Magma Reports Revenue of $147.0 Million for Fiscal 2009

SAN JOSE, Calif., May 27, 2009 (GLOBE NEWSWIRE) -- Magma(r) Design Automation Inc. (Nasdaq:LAVA), a provider of chip design software, today reported revenue of $34.1 million for its fourth quarter and $147.0 million for its 2009 fiscal year, both ended May 3, 2009.

"In Q4 we exceeded our key financial guidance ranges and re-established positive cash flow," said Rajeev Madhavan, chairman and CEO of Magma. "I anticipate our product teams will continue to deliver innovative technology advancements in fiscal 2010, such as the new Talus(r) COre(tm) technology we announced today."

GAAP Results

In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(8.8) million, or $(0.19) per share (basic and diluted), for the fourth quarter, compared to a net loss of $(7.2) million, or $(0.17) per share (basic and diluted), for the year-ago fourth quarter. For fiscal 2009 Magma reported a GAAP net loss of $(127.1) million, or $(2.84) per share (basic and diluted), compared to a net loss of $(30.8) million, or $(0.76) per share (basic and diluted), for fiscal 2008.

Non-GAAP Results

Magma's non-GAAP net income was $3.1 million for the quarter, or $0.07 per share (basic and diluted), which compares to non-GAAP net income of $8.0 million, or $0.17 per share (diluted), for the year-ago fourth quarter. For fiscal 2009 Magma's non-GAAP net loss was $(6.7) million, or $(0.15) per share (basic and diluted), compared to the company's non-GAAP net income of $27.1 million, or $0.58 per share (diluted), for the year-ago fiscal year.

Non-GAAP net income for the fourth quarter and full fiscal year of fiscal 2009 excludes the effects of amortization of developed technology, amortization of intangible assets, stock-based compensation, amortization of debt issuance costs and debt discount 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. 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 developed technology, litigation settlement and related legal expenses, amortization of debt issuance costs and debt discount accretion, acquisition-related expenses, charges associated with losses on equity investments 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 fourth quarter Magma generated cash flow from operations of approximately $5.5 million.

Business Outlook

For Magma's fiscal 2010 first quarter, ending Aug. 2, 2009, the company expects total revenue in the range of $27.5 million to $28.5 million. GAAP net loss per share is expected to be in the range of $(0.20) to $(0.19) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.00 to $0.01. For Magma's fiscal 2010, ending May 2, 2010, the company expects total revenue in the range of $120.0 million to $125.0 million. GAAP net loss per share is expected to be in the range of $(0.70) to $(0.68) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.01 to $0.03. 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 additional first 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. All guidance issued by the company before May 27, 2009 is no longer in effect.

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, amortization of debt issuance costs, debt discount accretion, charges associated with losses on equity and other investments, acquisition-related expenses, litigation settlement and related legal 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, 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; (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 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) 419-6591
       Elsewhere:          (719) 325-4868

Following completion of the call, a webcast replay of the call will be available at http://investor.magma-da.com/medialist.cfm through June 3, 2009. Those without Internet access may listen to a replay of the call by telephone until 11:59 p.m. PDT on June 3 by calling:

       U.S. & Canada:      (888) 203-1112, code #8860034
       Elsewhere:          (719) 457-0820, code #8860034

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 may cause us to be unable to recognize revenue from backlog, and changes in the type of orders comprising backlog could affect the proportion of revenue recognized from backlog each quarter, which could have a material adverse effect on our financial condition and results of operations. 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 Feb. 2, 2009. Magma undertakes no additional obligation to update these forward-looking statements.

About Magma

Magma's electronic design automation (EDA) software is used to create complex, high-performance integrated circuits (ICs) for cellular telephones, electronic games, WiFi, MP3 players, DVD/digital video, networking, automotive electronics and other electronic applications. Magma products for IC implementation, analog/mixed-signal design, analysis, physical verification, circuit simulation and characterization are recognized as embodying the best in semiconductor technology, providing the world's top chip companies the "Fastest Path to Silicon."(tm) Magma 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. Visit Magma Design Automation on the Web at www.magma-da.com.

Magma and Talus are registered trademarks and COre and "Fastest Path to Silicon" are trademarks 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,            April  6,
                                                                                                  2009                  2008
                                                                                              ---------        ---------

  ASSETS
  Current  assets:
      Cash  and  cash  equivalents                                      $    32,888        $    46,970
      Restricted  cash                                                                  9,215                      --
      Short-term  investments                                                          --                3,000
      Accounts  receivable,  net                                              26,635              38,310
      Prepaid  expenses  and  other  current  assets              5,443                5,244
                                                                                              ---------        ---------
          Total  current  assets                                                  74,181              93,524
  Property  and  equipment,  net                                            10,443              15,553
  Intangibles,  net                                                                  12,170              40,436
  Goodwill                                                                                    6,666              64,877
  Long-term  investments                                                        17,909              17,538
  Other  assets                                                                            5,707                5,467
                                                                                              ---------        ---------
          Total  assets                                                            $  127,076        $  237,395
                                                                                              =========        =========

  LIABILITIES  AND  STOCKHOLDERS'  EQUITY
  Current  liabilities:
      Accounts  payable                                                        $      1,212        $      3,971
      Accrued  expenses                                                              15,539              27,788
      Secured  credit  line                                                        12,451                      --
      Revolving  note,  current  portion                                12,181                      --
      Current  portion  of  other  long-term
        liabilities                                                                        2,679                2,078
      Deferred  revenue                                                              35,779              25,254
      Convertible  notes                                                                    --              15,216
                                                                                              ---------        ---------
          Total  current  liabilities                                        79,841              74,307
  Convertible  subordinated  notes,  net                            49,221              48,518
  Long-term  tax  liabilities                                                  3,792                3,878
  Other  long-term  liabilities                                              3,160                2,374
                                                                                              ---------        ---------
          Total  liabilities                                                      136,014            129,077
                                                                                              ---------        ---------
  Stockholders'  equity:
      Common  stock                                                                                5                        5
      Additional  paid-in  capital                                        400,713            374,183
      Accumulated  deficit                                                    (371,688)        (228,389)
      Treasury  stock  at  cost                                                (32,615)          (32,697)
      Accumulated  other  comprehensive  loss                      (5,353)            (4,784)
                                                                                              ---------        ---------
          Total  stockholders'  equity  (deficit)                  (8,938)          108,318
                                                                                              ---------        ---------
          Total  liabilities  and  stockholders'
            equity                                                                      $  127,076        $  237,395
                                                                                              =========        =========



                                        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
                                                      --------------------    --------------------
                                                          May  3,        April  6,        May  3,        April  6,
                                                          2009              2008              2009              2008
                                                      ---------    ---------    ---------    ---------
  Revenue:
      Licenses                                $    17,551    $    35,821    $    76,475    $  139,062
      Bundled  licenses  and
        services                                      7,766          10,358          33,430          40,515
      Services                                        8,753            8,835          37,052          34,842
                                                      ---------    ---------    ---------    ---------
          Total  revenue                        34,070          55,014        146,957        214,419
                                                      ---------    ---------    ---------    ---------
  Cost  of  revenue:
      Licenses                                        5,185            4,862          19,416          19,151
      Bundled  licenses  and
        services                                      2,563            2,429          10,460            9,474
      Services                                        4,026            5,355          18,453          20,729
                                                      ---------    ---------    ---------    ---------
          Total  cost  of  revenue        11,774          12,646          48,329          49,354
                                                      ---------    ---------    ---------    ---------
  Gross  profit                                  22,296          42,368          98,628        165,065
                                                      ---------    ---------    ---------    ---------

  Operating  expenses:
      Research  and  development      14,274          20,382          68,751          76,920
      Sales  and  marketing                11,089          17,331          56,024          70,711
      General  and
        administrative                          5,142            7,139          24,307          31,576
      Impairment  of  goodwill                  --                  --          60,089                  --
      Amortization  of
        intangible  assets                        335            1,735            2,994            8,043
      In-process  research
        and  development                              --            1,600                  --            2,256
      Restructuring  charge                2,049                  --          10,661                291
                                                      ---------    ---------    ---------    ---------
          Total  operating
            expenses                                32,889          48,187        222,826        189,797
                                                      ---------    ---------    ---------    ---------
  Operating  loss                            (10,593)        (5,819)    (124,198)      (24,732)
                                                      ---------    ---------    ---------    ---------

  Other  income  (expense):
      Interest  income                              115                511                637            2,021
      Interest  expense                          (861)            (593)        (2,865)        (2,467)
      Other  income  (expense),
        net                                                  (350)            (642)            (560)            (591)
                                                      ---------    ---------    ---------    ---------
          Total  other  income,
            (expense)  net                      (1,096)            (724)        (2,788)        (1,037)
                                                      ---------    ---------    ---------    ---------
  Net  loss  before  income
    taxes                                            (11,689)        (6,543)    (126,986)      (25,769)
  Provision  for  (benefit
    from)  income  taxes                    (2,848)              685                  93            5,066
                                                      ---------    ---------    ---------    ---------

  Net  loss                                    $    (8,841)  $    (7,228)  $(127,079)  $  (30,835)
                                                      =========    =========    =========    =========

  Net  loss  per  share  -
    basic  and  diluted                $      (0.19)  $      (0.17)  $      (2.84)  $      (0.76)
                                                      =========    =========    =========    =========

  Shares  used  in
    calculation:
      Basic  and  diluted                    46,357          42,265          44,698          40,518
                                                      =========    =========    =========    =========



            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)                            May  3,        April  6,        May  3,        April  6,
                                                          2009              2008              2009              2008

  GAAP  net  loss                          $    (8,841)  $    (7,228)  $(127,079)  $  (30,835)
  Cost  of  license  revenue
      Amortization  of
        developed  technology              4,973            4,567          18,680          18,079
      Royalties                                            --                  --                  --                245
                                                      ------------------------------------------
                                                              4,973            4,567          18,680          18,324
  Cost  of  bundled  license
    and  services  revenue
      Amortization  of
        developed  technology              1,738            1,043            6,595            4,156
      Stock-based  compensation              54                  80                269                326
                                                      ------------------------------------------
                                                              1,792            1,123            6,864            4,482
  Cost  of  service  revenue
      Stock-based  compensation            287                323            1,282            1,354
  Research  and  development
      Stock-based  compensation        1,522            2,358            7,405            8,050
      Acquisition  related
        expenses                                            55                773                652            2,677
                                                      ------------------------------------------
                                                              1,577            3,131            8,057          10,727
  Sales  and  marketing
      Stock-based  compensation        1,165            1,463            5,281            5,235
  General  and  administrative
      Stock-based  compensation        1,268            1,277            4,915            5,459
      Litigation  settlement
        and  related  legal
        expense                                              --                  --                  --            1,632
                                                      ------------------------------------------
                                                              1,268            1,277            4,915            7,091
  Impairment  of  goodwill                      --                                60,089
  Amortization  of
    intangible  assets                            335            1,735            2,994            8,043
  In-process  research  and
    development                                          --            1,600                  --            2,256
  Restructuring  charges                  2,049                  --          10,661                291
  Other  income  (expense)
      Interest  expense,
        amortization  of  debt
        issuance  cost,  and
        debt  discount  accretion            273                538            1,069            2,183
      Loss  on  equity  and
        other  investments                        (58)                45                731                480
                                                      ------------------------------------------
                                                                  215                583            1,800            2,663
  Provision  for  income  taxes      (1,696)            (588)            (254)        (2,567)
                                                      --------------------    --------------------
  Non-GAAP  net  income
    (loss)                                      $      3,124    $      7,986    $    (6,710)  $    27,064
                                                      --------------------    --------------------



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

  Earnings/(Loss)  Per
    Share  Reconciliation            Three  Months  Ended      Twelve  Months  Ended
                                                          May  3,        April  6,        May  3,        April  6,
                                                          2009              2008              2009              2008

  GAAP  net  loss                          $      (0.19)  $      (0.17)  $      (2.84)  $      (0.76)
  Cost  of  license  revenue
      Amortization  of
        developed  technology                0.11              0.11              0.42              0.45
      Royalties                                            --                  --                  --              0.01
                                                      ------------------------------------------
                                                                0.11              0.11              0.42              0.46
  Cost  of  bundled  license
    and  services  revenue
      Amortization  of
        developed  technology                0.04              0.02              0.15              0.10
      Stock-based  compensation          0.00                  --                  --              0.01
                                                      ------------------------------------------
                                                                0.04              0.02              0.15              0.11
  Cost  of  service  revenue
      Stock-based  compensation          0.01              0.01              0.03              0.03
  Research  and  development
      Stock-based  compensation          0.03              0.06              0.17              0.20
      Acquisition  related
        expenses                                        0.00              0.02              0.01              0.06
                                                      ------------------------------------------
                                                                0.03              0.08              0.18              0.26

  Sales  and  marketing
      Stock-based  compensation          0.02              0.03              0.12              0.13
  General  and  administrative
      Stock-based  compensation          0.03              0.03              0.11              0.13
      Litigation  settlement
        and  related  legal
        expense                                              --                  --                  --              0.04
                                                      ------------------------------------------
                                                                0.03              0.03              0.11              0.17
  Impairment  of  goodwill                      --                  --              1.34                  --
  Amortization  of
    intangible  assets                          0.01              0.04              0.07              0.20
  In-process  research  and
    development                                          --              0.04                  --              0.06
  Restructuring  charges                    0.04                  --              0.24              0.01
  Other  income  (expense)
      Interest  expense,
        amortization  of  debt
        issuance  cost,  and
        debt  discount  accretion          0.01              0.01              0.02              0.05
      Loss  on  equity
        investments                                      --                  --              0.02              0.01
                                                      ------------------------------------------
                                                                0.01              0.01              0.04              0.06
  Provision  for  income  taxes        (0.04)          (0.01)          (0.01)          (0.06)
                                                      --------------------    --------------------
  Non-GAAP  net  income
    (loss)  per  share                  $        0.07    $        0.19    $      (0.15)  $        0.67
                                                      --------------------    --------------------
  Non-GAAP  net  income
    (diluted)                                $        0.07    $        0.17    $      (0.15)  $        0.58
                                                      --------------------    --------------------

  Basic  shares  used  in
    calculation                                  46,357          42,123          44,698          40,518
  Diluted  shares  used  in
    calculation*                                47,014          47,533          46,249          46,868


  *  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  MAY  27,  2009
  IMPACT  OF  KNOWN  NON-GAAP  ADJUSTMENTS  ON  FORWARD-LOOKING  DILUTED  NET
                                        INCOME  PER  SHARE  AND  NET  INCOME
                                                          (Unaudited)

                                                        Quarter  Ending                        Year  Ending
                                                        August  2,  2009                        May  2,  2010

  GAAP  diluted  net
    loss  per  share                  $  (0.20)  to  $  (0.19)          $  (0.70)  to  $  (0.68)
      Amortization  of
        developed  technology
        and  intangibles                          $0.05                                        $0.21
      Amortization  of
        deferred  stock-based
        compensation                                $0.11                                        $0.42
      Debt  related  costs                      $0.03                                        $0.06
      Equity  and  other
        investment  related
        charges                                          $0.01                                        $0.02

  Non-GAAP  diluted  net
    income  per  share                    $0.00  to  $0.01                      $0.01  to  $0.03


  (in  millions)                            Quarter  Ending                        Year  Ending
                                                        August  2,  2009                        May  2,  2010

  GAAP  net  loss                      $  (9.3)  to  $  (8.8)              $  (33.1)  to  $  (32.1)
      Amortization  of
        developed  technology
        and  intangibles                            $2.5                                            $9.9
      Amortization  of
        deferred  stock-based
        compensation                                  $5.3                                          $19.7
      Debt  related  costs                        $1.0                                            $3.0
      Equity  and  other
        investment  related
        charges	                                  $0.5	                                      $1.0
  Non-GAAP  net  income                    $0.0  to  $0.5                          $0.5  to  $1.5
 
 CONTACT:    Magma  Design  Automation  Inc.
                    Media:
                    Monica  Marmie,  Director,  Marketing  Communications
                        (408)  565-7689
                        
  Email  Contact  
                    Investors:
                    Milan  G.  Lazich,  Vice  President,  Corporate  Marketing
                        (408)  565-7706
                        
  Email  Contact  
 

 



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