SAN JOSE, Calif., Jan. 31, 2008 (PRIME NEWSWIRE) -- Magma Design Automation Inc. (Nasdaq:LAVA), a provider of chip design software, today reported record revenue of $55.7 million for its fiscal 2008 third quarter ended Jan. 6, 2008, an increase of 23.6 percent over the $45.1 million revenue reported for the year-ago third quarter, ended Dec. 31, 2006.
"In Q3 we delivered another quarter of record revenue, and we continued to see improved profitability and strong cash flow," said Rajeev Madhavan, chairman and CEO of Magma. "Our research and development teams continue to deliver capabilities for products serving both our traditional and new markets, maintaining a strong technology edge over our competitors."
GAAP Results
In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(5.9) million, or $(0.14) per share (basic and diluted), for the third quarter of fiscal 2008, compared to a net loss of $(13.6) million, or $(0.37) per share (basic and diluted), for the third quarter of fiscal 2007.
Non-GAAP Results
Magma's non-GAAP net income was $7.5 million for the third quarter of fiscal 2008, or $0.16 per share (diluted), which compares to non-GAAP net income of $2.4 million, or $0.06 per share (diluted), for the year-ago third quarter.
Non-GAAP net income for the third quarter of fiscal 2008 excludes the effects of amortization of developed technology, amortization of intangible assets, stock-based compensation, legal settlement and other expenses, interest expense and amortization of debt issuance cost, debt discount accretion, charges associated with losses in equity investments, acquisition-related and other expenses, and the tax effects of these adjustments. Non-GAAP net income for the third quarter of fiscal 2007 excludes the effects of amortization of developed technology, amortization of intangible assets, amortization of deferred stock-based compensation, in-process research and development charges, acquisition-related expenses, charges associated with losses in equity investments and the tax effects of these adjustments. A reconciliation of Magma's non-GAAP results to GAAP results is included in this press release.
In the third quarter of fiscal 2008 Magma generated cash from operations of approximately $14.1 million.
Business Outlook
For Magma's fiscal 2008 fourth quarter, ending April 6, 2008, the company expects total revenue in the range of $56 million to $58 million. GAAP net loss per share is expected to be in the range of $(0.25) to $(0.23) and non-GAAP earnings per share (EPS) is expected to be in the range of $0.15 to $0.17. GAAP Operating Loss is expected to be in the range of (13.0) percent to (10.0) percent, and Non-GAAP Operating Margin is expected to be in the range of 16 percent to 18 percent. A schedule showing a reconciliation of the projected non-GAAP EPS to GAAP EPS results is included in this release. For Magma's fiscal year 2008, ending April 6, 2008, the company increased its expected revenue growth rate over fiscal 2007 to a range of 21 percent to 22 percent, with an expected revenue range of $215 million to $217 million. For Magma's fiscal year 2008, the company also decreased its expected GAAP net loss per share to a range of $(0.84) to $(0.82) and increased its expected non-GAAP EPS to a range of $0.56 to $0.58. A Financial Data Supplement containing detailed financial information intended to provide guidance and further insight into Magma's business is available online at http://investor.magma-da.com/supplement.cfm 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 is useful 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 charges, litigation settlement and related legal expenses, integration and other acquisition-related expenses, workforce realignment restructuring charges, expenses associated with lease amendment and related headquarters office relocation, net gain on exchange of convertible notes, debt discount accretion, and the tax effects of its non-GAAP adjustments (yielding a non-GAAP effective tax rate of 25.0 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) total cost of revenue; (5) gross profit; (6) operating expenses, research and development; (7) operating expenses, sales and marketing; (8) operating expenses, general and administrative; (9) operating expenses, amortization of intangible assets; (10) operating expenses, in-process research and development; (11) total operating expenses; (12) operating loss; (13) interest expense; (14) other income (expense), net; (15) total other income (expense), net; (16) net loss before income taxes; (17) provision for income taxes; (18) net loss before cumulative effect of change in accounting principles; (19) cumulative effect of change in accounting principles; (20) net loss; and (21) net 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 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. Similarly, since Magma does not acquire businesses on a predictable cycle, management excludes acquisition-related charges, such as in-process research and development charges, in order to make more consistent and meaningful evaluations of Magma's operating expenses. 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 those relating to workforce reductions executed in the ordinary course of business, 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, including forward-looking guidance, during a live earnings call today at 2 p.m. PST. The call will be 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: (888) 233-7970
Elsewhere: (913) 312-0380
Following completion of the call, a webcast replay of the call will be available at http://investor.magma-da.com/medialist.cfm through Feb. 7, 2008. Those without Internet access may listen to a replay of the call by telephone until 11:59 p.m. PST on Feb. 7 by calling:
U.S. & Canada: (719) 457-0820, code #4230942
Elsewhere: (888) 203-1112, code #4230942
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; market acceptance of new products; 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 or the economy more generally; 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 quarterly report on Form 10-Q for the period ended Sept. 30, 2007. 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.
LAVA - F
MAGMA DESIGN AUTOMATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
January 6, April 1,
2008 2007
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 52,034 $ 45,338
Restricted cash -- 4,997
Short-term investments 17,700 10,700
Accounts receivable, net 28,054 41,086
Prepaid expenses and other current assets 5,106 4,126
---------- ----------
Total current assets 102,894 106,247
Property and equipment, net 16,070 17,866
Intangibles, net 41,250 56,874
Goodwill 53,870 48,499
Restricted cash -- 4,700
Deferred tax assets 6,901 --
Other assets 5,103 5,460
---------- ----------
Total assets $ 226,088 $ 239,646
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,778 $ 7,442
Accrued expenses 24,488 53,254
Deferred revenue 23,987 28,417
Convertible notes, current 15,216 --
---------- ----------
Total current liabilities 67,469 89,113
Convertible notes, net 48,355 63,077
Line of credit -- 3,000
Long-term tax liabilities 11,774 --
Other long-term liabilities 2,259 1,689
---------- ----------
Total liabilities 129,857 156,879
---------- ----------
Stockholders' equity:
Common stock 4 4
Additional paid-in capital 349,425 310,825
Accumulated deficit (222,209) (197,808)
Treasury stock at cost (27,878) (29,162)
Accumulated other comprehensive loss (3,111) (1,092)
---------- ----------
Total stockholders' equity 96,231 82,767
---------- ----------
Total liabilities and stockholders' equity $ 226,088 $ 239,646
========== ==========
MAGMA DESIGN AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
------------------------------------------
Jan. 6, Dec. 31, Jan. 6, Dec. 31,
2008 2006 2008 2006
--------- -------------------- ---------
Revenue:
Licenses $ 35,615 $ 23,974 $103,241 $ 71,129
Bundled licenses
and services 11,283 10,032 30,157 32,277
Services 8,849 11,088 26,007 24,610
--------- -------------------- ---------
Total revenue 55,747 45,094 159,405 128,016
--------- -------------------- ---------
Cost of revenue:
Licenses 4,362 6,282 14,289 17,273
Bundled licenses
and services 2,504 2,980 7,045 9,819
Services 5,274 4,757 15,374 12,704
--------- -------------------- ---------
Total cost of revenue 12,140 14,019 36,708 39,796
--------- -------------------- ---------
Gross profit 43,607 31,075 122,697 88,220
--------- -------------------- ---------
Operating expenses:
Research and development 19,513 15,660 56,538 46,716
Sales and marketing 17,833 14,919 53,380 43,333
General and
administrative 8,570 9,660 24,437 29,667
Amortization of
intangible assets 2,242 2,923 6,308 8,735
In-process research
and development -- 1,300 656 1,300
Restructuring charge -- -- 291 --
--------- --------- --------- ---------
Total operating
expenses 48,158 44,462 141,610 129,751
--------- --------- --------- ---------
Operating loss (4,551) (13,387) (18,913) (41,531)
--------- --------- --------- ---------
Other income (expense):
Interest income 562 623 1,510 2,181
Interest expense (618) (141) (1,874) (449)
Gain on extinguishment
of debt -- -- -- 4,809
Other income
(expense), net (18) (326) 51 (925)
--------- --------- --------- ---------
Total other income
(expense), net (74) 156 (313) 5,616
--------- --------- --------- ---------
Net loss before
income taxes (4,625) (13,231) (19,226) (35,915)
Provision for
income taxes 1,318 330 4,381 1,100
--------- --------- --------- ---------
Net loss before cumulative
effect of change in
accounting principles (5,943) (13,561) (23,607) (37,015)
Cumulative effect of
change in accounting
principles -- -- -- 321
--------- --------- --------- ---------
Net loss $ (5,943) $(13,561) $(23,607) $(36,694)
========= ========= ========= =========
Net loss per share -
basic and diluted $ (0.14) $ (0.37) $ (0.59) $ (1.01)
========= ========= ========= =========
Shares used in calculation:
Basic and diluted 41,025 37,072 39,990 36,289
========= ========= ========= =========
Reconciliation of Third Quarter GAAP and Non-GAAP Financial Results
Statement of
Operations Reconciliation Three Months Ended Nine Months Ended
-------------------- --------------------
(in thousands) Jan. 6, Dec. 31, Jan. 6, Dec. 31,
2008 2006 2008 2006
--------- --------- --------- ---------
GAAP net loss $ (5,943) $(13,561) $(23,607) $(36,694)
Cost of licenses revenue
Amortization of
developed technology 4,211 5,985 13,512 16,723
Royalties -- -- 245 --
--------- --------- --------- ---------
4,211 5,985 13,757 16,723
Cost of bundled licenses
and services revenue
Amortization of
developed technology 1,053 1,979 3,113 5,976
Stock-based compensation 86 46 246 222
--------- --------- --------- ---------
1,139 2,025 3,359 6,198
Cost of services revenue
Stock-based compensation 323 242 1,031 752
Research and development
Stock-based compensation 1,813 1,150 5,692 4,757
Acquisition-related
and other expenses 569 769 1,904 2,371
--------- --------- --------- ---------
2,382 1,919 7,596 7,128
Sales and marketing
Stock-based compensation 1,256 804 3,771 3,058
General and administrative
Stock-based compensation 1,401 1,053 4,181 3,520
Legal settlement
and other expenses 1,052 -- 1,633 --
--------- --------- --------- ---------
2,453 1,053 5,814 3,520
Amortization of
intangible assets 2,242 2,923 6,308 8,735
In-process research
and development -- 1,300 656 1,300
Restructuring costs -- -- 291 --
Other (income) expense
Net gain on repurchase
of convertible notes
and loss on sale of
marketable securities
in conjunction with
the repurchase -- -- -- (4,809)
Interest expense,
amortization of
debt issuance cost
and debt discount
accretion 567 -- 1,644 --
Loss on equity
investments 57 132 436 440
--------- --------- --------- ---------
624 132 2,080 (4,369)
Cumulative adjustment due
to change in accounting
principles -- -- -- (321)
Tax effect (1,184) (458) (1,979) (682)
--------- --------- --------- ---------
Non-GAAP net income $ 7,503 $ 2,364 $ 19,077 $ 5,348
========= ========= ========= =========
Reconciliation of Third Quarter GAAP and Non-GAAP Financial Results
Earnings/(Loss)
Per Share Reconciliation Three Months Ended Nine Months Ended
------------------------------------------
Jan. 6, Dec. 31, Jan. 6, Dec. 31,
2008 2006 2008 2006
------------------------------------------
GAAP net loss $ (0.14) $ (0.37) $ (0.59) $ (1.01)
Cost of licenses revenue
Amortization of
developed technology 0.10 0.16 0.34 0.46
Royalties -- -- 0.01 --
--------- --------- --------- ---------
0.10 0.16 0.35 0.46
Cost of bundled licenses
and services revenue
Amortization of
developed technology 0.03 0.05 0.08 0.16
Stock-based compensation -- -- 0.01 0.01
--------- --------- --------- ---------
0.03 0.05 0.09 0.17
Cost of services revenue
Stock-based compensation 0.01 0.01 0.03 0.02
Research and development
Stock-based compensation 0.05 0.03 0.14 0.13
Acquisition-related
and other expenses 0.01 0.02 0.05 0.07
--------- --------- --------- ---------
0.06 0.05 0.19 0.20
Sales and marketing
Stock-based compensation 0.03 0.02 0.09 0.08
General and administrative
Stock-based compensation 0.03 0.03 0.10 0.10
Legal settlement
and other expenses 0.03 -- 0.04 --
--------- --------- --------- ---------
0.06 0.03 0.14 0.10
Amortization of
intangible assets 0.05 0.08 0.16 0.24
In-process research
and development -- 0.04 0.01 0.04
Restructuring costs -- -- 0.01 --
Other (income) expense
Net gain on repurchase
of convertible
notes and loss on sale
of marketable securities
in conjunction with
the repurchase -- (0.13)
Interest expense,
amortization of debt
issuance cost and debt
discount accretion 0.01 -- 0.04 --
Loss on equity
investments -- -- 0.01 0.01
--------- --------- --------- ---------
0.01 -- 0.05 (0.12)
Cumulative adjustment
due to change in
accounting principles -- -- -- (0.01)
Tax effect (0.03) (0.01) (0.05) (0.02)
--------- --------- --------- ---------
Non-GAAP net income $ 0.18 $ 0.06 $ 0.48 $ 0.15
========= ========= ========= =========
Non-GAAP net income
(diluted) $ 0.16 $ 0.06 $ 0.41 $ 0.13
========= ========= ========= =========
Basic shares used
in calculation 41,025 37,072 39,990 36,289
Diluted shares used
in calculation* 47,552 41,375 46,652 40,868
* 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 JANUARY 6, 2008
IMPACT OF KNOWN NON-GAAP ADJUSTMENTS ON FORWARD-LOOKING
NET LOSS PER SHARE AND NET LOSS
(Unaudited)
Quarter Ending Fiscal Year Ending
April 6, 2008 April 6, 2008
GAAP net loss
per share (basic) $ (0.25) to $ (0.23) $ (0.84) to $ (0.82)
Amortization of
developed technology
and intangibles $0.18 $0.64
Stock-based compensation $0.11 $0.41
Acquisition
related expenses $0.04 $0.09
Legal settlement, in
process research and
development charges
and other expense $0.02 $0.04
Interest expense,
amortization of debt
issuance cost and debt
discount accretion $0.01 $0.05
Basic and diluted share
count impact on EPS $0.04 $0.17
Non-GAAP diluted net
income per share $0.15 to $0.17 $0.56 to $0.58
(in millions) Quarter Ending Fiscal Year Ending
April 6, 2008 April 6, 2008
GAAP net loss $ (10) to $ (9) $ (34) to $ (33)
Amortization of
developed technology
and intangibles $9 $32
Stock-based compensation $5 $20
Acquisition
related expenses $2 $3
Legal settlement, in
process research and
development charges
and other expense -- $3
Interest expense,
amortization of debt
issuance cost and debt
discount accretion $1 $2
Non-GAAP net income $7 to $8 $26 to $27