Magma Reports Revenue of $147.0 Million for Fiscal 2009
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Magma Reports Revenue of $147.0 Million for Fiscal 2009

SAN JOSE, Calif., May 27, 2009 (GLOBE NEWSWIRE) -- Magma(r) Design Automation Inc. (Nasdaq:LAVA), a provider of chip design software, today reported revenue of $34.1 million for its fourth quarter and $147.0 million for its 2009 fiscal year, both ended May 3, 2009.

"In Q4 we exceeded our key financial guidance ranges and re-established positive cash flow," said Rajeev Madhavan, chairman and CEO of Magma. "I anticipate our product teams will continue to deliver innovative technology advancements in fiscal 2010, such as the new Talus(r) COre(tm) technology we announced today."

GAAP Results

In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(8.8) million, or $(0.19) per share (basic and diluted), for the fourth quarter, compared to a net loss of $(7.2) million, or $(0.17) per share (basic and diluted), for the year-ago fourth quarter. For fiscal 2009 Magma reported a GAAP net loss of $(127.1) million, or $(2.84) per share (basic and diluted), compared to a net loss of $(30.8) million, or $(0.76) per share (basic and diluted), for fiscal 2008.

Non-GAAP Results

Magma's non-GAAP net income was $3.1 million for the quarter, or $0.07 per share (basic and diluted), which compares to non-GAAP net income of $8.0 million, or $0.17 per share (diluted), for the year-ago fourth quarter. For fiscal 2009 Magma's non-GAAP net loss was $(6.7) million, or $(0.15) per share (basic and diluted), compared to the company's non-GAAP net income of $27.1 million, or $0.58 per share (diluted), for the year-ago fiscal year.

Non-GAAP net income for the fourth quarter and full fiscal year of fiscal 2009 excludes the effects of amortization of developed technology, amortization of intangible assets, stock-based compensation, amortization of debt issuance costs and debt discount accretion, charges associated with losses on equity investments and other investments, restructuring charges, asset impairment charges, acquisition-related expenses and the related provision for income taxes. Non-GAAP net income for the fourth quarter and full fiscal year of fiscal 2008 excludes the effects of amortization of developed technology, amortization of intangible assets, stock-based compensation, in-process research and developed technology, litigation settlement and related legal expenses, amortization of debt issuance costs and debt discount accretion, acquisition-related expenses, charges associated with losses on equity investments and the related provision for income taxes. A reconciliation of our non-GAAP results to GAAP results is included in this press release.

In the fourth quarter Magma generated cash flow from operations of approximately $5.5 million.

Business Outlook

For Magma's fiscal 2010 first quarter, ending Aug. 2, 2009, the company expects total revenue in the range of $27.5 million to $28.5 million. GAAP net loss per share is expected to be in the range of $(0.20) to $(0.19) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.00 to $0.01. For Magma's fiscal 2010, ending May 2, 2010, the company expects total revenue in the range of $120.0 million to $125.0 million. GAAP net loss per share is expected to be in the range of $(0.70) to $(0.68) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.01 to $0.03. A schedule showing a reconciliation of the projected non-GAAP EPS to GAAP EPS results is included in this release. A Financial Data Supplement containing additional first quarter and full fiscal year 2010 guidance, as well as detailed financial information intended to provide guidance and further insight into our business is available online in the Investor Relations section of the Magma website. All guidance issued by the company before May 27, 2009 is no longer in effect.

GAAP Reconciliation

Magma provides non-GAAP financial information to assist investors in assessing its current and future operations in the way that Magma's management evaluates those operations. Magma believes that this non-GAAP information provides useful information to investors by excluding the effect of some expenses that are required to be recorded under GAAP but that Magma believes are not indicative of Magma's core operating results, or that are expected to be incurred over a limited period of time.

Magma's management evaluates and makes operating decisions about its business operations primarily based on bookings, revenue and the core costs of those business operations. Management believes that the amortization of developed technology and intangible assets, stock-based compensation, in-process research and development expenses, amortization of debt issuance costs, debt discount accretion, charges associated with losses on equity and other investments, acquisition-related expenses, litigation settlement and related legal expenses, and the related provision for income taxes, and other significant unusual items are not operating costs of its core software and service business operations. Therefore, management presents non-GAAP financial measures, along with GAAP measures, in this earnings release by excluding these items from the period expenses. The income statement line items affected are as follows: (1) cost of revenue, licenses; (2) cost of revenue, bundled licenses and services; (3) cost of revenue, services; (4) operating expenses, research and development; (5) operating expenses, in-process research and development; (6) operating expenses, sales and marketing; (7) operating expenses, general and administrative; (8) operating expenses, amortization of intangible assets; (9) operating expenses, restructuring charge; (10) other income (expense), net; (12) Provision for income taxes and (13) net income (loss) per share.

For each such non-GAAP financial measure, the adjustment provides management with information about Magma's underlying operating performance that enables a more meaningful comparison of its financial results in different reporting periods. For example, since Magma does not acquire businesses on a predictable cycle, management excludes acquisition-related charges, such as in-process research and development charges, to make more consistent and meaningful evaluations of Magma's operating expenses. Similarly, since Magma does not undertake significant restructuring or realignments on a predictable cycle, management would have difficulty evaluating Magma's profitability as measured by gross profit, operating profit, income before taxes and net income on a period-to-period basis unless it excluded these charges. Management also uses these measures to help it make budgeting decisions between those expenses that affect operating expenses and operating margin (such as research and development, sales and marketing, and general and administrative expenses), and those expenses that affect cost of revenue and gross margin (such as product development expenses).

Further, the availability of non-GAAP financial information helps management track actual performance relative to financial targets, including both internal targets and publicly announced targets. Making this non-GAAP financial information available also helps investors compare Magma's performance with the announced operating results of its principal competitors, which regularly provide similar non-GAAP financial information.

Management recognizes that the use of these non-GAAP measures has limitations, including the fact that management must exercise judgment in determining whether some types of charges, such as stock-based compensation relating to stock grants and acquisition related charges, should be excluded from non-GAAP financial measures. Management believes, however, that providing this non-GAAP financial information facilitates consistent comparison of Magma's financial performance over time. Magma has historically provided non-GAAP results to the investment community, not as an alternative but as a supplement to GAAP information, to enable investors to evaluate Magma's core operating performance in the way that management does.

Conference Call

Magma will discuss the financial results for the recently completed quarter and year, along with forward-looking guidance, during a live earnings call today at 2 p.m. PDT, available live by both webcast and telephone. To listen live via webcast, visit the Investor Relations section of Magma's website at http://investor.magma-da.com/medialist.cfm. To listen live via telephone, call either of the numbers below:

       U.S. & Canada:      (877) 419-6591
       Elsewhere:          (719) 325-4868

Following completion of the call, a webcast replay of the call will be available at http://investor.magma-da.com/medialist.cfm through June 3, 2009. Those without Internet access may listen to a replay of the call by telephone until 11:59 p.m. PDT on June 3 by calling:

       U.S. & Canada:      (888) 203-1112, code #8860034
       Elsewhere:          (719) 457-0820, code #8860034

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements in the "Business Outlook" section and in quotations from Magma's management. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from Magma's current expectations. Factors that could cause or contribute to such differences include, but are not limited to: the substantial amount of Magma's indebtedness, which could adversely affect our financial position; customer payment defaults may cause us to be unable to recognize revenue from backlog, and changes in the type of orders comprising backlog could affect the proportion of revenue recognized from backlog each quarter, which could have a material adverse effect on our financial condition and results of operations. We rely on a small number of customers for a significant portion of our revenue, and our revenue could decline if customers delay orders or fail to renew licenses or if we are unable to maintain or develop relationships with current or potential customers; we compete against companies that hold a large share of the EDA market and competition is increasing among EDA vendors as customers tightly control their EDA spending and use fewer vendors to meet their needs. If we cannot compete successfully, we will not gain market share and our revenue could decline. Other factors may include weaker-than-anticipated sales of Magma's products and services; weakness in the semiconductor or electronic systems industries; a potential failure of customers to adopt, or to adopt at a sufficiently fast rate, 65-nanometer and smaller design geometries on a large scale; Magma's ability to integrate acquired businesses and technologies; potentially higher-than-anticipated costs of litigation; potentially higher-than-anticipated costs of compliance with regulatory requirements, including those relating to internal control over financial reporting; the ability to manage expanding operations; the ability to attract and retain the key management and technical personnel needed to operate Magma successfully; the ability to continue to deliver competitive products to customers; and changes in accounting rules. Further discussion of these and other potential risk factors may be found in Magma's public filings with the Securities and Exchange Commission (www.sec.gov), including its Form 10-Q for the fiscal quarter ended Feb. 2, 2009. Magma undertakes no additional obligation to update these forward-looking statements.

About Magma

Magma's electronic design automation (EDA) software is used to create complex, high-performance integrated circuits (ICs) for cellular telephones, electronic games, WiFi, MP3 players, DVD/digital video, networking, automotive electronics and other electronic applications. Magma products for IC implementation, analog/mixed-signal design, analysis, physical verification, circuit simulation and characterization are recognized as embodying the best in semiconductor technology, providing the world's top chip companies the "Fastest Path to Silicon."(tm) Magma maintains headquarters in San Jose, Calif., and offices throughout North America, Europe, Japan, Asia and India. Magma's stock trades on Nasdaq under the ticker symbol LAVA. Visit Magma Design Automation on the Web at www.magma-da.com.

Magma and Talus are registered trademarks and COre and "Fastest Path to Silicon" are trademarks of Magma Design Automation. All other product and company names are trademarks and registered trademarks of their respective companies.

                     MAGMA DESIGN AUTOMATION, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)
                              (unaudited)

                                                 May 3,      April 6,
                                                 2009         2008
                                               ---------    ---------

 ASSETS
 Current assets:
   Cash and cash equivalents                   $  32,888    $  46,970
   Restricted cash                                 9,215           --
   Short-term investments                             --        3,000
   Accounts receivable, net                       26,635       38,310
   Prepaid expenses and other current assets       5,443        5,244
                                               ---------    ---------
     Total current assets                         74,181       93,524
 Property and equipment, net                      10,443       15,553
 Intangibles, net                                 12,170       40,436
 Goodwill                                          6,666       64,877
 Long-term investments                            17,909       17,538
 Other assets                                      5,707        5,467
                                               ---------    ---------
     Total assets                              $ 127,076    $ 237,395
                                               =========    =========

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
   Accounts payable                            $   1,212    $   3,971
   Accrued expenses                               15,539       27,788
   Secured credit line                            12,451           --
   Revolving note, current portion                12,181           --
   Current portion of other long-term
    liabilities                                    2,679        2,078
   Deferred revenue                               35,779       25,254
   Convertible notes                                  --       15,216
                                               ---------    ---------
     Total current liabilities                    79,841       74,307
 Convertible subordinated notes, net              49,221       48,518
 Long-term tax liabilities                         3,792        3,878
 Other long-term liabilities                       3,160        2,374
                                               ---------    ---------
     Total liabilities                           136,014      129,077
                                               ---------    ---------
 Stockholders' equity:
   Common stock                                        5            5
   Additional paid-in capital                    400,713      374,183
   Accumulated deficit                          (371,688)    (228,389)
   Treasury stock at cost                        (32,615)     (32,697)
   Accumulated other comprehensive loss           (5,353)      (4,784)
                                               ---------    ---------
     Total stockholders' equity (deficit)         (8,938)     108,318
                                               ---------    ---------
     Total liabilities and stockholders'
      equity                                   $ 127,076    $ 237,395
                                               =========    =========



                    MAGMA DESIGN AUTOMATION, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share data)
                             (Unaudited)

                                 For the               For the
                            Three Months Ended    Twelve Months Ended
                           --------------------  --------------------
                             May 3,    April 6,    May 3,    April 6,
                             2009       2008       2009       2008
                           ---------  ---------  ---------  ---------
 Revenue:
   Licenses                $  17,551  $  35,821  $  76,475  $ 139,062
   Bundled licenses and
    services                   7,766     10,358     33,430     40,515
   Services                    8,753      8,835     37,052     34,842
                           ---------  ---------  ---------  ---------
     Total revenue            34,070     55,014    146,957    214,419
                           ---------  ---------  ---------  ---------
 Cost of revenue:
   Licenses                    5,185      4,862     19,416     19,151
   Bundled licenses and
    services                   2,563      2,429     10,460      9,474
   Services                    4,026      5,355     18,453     20,729
                           ---------  ---------  ---------  ---------
     Total cost of revenue    11,774     12,646     48,329     49,354
                           ---------  ---------  ---------  ---------
 Gross profit                 22,296     42,368     98,628    165,065
                           ---------  ---------  ---------  ---------

 Operating expenses:
   Research and development   14,274     20,382     68,751     76,920
   Sales and marketing        11,089     17,331     56,024     70,711
   General and
    administrative             5,142      7,139     24,307     31,576
   Impairment of goodwill         --         --     60,089         --
   Amortization of
    intangible assets            335      1,735      2,994      8,043
   In-process research
    and development               --      1,600         --      2,256
   Restructuring charge        2,049         --     10,661        291
                           ---------  ---------  ---------  ---------
     Total operating
      expenses                32,889     48,187    222,826    189,797
                           ---------  ---------  ---------  ---------
 Operating loss              (10,593)    (5,819)  (124,198)   (24,732)
                           ---------  ---------  ---------  ---------

 Other income (expense):
   Interest income               115        511        637      2,021
   Interest expense             (861)      (593)    (2,865)    (2,467)
   Other income (expense),
    net                         (350)      (642)      (560)      (591)
                           ---------  ---------  ---------  ---------
     Total other income,
      (expense) net           (1,096)      (724)    (2,788)    (1,037)
                           ---------  ---------  ---------  ---------
 Net loss before income
  taxes                      (11,689)    (6,543)  (126,986)   (25,769)
 Provision for (benefit
  from) income taxes          (2,848)       685         93      5,066
                           ---------  ---------  ---------  ---------

 Net loss                  $  (8,841) $  (7,228) $(127,079) $ (30,835)
                           =========  =========  =========  =========

 Net loss per share -
  basic and diluted        $   (0.19) $   (0.17) $   (2.84) $   (0.76)
                           =========  =========  =========  =========

 Shares used in
  calculation:
   Basic and diluted          46,357     42,265     44,698     40,518
                           =========  =========  =========  =========



      Reconciliation of Fourth Quarter and Fiscal Year GAAP and
                      Non-GAAP Financial Results

 Statement of Operations
  Reconciliation            Three Months Ended   Twelve Months Ended
 (in thousands)              May 3,    April 6,    May 3,    April 6,
                             2009       2008       2009       2008

 GAAP net loss             $  (8,841) $  (7,228) $(127,079) $ (30,835)
 Cost of license revenue
   Amortization of
    developed technology       4,973      4,567     18,680     18,079
   Royalties                      --         --         --        245
                           ------------------------------------------
                               4,973      4,567     18,680     18,324
 Cost of bundled license
  and services revenue
   Amortization of
    developed technology       1,738      1,043      6,595      4,156
   Stock-based compensation       54         80        269        326
                           ------------------------------------------
                               1,792      1,123      6,864      4,482
 Cost of service revenue
   Stock-based compensation      287        323      1,282      1,354
 Research and development
   Stock-based compensation    1,522      2,358      7,405      8,050
   Acquisition related
    expenses                      55        773        652      2,677
                           ------------------------------------------
                               1,577      3,131      8,057     10,727
 Sales and marketing
   Stock-based compensation    1,165      1,463      5,281      5,235
 General and administrative
   Stock-based compensation    1,268      1,277      4,915      5,459
   Litigation settlement
    and related legal
    expense                       --         --         --      1,632
                           ------------------------------------------
                               1,268      1,277      4,915      7,091
 Impairment of goodwill           --                60,089
 Amortization of
  intangible assets              335      1,735      2,994      8,043
 In-process research and
  development                     --      1,600         --      2,256
 Restructuring charges         2,049         --     10,661        291
 Other income (expense)
   Interest expense,
    amortization of debt
    issuance cost, and
    debt discount accretion      273        538      1,069      2,183
   Loss on equity and
    other investments            (58)        45        731        480
                           ------------------------------------------
                                 215        583      1,800      2,663
 Provision for income taxes   (1,696)      (588)      (254)    (2,567)
                           --------------------  --------------------
 Non-GAAP net income
  (loss)                   $   3,124  $   7,986  $  (6,710) $  27,064
                           --------------------  --------------------



      Reconciliation of Fourth Quarter and Fiscal Year GAAP and
                      Non-GAAP Financial Results

 Earnings/(Loss) Per
  Share Reconciliation      Three Months Ended   Twelve Months Ended
                             May 3,    April 6,    May 3,    April 6,
                             2009       2008       2009       2008

 GAAP net loss             $   (0.19) $   (0.17) $   (2.84) $   (0.76)
 Cost of license revenue
   Amortization of
    developed technology        0.11       0.11       0.42       0.45
   Royalties                      --         --         --       0.01
                           ------------------------------------------
                                0.11       0.11       0.42       0.46
 Cost of bundled license
  and services revenue
   Amortization of
    developed technology        0.04       0.02       0.15       0.10
   Stock-based compensation     0.00         --         --       0.01
                           ------------------------------------------
                                0.04       0.02       0.15       0.11
 Cost of service revenue
   Stock-based compensation     0.01       0.01       0.03       0.03
 Research and development
   Stock-based compensation     0.03       0.06       0.17       0.20
   Acquisition related
    expenses                    0.00       0.02       0.01       0.06
                           ------------------------------------------
                                0.03       0.08       0.18       0.26

 Sales and marketing
   Stock-based compensation     0.02       0.03       0.12       0.13
 General and administrative
   Stock-based compensation     0.03       0.03       0.11       0.13
   Litigation settlement
    and related legal
    expense                       --         --         --       0.04
                           ------------------------------------------
                                0.03       0.03       0.11       0.17
 Impairment of goodwill           --         --       1.34         --
 Amortization of
  intangible assets             0.01       0.04       0.07       0.20
 In-process research and
  development                     --       0.04         --       0.06
 Restructuring charges          0.04         --       0.24       0.01
 Other income (expense)
   Interest expense,
    amortization of debt
    issuance cost, and
    debt discount accretion     0.01       0.01       0.02       0.05
   Loss on equity
    investments                   --         --       0.02       0.01
                           ------------------------------------------
                                0.01       0.01       0.04       0.06
 Provision for income taxes    (0.04)     (0.01)     (0.01)     (0.06)
                           --------------------  --------------------
 Non-GAAP net income
  (loss) per share         $    0.07  $    0.19  $   (0.15) $    0.67
                           --------------------  --------------------
 Non-GAAP net income
  (diluted)                $    0.07  $    0.17  $   (0.15) $    0.58
                           --------------------  --------------------

 Basic shares used in
  calculation                 46,357     42,123     44,698     40,518
 Diluted shares used in
  calculation*                47,014     47,533     46,249     46,868


 * Gives effect to the potential issuance of common stock upon
   conversion of convertible subordinated notes, if dilutive, and to
   the effect of all dilutive potential common shares outstanding
   during the period, including stock options, using the treasury
   stock method



                    MAGMA DESIGN AUTOMATION, INC.
                         AS OF MAY 27, 2009
 IMPACT OF KNOWN NON-GAAP ADJUSTMENTS ON FORWARD-LOOKING DILUTED NET
                    INCOME PER SHARE AND NET INCOME
                             (Unaudited)

                            Quarter Ending            Year Ending
                            August 2, 2009            May 2, 2010

 GAAP diluted net
  loss per share         $ (0.20) to $ (0.19)     $ (0.70) to $ (0.68)
   Amortization of
    developed technology
    and intangibles             $0.05                    $0.21
   Amortization of
    deferred stock-based
    compensation                $0.11                    $0.42
   Debt related costs           $0.03                    $0.06
   Equity and other
    investment related
    charges                     $0.01                    $0.02

 Non-GAAP diluted net
  income per share          $0.00 to $0.01           $0.01 to $0.03


 (in millions)              Quarter Ending            Year Ending
                            August 2, 2009            May 2, 2010

 GAAP net loss           $ (9.3) to $ (8.8)       $ (33.1) to $ (32.1)
   Amortization of
    developed technology
    and intangibles              $2.5                      $9.9
   Amortization of
    deferred stock-based
    compensation                 $5.3                     $19.7
   Debt related costs            $1.0                      $3.0
   Equity and other
    investment related
    charges	                 $0.5	                   $1.0
 Non-GAAP net income          $0.0 to $0.5             $0.5 to $1.5
CONTACT:  Magma Design Automation Inc.
          Media:
          Monica Marmie, Director, Marketing Communications
            (408) 565-7689
            
Email Contact
          Investors:
          Milan G. Lazich, Vice President, Corporate Marketing
            (408) 565-7706
            
Email Contact