Magma Design Automation, Inc. Earnings: Strong Margins Continue

Magma Design Automation, Inc. (NASDAQ:LAVA) reported its results for the first quarter. The Company provides design and implementation, analysis and verification software that enables chip designers to reduce the time it takes to design and produce complex integrated circuits.

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Magma Design Automation Earnings Cheat Sheet for the First Quarter

Results: Loss narrowed to $100,000 (0 cents per diluted share) from $3.3 million (loss of 6 cents per share) in the same quarter a year earlier.

Revenue: Rose 8.4% to $35.3 million from the year earlier quarter.

Actual vs. Wall St. Expectations: LAVA reported adjusted net income of 7 cents per share. By that measure, the company fell in line with the mean estimate of 7 cents per share. It fell short of the average revenue estimate of $36.4 million.

Quoting Management: “In the first quarter, we continued to provide the most integrated and differentiated products that enable our customers to cost effectively design the most complex SoCs,” said Rajeev Madhavan, Magma Chairman and Chief Executive Officer. “While revenue came in just below the bottom end of our guidance range, we achieved our operating margin and EPS guidance for the quarter. The positive reaction we experienced at June’s Design Automation Conference to our Silicon One initiative indicates we are on the right track in providing leading edge semiconductor design solutions to our customers. Additionally, we continue to see strong design activity in the customer base which is a solid indicator of the health of the EDA market.”

Key Stats:

Last quarter marked the fifth consecutive quarter of gross margins expanding as the company’s gross margin expanded 1.5 percentage points to 86.9% from the year earlier quarter. Over that span, margins have grown on average 2.5 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 13.2% to $38 million in the fourth quarter of the last fiscal year. The figure rose 12.3% in the third quarter of the last fiscal year from the year earlier and climbed 14.4% in the second quarter of the last fiscal year from the year-ago quarter.

The company fell in line with estimates last quarter after missing the mark in the previous two quarters. In the fourth quarter of the last fiscal year, it fell short by 4 cents, and in the third quarter of the last fiscal year, it missed by 4 cents.

LAVA’s loss in the latest quarter follows profits in the previous two quarters. The company reported a profit of $1.7 million in the fourth quarter of the last fiscal year and a profit of $961,000 in the third quarter of the last fiscal year.

Competitors to Watch: Synopsys, Inc. (NASDAQ:SNPS), Mentor Graphics Corp. (NASDAQ:MENT), Cadence Design Systems, Inc. (NASDAQ:CDNS), PDF Solutions, Inc. (NASDAQ:PDFS), ANSYS, Inc. (NASDAQ:ANSS), Tessera Technologies, Inc. (NASDAQ:TSRA), Parametric Technology (NASDAQ:PMTC), Autodesk, Inc. (NASDAQ:ADSK), Cimatron Ltd. (NASDAQ:CIMT), and National Instruments Corp (NASDAQ:NATI).

Investing Insights: Steve Jobs Prepares to Deliver a New Catalyst for Apple’s Stock.

(Source: Xignite Financials)

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