Magma Design Automation Inc. F4Q10 (Qtr End 05/02/2010) Earnings Call Transcript

Magma Design Automation Inc. F4Q10 (Qtr End 05/02/2010) Earnings Call Transcript
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Magma Design Automation Inc. (LAVA)

F4Q10 (Qtr End 05/02/2010) Earnings Call

May 27, 2010 5:00 PM ET

Executives

Milan Lazich – Vice President, Corporate Marketing

Rajeev Madhavan – Chairman and CEO

Roy Jewell – President and COO

Pete Teshima – Chief Financial Officer

Analysts

Rich Valera – Needham & Co.

Tom Diffely – D.A. Davidson

Doug Anderson – Private Investor

Presentation

Operator

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Welcome to Magma's Fourth Quarter Fiscal 2010 Earnings Call. All lines have been placed on mute and we ask that all participants turnoff wireless communication devices to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Now here is Magma's Vice President of Corporate Marketing, Milan Lazich.

Milan Lazich

Thank you. Welcome to Magma's fiscal 2010 fourth quarter earnings call, hosted by Chairman and CEO, Rajeev Madhavan; President and Chief Operating Officer, Roy Jewell; and CFO, Pete Teshima. Our Q4 earnings release is on Magma's website and it includes a reconciliation of non-GAAP results to GAAP results.

The financial data supplement in our website's Investor Relations section also includes a reconciliation of non-GAAP results to GAAP results, as well as updated financial guidance. Unless otherwise noted, during this call all references to expenses, margins and other financials are on a non-GAAP basis.

Please note that during our call, including the question-and-answer period, we make forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, and that actual results may differ materially from expectations.

For information on factors that could cause a difference in our results, please refer to our Form 10-Q for the fiscal quarter ended January 31, 2010, to Magma’s subsequent and future filings with the Securities and Exchange Commission, and to the cautionary statements related to forward-looking statements in today’s earnings press release. Magma undertakes no additional obligation to update these forward-looking statements.

With that, let me turn the call over to Rajeev Madhavan.

Rajeev Madhavan

Good afternoon. As I look back at the year just ended and ahead to the year just begun, I have to say that both views are better than 12 months ago. Fourth quarter revenue was $33.6 million, non-GAAP EPS was $0.06 and non-GAAP operating margin was 13%, all of which exceeded our guidance.

For fiscal 2010, revenue came in at $123.1 million, also better than our guidance. At the beginning of the fourth quarter we increased our bookings expectations to greater than $130 million, and we exceeded our bookings -- target. And for the second year in a row more than 90% of revenue came from backlog in our highly ratable revenue model.

This is a good time to be Magma, as we begin fiscal 2011 at a very strong point in our product cycle, with a backlog greater than we had a year ago and the biggest pipeline the company has ever had to begin a year.

Bookings growth was strong last year and we are projecting another strong year with bookings expected to be in the range of $160 million to $170 million, a 22% to 30% increase. We are very optimistic about the year ahead, let me tell you why.

One reason is our position in analog, our products met with great acceptance as we entered this market. The FineSim products continue to take share in circuit simulation, and our analog products, which include Finesim, Titan ADX and Titan ALX, are growing even faster than Blast Fusion did when it was the basis for Magma’s IPO.

In addition to our deployment at foundries, we have deployed FineSim in 13 of the top 25 semiconductor companies, and with Titan we are actively engaged with nine of the top 25 semiconductor companies.

For the Titan platform, we used fiscal 2010 to lay a foundation for growth this year and based on early successes and recent line extensions, I expect to see that growth. The Titan Accelerators are the latest additions to the Titan line, providing capabilities for rapidly designing and optimizing analog and mixed-signal SoCs for advanced geometries. Titan lets customers preserve their legacy investment in analog and its tight integration with the Talus digital platform provides the most complete solution for mixed-signal SoC design.

In the digital market we strengthened our product line significantly. In March, we announced Tekton, a new static timing analysis engine along with QCP, our new parasitic extractor that is based on technology from our gold standard QuickCap product.

The latest Talus release is performing very well and there is more to come, watch for two major product announcements in place and route that will extend our leadership even beyond when we launched Magma with physical synthesis. Some customers at DAC will get an advance look at them under NDA.

Overall we are seeing wide product adoption by customers, including some accounts where traction had slowed. Several key accounts that had been promoted as using another supplier as their primary EDA vendor recently expanded their relationships with Magma, including some of the leaders at 28 and 20-nanometer technology.

In the last two quarters, three of the biggest fabless companies designing chips at the 28-nanometer nodes for both wireless and high-performance applications renewed or extended their commitment to Magma Talus.

Now Roy will cover some of the product and customer successes of the quarter. Roy?

Roy Jewell

Thanks, Rajeev. Magma has a lot of momentum right now as Rajeev described. Some recent product announcements are big reasons for it. We announced Tekton and QCP in March with a lineup of initial customer engagements well beyond the number targeted.

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