UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No.: 0-33213
MAGMA DESIGN AUTOMATION, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0454924 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
5460 Bayfront Plaza
Santa Clara, California 95054
(Address of principal executive offices)
Telephone: (408) 565-7500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).Yes x No ¨
On July 30, 2004, 35,000,797 shares of Registrant’s Common Stock, $.0001 par value were outstanding.
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 2004
INDEX
i
| Item 1. | Financial Statements |
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| June 30, 2004 |
March 31, 2004 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 55,391 | $ | 72,684 | ||||
| Restricted cash |
2,665 | 2,662 | ||||||
| Short-term investments |
196 | — | ||||||
| Accounts receivable, net |
30,495 | 34,237 | ||||||
| Prepaid expenses and other current assets |
9,021 | 9,588 | ||||||
| Total current assets |
97,768 | 119,171 | ||||||
| Property and equipment, net |
18,644 | 15,196 | ||||||
| Intangibles, net |
89,466 | 62,793 | ||||||
| Goodwill |
33,587 | 33,529 | ||||||
| Long-term investments |
95,296 | 78,158 | ||||||
| Other assets |
6,392 | 5,628 | ||||||
| Total assets |
$ | 341,153 | $ | 314,475 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,707 | $ | 1,658 | ||||
| Accrued expenses |
19,175 | 19,132 | ||||||
| Deferred revenue |
23,429 | 19,947 | ||||||
| Total current liabilities |
44,311 | 40,737 | ||||||
| Convertible subordinated notes |
150,000 | 150,000 | ||||||
| Deferred income taxes |
15,828 | 5,102 | ||||||
| Other long-term liabilities |
1,755 | 897 | ||||||
| Total liabilities |
211,894 | 196,736 | ||||||
| Contingencies (Note 9) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock |
3 | 3 | ||||||
| Additional paid-in capital |
242,256 | 226,586 | ||||||
| Deferred stock-based compensation |
(1,527 | ) | (718 | ) | ||||
| Accumulated deficit |
(109,598 | ) | (107,063 | ) | ||||
| Accumulated other comprehensive loss |
(1,875 | ) | (1,069 | ) | ||||
| Total stockholders’ equity |
129,259 | 117,739 | ||||||
| Total liabilities and stockholders’ equity |
$ | 341,153 | $ | 314,475 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Revenue: |
||||||||
| Licenses |
$ | 30,892 | $ | 20,517 | ||||
| Services |
5,137 | 2,296 | ||||||
| Total revenue |
36,029 | 22,813 | ||||||
| Cost of revenue* |
5,042 | 3,246 | ||||||
| Gross profit |
30,987 | 19,567 | ||||||
| Operating expenses: |
||||||||
| Research and development |
9,569 | 5,008 | ||||||
| In-process research and development |
4,009 | — | ||||||
| Sales and marketing |
11,267 | 7,089 | ||||||
| General and administrative |
3,625 | 2,438 | ||||||
| Amortization of intangible assets |
4,475 | — | ||||||
| Amortization of stock-based compensation** |
458 | 3,978 | ||||||
| Restructuring charge |
502 | — | ||||||
| Total operating expenses |
33,905 | 18,513 | ||||||
| Operating income (loss) |
(2,918 | ) | 1,054 | |||||
| Other income (expense): |
||||||||
| Interest income |
553 | 608 | ||||||
| Interest expense |
(246 | ) | (111 | ) | ||||
| Other expense, net |
(562 | ) | (753 | ) | ||||
| Other expense, net |
(255 | ) | (256 | ) | ||||
| Income (loss) before income taxes |
(3,173 | ) | 798 | |||||
| Benefit from (Provision for) income taxes |
638 | (725 | ) | |||||
| Net income (loss) |
$ | (2,535 | ) | $ | 73 | |||
| Net income (loss) per common share: |
||||||||
| Basic |
$ | (0.08 | ) | $ | 0.00 | |||
| Diluted |
$ | (0.08 | ) | $ | 0.00 | |||
| Shares used in calculation: |
||||||||
| Basic |
33,671 | 30,764 | ||||||
| Diluted |
33,671 | 36,152 | ||||||
| * Stock-based compensation included in cost of revenue |
$ | 4 | $ | 4 | ||||
| ** Components of stock-based compensation included in operating expenses: |
||||||||
| Research and development |
$ | 290 | $ | 1,559 | ||||
| Sales and marketing |
25 | 131 | ||||||
| General and administrative |
143 | 2,288 | ||||||
| $ | 458 | $ | 3,978 | |||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (2,535 | ) | $ | 73 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
7,284 | 1,129 | ||||||
| In-process research and development |
4,009 | — | ||||||
| Provision for doubtful accounts |
116 | 45 | ||||||
| Interest expense on convertible subordinated note |
245 | 111 | ||||||
| Share in losses of private company investments |
331 | 792 | ||||||
| Accrued interest on notes receivable from stockholders |
— | 8 | ||||||
| Amortization of stock-based compensation |
462 | 3,982 | ||||||
| Restructuring charge |
502 | — | ||||||
| Deferred income taxes |
(1,153 | ) | — | |||||
| Income tax benefit realized from employee stock options |
26 | — | ||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
2,825 | (3,048 | ) | |||||
| Prepaid expenses and other assets |
835 | (4,882 | ) | |||||
| Accounts payable |
49 | (15 | ) | |||||
| Accrued expenses |
(4,651 | ) | 938 | |||||
| Deferred revenue |
4,041 | 3,155 | ||||||
| Other long-term liabilities |
82 | (64 | ) | |||||
| Net cash provided by operating activities |
12,468 | 2,224 | ||||||
| Cash flows from investing activities: |
||||||||
| Asset purchases and acquisitions, net of cash acquired |
(9,089 | ) | — | |||||
| Purchase of property and equipment |
(4,797 | ) | (794 | ) | ||||
| Purchase of short-term investments |
(196 | ) | ||||||
| Purchase of long-term investments |
(31,452 | ) | (54,961 | ) | ||||
| Proceeds from the sale of long-term investments |
13,358 | — | ||||||
| Purchase of strategic equity investments |
(250 | ) | — | |||||
| Restricted cash |
(3 | ) | — | |||||
| Other assets |
— | 197 | ||||||
| Net cash used in investing activities |
(32,429 | ) | (55,558 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from issuance of convertible subordinated notes |
— | 145,187 | ||||||
| Proceeds from issuance of common stock |
2,591 | 5,571 | ||||||
| Repurchase of common stock |
— | (19,980 | ) | |||||
| Purchase of hedge instrument |
— | (56,154 | ) | |||||
| Proceeds from issuance of common stock warrant |
— | |||||||