SAN JOSE, Calif., Oct. 25, 2007 (PRIME NEWSWIRE) -- Magma Design Automation Inc. (Nasdaq:LAVA), a provider of semiconductor design software, today reported record revenue of $53.5 million for its fiscal 2008 second quarter ended Sept. 30, 2007, an increase of 27.5 percent over the $42.0 million reported for the year-ago second quarter, ended Oct. 1, 2006.
"In Q2 we delivered another quarter of record revenue and continued to improve our profitability," said Rajeev Madhavan, chairman and CEO of Magma. "The success of our new products is enabling us to increase our presence with long-time customers and establish share in markets where we traditionally did not compete. Looking back at the first half of fiscal 2008, we have executed as expected."
GAAP Results
In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(6.4) million, or $(0.16) per share (basic and diluted), for the second quarter of fiscal 2008, compared to a net loss of $(12.4) million, or $(0.34) per share (basic and diluted), for the second quarter of fiscal 2007.
Non-GAAP Results
Magma's non-GAAP net income was $7.0 million for the second quarter of fiscal 2008, or $0.15 per share (diluted), which compares to non-GAAP net income of $2.3 million, or $0.06 per share (diluted), for the year-ago second quarter.
Non-GAAP net income for the second quarter of fiscal 2008 excludes the effects of amortization of developed technology, amortization of intangible assets, stock-based compensation, in-process research and development charges, 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 second quarter of fiscal 2007 excludes the effects of amortization of developed technology, amortization of intangible assets, amortization of deferred stock-based compensation, 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 second quarter of fiscal 2008 Magma generated cash from operations of approximately $20.0 million.
Business Outlook
For Magma's fiscal 2008 third quarter, ending Dec. 30, 2007, the company expects total revenue in the range of $53 million to $55 million. GAAP net loss per share is expected to be in the range of $(0.21) to $(0.19) and non-GAAP earnings per share (EPS) is expected to be in the range of $0.13 to $0.15. GAAP Operating Loss is expected to be in the range of (11.5) percent to (8.5) percent, and Non-GAAP Operating Margin is expected to be in the range of 14.5 percent to 16.5 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 decreased its expected GAAP net loss per share to a range of $(0.87) to $(0.85) and increased its expected non-GAAP EPS to a range of $0.53 to $0.55. 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 income (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. PDT. 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) 211-4461
Elsewhere: (913) 312-0657
Following completion of the call, a webcast replay of the call will be available at http://investor.magma-da.com/medialist.cfm through Nov. 1, 2007. Those without Internet access may listen to a replay of the call by telephone until 11:59 p.m. PDT on Nov. 1 by calling:
U.S. & Canada: (719) 457-0820, code #8913439
Elsewhere: (888) 203-1112, code #8913439
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; 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 July 1, 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.
MAGMA DESIGN AUTOMATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, April 1,
2007 2007
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 45,914 $ 45,338
Restricted cash 261 4,997
Short-term investments 8,300 10,700
Accounts receivable, net 36,335 41,086
Prepaid expenses and other current assets 6,337 4,126
-------- --------
Total current assets 97,147 106,247
Property and equipment, net 16,357 17,866
Intangibles, net 47,762 56,874
Goodwill 54,301 48,499
Restricted cash -- 4,700
Deferred tax assets 6,901 --
Other assets 5,486 5,460
-------- --------
Total assets $227,954 $239,646
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,419 $ 7,442
Accrued expenses 26,233 53,254
Deferred revenue 27,635 28,417
Convertible notes, current 15,216 --
-------- --------
Total current liabilities 73,503 89,113
Convertible notes, net 48,184 63,077
Line of credit -- 3,000
Long-term tax liabilities 11,590 --
Other long-term liabilities 2,292 1,689
-------- --------
Total liabilities 135,569 156,879
-------- --------
Stockholders' equity:
Common stock 4 4
Additional paid-in capital 338,890 310,825
Accumulated deficit (216,124) (197,808)
Treasury stock at cost (28,517) (29,162)
Accumulated other comprehensive loss (1,868) (1,092)
-------- --------
Total stockholders' equity 92,385 82,767
-------- --------
Total liabilities and stockholders' equity $227,954 $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 Six Months Ended
--------------------------------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
2007 2006 2007 2006
-------- -------- -------- --------
Revenue:
Licenses $ 35,637 $ 24,035 $ 67,626 $ 47,154
Bundled licenses and
services 9,217 10,824 18,874 22,245
Services 8,639 7,103 17,158 13,522
-------- -------- -------- --------
Total revenue 53,493 41,962 103,658 82,921
-------- -------- -------- --------
Cost of revenue:
Licenses 4,603 5,663 9,927 10,992
Bundled licenses and
services 2,117 3,356 4,541 6,839
Services 5,254 4,192 10,100 7,946
-------- -------- -------- --------
Total cost of revenue 11,974 13,211 24,568 25,777
-------- -------- -------- --------
Gross profit 41,519 28,751 79,090 57,144
-------- -------- -------- --------
Operating expenses:
Research and
development 18,355 15,608 37,025 31,057
Sales and marketing 18,645 14,567 35,547 28,414
General and
administrative 7,533 8,211 15,867 20,006
Amortization of
intangible assets 2,039 2,922 4,066 5,812
In-process research
and development 656 -- 656 --
Restructuring charge -- -- 291 --
-------- -------- -------- --------
Total operating
expenses 47,228 41,308 93,452 85,289
-------- -------- -------- --------
Operating loss (5,709) (12,557) (14,362) (28,145)
-------- -------- -------- --------
Other income (expense):
Interest income 489 671 948 1,558
Interest expense (599) (133) (1,256) (308)
Gain on extinguishment
of debt -- -- -- 4,809
Other expense, net 796 (493) 69 (599)
-------- -------- -------- --------
Total other income
(expense), net 686 45 (239) 5,460
-------- -------- -------- --------
Net loss before income
taxes (5,023) (12,512) (14,601) (22,685)
Provision for income
taxes 1,372 (91) 3,063 770
-------- -------- -------- --------
Net loss before
cumulative effect of
change in accounting
principles (6,395) (12,421) (17,664) (23,455)
Cumulative effect of
change in accounting
principles -- -- -- 321
-------- -------- -------- --------
Net loss $ (6,395) $(12,421) $(17,664) $(23,134)
======== ======== ======== ========
Net loss per share -
basic and diluted $ (0.16) $ (0.34) $ (0.45) $ (0.64)
======== ======== ======== ========
Shares used in
calculation:
Basic and diluted 39,919 36,140 39,383 35,900
======== ======== ======== ========
Reconciliation of Second Quarter GAAP and Non-GAAP Financial Results
Statement of Operations Three Months Ended Six Months Ended
Reconciliation -------------------- --------------------
(in thousands) Sept. 30, Oct. 1, Sept. 30, Oct. 1,
2007 2006 2007 2006
-------------------- --------------------
GAAP net loss $ (6,395) $(12,421) $(17,664) $(23,134)
Cost of licenses revenue
Amortization of
developed technology 4,089 5,584 9,301 10,737
Acquisition-related
and other expenses 245 -- 245 --
-------------------- --------------------
4,334 5,584 9,546 10,737
Cost of bundled licenses
and services revenue
Amortization of
developed technology 838 1,986 2,060 3,998
Stock-based compensation 79 83 161 176
-------------------- --------------------
917 2,069 2,221 4,174
Cost of services revenue
Stock-based compensation 360 261 708 510
Research and development
Stock-based compensation 1,947 1,593 3,878 3,607
Acquisition-related
and other expenses 663 751 1,335 1,603
-------------------- --------------------
2,610 2,344 5,213 5,210
Sales and marketing
Stock-based compensation 1,293 983 2,515 2,253
General and administrative
Stock-based compensation 1,384 1,199 2,780 2,467
Legal settlement and
other expenses -- -- 581 --
-------------------- --------------------
1,384 1,199 3,361 2,467
Amortization of
intangible assets 2,039 2,922 4,067 5,812
In-process research and
development 656 -- 656 --
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 532 -- 1,077 --
Loss on equity
investments 177 153 379 309
-------------------- --------------------
709 153 1,456 (4,500)
Cumulative adjustment
due to change in
accounting principles -- -- -- (321)
Tax effect (948) (841) (795) (224)
-------------------- --------------------
Non-GAAP net income $ 6,959 $ 2,253 $ 11,575 $ 2,984
==================== ====================
Reconciliation of Second Quarter GAAP and Non-GAAP Financial Results
Earnings/(Loss) Per Three Months Ended Six Months Ended
Share Reconciliation -------------------- --------------------
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
2007 2006 2007 2006
-------------------- --------------------
GAAP net loss $ (0.16) $ (0.34) $ (0.45) $ (0.64)
Cost of licenses revenue
Amortization of
developed technology 0.10 0.15 0.23 0.30
Acquisition-related
and other expenses 0.01 -- 0.01 --
-------------------- --------------------
0.11 0.15 0.24 0.30
Cost of bundled licenses
and services revenue
Amortization of
developed technology 0.02 0.06 0.05 0.11
Stock-based compensation -- -- 0.01 0.01
-------------------- --------------------
0.02 0.06 0.06 0.12
Cost of services revenue
Stock-based compensation 0.01 0.01 0.02 0.01
Research and development
Stock-based compensation 0.05 0.04 0.10 0.10
Acquisition-related
and other expenses 0.02 0.02 0.03 0.04
-------------------- --------------------
0.07 0.06 0.13 0.14
Sales and marketing
Stock-based compensation 0.03 0.03 0.06 0.06
General and administrative
Stock-based compensation 0.03 0.03 0.07 0.07
Legal settlement and
other expenses -- -- 0.01 --
-------------------- --------------------
0.03 0.03 0.08 0.07
Amortization of
intangible assets 0.05 0.08 0.10 0.16
In-process research and
development 0.02 -- 0.02 --
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 -- 0.03 --
Loss on equity
investments -- -- 0.01 0.01
-------------------- --------------------
0.01 -- 0.04 (0.12)
Cumulative adjustment
due to change in
accounting principles -- -- -- (0.01)
Tax effect (0.02) (0.02) (0.02) (0.01)
-------------------- --------------------
Non-GAAP net income $ 0.17 $ 0.06 $ 0.29 $ 0.08
-------------------- --------------------
Non-GAAP net income
(diluted) $ 0.15 $ 0.06 $ 0.25 $ 0.07
-------------------- --------------------
Basic shares used in
calculation 39,919 36,140 39,383 35,900
Diluted shares used in
calculation* 46,698 40,350 46,071 40,474
* 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 SEPTEMBER 30, 2007
IMPACT OF KNOWN NON-GAAP ADJUSTMENTS ON FORWARD-LOOKING DILUTED NET
INCOME PER SHARE AND NET INCOME
(Unaudited)
Quarter Ending Fiscal Year Ending
December 30, 2007 April 6, 2008
GAAP net loss per share
(basic) $ (0.21) to $ (0.19) $ (0.87) to $ (0.85)
Amortization of
developed technology
and intangibles $0.16 $0.63
Stock-based
compensation $0.10 $0.41
Acquisition related
expenses $0.03 $0.07
Legal settlement, in
process research and
development charges
and other expense -- $0.05
Interest expense,
amortization of debt
issuance cost and debt
discount accretion $0.01 $0.04
Basic and diluted share
count impact on EPS $0.04 $0.20
Non-GAAP diluted net
income per share $0.13 to $0.15 $0.53 to $0.55
(in millions) Quarter Ending Fiscal Year Ending
December 30, 2007 April 6, 2008
GAAP net loss $ (9) to $ (8) $ (34) to $ (33)
Amortization of
developed technology
and intangibles $8 $32
Stock-based
compensation $5 $20
Acquisition related
expenses $1 $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 $6 to $7 $26 to $27
LAVA-F