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