Magma Reports Revenue of $31.0 Million for Third Quarter --
Exceeds All Financial Guidance
GlobeNewswire
2010-02-26
SAN JOSE, Calif., Feb. 25, 2010 (GLOBE NEWSWIRE) -- Magma(R) Design
Automation Inc. (Nasdaq:LAVA), a provider of chip design software,
today reported revenue of $31.0 million for its fiscal 2010 third
quarter ended Jan. 31, 2010, above the company's guidance range of
$29.5 million to $30.0 million. Third-quarter revenue increased 1
percent from the $30.7 million reported for the year-ago third quarter
ended Feb. 1, 2009.
"Magma performed very well in the third quarter, continuing a string of
quarters where we beat our revenue guidance and generated cash," said
Rajeev Madhavan, Magma chairman and CEO. "Our products in physical
verification, circuit simulation and analog/mixed-signal design are
showing good momentum that we believe position us for significant
bookings growth."
GAAP Results
In accordance with generally accepted accounting principles (GAAP),
Magma reported a net loss of $(2.6) million, or $(0.05) per share
(basic and diluted), for the third quarter, compared to a net loss of
$(77.8) million, or $(1.72) per share (basic and diluted), for the
year-ago third quarter.
Non-GAAP Results
Magma's non-GAAP net income was $2.0 million for the third quarter, or
$0.04 per share (basic and diluted), which compares to a non-GAAP net
loss of $(4.3) million, or $(0.09) per share (basic and diluted), for
the year-ago third quarter.
Non-GAAP net income for the third quarter of fiscal 2010 excludes the
effects of amortization of developed technology, amortization of
intangible assets, amortization of stock-based compensation,
amortization of debt issuance costs, debt discount and premium
accretion, charges associated with losses on equity investments and
other investments, restructuring charges and the related provision for
income taxes. Non-GAAP net loss for the third quarter of fiscal 2009
excludes the effects of amortization of developed technology,
amortization of intangible assets, amortization of deferred stock-based
compensation, amortization of debt issuance costs, debt discount
accretion, charges associated with losses on equity investments,
restructuring charges, asset impairment charges, acquisition-related
expenses and the related provision for income taxes. A reconciliation
of our non-GAAP results to GAAP results is included in this press
release.
In the third quarter of fiscal 2010, Magma generated cash flow from
operations of approximately $4.0 million.
Business Outlook
For Magma's fiscal 2010 fourth quarter, ending May 2, 2010, the company
expects total revenue in the range of $32.5 million to $33.0 million.
GAAP net loss per share is expected to be in the range of $(0.09) to
$(0.08) and non-GAAP earnings per share (EPS) are expected to be in the
range of $0.03 to $0.04. For Magma's fiscal year 2010, ending May 2,
2010, the company expects total revenue in the range of $122.0 million
to $122.5 million, compared to the previous guidance range of $120.0
million to $125.0 million. A Financial Data Supplement containing
additional fourth quarter and full fiscal year 2010 guidance, as well
as detailed financial information intended to provide guidance and
further insight into our business, is available online in the Investor
Relations section of the Magma website.
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, amortization of intangible
assets, stock-based compensation, amortization of debt issuance costs,
debt discount and premium accretion, charges associated with losses on
equity investments and other investments, restructuring charges, asset
impairment charges, acquisition-related expenses and the related
provision for income taxes, 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, sales and
marketing; (6) operating expenses, general and administrative; (7)
operating expenses, amortization of intangible assets; (8) operating
expenses, restructuring charge; (9) interest expense; (10) valuation
gain (loss), net; (11) other income (expense), net; (12) provision for
income taxes and (13) net income (loss) per share.
For each such non-GAAP financial measure, the adjustment provides
management with information about Magma's underlying operating
performance that enables a more meaningful comparison of its financial
results in different reporting periods. For example, since Magma does
not acquire businesses on a predictable cycle, management excludes
acquisition-related charges, such as in-process research and
development charges, to make more consistent and meaningful evaluations
of Magma's operating expenses. Similarly, since Magma does not
undertake significant restructuring or realignments on a predictable
cycle, management would have difficulty evaluating Magma's
profitability as measured by gross profit, operating profit, income
before taxes and net income on a period-to-period basis unless it
excluded these charges. Management also uses these measures to help it
make budgeting decisions between those expenses that affect operating
expenses and operating margin (such as research and development, sales
and marketing, and general and administrative expenses), and those
expenses that affect cost of revenue and gross margin (such as product
development expenses).
Further, the availability of non-GAAP financial information helps
management track actual performance relative to financial targets,
including both internal targets and publicly announced targets. Making
this non-GAAP financial information available also helps investors
compare Magma's performance with the announced operating results of its
principal competitors, which regularly provide similar non-GAAP
financial information.
Management recognizes that the use of these non-GAAP measures has
limitations, including the fact that management must exercise judgment
in determining whether some types of charges, such as stock-based
compensation relating to stock grants and acquisition-related charges,
should be excluded from non-GAAP financial measures. Management
believes, however, that providing this non-GAAP financial information
facilitates consistent comparison of Magma's financial performance over
time. Magma has historically provided non-GAAP results to the
investment community, not as an alternative but as a supplement to GAAP
information, to enable investors to evaluate Magma's core operating
performance in the way that management does.
Conference Call
Magma will discuss the financial results for the recently completed
quarter, along with forward-looking guidance, during a live earnings
call today at 2 p.m. PST, 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) 710-4002
Elsewhere: (913) 312-0938
Following completion of the call, a webcast replay of the call will be
available at http://investor.magma-da.com/medialist.cfm through March
4, 2010. Those without Internet access may listen to a replay of the
call by telephone until 11:59 p.m. PST on March 4, 2010 by calling:
U.S. & Canada: (888) 203-1112, code #7476916
Elsewhere: (719) 457-0820, code #7476916
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the "safe harbor" provision of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include
statements in the "Business Outlook" section and in quotations from
Magma's management. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ
materially from Magma's current expectations. Factors that could cause
or contribute to such differences include, but are not limited to: the
substantial amount of Magma's indebtedness, which could adversely
affect our financial position; customer payment defaults, which may
cause us to be unable to recognize revenue from backlog, and changes in
the type of orders comprising backlog, which could affect the
proportion of revenue recognized from backlog each quarter, both of
which could have a material adverse effect on our financial condition
and results of operations; and doubt over our ability to continue as a
going concern. We rely on a small number of customers for a significant
portion of our revenue, and our revenue could decline if customers
delay orders or fail to renew licenses or if we are unable to maintain
or develop relationships with current or potential customers; we
compete against companies that hold a large share of the EDA market and
competition is increasing among EDA vendors as customers tightly
control their EDA spending and use fewer vendors to meet their needs.
If we cannot compete successfully, we will not gain market share and
our revenue could decline. Other factors may include
weaker-than-anticipated sales of Magma's products and services;
weakness in the semiconductor or electronic systems industries; a
potential failure of customers to adopt, or to adopt at a sufficiently
fast rate, 65-nanometer and smaller design geometries on a large scale;
Magma's ability to integrate acquired businesses and technologies;
potentially higher-than-anticipated costs of litigation; potentially
higher-than-anticipated costs of compliance with regulatory
requirements, including those relating to internal control over
financial reporting; the ability to manage expanding operations; the
ability to attract and retain the key management and technical
personnel needed to operate Magma successfully; the ability to continue
to deliver competitive products to customers;and changes in accounting
rules. Further discussion of these and other potential risk factors may
be found in Magma's public filings with the Securities and Exchange
Commission (www.sec.gov), including its Form 10-Q for the fiscal
quarter ended Nov. 1, 2009. Magma undertakes no additional obligation
to update these forward-looking statements.
About Magma
Magma's electronic design automation (EDA) software provides the
"Fastest Path to Silicon"(TM) and enables the world's top chip
companies to create high-performance integrated circuits (ICs) for
cellular telephones, electronic games, WiFi, MP3 players, digital
video, networking and other electronic applications. Magma products are
used in IC implementation, analog/mixed-signal design, analysis,
physical verification, circuit simulation and characterization. The
company maintains headquarters in San Jose, Calif., and offices
throughout North America, Europe, Japan, Asia and India. Magma's stock
trades on Nasdaq under the ticker symbol LAVA. Follow Magma on Twitter
at www.Twitter.com/MagmaEDA and on Facebook at www.Facebook.com/Magma.
Visit Magma Design Automation on the Web at www.magma-da.com.
Magma is a registered trademark and "Fastest Path to Silicon" 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)
May 3,
2009
(as
January adjusted)
31, 2010 (1)
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 50,150 $ 32,888
Restricted cash 250 9,215
Short-term investments,
pledged as collateral for
secured credit line 16,873 --
Accounts receivable, net 19,411 26,635
Prepaid expenses and other
current assets 8,948 5,443
---------- ----------
Total current assets 95,632 74,181
Property and equipment, net 6,467 10,443
Intangibles, net 8,576 12,170
Goodwill 6,968 6,666
Long-term investments, pledged
as collateral for secured
credit line -- 17,908
Other assets 5,619 5,665
---------- ----------
Total assets $ 123,262 $ 127,033
========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 1,412 $ 1,212
Accrued expenses 16,335 15,353
Secured credit line 11,244 12,451
Revolving note 12,200 12,181
Current portion of other
long-term liabilities 1,998 2,679
Deferred revenue 32,920 35,779
Convertible notes, net of
debt discount 22,944 --
---------- ----------
Total current liabilities 99,053 79,655
Convertible notes, net of debt
premium 28,358 47,600
Long-term tax liabilities 1,897 9,729
Other long-term liabilities 1,108 3,160
---------- ----------
Total liabilities 130,416 140,144
---------- ----------
Stockholders' equity
(deficit):
Common stock 5 5
Additional paid-in capital 413,458 405,342
Accumulated deficit (383,096) (380,490)
Treasury stock at cost (32,615) (32,615)
Accumulated other
comprehensive loss (4,906) (5,353)
---------- ----------
Total stockholders' equity
(deficit) (7,154) (13,111)
---------- ----------
Total liabilities and
stockholders' equity $ 123,262 $ 127,033
========== ==========
(1) Prior periods adjusted for the adoption of ASC
470-20.
MAGMA DESIGN AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
For the Three Months Ended For the Nine Months Ended
February 1,
2009 February 1,
January 31, (as January 31, 2009
2010 adjusted) (1) 2010 (as adjusted) (1)
---------------- ----------------- ---------------- ------------------
Revenue:
Licenses $16,191 $13,086 $43,207 $58,924
Bundled licenses and
services 7,923 8,248 23,692 25,664
Services 6,851 9,353 22,569 28,299
---------------- ----------------- ---------------- ------------------
Total revenue 30,965 30,687 89,468 112,887
---------------- ----------------- ---------------- ------------------
Cost of revenue:
Licenses 844 4,463 2,327 14,231
Bundled licenses and
services 1,114 3,032 3,167 7,897
Services 3,244 4,377 9,726 14,427
---------------- ----------------- ---------------- ------------------
Total cost of revenue 5,202 11,872 15,220 36,555
---------------- ----------------- ---------------- ------------------
Gross profit 25,763 18,815 74,248 76,332
---------------- ----------------- ---------------- ------------------
Operating expenses:
Research and development 12,218 15,297 35,143 54,476
Sales and marketing 10,051 12,658 29,754 44,935
General and administrative 4,286 5,469 13,199 19,165
Impairment of goodwill -- 60,089 -- 60,089
Amortization of intangible
assets 260 378 870 2,660
Restructuring charge (17) 3,286 933 8,612
---------------- ----------------- ---------------- ------------------
Total operating expenses 26,798 97,177 79,899 189,937
---------------- ----------------- ---------------- ------------------
Operating loss (1,035) (78,362) (5,651) (113,605)
---------------- ----------------- ---------------- ------------------
Other income (expense):
Interest income 75 142 180 522
Interest expense (1,037) (1,068) (3,299) (3,114)
Valuation gain (loss), net 64 1,068 390 (611)
Other income (expense), net (523) (207) (1,310) 401
---------------- ----------------- ---------------- ------------------
Total other income,
(expense) net (1,421) (65) (4,039) (2,802)
---------------- ----------------- ---------------- ------------------
Net loss before income taxes (2,456) (78,427) (9,690) (116,407)
Benefit from (provision for)
income taxes (182) 629 7,084 (2,941)
---------------- ----------------- ---------------- ------------------
Net income (loss) $ (2,638) $ (77,798) $ (2,606) $ (119,348)
================ ================= ================ ==================
Net income (loss) per share
-- basic $ (0.05) $ (1.72) $ (0.05) $ (2.70)
================ ================= ================ ==================
Net income (loss) per share
-- diluted $ (0.05) $ (1.72) $ (0.05) $ (2.70)
================ ================= ================ ==================
Shares used in calculation:
Basic 50,348 45,215 49,018 44,165
================ ================= ================ ==================
Diluted 50,348 45,215 49,018 44,165
================ ================= ================ ==================
(1) Prior periods adjusted for the adoption of ASC 470-20.
Reconciliation of Third Quarter GAAP and Non-GAAP Financial Results
Statement of Operations
Reconciliation
(in thousands)
Three Months Ended Nine Months Ended
-
February 1, February 1,
2009 2009
January (as January (as
31, 2010 adjusted)(1) 31, 2010 adjusted)(1)
-------- ------------ -------- ------------
GAAP net income (loss) $(2,638) $ (77,798) $(2,606) $(119,348)
Cost of license revenue
Amortization of developed
technology 623 4,252 2,135 13,708
Cost of bundled license and
services revenue
Amortization of developed
technology 240 2,117 937 4,856
Stock-based compensation 80 68 220 216
-------- ------------ -------- ------------
320 2,185 1,157 5,072
Cost of service revenue
Stock-based compensation 328 365 992 994
Research and development
Stock-based compensation 1,221 1,942 3,377 5,883
Acquisition related expenses -- 74 13 597
-------- ------------ -------- ------------
1,221 2,016 3,390 6,480
Sales and marketing
Stock-based compensation 1,011 1,230 3,088 4,116
General and administrative
Stock-based compensation 971 1,221 2,881 3,647
Impairment of goodwill -- 60,089 -- 60,089
Amortization of intangible
assets 260 378 870 2,659
Restructuring charges (17) 3,286 933 8,612
Other income (expense)
Interest expense, amortization
of debt issuance cost, and
debt discount accretion 330 644 1,477 1,906
Gain on extinguishment of debt -- -- (278) --
Loss (gain) on equity and
other investments 118 (971) 4 789
-------- ------------ -------- ------------
448 (327) 1,203 2,695
Provision for income taxes (504) (1,163) (8,641) 1,443
-------- ------------ -------- ------------
Non-GAAP net income (loss) $2,023 $(4,266) $5,402 $(9,833)
-------- ------------ -------- ------------
(1) Prior periods adjusted for the adoption of ASC 470-20.
Reconciliation of Third Quarter GAAP and Non-GAAP Financial Results
Earnings/(Loss) Per Share
Reconciliation Three Months Ended Nine Months Ended
February 1, February 1,
2009 2009
January 31, (as January 31, (as
2010 adjusted)(1) 2010 adjusted)(1)
------------ -------------- ------------ --------------
GAAP net income (loss) $(0.05) $(1.72) $(0.05) $(2.70)
Cost of license revenue
Amortization of developed
technology 0.01 0.09 0.04 0.31
Cost of bundled license and
services revenue
Amortization of developed
technology 0.01 0.05 0.02 0.11
Stock-based compensation -- -- 0.01 0.01
------------ -------------- ------------ --------------
0.01 0.05 0.03 0.12
Cost of service revenue
Stock-based compensation 0.01 0.01 0.02 0.02
Research and development
Stock-based compensation 0.02 0.05 0.07 0.13
Acquisition related expenses -- -- -- 0.02
------------ -------------- ------------ --------------
0.02 0.05 0.07 0.15
Sales and marketing
Stock-based compensation 0.02 0.03 0.06 0.09
General and administrative
Stock-based compensation 0.02 0.03 0.06 0.08
Impairment of goodwill -- 1.33 -- 1.36
Amortization of intangible assets -- 0.01 0.02 0.06
Restructuring charges -- 0.07 0.02 0.20
Other income (expense)
Interest expense, amortization
of debt issuance cost, and debt
discount accretion 0.01 0.01 0.03 0.04
Gain on extinguishment of debt -- -- (0.01) --
Loss (gain) on equity and other
investments -- (0.02) -- 0.02
------------ -------------- ------------ --------------
0.01 (0.01) 0.02 0.06
Provision for income taxes (0.01) (0.03) (0.18) 0.03
------------ -------------- ------------ --------------
Non-GAAP net income $0.04 $(0.09) $0.11 $(0.22)
------------ -------------- ------------ --------------
Non-GAAP net income (diluted) $0.04 $(0.09) $0.10 $(0.22)
------------ -------------- ------------ --------------
Basic shares used in calculation 50,348 45,215 49,018 44,165
------------ -------------- ------------ --------------
Diluted shares used in
calculation* 67,687 45,215 58,510 44,165
------------ -------------- ------------ --------------
(1) Prior periods adjusted for the adoption of ASC 470-20.
*Gives effect to the potential issuance of common stock upon conversion of convertible
subordinated notes, if dilutive, and to the effect of all dilutive potential common shares
outstanding during the period, including stock options, using the treasury stock method
MAGMA DESIGN AUTOMATION, INC.
AS OF FEBRUARY 25, 2010
IMPACT OF KNOWN NON-GAAP ADJUSTMENTS ON FORWARD-LOOKING DILUTED NET
INCOME PER SHARE AND NET INCOME
(unaudited)
Quarter Ending Year Ending
May 2, 2010 May 2, 2010
-------------------- --------------------
GAAP diluted net loss per share $ (0.09) to $ (0.08) $ (0.15) to $ (0.14)
Amortization of developed
technology and intangibles $0.03 $0.09
Amortization of deferred
stock-based compensation $0.07 $0.28
Equity and other investment related
charges $0.00 $0.02
Other $0.02 $(0.11)
Non-GAAP diluted net income per
share $0.03 to $0.04 $0.13 to $0.14
Quarter Ending Year Ending
(in millions) May 2, 2010 May 2, 2010
-------------------- --------------------
GAAP net loss $ (4.9) to $ (4.5) $ (7.5) to $ (7.1)
Amortization of developed
technology and intangibles $1.5 $4.6
Amortization of deferred
stock-based compensation $4.0 $14.6
Equity and other investment related
charges $0.2 $1.0
Other $1.0 $(5.5)
Non-GAAP net income $1.8 to $2.2 $7.2 to $7.6
CONTACT: Magma Design Automation Inc.
Media:
Monica Marmie, Director, Marketing Communications
(408) 565-7689
mmarmie@magma-da.com
Investors:
Milan G. Lazich, Vice President, Corporate Marketing
(408) 565-7706
milan.lazich@magma-da.com
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