Magma Reports Revenue of $123.1 million for Fiscal 2010

Bangalore, May 28, 2010–– Magma® Design Automation Inc. (Nasdaq: LAVA), a provider of chip design software, today reported revenue of $33.6 million for its fourth quarter and $123.1 million for its 2010 fiscal year, both ended May 2, 2010.
“Magma is in a much stronger position than a year ago, both in terms of products and financial performance,” said Rajeev Madhavan, Magma chairman and chief executive officer. “Our key product groups – Talus, Titan, FineSim and Quartz – are demonstrating competitive strength and continuing to improve their traction in the market. As to our financial performance in fiscal 2010, we beat all guidance ranges and continued consistent cash generation. We are optimistic as we enter the new fiscal year.”

GAAP Results
In accordance with generally accepted accounting principles (GAAP), Magma reported a net loss of $(0.7) million, or $(0.01) per share (basic and diluted), for the fourth quarter, compared to a net loss of $(9.9) million, or $(0.21) per share (basic and diluted), for the year-ago fourth quarter. For fiscal 2010 Magma reported a GAAP net loss of $(3.3) million, or $(0.07) per share (basic and diluted), compared to a net loss of $(129.2) million, or $(2.89) per share (basic and diluted), for fiscal 2009.
Non-GAAP Results

Magma’s non-GAAP net income was $3.7 million for the quarter, or $0.07 per share (basic) and $0.06 per share (diluted), which compares to non-GAAP net income of $3.3 million, or $0.07 per share (basic and diluted), for the year-ago fourth quarter. For fiscal 2010 Magma’s non-GAAP net income was $9.1 million, or $0.18 per share (basic) and $0.17 per share (diluted), compared to the company’s non-GAAP net loss of $(6.5) million, or $(0.15) per share (basic and diluted), for the year-ago fiscal year.
Non-GAAP net income for the fourth quarter and full fiscal year of fiscal 2010 excludes the effects of amortization of developed technology, amortization of intangible assets, stock-based compensation, amortization of debt issuance costs and debt discount/premium accretion, acquisition-related expenses, gain on debt extinguishment, charges associated with equity and other investments and related legal expenses, restructuring charges and the related provision for income taxes. 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, acquisition-related expenses, charges associated with equity and other investments, asset impairment charges, restructuring charges 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 $2.4 million.

Business Outlook
For Magma’s fiscal 2011 first quarter, ending August 1, 2010, the company expects total revenue in the range of $31.0 million to $31.5 million. GAAP net loss per share is expected to be in the range of $(0.07) to $(0.06) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.02 to $0.03. For Magma’s fiscal 2011, ending May 1, 2011, the company expects total revenue in the range of $130.0 million to $133.0 million. GAAP net loss per share is expected to be in the range of $(0.16) to $(0.14) and non-GAAP earnings per share (EPS) are expected to be in the range of $0.18 to $0.20. 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 2011 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 and intangible assets, stock-based compensation, in-process research and development expenses, amortization of debt issuance costs and debt discount/premium accretion, charges associated with equity and other investments and related legal expenses, acquisition-related expenses, asset impairment charges, restructuring charges 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; (11) provision for income taxes and (12) 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.

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.
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