say it:Mentor serves this market in many areas, but of the automotive-specific products there are three that constitute most of the revenue. First, capital family of wire harness product provides a complete enterprise solution from concept through design, manufacturing, costing and after sales service. This family has evolved over the years and now serves more than 35 automotive OEMs, 75 Tier-1 suppliers and nearly 30 heavy equipment suppliers.
In addition capital is used by several dozen aerospace and electronic systems companies, including more than half of the leading commercial, regional and military aircraft OEMs. Fiscal Q2 was an all-time record for the Capital family of products.
Second, Mentor’s embedded software products and services for the automotive industry have grown rapidly in the last two years and set a record for second quarter. This family includes a complete Linux-embedded software development environment for automotive applications, which in some cases may exceed 100 million lines of codes.
Third and most recently has been the explosion in demand for autos AUTOSAR software development tools, reflecting the broad adoption of this new methodology by the automotive industry. 10 OEMs and 32 Tier-1 suppliers have deployed Mentor’s AUTOSAR solutions in 119 production car models and Mentor was the first company to offer a full AUTOSAR development suite.
One of the top-10 bookings of the quarter was all driven by AUTOSAR completely. This product line also experienced all-time record bookings this quarter and we expect the industry overall to source hundreds of electronic-controlled unit with AUTOSAR this year.
Of course it is not all automotive. Greg Hinckley, my old boss at VLSI Technology, filled out the color.Strength in automotive accounts drove second-quarter revenue and non-GAAP earnings per share to levels ahead of guidance. Record Q2 revenues of $260.2 million were $10.2 million over guidance and 3% over last year. With continued attention to expenses, all of incremental revenue fell through to earnings driving non-GAAP EPS as Wally said to $0.23, $0.08 ahead of guidance. This is the 22nd consecutive quarter we have exceeded our earnings guidance.
So Mentor are in good shape and have a strength in automotive that none of the other EDA companies can claim.Share this post via: