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