Magma Reports Revenue of $214.4 million for Fiscal 2008, 20.4 Percent Above Prior Year

Q4 Revenue of $55.0 Million is 9.7 Percent Above Year-Ago Period


SAN JOSE, Calif., May 1, 2008 (PRIME NEWSWIRE) -- Magma Design Automation Inc. (Nasdaq:LAVA), a provider of chip design software, today reported revenue of $55.0 million for its fourth quarter and $214.4 million for its 2008 fiscal year, both ended April 6, 2008.

"We reached major market and financial milestones this year," said Rajeev Madhavan, chairman and CEO of Magma. "Revenue grew more than 20 percent, new products established greater traction, and products released toward the end of the year were well received."

GAAP Results

In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(7.2) million, or $(0.17) per share (basic and diluted), for the fourth quarter, compared to a net loss of $(24.5) million, or $(0.65) per share (basic and diluted), for the year-ago fourth quarter. For fiscal 2008 Magma reported a GAAP net loss of $(30.8) million, or $(0.76) per share (basic and diluted), compared to a net loss of $(61.2) million, or $(1.67) per share (basic and diluted), for fiscal 2007.

Non-GAAP Results

Magma's non-GAAP net income was $8.0 million for the quarter, or $0.17 per share (diluted), which compares to non-GAAP net income of $3.7 million, or $0.09 per share (diluted), for the year-ago fourth quarter. For fiscal 2008 Magma's non-GAAP net income was $27.1 million, or $0.58 per share (diluted), compared to the company's non-GAAP net income of $9.0 million, or $0.22 per share (diluted), for the year-ago fiscal year.

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 development expenses, debt discount accretion, charges associated with losses in equity investments, restructuring charges, acquisition-related expenses and the tax effects of these adjustments. Non-GAAP net income for the fourth quarter and full fiscal year of fiscal 2007 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, expenses associated with lease amendment and related headquarter office relocation, net gain on exchange of convertible notes, debt discount accretion, acquisition-related expenses, cumulative effect of change in accounting principle, charges associated with losses in equity investments and the tax effects of these adjustments. 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 $2.6 million. The company generated $1.4 million free cash flow (defined as cash flow from operations less capital expenditures).

Business Outlook

For Magma's fiscal 2009 first quarter, ending Aug. 3, 2008, the company expects total revenue in the range of $50.0 million to $51.5 million. GAAP net loss per share is expected to be in the range of $(0.38) to $(0.36) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.07 to $0.09. 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 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.

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, debt discount accretion, charges associated with losses in equity investments, acquisition-related expenses, litigation settlement and related legal expenses, expenses associated with lease amendment and related headquarter office relocation, net gain on exchange of convertible notes, and the tax effects of its non-GAAP adjustments (yielding a non-GAAP effective tax rate of 22.0 percent for fiscal 2008) 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; (11) cumulative effect of change in accounting principle; (12) tax effect; and (13) net income (loss) per share. To determine its non-GAAP provision for income taxes, Magma recalculates tax based on non-GAAP income before income taxes and adjusts accordingly.

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) 502-9272
      Elsewhere:        (913) 981-5597

Following completion of the call, a webcast replay of the call will be available at http://investor.magma-da.com/medialist.cfm through May 8, 2008. Those without Internet access may listen to a replay of the call by telephone until 11:59 p.m. PDT on May 8 by calling:



      U.S. & Canada:    (888) 203-1112, code #8572405
      Elsewhere:        (719) 457-0820, code #8572405

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: competition in the EDA market; 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; any delay of customer orders or failure of customers to renew licenses; 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; 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 Jan. 6, 2008. Magma undertakes no additional obligation to update these forward-looking statements.

About Magma

Magma's software for designing integrated circuits (ICs) is used to create complex, high-performance chips required in cellular telephones, electronic games, WiFi, MP3 players, DVD/digital video, networking, automotive electronics and other electronic applications. Magma's EDA software for IC implementation, analysis, physical verification, circuit simulation and characterization is recognized as embodying the best in semiconductor technology, enabling the world's top chip companies to ``Design Ahead of the Curve''(tm) while reducing design time and costs. Magma is headquartered in San Jose, Calif., with offices around the world. Magma's stock trades on Nasdaq under the ticker symbol LAVA. Visit Magma Design Automation on the Web at www.magma-da.com.

Magma is a registered trademark and "Design Ahead of the Curve" is a trademark 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)
                   
                                             April 6,        April 1,
                                               2008            2007
                                            ---------       --------- 
 ASSETS
 Current assets:
   Cash and cash equivalents                $  46,970       $  45,338
   Restricted cash                                 --           4,997
   Short-term investments                       3,000          10,700
   Accounts receivable, net                    38,310          41,086
   Prepaid expenses and other            
    current assets                              5,244           4,126
                                            ---------       ---------
     Total current assets                      93,524         106,247
 Long-term investments                         17,538              --
 Property and equipment, net                   15,553          17,866
 Intangibles, net                              40,436          56,874
 Goodwill                                      64,877          48,499
 Restricted cash                                   --           4,700
 Deferred tax assets                            6,901              --
 Other assets                                   5,467           5,460
                                            ---------       ---------
     Total assets                           $ 244,296       $ 239,646
                                            =========       =========
 LIABILITIES AND STOCKHOLDERS' EQUITY                   
 Current liabilities:                    
   Accounts payable                         $   3,971       $   7,442
   Accrued expenses                            29,866          53,254
   Deferred revenue, current                   25,254          28,417
   Convertible notes, current                  15,216              --
                                            ---------       ---------
     Total current liabilities                 74,307          89,113
                                         
 Convertible subordinated notes, net           48,518          63,077
 Line of credit                                    --           3,000
 Long-term tax liabilities                     11,869              --
 Other long-term liabilities                    2,374           1,689
                                            ---------       ---------
     Total liabilities                        137,068         156,879
                                            ---------       ---------
                                         
 Stockholders' equity:                   
   Common stock                                     5               4
   Additional paid-in capital                 374,183         310,825
   Accumulated deficit                       (229,479)       (197,808)
   Treasury stock at cost                     (32,697)        (29,162)
   Accumulated other comprehensive loss        (4,784)         (1,092)
                                            ---------       ---------
     Total stockholders' equity               107,228          82,767
                                            ---------       ---------
     Total liabilities and               
      stockholders' equity                  $ 244,296       $ 239,646
                                            =========       =========



          
                       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
                           -------------------    --------------------
                           April 6,   April 1,     April 6,  April 1,
                             2008       2007        2008        2007  
                           -------    --------    --------    --------
 Revenue:
   Licenses                $35,821    $ 30,863    $139,062    $101,991
   Bundled licenses 
    and services            10,358      10,648      40,515      42,925
   Services                  8,835       8,627      34,842      33,237
                           -------    --------    --------    --------
     Total revenue          55,014      50,138     214,419     178,153
                           -------    --------    --------    --------
 Cost of revenue:
   Licenses                  4,862       6,852      19,151      24,125
   Bundled licenses and
    services                 2,429       3,116       9,474      12,935
   Services                  5,355       4,815      20,729      17,519
                           -------    --------    --------    --------
     Total cost of 
      revenue               12,646      14,783      49,354      54,579
                           -------    --------    --------    --------
 Gross profit               42,368      35,355     165,065     123,574
                           -------    --------    --------    --------

 Operating expenses:
   Research and 
    development             20,382      16,909      76,920      63,625
   In-process research
    and development          1,600          --       2,256       1,300
   Sales and marketing      17,331      16,708      70,711      60,041
   General and 
    administrative           7,139      25,702      31,576      55,370
   Amortization of
    intangible assets        1,735       2,276       8,043      11,011
   Restructuring charge         --          --         291          --
                           -------    --------    --------    --------
     Total operating
      expenses              48,187      61,595     189,797     191,347
                           -------    --------    --------    --------
 Operating loss             (5,819)    (26,240)    (24,732)    (67,773)
                           -------    --------    --------    --------

 Other income (expense):
   Interest income             511         548       2,021       2,729
   Interest expense           (593)       (274)     (2,467)       (723)
   Gain on 
    extinguishment of 
    debt                        --          --          --       4,809
   Other income 
    (expense), net            (642)      1,378        (591)        454
                           -------    --------    --------    --------
     Total other income,
      (expense) net           (724)      1,652      (1,037)      7,269
                           -------    --------    --------    --------
 Net loss before income
  taxes                     (6,543)    (24,588)    (25,769)    (60,504)
 Provision for (benefit
  from) income taxes           685         (98)      5,066       1,002
                           -------    --------    --------    --------
 Net loss before 
  cumulative effect of 
  change in
  accounting principle      (7,228)    (24,490)    (30,835)    (61,506)
 Cumulative effect of
  change in accounting
  principle                     --          --          --         321

                           -------    --------    --------    --------
 
 Net loss                  $(7,228)   $(24,490)   $(30,835)   $(61,185)
                           =======    ========    ========    ========
 
 Net loss per share -
  basic and diluted        $ (0.17)   $  (0.65)   $  (0.76)   $  (1.67)
                           =======    ========    ========    ========
 Shares used in
  calculation:
   Basic and diluted        42,265      37,557      40,518      36,605
                           =======    ========    ========    ========



  
                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)         April 6,   April 1,    April 6,    April 1, 
                          2008       2007        2008         2007

 GAAP net loss         $ (7,228)   $(24,490)   $(30,835)   $(61,185)
 Cost of license
  revenue
   Amortization of
    developed
    technology            4,567       6,631      18,079      23,368
   Royalties                 --          --         245          --
                       --------------------------------------------
                          4,567       6,631      18,324      23,368
 Cost of bundled
  license and
  services revenue
   Amortization of
    developed
    technology            1,043       1,808       4,156       7,770
   Stock-based
    compensation             80          57         326         267
                       --------------------------------------------
                          1,123       1,865       4,482       8,037
 Cost of service
  revenue
   Stock-based
    compensation            323         222       1,354         986
 Research and
  development
   Stock-based
    compensation          2,358       1,123       8,050       5,880
   Acquisition
    related
    expenses                773         425       2,677       2,797
                       --------------------------------------------
                          3,131       1,548      10,727       8,677
 In-process
  research and
  development             1,600          --       2,256       1,300
 Sales and
  marketing
   Stock-based
    compensation          1,463         794       5,235       3,851
 General and
  administrative
   Stock-based
    compensation          1,277       1,060       5,459       4,580
   Litigation
    settlement and
    related legal
    expense                  --      14,456       1,632      14,456
   Expenses
    associated with
    lease amendment
    and headquarter
    office relocation        --       1,864          --       1,864
                       --------------------------------------------
                          1,277      17,380       7,091      20,900
 Amortization of
  intangible assets       1,735       2,276       8,043      11,011
 Restructuring
  charges                    --          --         291          --
 Other income
  (expense)
    Net gain on
     exchange or
     repurchase of
     convertible
     notes and loss
     on sale of
     marketable
     securities in
     conjunction
     with the
     repurchase              --      (1,723)         --      (6,532)
    Debt discount
     accretion              538          45       2,183          45
    Loss on
     equity
     investments             45         165         480         605
                       --------------------------------------------
                            583      (1,513)      2,663      (5,882)
 Cumulative effect
  of change in
  accounting
  principle                              --          --        (321)
 Tax effect                (588)     (1,016)     (2,567)     (1,699)
                       --------------------    --------------------
 Non-GAAP net
  income               $  7,986    $  3,697    $ 27,064    $  9,043
                       --------------------    --------------------




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



 Earnings/(Loss) Per Share Reconciliation 

                           Three Months Ended      Twelve Months Ended
                           April 6,    April 1,    April 6,   April 1,
                            2008         2007       2008       2007

 GAAP net loss             $(0.17)     $(0.65)     $(0.76)     $(1.67)
 Cost of license revenue                                       
  Amortization of                                              
   developed technology      0.11        0.18        0.45        0.64
  Royalties                    --          --        0.01          --
                           ------------------------------------------
                             0.11        0.18        0.46        0.64
 Cost of bundled license                                       
  and services revenue                                         
   Amortization of                                              
    developed technology     0.02        0.05        0.10        0.21
   Stock-based                                                  
    compensation               --          --        0.01        0.01
                           ------------------------------------------
                             0.02        0.05        0.11        0.22
 Cost of service revenue                                       
  Stock-based                                                  
   compensation              0.01        0.01        0.03        0.03
 Research and development                                      
  Stock-based                                                  
   compensation              0.06        0.03        0.20        0.16
  Acquisition related                                          
   expenses                  0.02        0.01        0.06        0.08
                           ------------------------------------------
                             0.08        0.04        0.26        0.24
 In-process research and                                       
  development                0.04          --        0.06        0.04
 Sales and marketing                                           
  Stock-based                                                  
   compensation              0.03        0.02        0.13        0.10
 General and                                                   
  administrative                                               
   Stock-based                                                  
    compensation             0.03        0.03        0.13        0.13
   Litigation settlement                                        
    and related legal                                           
    expense                    --        0.38        0.04        0.39
   Expenses associated                                       
    with lease amendment                                        
    and headquarter                                             
    office relocation          --        0.05          --        0.05
                           ------------------------------------------
                             0.03        0.46        0.17        0.57
 Amortization of                                               
  intangible assets          0.04        0.06        0.20        0.30
 Restructuring charges         --          --        0.01          --
 Other income (expense)                                        
   Net gain on exchange                                        
    or repurchase of                                           
    convertible notes                                          
    and loss on sale of                                        
    marketable                                                 
    securities in                                              
    conjunction with the                                       
    repurchase                 --       (0.05)         --       (0.18)
   Debt discount                                               
    accretion                0.01          --        0.05          --
   Loss on equity                                              
    investments                --        0.01        0.01        0.02
                           ------------------------------------------
                             0.01       (0.04)       0.06       (0.16)
 Cumulative effect of                                          
  change in accounting                                         
  principle                    --          --          --       (0.01)
 Tax effect                 (0.01)      (0.03)      (0.06)      (0.05)
                           ------------------      ------------------
                                            
 Non-GAAP net income       $ 0.19      $ 0.10      $ 0.67      $ 0.25
                           ------------------      ------------------ 
 Non-GAAP net income                                           
  (diluted)                $ 0.17      $ 0.09      $ 0.58      $ 0.22
                           ------------------      ------------------ 
                                                               
 Basic shares used in                                              
  calculation              42,123      37,557      40,518      36,605
 Diluted shares used                                          
  in calculation*          47,533      42,144      46,868      40,799
                                                             

 * Gives effect to the potential issuance of common stock upon
   conversion of convertible subordinated notes 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 APRIL 6, 2008
         IMPACT OF KNOWN NON-GAAP ADJUSTMENTS ON FORWARD-LOOKING 
             DILUTED NET INCOME PER SHARE AND NET INCOME
                             (Unaudited)

                                  Quarter Ending        Year Ending
                                  August 3, 2008        May 3, 2009

  
 GAAP diluted net loss per           $ (0.38) to          $ (1.25) to
  share                              $ (0.36)             $ (1.20)  
   Amortization of
    developed technology 
    and intangibles                    $0.24                $0.89
   Amortization of deferred 
    stock-based                        
    compensation                       $0.13                $0.51
   Acquisition related 
    expenses                           $0.04                $0.13
   Basic and diluted share 
    count impact on EPS                $0.04                $0.22

 Non-GAAP diluted net income           $0.07 to            $0.50 to
  per share                            $0.09               $0.55
                                        


 (in millions)                    Quarter Ending        Year Ending
                                  August 3, 2008        May 3, 2009

 GAAP net loss                       $ (16) to          $ (52) to
                                       $ (15)              $ (49)
   Amortization of developed
    technology and 
    intangibles                         $11                  $45
   Amortization of deferred 
    stock-based compensation             $7                  $26
   Acquisition related 
    expenses                             $1                   $6

 Non-GAAP net income                  $3 to $4            $25 to $28

LAVA-F



            

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