Q4 Revenue of $55.0 Million is 9.7 Percent Above Year-Ago Period
SAN JOSE, Calif., May 1, 2008 -- 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."
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.
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).
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.
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.
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
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